, accessed 29 August 2016, (Exhibit\nEU-206).\n\ng. High End Computing Program.1023\n8.65. In its first written submission, the European Union argues that NASA \"continues to provide\nfunding and support to Boeing through certain of the Original NASA Programmes in the same or\nsubstantively similar manner as before the original panel \" and that NASA \"also currently maintains\nadditional subsidies for Boeing in the form of funding and access to government facilities,\nequipment and employees provided under successor and other closely related programmes\".1024\n8.66. The European Union states that the seven programmes that it identifies as involving\npost-2006 NASA aeronautics R&D subsidies \"include both Original NASA Programmes and\nsuccessor and other closely related programmes \".1025 Thus, it would appear that, as far as the\nalleged post-2006 NASA aeronautics R&D subsidies are concerned, the original NASA aeronautics\nR&D programmes are at i ssue only insofar as they may have been \"included\" in the seven\nprogrammes identified by the European Union.1026\n8.2.2.2.2 The existence of the measures\n8.67. In its first written submission, the United States indicate s that neither the Aeronautics\nStrategy and Management P rogram nor the High -End Computing Program had funded any\npayments, or provided any facilities, equipment or employees, to Boeing for non -engine\naeronautics research in the post-2006 period.1027 The United States' assertions suggest that in fact\nthere are no r elevant NASA aeronautics R&D measures in existence as regards these two\naeronautics R&D programmes. The European Union responds that the United States mistakenly\ndefines the measure solely by identifiable contracts and agreements. 1028 The European Union then\nrefers to arguments it makes in the context of estimating the amount of the financial contributions\nrepresented by the alleged NASA aeronautics R&D subsidies, that the value of the subsidy extends\nbeyond the \"four corners \" of the specific legal instruments that are the \"mechanisms by which\nNASA provides subsidies for Boeing LCA\".1029\n8.68. In our view, the European Union 's arguments erroneously conflate the issue raised by the\nUnited States, which goes to the existence of the measure, with the question of how to va lue the\namount of a subsidy, assuming that the measure said to constitute the subsidy in fact exists. We\nrecall in paragraph 8.62 above that the payments and access to government facilities, equipment,\nand employees occur through particular legal instruments entered into between NASA and Boeing,\nnamely NASA procurement contracts, cooperative agreements, or Space Act Agreements which are\nfunded under the challenged NASA aeronautics R&D programmes. 1030 In the absence of any\nevidence that the Aeronautics Strategy and Management Program or the High -End Computing\nProgram funded any procurement contracts, cooperative agreements , or Space Act Agreements\n\n1022 NASA formed Aeronautics Strategy and Management in 2012 to \"conduct{} research and provide{}\nprogrammatic support that does not fit well into the current five programs\", including information technology\nexpenses, studies, and administrative functions for other NASA aeronautics R&D programmes. (NASA\nAeronautics Strategy and Management Budget Estimates for FY 2012-FY 2013, (Exhibit EU-43), FY 2012,\npp. AERO-44 and AERO-45). See also Memorandum of Understanding Among the Department of\nTransportation, Department of Commerce, Department of Defense, Department of Homeland Security, and\nNational Aeronautics and Space Administration for the Next Generation Air Transportation System Joint\nPlanning And Development, 9 June 2008, (Exhibit EU-192).\n1023 With funding from the Strategic Capabilities Assets Program, the High End Computing Program\nsupports the operation, maintenance, and upgrade to NASA supercomputing facilities at the Ames Research\nCenter, including NASA's \"Pleiades\" supercomputer, which supports NASA's aeronautics, exploration, space\noperation and science missions. (NASA High End Computing Program FY 2009-FY 2013, (Exhibit EU-46),\nFY 2010 Budget, SCI-18).\n1024 European Union's first written submission, para. 60.\n1025 European Union's first written submission, para. 72.\n1026 As explained in Section 8.1, the European Union additionally argues that the pre-2007 NASA\naeronautics R&D subsidies at issue in the original proceeding, which include \"NASA R&D support to Boeing\"\nprovided through the original NASA aeronautics R&D programmes have not been withdrawn and continue to\nbenefit Boeing at present. (European Union's first written submission, para. 1181).\n1027 United States' first written submission, paras. 192 and 194.\n1028 European Union's second written submission, para. 211.\n1029 European Union's second written submission, para. 262.\n1030 See paras. 8.74, 8.77, 8.78, and 8.79 below. Panel Report, US – Large Civil Aircraft (2nd complaint),\nparas. 7.944 and 7.945. See also our analysis of the amount of the subsidy and the amount of the relevant\nfinancial contribution in Section 8.2.2.6 below.\n\nwith Boeing in the post-2006 period, we consider there to be insufficient evidence that the relevant\nmeasures under these aeronautics R&D programmes exist.\n8.69. In addition, with respect to the Strategic Capabilities Assets Program, the United States\nasserts that the only contract that Boeing received under this programme that wa s related to\naeronautics research was a n open-market, commercial purchase of a licence for NASA to use\nBoeing's proprietary flight training simulator (Contract NNL12AA55P).1031 The United States argues\nthat this contract did not involve any research on Boeing 's part or the provision of facilities,\nequipment or employees to Boeing and that it is therefore not within the Panel 's terms of\nreference, which cover only NASA \"funding and access to government facilities, equipment, and\nemployees for R&D applicable to the development, design and production of LCA \".1032 The\nEuropean Union responds that the United States erroneously considers that \"only contracts or\nagreements funded by the programme can constitute a subsidy \".1033 The European Union states\nthat its claims with respect to the Strategic Capabilities Assets Program address the aeronautics\ntest and simulation capabilities funded by this programme. 1034 However, to the extent that the\nUnited States has fully and accurately described this particular contract, the European Union\nsubmits that such a purchase of goods would not appear to be among the aspects of the NASA\naeronautics R&D programmes that it is challenging.1035\n8.70. We observe that Contract NNL12AA55P relates to the purchase of a simulator licence for use\nof Boeing 's pr oprietary 737NG -800W/winglets flight simulator data 1036, and consistent with the\nviews of the parties, this should not be examined among the NASA aeronautics R&D measures\nbefore us. Accordingly, as there is no evidence that any procurement contracts, cooperat ive\nagreements, or Space Act Agreements with Boeing were funded by the Strategic Capabilities\nAssets Program, we do not consider the Strategic Capabilities Assets Program as part of our\nassessment.\n8.71. Finally, with respect to the Integrated Systems Research P rogram, the United States argues\nthat certain funds were used by NASA to make purchases of items from Boeing, which it describes\nas \"commercial, open -market items \" that did not involve any research on Boeing 's part or the\nprovision of facilities, equipment or employees to Boeing.1037 It submits that these transactions are\nnot within the Panel 's terms of reference. The European Union does not appear to dispute this.\nAccordingly, we find that these transactions should also not be examined as part of the measures\nat issue under the NASA aeronautics R&D programmes before us. As the United States has\nidentified obligations with Boeing pursuant to other procurement contracts funded under the\nIntegrated Systems Research Program, our assessment of the measures will add ress those\ncontracts.\n8.72. Accordingly, in light of the explanations in paragraphs 8.68-8.71 above, the NASA\naeronautics R&D measures that we examine in this Section are payments and acce ss to facilities,\nequipment, and employees provided to Boeing under post -2006 procurement contracts,\ncooperative agreements, and Space Act Agreements between NASA and Boeing funded under the\nfour NASA aeronautics R&D programmes identified in (a) through (d) of paragraph 8.64 above, i.e.\nthe Fundamental Aeronautics Research Program, the Integrated Systems Research Program, the\nAviation Safety Program and the Aeronautics Test Program.\n\n1031 United States' first written submission, para. 193. Contract NNL12AA55P was initially identified as\nExhibit USA-103 and was subsequently submitted as Exhibit USA-576. (See United States' comments to\nEuropean Union's response to Panel question No. 89).\n1032 United States' first written submission, para. 193.\n1033 European Union's second written submission, para. 217.\n1034 European Union's second written submission, para. 217 (referring to the amount of the annual\nbudgeted NASA aeronautics R&D programme funding that it allocates to Boeing as its \"top-down\" estimate of\nthe value of the financial contribution provided to Boeing). See NASA Subsidies to Boeing's LCA Division\n(Exhibit EU-36), p. 8.\n1035 European Union's response to Panel question No. 89, para. 99.\n1036 See NASA Purchase Order NNL12AA55P, (Exhibit USA-576) (BCI), pp. 1 and 15.\n1037 United States' first written submission, para. 187. The United States refers to: (a) a ceramic matrix\ncomposite sandwich structure test coupon for [[HSBI]] (NASA Purchase Order NNC11QA17P, (Exhibit\nUSA-98) (HSBI), pp. 1 and 18); (b) a ceramic matrix composite sandwich structures for exhaust systems for\n[[HSBI]] (allegedly purchase pursuant to Purchase Order NNC11VA84P, which was not submitted as an\nexhibit); and (c) an additional order of ceramic matrix composite sandwich structures for [[HSBI]] (NASA\nPurchase Order NNC11VA99P, (Exhibit USA-99) (HSBI), p. 2).\n\n8.2.2.2.3 The instruments and processes through which R&D is commissioned under\nNASA's aeronautics R&D programmes\n8.73. The Space Act authorizes NASA to enter into certain types of instruments to fund R&D with\ncontractors and academic institutions, including awards made in the form of grants, coopera tive\nagreements, or contracts depending on the nature of the submitting organization or other specific\nrequirements.1038\n8.74. NASA procurement contracts are the appropriate instrument in cases where the principal\npurpose is to acquire goods and services for the d irect bene fit or use of the United States\nGovernment.1039 Procurement c ontracts are subject to the U.S. Federal Acquisition Regulation\n(FAR).1040\n8.75. Indefinite Delivery/Indefinite Quantity ( IDIQ) procurement contracts are \"umbrella\"\ncontracts that provide for the p rocurement of an indefinite quantity of supplies and/or services\nwhen the exact time or quantity of futu re deliveries are not known at the time of the award of the\ncontract. These arrangements contain statements of work that describe the general scope, nat ure,\ncomplexity and purpose of the contract. Work is awarded under IDIQ contracts pursuant to\nparticular \"task orders\" (or \"delivery orders\"), which typically contain more detailed statements of\nwork.1041 Task orders and delivery orders are not themselves ind ependent contracts, as they rely\non the body of the IDIQ contract for many of their provisions. 1042 Single or multiple task orders\nmay be awarded under IDIQ contracts.\n8.76. NASA also awards contracts through Basic Ordering Agreements (BOAs) , which are\nframework agreements setting certain terms of an acquisition in advance of the issuance of the\nrequirements applicable to the acquisition. 1043 Such terms may cover a description of supplies and\nservices to be procured and the method for pricing, issuing, and delivering contracts/orders under\nthe agreement. This mechanism enables NASA to focus on the critical contract terms for each work\npackage and implement them through a task order, rather than go through the expense of\nnegotiating a new contract each time NASA contrac ts for research.1044 As a legal matter, however,\nBOAs are not contracts by themselves because there is no consideration until the first task is\nawarded.1045\n8.77. NASA cooperative agreements are used where the \"principal purpose is the transfer of\nanything of value to the recipient to accomplish a public purpose of support or stimulation \" and\nwhere \"substantial involvement is anticipated between NASA and the recipient \".1046 \"Substantial\ninvolvement\" may include an \"active NASA role in collaborative relations, access to a NASA site or\nequipment, or sharing NASA facilities and personnel \".1047 Cooperative agreements also provide for\nthe possibility of \"joint funding \" by NASA and participating private entities as well as non -cash\ncontributions.1048\n\n1038 NASA Policy Directive on Authority to Enter into Space Act Agreements, NPD 1050.1I\n(23 December 2008), (Exhibit USA-303).\n1039 See Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 593 and accompanying\nfns; and Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.945 and accompanying fns.\n1040 See e.g. NASA, Grant and Cooperative Agreement Handbook, Part 1260, (November 2014), (Exhibit\nEU-1369), p. A-10.\n1041 United States' first written submission, para. 108.\n1042 United States' response to Panel question No. 95, para. 166.\n1043 United States' first written submission, para. 122; response to Panel question No. 95, para. 166.\n1044 United States' first written submission, para. 122.\n1045 United States' response to Panel question No. 95, para. 166.\n1046 NASA, Grant and Cooperative Agreement Handbook, Part 1260, (November 2014), (Exhibit\nEU-1369), p. A-11 (referring to United States Code of Federal Regulations, Title 14, section 12.60.12(d)). In\nidentifying the contracts and agreements at issue between NASA and Boeing in the original proceeding, the\npanel noted that \"in a few cases\", transactions between NASA and Boeing under the original NASA aeronautics\nR&D programmes were undertaken pursuant to cooperative agreements. (Panel Report, US – Large Civil\nAircraft (2nd complaint), fn 2408, para. 7.945).\n1047 NASA, Grant and Cooperative Agreement Handbook, Part 1260, (November 2014), (Exhibit\nEU-1369), p. A-11 (referring to United States Code of Federal Regulations, Title 14, section 12.60.12(d)(1)).\n1048 United States' second written submission, fn 220, para. 158 (\"cooperative agreements are the only\ninstruments used by NASA that provide for 'joint funding,' and they did not represent a significant share of\nNASA's payments to Boeing at any point from 1989 to the present\"). See also NASA, Grant and Cooperative\n\n8.78. NASA may enter into Space Act Agre ements pursuant to its \"other transactions\" authority\nunder the Space Act, in order to \"utilize the broad authority granted to the Agency in the Space\nAct to further the Agency 's missions\".1049 Policy Directive 1050.1H describes these arrangements\nas follows:\nSpace Act Agreements … Establish a set of legally enforceable promises between\nNASA and the other party to the Agreement (herein \"Agreement Partner \"). Such\nAgreements constitute Agency commitments of resources (including personnel,\nfunding, services, equipment, expertise, information, or facilities) to accomplish stated\nobjectives of a joint undertaking with an Agreement Partner. The Agreement Partner\ncan be a U .S. or foreign person or entity, an educational institution, a Federal, state ,\nor local governmental unit, a foreign government, or an international organization.1050\n8.79. As the panel explained in the original proceeding, NASA may enter into reimbursable,\nnon-reimbursable and partially-reimbursable Space Act Agreements. Under fully reimbursable\nSpace Act Ag reements, full reimbursement is required for goods , services or facilities provided,\nwhile alternatively, NASA has authority to accept partial reimbursement, or no reimbursement\nwhere activities undertaken pursuant to the agreement offer corresponding \"benefits to NASA\", or\nNASA and an agreement partner undertake mutually beneficial activity that furthers the Agency 's\nmissions.1051\n8.80. NASA solicits proposals for research from contractors and universities through various\nmechanisms depending on the objectives of research, including through the issuance of NASA\nResearch Announcements (NRAs). NRAs may be used to solicit proposals for foundational research\nin areas relevant to enhancing NASA's core competencies, including through the award of\ncontracts, grants or cooperative agreements. NRA solicitations are released by NASA Headquarters\nthrough the Web-based NASA Solicitation and Proposal Integrated Review and Evaluation System.\nAll NRA technical work is defined and managed at NASA centr es by project teams within NAS A\nprogramme areas (e.g. Aviation Safety, Fundamental Aeronautics, and Aeronautics Test Program).\nNRA awards originate from the centr es. Competition for NRAs awards is described as \"full and\nopen\" to educational institutions, industry and non -profit organiz ations.1052 Under this process,\nNASA issues requests for information (RFIs) relating to research goals identified in connection with\ntechnological roadmaps. NASA develops feedback based on RFIs it receives to develop NASA\ncentre technical proposals. Thereafte r, an NRA is issued to solicit proposals from the external\ncommunity to undertake research identified in NASA centr e proposals, after which NASA selects\nproposals for funding. 1053 The United States has identified discrete NRAs that NASA has issued in\nrelation to the challenged aeronautics R&D programmes since 2006. 1054 The United States has\nexplained that NRAs are only one of the vehicles that NASA uses to solicit offers from contractors\nand universities (for instance, the United States explains that procurement contracts such as IDIQ\ncontracts are used to acquire services or goods for the U.S. Government). The United States notes\nthat a number of solicitations by NASA outside the NRA process resulted in the award of contracts\nwith Boeing during the 2007-2012 period.1055\n\nAgreement Handbook, Part 1260, (November 2014), (Exhibit EU-1369), p. A-14 (referring to United States\nCode of Federal Regulations, title 14, section 12.60.14) (\"non-monetary (zero dollar) grants or cooperative\nagreements shall not be used, except for no-cost extensions\").\n1049 NASA Policy Directive on Authority to Enter into Space Act Agreements, NPD 1050.1I\n(23 December 2008), (Exhibit USA-303); and Panel Report, US – Large Civil Aircraft (2nd complaint),\npara. 7.945 and accompanying fns. See also NASA, Space Act Agreements Guide, Advisory Implementing\nInstruction NAII 1050-1C, (25 February 2013), section 2.2.10, (Exhibit EU-1037), pp. 5 and 6.\n1050 NASA Policy Directive on Authority to Enter into Space Act Agreements, NPD 1050.1I\n(23 December 2008), (Exhibit USA-303).\n1051 See Panel Report, US – Large Civil Aircraft (2nd complaint), fn 2410, para. 7.945. See also NASA,\nSpace Act Agreements Guide, Advisory Implementing Instruction NAII 1050-1C, (25 February 2013),\nsection 2.2.10, (Exhibit EU-1037), pp. 13-16; NASA Policy Directive on Authority to Enter into Space Act\nAgreements, NPD 1050.1I (23 December 2008), (Exhibit USA-303).\n1052 See NASA website, available at <http://www.aeronautics.nasa.gov/nra.htm>, accessed\n29 August 2016.\n1053 United States' first written submission, para. 105.\n1054 United States' first written submission, paras. 105-107.\n1055 United States response to Panel question No. 95, paras. 167 and 168.\n\n8.2.2.3 Whether there is a financial contribution\n8.2.2.3.1 Main arguments of the parties and third parties\n8.81. The European Union argues that NASA has made \"no significant changes since 2006 \"1056 to\nthe nature of procurements contracts and agreements that it enters into with Boeing under the\nchallenged aeronautics R&D programmes, and thus, the Panel should conclude that the payments\nand access to government facilities, equipment, and employees provided to Boeing under the\npost-2006 NASA aeronautics R&D measures at issue are s imilarly financial contributions under\nArticle 1.1(a)(1) of the SCM Agreement.1057\n8.82. The European Union argues that the NASA aeronautics R&D measures share many of the\nsame characteristics that led the Appellate Body to conclude that the NASA procurement contra cts\nand DOD assistance instruments before the original panel constitute d transactions that were \"akin\nto a species of joint venture \", which were analogous to a type of equity infusion, and therefore\nconstituted financial contributions within the meaning of Article 1.1(a)(1) of the SCM Agreement.\nSpecifically, the European Union considers that payments under the challenged NASA aeronautics\nR&D measures qualify as a direct transfer of funds within the meaning of Article 1.1(a)(1)(i) , while\nthe provision of access to facilities, equipment, and employees qualifies as a government provision\nof goods and services other than general infrastructure under Article 1.1(a)(1)(iii) of the SCM\nAgreement.1058\n8.83. The European Union contends that, l ike the NASA procurement contrac ts and DOD\nassistance instruments before the original panel, the transactions under the current NASA\naeronautics R&D measures involve payments by NASA , in the case of procurement contracts, as\nwell as the commitment of non -monetary resources by both NASA a nd Boeing under procurement\ncontracts, cooperative agreements, and Space Act Agreements . In addition, the subjects to be\nresearched are often determined collaboratively between NASA and Boeing, and the fruits of the\nresearch are shared between the parties. Thus, the European Union considers that the transactions\nunder the post-2006 NASA aeronautics R&D measures are akin to a species of joint venture. The\nEuropean Union disputes the United States ' contention that an alleged overhaul 1059 of NASA\naeronautics R&D practices should have any impact on the Panel 's assessment of whether the\npost-2006 NASA aeronautics R&D measures involve financial contributions. Contrary to the\nUnited States' assertions, the European Union argues that NASA continues to support the needs of\nthe U.S. aviation industry with the goal of accelerating the development of advanced technologies\nfor practical application. 1060 The E uropean Union rejects the suggestion that there is no longer\ncollaboration in determining research to be undertaken. 1061 The European Union additionally\ndisputes that the United States has made any changes to its dissemination policies and asserts\nthat NASA continues to restrict the disclosure of data .1062 The European Union also contests that\nthere have not been any meaningful changes to NASA policies to enable foreign companies access\nto NASA facilities. 1063 Finally, it submits that the value of payments and support to Boeing has\nincreased since the end of the implementation period and any suggestion otherwise is based on a\nflawed and overly-narrow conception that is inconsistent with the approach followed by the panel\nand the Appellate Body.1064\n8.84. In addition, the European Union contends that the transactions in question possess the\nsame features that led the Appellate Body to conclude t hat the NASA procurement contracts and\nDOD assistance instruments before the original panel were analogous to equity infusions. In this\n\n1056 European Union's second written submission, para. 242.\n1057 European Union's first written submission, para. 60.\n1058 European Union's first written submission, paras. 169-177; second written submission,\nparas. 231-238 and 242-249. See also European Union's response to Panel question No. 14, paras. 98 and 99.\n1059 The European Union submits that the various changes the United States has identified as\ncompliance measures were part of a process that culminated in January 2006, \"in the middle of the original\nreference period – and yet had no effect on the findings of the original panel or Appellate Body\".\n(European Union's second written submission, paras. 177 and 178).\n1060 European Union's second written submission, paras. 177-187.\n1061 European Union's second written submission, para. 185; comments on United States' response to\nPanel question No. 94, paras. 243-250.\n1062 European Union's second written submission, paras. 190-193.\n1063 European Union's second written submission, para. 198.\n1064 European Union's second written submission, paras. 258-269.\n\nregard, under the post -2006 NASA aeronautics R&D measures, funding is provided in expectation\nof some kind of return in the form of scientific and technical information, discoveries, and data\nexpected to result from the research performed; there is no certainty that research will be\nsuccessful; the funder's risks are limited to the amount of money it commits and the opportunity\ncost of other support it provides; and NASA as the funder contributes to the project by providing\naccess to facilities, equipment, and employees, as some equity investors would also do.1065\n8.85. In light of its position that the NASA aeronautics R&D measures at issue are akin to a\nspecies of joint venture and analogous to a type of equity infusion and that therefore the\npayments and access to facilities, equipment , and employees provided under these measures are\nfinancial contributions within the meaning of A rticle 1.1(a), the European Union submits that the\nPanel need not consider the United States' arguments that the transactions may be characterized\nas purchases of services, or that transactions properly characterized as \"purchases of services\" are\nexcluded from the scope of the SCM Agreement.\n8.86. Moreover, the European Union argues that the United States has failed to demonstrate on\nthe basis of a proper Vienna Convention analysis of Article 1.1(a)(1) that transactions properly\ncharacterized as purchases of se rvices are excluded from the scope of that provision. In light of\nthe Appellate Body 's decision to declare the original panel's interpretation of Article 1.1(a)(1)\n\"moot and of no legal effect \", there is no basis for the United States to argue that the App ellate\nBody would have agreed with the panel 's reasoning as to why purchases of services are excluded\nfrom the scope of Article 1.1(a)(1).1066\n8.87. The European Union also argues, in the alternative, that \"the transfer to Boeing of patent\nand other intellectual pr operty rights in the technologies and data developed under the NASA\naeronautics R&D programmes additionally constitutes a provision of 'goods … other than general\ninfrastructure' within the meaning of Article 1.1(a)(1)(iii) of the SCM Agreement \".1067 The\nEuropean Union requests the Panel not to consider this \"alternative\" conception of the financial\ncontribution \"unless it rejects the European Union 's primary contentions, with respect to the\ncharacterisation of the challenged aeronautics R&D measures\".1068\n8.88. The United States argues that the post-2006 cooperative agreements and Space Act\nAgreements should be treated as joint ventures for purposes of the financial contribution analysis ,\nwhile the transactions between NASA and Boeing under post -2006 procurement contra cts are\nproperly characterized as purchases of services, which are not financial contributions and therefore\nare outside the scope of the SCM Agreement.\n8.89. The United States argues that the Appellate Body in the original proceeding identified six\nfeatures of the pre -2007 NASA procurement contracts that warranted their characterization as\n\"joint ventures\" and submits that post -2006 Space Act Agreements and cooperative agreements\nshare many of the se same attributes. 1069 This includes the pooling of non -monetary resources,\nwith Boeing sometimes making payments to NASA, while NASA provides Boeing with access to\nNASA facilities and equipment. In addition, although NASA no longer uses \"limited exclusive rights\ndata\" ( LERD) clauses, Boeing has an opportunity to exploit technology resulting from work\nperformed under agreements .1070 Accordingly, the post -2006 Space Act Agreements are best\ncharacterized as transactions that are \"akin to a species of joint venture \". The United States\nconfirms that NASA cooperative agreements are the only NASA arrangements that provide for\n\"joint funding\" by NASA and participating private entities as well as non -cash contributions1071 and\n\n1065 European Union's first written submission, para. 174; second written submission, paras. 165-186,\n234, and 244-246.\n1066 See European Union's second written submission, paras. 250-252; response to Panel question\nNo. 14, para. 101; and comments on United States' response to Panel question No. 14, paras. 60-62.\n1067 European Union's first written submission, para. 177 (emphasis added). The European Union has\nindicated that it is not challenging the provision of patent rights as a separate subsidy distinct from the NASA\naeronautics R&D contracts from which they arise, as it did before the original panel. (European Union's second\nwritten submission, para. 257).\n1068 European Union's response to Panel question No. 32, para. 197. The European Union explains that\nthis is an alternative manner of bringing the R&D contracts within the scope of Article 1.1(a)(1) of the SCM\nAgreement.\n1069 United States' first written submission, paras. 214-221.\n1070 United States' first written submission, paras. 214-219.\n1071 United States' second written submission, fn 220 and para. 158.\n\nas such, payments under these arrangements constitute a direct transfer of funds within the\nmeaning of Article 1 .1(a)(1)(i) of the SCM Agreement, while any provision s of goods and services\nconstitute financial contributions under Article 1.1(a)(1)(iii). The United States notes that NASA\nmakes only in -kind contri butions under Space Act Agreements , and thus, these arr angements\nconstitute financial contributions in the form of provisions of goods and services under\nArticle 1.1(a)(1)(iii), but there is no direct transfer of funds under Article 1.1(a)(1).1072\n8.90. As to the post -2006 NASA procurement contracts , the United States argues that the\ncharacteristics of these measure s differ in a number of significant respects from the pre -2007\nNASA procurement contracts , and that a thorough analysis of all of the evidence demonstrates\nthat the post -2006 NASA procurement contracts are pu rchases of services. 1073 The United States\nargues, to begin, that most of the features of the pre -2007 NASA procurement contracts that led\nthe Appellate Body to characterize them as \"akin to a species of joint venture \" do not apply to the\npost-2006 NASA procu rement contracts.1074 The United States argues in this regard that: (a) the\nsubjects to be researched are no longer determined collaboratively between NASA and industry,\nrather, the reformulation of ARMD research programme through the NRA process means that\nNASA decides research topics on its own; (b) the value of any access to NASA equipment,\nfacilities, and employees is far lower under the post -2006 NASA procurement contracts than the\npanel found under the pre -2007 procurement contracts, and the European Uni on has provided no\nevidence that research teams engaged under post -2006 NASA procurement contracts mixed\nindustry and NASA employees; (c) there is no evidence of any post -2006 procurement contract in\nwhich the value of any access to NASA facilities, equipm ent or employees is significantly higher\nthan the value of the payments; (d) while the pre -2007 procurement contracts were found to\ninvolve NASA and Boeing pooling non -monetary resources and employees, most of the post -2006\nprocurement contracts do not pro vide for facilities or equipment, and none of them refer to a\n\"pooling\" of employees; (e) while Boeing still does not pay any royalties to NASA for commercial\nrewards arising from the scientific and technical output of the research where the Boeing\nemployee, working alone or jointly with a NASA employee, performs the work that results in the\ninvention, this is not the case where a NASA employee invents the invention. In that case, NASA\nowns the invention and Boeing would have to pay a royalty; and (f) NASA has discontinued the\nuse of LERD clauses . In the original proceeding such clauses were found to give Boeing the\nexclusive right s to exploit technology resulting from pre -2007 NASA procurement contracts in\nwhich Boeing was contributing a significant amount of its own resources to the research efforts.1075\n8.91. The United States argues, based on the above differences between the characteristics of the\npre-2007 NASA procurement contracts that led to the Appellate Body 's characterization of them as\n\"akin to a species o f joint venture \", and the characteristics of the post -2006 NASA procurement\ncontracts, that the European Union has failed to meet its burden of proof to establish that the\npost-2006 NASA procurement contracts are financial contributions. Moreover, the abov e\nconsiderations, along with other evidence, as described in greater detail below, support a\nconclusion that the transactions are most appropriately characterized as purchases of services.\n8.92. In this regard, the United States argues that, following an \"overhaul\" of NASA research\npractices in 2006, NASA changed its approach to research contracting, both in terms of the nature\nof the research commissioned and the way it is conducted. According to the United States, NASA 's\nresearch contracting is no longer the collaborative, industry-centric model that led to the Appellate\nBody's findings in the original proceeding. 1076 NASA has shifted its research focus away from\n\n1072 United States' first written submission, para. 221.\n1073 United States' first written submission, para. 223.\n1074 United States' first written submission, para. 224. The six features are: (a) the subjects to be\nresearched are determined collaboratively between NASA and the U.S. aeronautics industry; (b) some of the\ntransactions involved NASA providing Boeing with access to its equipment, facilities and employees, and some\ncontracts awarded to Boeing provided for research teams that included NASA employees; (c) the value of the\naccess to NASA facilities, equipment, and employees was significantly higher than the value of payments under\nthe procurement contracts; (d) the transactions involve NASA and Boeing pooling non-monetary resources and\nemployees; (e) scientific and technical information, discoveries and data are among the expected outcomes of\nthe research jointly undertaken by Boeing and NASA and Boeing is not required to pay any royalties to NASA\nfor any resulting commercial rewards; and (f) LERD clauses give Boeing an exclusive right to exploit technology\nresulting from contracts in which they were contributing a significant amount of their own resources to contract\nresearch efforts. (United States' first written submission, paras. 103 and 213)\n1075 United States' first written submission, para. 224.\n1076 United States' second written submission, paras. 104, 124, and 220.\n\ntechnology demonstration toward longer -term fundamental research. NASA has also removed\nreferences to increasing industry competitiveness as an evaluation criterion and has reformulated\nthe NASA aeronautics research objectives as aiming at \"producing broad public goods of the kind\nthat governments routinely seek, with a substantial focus on building and im proving\ninfrastructure\".1077 NASA has reduced the role of contractors in setting research priorities under\nthe NRA process. 1078 In addition, NASA has changed its dissemination policies to remove\nrestrictions that had in the past limited dissemination of NASA -funded research; for example, by\neliminating the use of LERD clauses under post -2006 procurement contracts. NASA has also\nchanged its facilities policies to permit access by foreign entities on the same basis as U.S.\ncompanies.1079 The United States also asserts that NASA has \"more than halved \" funding for\naeronautics research in the FY 2007-FY 2012 period compared to FY 1989-FY 2006. Moreover,\nNASA has reduced the value of access to equipment, facilities, and employees in post -2006\nprocurement contracts such tha t the \"primary contribution\" from NASA involves payments, while\non the contractor side, Boeing 's contribution now \"consists of services, as witnessed by the\ndescription of the work in the contracts \".1080 As a result of these changes, the United States\nmaintains that the transactions under the challenged post -2006 procurement contracts differ in\ncritical respects from the characteristics the Appellate Body identified with respect to the pre -2007\nNASA procurement contracts.\n8.93. The United States argues that, in ligh t of the above factors, the European Union has failed\nto establish that the payments and provision of facilities, equipment, and employees to Boeing\nthrough any of the post-2006 procurement contracts constitute financial contributions within the\nmeaning of Article 1.1(a)(1) of the SCM Agreement. The United States argues that the\nEuropean Union's analysis addresses only whether the NASA procurement contracts can possibly\nbe characterized as joint ventures, without also examining whether they would more appropriately\nbe characterized as purchases of services. The United States considers that, following the guidance\nfrom the Appellate Body, a panel should take account of all of the relevant characteristics of the\nmeasure, and the features which are most central to the measure itself. As the Appellate Body\nacknowledged in Canada – Renewable Energy / Canada – Feed-in Tariff Program, one transaction\nmay have multiple aspects and a panel 's analysis must take those complexities into account. 1081\nThus, even if the Europe an Union were correct that the NASA procurement contracts had\ncharacteristics that were akin to a joint venture, the Panel would still need to weigh the relative\nmerits of each possible characterization, which the European Union's arguments fail to do.1082\n8.94. The United States argues that the post -2006 NASA procurement contracts are most\nappropriately characterized as purchases of services. This is because, on the NASA side of the\ntransaction, the primary contribution consists of payments to Boeing, with provisio ns of facilities\nand equipment being minimal, and with no provision for input from NASA personnel other than as\nreviewers of results produced by the contractors. On the Boeing side of the transaction, the\nprimary contribution consists of services, as witne ssed by the descriptions of the work in the\ncontracts.1083 The United States refers to the acceptance by the panel and Appellate Body in\nCanada – Renewable Energy / Canada – Feed-in Tariff Program that a purchase of goods occurs\nwhen a government or public bo dy obtains possession (including in the form of an entitlement)\nover a good by making a payment of some kind (monetary or otherwise). 1084 Under the same\nlogic, when a government obtains an entitlement to the supply of a service, by making a payment\nof some ki nd, there is a purchase of a service. This is what happens under the post -2006 NASA\nprocurement contracts: NASA pays money and obtains entitlement to the performance of services.\n\n1077 United States' first written submission, para. 104; second written submission, paras. 124-126.\n1078 United States' response to Panel question No. 15, para. 41.\n1079 This change was effected by NASA Policy Directive 1370.1, issued on 26 October 2007, under which,\naccording to the United States, Airbus has entered into reimbursable Space Act Agreements for the use of wind\ntunnels. (United States' first written submission, paras. 1 and 110; second written submission, paras. 124 and\n224; and NASA Policy Directive 1370.1 (26 October 2007), (Exhibit USA-256)).\n1080 United States' first written submission, paras. 224 and 225; second written submission, paras. 218\nand 224.\n1081 United States' second written submission, para. 216 (referring to Appellate Body Report, US – Large\nCivil Aircraft (2nd complaint), para. 586).\n1082 United States' second written submission, para. 216.\n1083 United States' first written submission, para. 225; second written submission, paras. 214 and 225.\n1084 United States' first written submission, para. 226 (referring to Appellate Body Reports, Canada –\nRenewable Energy / Canada – Feed-in Tariff Program, para. 5.123).\n\nThe post -2006 NASA procurement contracts are therefore purchases of services. 1085 The\nUnited States considers that the original panel 's analysis of the scope of Article 1.1(a)(1) of the\nSCM Agreement, as excluding transactions properly characterized as purchases of services,\nprovides compelling reasons to conclude that the post -2006 NASA procurement contracts are not\nfinancial contributions within the meaning of Article 1.1(a)(1) of the SCM Agreement.1086\n8.95. Finally, the United States argues that the European Union has failed to establish that\nintellectual property rights accruing to Boeing pursuant to activities conducted under NASA\ncontracts and agreements are financial contributions. First, as a factual matter, the United States\nargues that there is no transfer of intellectual property rights to Boeing under U.S. law, as the\npatent is the property of the person who makes the invention, and NASA does not transfer any\npatent to Boeing. Second, intellectual property is not a \"good\" and therefore cannot be the subject\nof a financial contribution in the form of a government provision of goods w ithin the meaning of\nArticle 1.1(a)(1)(iii) of the SCM Agreement. Third, any intellectual property rights developed as a\nresult of work under a NASA procurement contract are an effect of the contract, not an\nindependent financial contribution.1087\n8.96. Brazil considers that an interpretation of Article 1.1(a)(1) of the SCM Agreement that\nexcludes a priori government R&D measures that involve purchases of services from the scope of\nthe SCM Agreement would potentially undermine the effectiveness of the SCM Agreement. 1088\nBrazil argues that \"monetary contributions\" clearly fall within the meaning of a direct transfer of\nfunds under Article 1.1(a)(1)(i). A monetary contribution does not become something else simply\nbecause the funds may be repaid at a later date (such as f or a loan) or because other\nconsideration may be provided in return (such as equity or intellectual property). The significance\nand potentially distortive nature of a monetary contribution does not change by virtue of the fact\nthat the contribution is made in exchange for a service, as opposed to something else of value. In\nthis case, the Panel may, depending on the facts and circumstances surrounding the relevant\ntransactions, find that some or all of the monetary payment s by the U.S. Government to Boeing\nunder a particular R&D contract constitute a de facto grant or other type of direct transfer of\nfunds, and therefore a financial contribution under Article 1.1(a)(1)(i) of the SCM Agreement.1089\n8.97. Canada argues that, where a measure can be properly characteriz ed as the purchase of a\nservice, it should be excluded from the scope of financial contribution in Article 1.1(a)(1).1090 There\nmay be instances, however, where a measure that can properl y be characterized as a purchase of\na service has more than that one asp ect, and where the other aspect or aspects may fall within\nArticle 1.1(a)(1). To determine whether a measure includes additional aspects or elements, apart\nfrom the purchase of a service, a panel should consider the rights and obligations of the\ngovernment and the private entity, the financial conditions of the transactions under the measure\nand the balance of advantages between the parties.1091\n8.98. Japan argues that government measures involving payments in exchange for a provision of\nservices are not a priori excluded from the scope of Article 1.1(a)(1) of the SCM Agreement, as\nsuch an interpretation could create an \"enormous loophole\" in coverage and thereby undermine\nthe effectiveness of the SCM Agreement.1092 Japan argues that the drafters of the SCM Agreement,\n\n1085 United States first written submission, para. 226. The United States argues that the changes in the\nrelevant characteristics of the post-2006 procurement contracts compared to their pre-2007 counterparts\n\"shifted the balance of the transactions to the point where for most contracts, NASA's contribution consisted\nalmost exclusively of funds, and Boeing's contribution almost exclusively of services. This balance is\ncharacteristic of a purchase of services\". (United States' second written submission, para. 214).\n1086 United States' first written submission, paras. 93-97, 102, 104-111, 211, and 222-230; second\nwritten submission, paras. 226-231. While recognizing that the Appellate Body declared the original panel's\ninterpretation of Article 1.1(a)(1) \"moot\", owing to the Appellate Body's characterization of pre-2007 NASA\nprocurements and DOD assistance instruments as similar to joint ventures, the United States argues that the\npanel's interpretation of Article 1.1(a)(1) as regards purchases of services may nevertheless be considered in\nthis proceeding for the persuasiveness of the reasoning. (United States' first written submission, para. 230;\nsecond written submission, paras. 210 and 231).\n1087 United States' first written submission, paras. 231-235; second written submission, paras. 443-447.\n1088 Brazil's third-party submission, para. 88; third-party statement, para. 7; third-party response to\nPanel question No. 2.1, para. 4.\n1089 Brazil's third-party submission, para. 92; third-party statement, paras. 9-13.\n1090 Canada' third-party response to Panel question No. 2.1, para. 18.\n1091 Canada' third-party response to Panel question No. 2.1, para. 19.\n1092 Japan's third-party statement, paras. 6-9; third-party response to Panel question No. 5, para. 15.\n\neither in the travaux préparatoires or elsewhere, did not indicate any intention to exclude\npurchases of services from the scope of Article 1.1(a)(1). 1093 Japan considers that a composite\ntransaction that could potentially be a direct transfer of funds, in addition to a purchase of services\nwould involve financing beyond the remuneration or the cost paid in exchange for the provision of\na service.1094\n8.99. Korea argues that aspects of a transaction may be considered a financial contribution within\nthe meaning of Articl e 1.1(a)(1) of the SCM Agreement to the extent that those aspects are\nsubstantively comparable to at least one of the categories of government actions that are\nidentified within the meaning of Article 1.1(a)(1). In assessing the existence of a financial\ncontribution, Korea submits that a panel should look beyond the formal financial structure of a\ngovernment measure and assess the underlying characteristics and design of the measure.1095\n8.2.2.3.2 Evaluation by the Panel\n8.100. The question before us is whether payments and ac cess to facilities, equipment, and\nemployees provided by NASA to Boeing pursuant to post-2006 NASA procurement contracts,\ncooperative agreements and (non-reimbursable and partially-reimbursable) Space Act Agreements\nfunded through four NASA aeronautics R&D programmes (the Fundamental Aeronautics Program;\nthe Integrated Systems Research Program; the Aviation Safety Program; and the Aeronautics Test\nProgram) constitute financial contributions within the meaning of Article 1 of the SCM Agreement.\n8.101. The United States has not included these measures in its request for preliminary rulings of\n13 November 2012 and t here is no disagreement between the parties that the post -2006 NASA\naeronautics R&D measures are within the scope of this proceeding. Moreover, the United States\nrefers to actions taken by NASA with respect to the post -2006 measures in its substantive\nargumentation as to how it has withdrawn the subsidies at issue. In its Compliance\nCommunication, the United States indicates that NASA has modified the right s accorded to the\nparties under all of the NASA contracts covered by the DSB recommendations and rulings and that\n\"NASA has made identical modifications, as necessary, with regard to contracts subsequent to\nthose covered by the recommendations and rulings of the DSB, without prejudice to the U.S. view\nthat those contracts were not subsidies causing adverse effects to EU interests\". 1096 The\nUnited States considers that \"NASA has withdrawn the subsidies determined to exist, both with\nregard to the pre -2007 contracts covered by the recommendations and rulings of the DSB and\nwith regard to subsequent contracts and agreements.\"1097 Although the United States regards only\nthe pre-2007 NASA procurement contracts as being covered by the DSB recommendations and\nrulings, it is clear that it views the steps it has taken with respect to the post -2006 contracts as a\nwithdrawal of the subsidies determined to exist. In any event, we consider that, in light of the\nsimilarity and continuity that exist between the pre -2007 and post -2006 NASA aeronautics R&D\nmeasures, in terms of legal instruments and legal basis, the objectives pursued and the\nprogrammes under which they are funded, a review of whether the United States has complied\nwith Article 7.8 that excluded the post -2006 NASA a eronautics R&D measures would not be\nmeaningful.\n8.2.2.3.2.1 Post-2006 NASA cooperative agreements and Space Act Agreements\n8.102. It is not in dispute between the parties that the post -2006 cooperative agreements and\nSpace Act Agreements at issue in this proceeding are properly characterized as joint ventures, and\nthat transactions pursuant to these agreements constitute financial contributions within the\nmeaning of Article 1.1(a)(1) of the SCM Agreement. 1098 The United States does not argue that it\nhas withdrawn the subsidy by taking actions that would affect the legal characterization of these\ntransactions as financial contributions. Rather, the United States argues that these transactions do\n\n1093 Japan further notes that Article XV:1 of the GATS mandates negotiations on multilateral disciplines\n\"to avoid distortive effects of subsidies on trade in services\", and given this obligation, Japan considers that\npurchases of services \"may have been omitted from Article 1.1(a)(1) of the SCM Agreement out of precaution\nso as not to prejudge the outcomes of prospective negotiations on subsidies disciplines pursuant to Article XV\nof the GATS\". (Japan's third-party statement, para. 8).\n1094 Japan's third-party response to Panel question No. 5, para. 16.\n1095 Korea's third-party submission, paras. 16 and 17; third-party statement, paras. 10 and 11.\n1097 United States' second written submission, para. 108.\n1098 See, para. 8.88 above.\n\nnot confer a benefit within the meaning of Article 1.1(b). More specifically, we cons ider that :\n(a) payments made to Boeing under the post -2006 cooperative agreements at issue are direct\ntransfers of funds within the meaning of Article 1.1(a)(1)(i); and (b) the provision of access to\nNASA facilities, equipment, and employees to Boeing purs uant to the post -2006 cooperative\nagreements and Space Act Agreements at issue constitutes the provision of goods or services\nother than general infrastructure within the meaning of Article 1.1(a)(1)(iii) of the SCM\nAgreement.\n8.103. We therefore find that the pa yments provided by NASA to Boeing under\npost-2006 cooperative agreements , and the access to facilities, equipment, and\nemployees provided by NASA to Boeing under the post-2006 cooperative agreements\nand Space Act Agreements , funded under four NASA aeronaut ics R&D programmes\n(Fundamental Aeronautics Program; Integrated Systems Research Program; Aviation\nSafety Program; and Aeronautics Test Program) , are financial contributions within the\nmeaning of Article 1.1(a)(1) of the SCM Agreement. Specifically, the pa yments provided\nby NASA constitute financial contributions as direct transfer s of funds , within the\nmeaning of Article 1.1(a)(1)(i) of the SCM Agreement , and the provision of access to\nfacilities, equipment, and employees qualifies as a government provisio n of goods or\nservices other than general infrastructure, within the meaning of Article 1.1(a)(1)(iii) of\nthe SCM Agreement.\n8.2.2.3.2.2 Post-2006 NASA procurement contracts\n8.104. The parties disagree as to whether transactions under the post-2006 NASA procurement\ncontracts between NASA and Boeing constitute financial contributions.\n8.105. We will examine the post -2006 NASA procurement contracts to determine their relevant\ncharacteristics, based on an evaluation of the competing arg uments advanced by the\nEuropean Union and the United States. More specifically, we will examine the respects in which the\npost-2006 NASA procurement contracts are said to differ from their pre -2007 counterparts and\ndetermine whether, as argued by the United States, the differences are such that the trans actions\nare now most appropriately characterized as purchases of services even if, based on certain\ncharacteristics, they could also possibly be characterized as joint ventures. 1099 We will then\ndetermine whether, based on the outcome of this exercise, we con sider that these measures fall\nwithin the scope of Article 1.1(a)(1).\n8.106. Before undertaking this exercise, we recall the salient aspects of the Appellate Body 's\ncharacterization of the pre -2007 NASA procurement contracts and DOD assistance instruments as\ntransactions that were \"akin to a species of joint venture \", which were \"analogous to equity\ninfusions\", such that the payments and access to facilities, equipment, and employees provided to\nBoeing under the pre -2007 procurement contracts constituted financia l contributions within the\nmeaning of Article 1.1(a)(1) of the SCM Agreement.\n8.107. The Appellate Body first examined the pre -2007 NASA procurement contracts to identify\ntheir relevant characteristics, and thereafter considered whether the measures properly\ncharacterized fell within the scope of Article 1.1(a)(1). 1100 In assessing the pre -2007 NASA\nprocurement contracts, the Appellate Body made a number of observations regarding their\nrelevant features. It noted that on the \"input\" side of the transactions, NASA provided Boeing with\nfunding to conduct research, while NASA and Boeing both contributed the use of facilities,\nequipment, and employees for purposes of conducting research. 1101 In other words, the\ntransactions involved not just funding by NASA, but also NASA a nd Boeing pooling non -monetary\nresources and employees. 1102 The Appellate Body also emphasized that the subjects to be\nresearched were often determined collaboratively.1103\n8.108. On the \"output\" side of the transactions, which involved scientific and technical\ninformation, discoveries and data, the Appellate Body noted that Boeing could take title to\n\n1099 United States' first written submission, para. 216.\n1100 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), paras. 585-589.\n1101 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), paras. 595 and 606.\n1102 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 595.\n1103 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 595.\n\ninventions discovered, as well as rights over certain types of data derived from research, while the\nU.S. Government retained a royalty -free license to use the subject in vention or data for\ngovernment purposes. 1104 Moreover, pursuant to LERD clauses in certain NASA procurement\ncontracts, the U.S. Government's rights in data developed in the course of the contracted research\nwere limited.1105 In other words, on the \"output\" side, there was not a \"straightforward exchange\nof monetary resources for some kind of non -monetary consideration\".1106 Rather, the \"fruits of the\nresearch are shared between Boeing and NASA\".1107\n8.109. Based on the foregoing considerations, the Appellate Body considered:\nThe transactions are collaborative arrangements that are composite in nature in that\nthey involve various elements that are interlinked. The arrangements are akin to a\nspecies of joint venture.1108\n8.110. The Appellate Body then referred to statements by NASA offic ials that emphasized the\n\"partnership\" between NASA and the U.S. LCA industry , which further supported the conclusion\nthat the transactions between Boeing and NASA were comprised of a number of elements and\nwere collaborative in nature1109 and to the panel's description of the transactions in its analysis of\nserious prejudice which highlighted the composite nature of the pre -2007 NASA procurement\ncontracts and the collaborative relationship between NASA and Boeing.1110\n8.111. In determining whether the pre -2007 NASA procurement contracts, properly characterized\nas composite arrangements that are \"akin to a species of joint venture \", fell under any of the\nsubparagraphs of Article 1.1(a)(1), the Appellate Body began by noting several similarities\nbetween the \"collaborative undertakings\" that were the pre-2007 NASA procurement contracts and\nequity infusions, which are one of the examples of transactions covered by the more general\nreference to direct transfer of funds u nder Article 1.1(a)(1)(i).1111 First, NASA provides funding to\nBoeing in the expectation of some kind of return. The return in question is not financial, but\nrather, takes the form of scientific and technical information, discoveries, and data expected to\nresult from the research performed.1112 NASA, like an equity investor, has no certainty at the time\nit commits the funding that the research will be successful. NASA 's risks are limited to the amount\nof money it contributes and the opportunity cost of other support it provides to the project, much\nlike an equity inv estor.1113 Finally, like some equity investors, NASA contributes to the project by\nproviding access to equipment, facilities, and employees. On the basis of these characteristics, the\nAppellate Body concluded that the \"joint venture arrangements \" between NASA and Boeing had\ncharacteristics \"analogous to equity infusions \".1114 The commonality between the NASA joint\nventure arrangements and equity infusions was sufficient to enable the Appellate Body to conclude\nthat the measures in question fell within the concept of \"direct transfer of funds \" in\nArticle 1.1(a)(1)(i)1115, such that the payments under the pre -2007 NASA procurement contracts\nwere a direct transfer of funds within the meaning of Article 1.1(a)(1)(i) and the provision of\naccess to NASA facilities, equipment, and employees constituted a provision of goods or services\nother than general infrastructure within the meaning of Article 1.1(a)(1)(iii).1116\nWhether the post -2006 NASA procurement contracts are appropriately\ncharacterized as collaborative R&D arrangements or as purchases of services\n8.112. The United States refers to a number of principal features of the post -2006 NASA\nprocurement contracts which it considers support a different characterization of those instruments\nto the Appellate Body 's assessment of the p re-2007 NASA procurement contracts. We address\n\n1104 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), paras. 596 and 606.\n1105 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 596.\n1106 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 596.\n1107 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 596.\n1108 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 597.\n1109 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 598.\n1110 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 610.\n1111 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), paras. 621 and 622.\n1112 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 623.\n1113 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 623.\n1114 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 624.\n1115 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 624.\n1116 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 624.\n\neach of these features, along with the European Union 's responses, before engaging with the\nquestion of whether overall, it is most appropriate to characterize the post -2006 NASA\nprocurement contracts not as collaborative joint ventures, but as purchases of services.\n8.113. First, the United States argues that the nature of aeronautics research commissioned by\nNASA has changed, with a shift in focus from technology demonstration to longer -term\nfundamental research. T he United States submits that, following an overhaul of its research\npractices in 2006, NASA shifted the focus of its research toward \"foundational research \",\ndeveloping \"core competencies\" and \"producing broad public goods of the kind that governments\nroutinely seek\".1117 The United States considers that evidence submitted by the European Union\nequally supports the conclusion that basic research is targeted toward serving the needs of the\nbroader community, including in areas of national security, transportat ion safety and efficiency\nimprovements.1118 Regardless of any references to achieving \"specific technology demonstration\ngoals\" or \"system-level objectives\", the United States contends that it is up to industry to leverage\nresearch for commercial applications. The European Union responds that the alleged overhaul was\nundertaken to improve NASA 's effectiveness in supporting the needs of Boeing and the U.S.\naviation industry so as to improve their competiveness, including maturing technologies for\ntransition to practical application.1119\n8.114. We first explain the context in which the alleged overhaul of NASA 's research contracting\npractices occurred in 2006. In 2001, the U.S. Congress established a Commission on the Future of\nthe United States Aerospace Industry to study issues associated with the future of this industry\nand to recommend potential actions by the U.S. Government to support the maintenance of a\nrobust industry. The Commission made a number of recommendations in 2002, many of which\nrequired federal agencies such as NASA to take actions. 1120 Of particular relevance in the field of\nU.S. aerospace R&D, the Commission had identified as a challenge the lack of sufficient and\nsustained public funding for research and associated infrastructure for research, development ,\ntesting, and evaluation, which it considered to limit the United States ' ability to address critical\nnational challenges and to enable breakthrough aerospace capabilities. 1121 The Commission had\ntherefore recommended that the U.S. Government \"significantly increase its investment in basic\naerospace research, which enhances national security; enables breakthrough capabilities; and\nfosters an efficient, secure and safe aerospace transportation system\".1122\n8.115. NASA addressed the Commission 's recommendations to focus on basic research by\nrestructuring NASA's ARMD to give greater priority to fundamental research. 1123 Accordingly,\nARMD's three aeronautics R&D programmes became Fundamental Aeronautics, Aviation Safety and\nAirspace Systems, to replace previous aeronautics R& D programmes in Vehicle Systems, Aviation\nSafety and Security, and Airspace Systems, respectively. 1124 Within those programmes, the most\nsignificant change occurred with respect to the Fundamental Aeronautics Program, which focuses\n\n1117 United States' first written submission, para. 104.\n1118 United States' first written submission, paras. 128-130. See also Commission on the Future of the\nUnited States Aerospace Industry, Final Report, (November 2002), (Exhibit EU-1029); National Research\nCouncil of the National Academies, Decadal Survey of Civil Aeronautics: Foundation for the Future, (2006),\n(Exhibit EU-1030); and U.S. Government Accountability Office, Aerospace Industry, Progress in Implementing\nAerospace Commission Recommendations, and Remaining Challenges, Report No. GAO-06-920,\n(September 2006), (Exhibit EU-1031), pp. 10 and 24.\n1119 European Union's second written submission, paras. 177-187.\n1120 Commission on the Future of the United States Aerospace Industry, Final Report, (November 2002),\n(Exhibit EU-1029).\n1121 U.S. Government Accountability Office, Aerospace Industry, Progress in Implementing Aerospace\nCommission Recommendations, and Remaining Challenges, Report No. GAO-06-920, (September 2006),\n(Exhibit EU-1031), p. 10.\n1122 U.S. Government Accountability Office, Aerospace Industry, Progress in Implementing Aerospace\nCommission Recommendations, and Remaining Challenges, Report No. GAO-06-920, (September 2006),\n(Exhibit EU-1031), p. 10.\n1123 U.S. Government Accountability Office, Aerospace Industry, Progress in Implementing Aerospace\nCommission Recommendations, and Remaining Challenges, Report No. GAO-06-920, (September 2006),\n(Exhibit EU-1031), p. 22. NASA uses the term \"fundamental research\" to refer to research that includes\ncontinued long-term, scientific study in core areas such as physics, chemistry, materials, experimental\ntechniques, and computational techniques to enable new capabilities and technologies for individual and\nmultiple disciplines.\n1124 The European Union does not challenge the Airspace Systems Program as involving any subsidies to\nBoeing in this proceeding.\n\non fundamental aeronautics research rather than on development projects. NASA has indicated\nthat these programmes give priority to fundamental research that is applicable to a broad range of\nair vehicles, whereas previously, NASA had emphasized \"bringing specific projects to higher\ntechnological maturity, often focusing on these narrowly defined demonstration projects and not\non developing technology that would be transferable to other types of systems or projects\".1125\n8.116. The United States indicates that the majority of the work that Boei ng performed under the\nFundamental Aeronautics Program in the post -2006 period was organized under two BOAs. One\nwas a 2004 BOA that had previously been part of the Vehicle Systems Effort to research structure\nand materials for aerospace vehicles and aerod ynamic, aerothermodynamic and acoustics\ntechnology for aerospace vehicles and passed to the Fundamental Aeronautics Program in\n2006.1126 We have reviewed the task orders issued under the 20 04 BOA identified by the\nUnited States, along with the United States ' descriptions of the work that Boeing performed under\nthese instruments, which it argues produce a \"variety of public goods \".1127 It is not evident to us\nthat this work was focused solely on fundamental research. Indeed, some of the tasks were part of\nan effort to develop prototypes, and others involved the design, analysis and fabrication of tooling\nfor a large test article made primarily of PRSEUS materials. Even the United States ' description of\nthe ways in which Boeing's work under these instruments produced public goods does not preclude\nthem also being of value and interest to Boeing. Indeed, the United States admits that the PRSEUS\nstudies, while providing knowledge useful to safety regulators, also provided information useful to\n\"any entity planning to build a composite aircraft\".1128 We reach a similar conclusion regarding our\nreview of the tasks Boeing carried out under the 2008 BOA between NASA and Boeing that was\nfunded by the Fundamental Aeronautics Program. The United States acknowledges that one task\nwas aimed at development of N+3 and N+4 technologies for entry into service in the 2030 -2035\nand 2040 -2050 periods, respectively, while another called for a \"generalized prediction of the\nchallenges faced by commercial aircraft operators and the types of v ehicle capabilities needed to\nmeet those needs\".1129 Another task called for a study of the technologies necessary to produce a\nsupersonic aircraft capable of carrying 35 -70 passengers for entry into service in the 2018 -2020\nperiod.1130 Indeed, the statements of work under certain contracts are classified, which also\nsuggests that the work in question involves far more than a focus on purely fundamental research.\nIn short, while we do not disagree that NASA refocused the research efforts under certain of its\naeronautics R&D programmes t o place greater emphasis on fundamental research rather than\ntechnology demonstration, we are not persuaded that the work that Boeing performed under\nprocurement contracts funded through the Fundamental Aeronautics Program in the po st-2006\nperiod involved only fundamental research.\n8.117. We reach a similar conclusion with respect to the procurement contracts funded under the\nAviation Safety Program. Our review of the tasks Boeing performed under the 2006 and 2007\nBOAs funded under the Aviation Safety Program indicates that, while the work had use \"far beyond\nBoeing and far beyond the development and production of large civil aircraft \"1131, it was also\nclearly not confined to fundamental research.\n8.118. The Integrated Systems Research Program did no t result from NASA 's 2006\nreorganization. Rather, it was created in 2010 with an initial focus on developing new vehicle\nconcepts and enabling technologies that will simultaneously reduce fuel burn, noise , and\nemissions.1132 The United States in its first wri tten submission identified the relevant BOAs, task\norders, and contracts between NASA and Boeing that were funded under this programme. It is not\nevident to us that the work that Boeing performed under these instruments was confined to\nfundamental research and the United States does not suggest otherwise.1133\n\n1125 U.S. Government Accountability Office, Aerospace Industry, Progress in Implementing Aerospace\nCommission Recommendations, and Remaining Challenges, Report No. GAO-06-920, (September 2006),\n(Exhibit EU-1031), p. 23.\n1126 United States' first written submission, para. 123. 2004 BOA, (Exhibit USA-24) (HSBI).\n1127 United States' first written submission, para. 132.\n1128 United States' first written submission, para. 132.\n1129 United States' first written submission, para. 134.\n1130 United States' first written submission, para. 135.\n1131 United States' first written submission, para. 159.\n1132 NASA Budget Estimates for FY 2010, (Exhibit USA-92), p. AERO-2.\n1133 See United States' first written submission, paras. 181-191. The Aeronautics Test Program is an\ninfrastructure maintenance and development programme for NASA's large aeronautics ground test facilities,\n\n8.119. In summary, our review of the procurement contracts funded by the relevant NASA\naeronautics R&D programmes suggests that, notwithstanding NASA 's 2006 shift in focus to\nlonger-term fundamental research in a general sense, at least under the Fundamental Aeronautics\nProgram, the work performed by Boeing under the procurement contracts at issue is not confined\nto fundamental research in the sense of \"long term, scientific study in core areas such as physics,\nchemistry, materials, experimental techniques, and computational techniques to enable new\ncapabilities and technologies for individual and multiple disciplines \".1134 Rather, even if these\nprocurement contracts did not always involve Boeing in specific develop ment projects, it appears\nthat much of the work could be generally described as applied research.1135\n8.120. Moreover, we note that the realignment of NASA's research activities was, according to the\nU.S. Government Accountability Office (GAO), nevertheless underta ken to implement the\nrecommendations of the Commission on the Future of the United States Aerospace Industry, which\nwere aimed at supporting the maintenance of a robust U.S. aerospace industry in the 21 st century.\nIn this respect, NASA 's aeronautics R&D ac tivities, even where focused on basic and applied\nresearch rather than advanced stages of development, appear ultimately to be designed, through\ncollaborative efforts with industry, to advance the interests of the U.S. aerospace industry. For\nexample, a 2008 NRA under the Fundamental Aeronautics Program explains that NASA 's focus on\nfoundational research through partnerships with universities and industry and the development of\nsystem-level solutions will \"support U.S. leadership in aerospace\":\nNASA has def ined four distinct levels to describe its approach to Fundamental\nAeronautics technology development: (1) conduct foundational research to further our\nfundamental understanding of the underlying physics and our ability to model that\nphysics, (2) leverage the foundational research to develop technologies and analytical\ntools focused on discipline-based solutions, (3) integrate methods and technologies to\ndevelop multi -disciplinary solutions, and (4) solve the aeronautics challenges for a\nbroad range of air vehicles with system-level optimization, assessment and technology\nintegration.\nInteraction with the aeronautics community aligns with the four levels: (1) NASA will\nadvance the state of knowledge of the underlying physics and its modelling by\npartnering wi th universities and companies engaged in foundational research, (2)\nNASA will investigate discipline -related challenges and will interact with the\naeronautics community through published reports and direct technology transfer, (3)\nNASA will develop multidi sciplinary methods and technologies, and disseminate them\nin published reports and direct technology transfer, and (4) NASA will collaborate with\nindustry by means of non -reimbursable cooperative agreements to address system -\nlevel challenges at the precompetitive level.1136\n8.121. NASA elsewhere explains the objective of \"partnering with universities and companies\nengaged in foundational research \" as a way \"to provide value to industry of a more enduring\nnature\"1137:\n\nprimarily wind tunnels. The European Union's challenges involving this programme relate only to Space Act\nAgreements and therefore we do not further consider it here. (See European Union's first written submission,\nparas. 133 and 134).\n1134 U.S. Government Accountability Office, Aerospace Industry, Progress in Implementing Aerospace\nCommission Recommendations, and Remaining Challenges, Report No. GAO-06-920, (September 2006),\n(Exhibit EU-1031), p. 22 and fn 33.\n1135 While \"basic research\" works to expand fundamental knowledge in areas such as physics, chemistry\nand mathematics without specific applications in mind, \"applied research\" aims to gain knowledge applicable to\nsolving specific and identified needs, building on the general work of the basic sciences, e.g. activities to\ndevelop better propulsion and power technology and crew and personnel protection technology. Applied\nresearch can be distinguished from development projects, which use the knowledge and understanding to build\nnew, or improve existing, systems. (U.S. Government Accountability Office, Aerospace Industry, Progress in\nImplementing Aerospace Commission Recommendations, and Remaining Challenges, Report No. GAO-06-920,\n(September 2006), (Exhibit EU-1031), p. 39).\n1136 NASA, Research Opportunities in Aeronautics – 2008 (ROA-2008), NASA Research Announcement\nNNH08ZEA001N, (7 March 2008), (Exhibit USA-61), appendix A, pp. A1 and A2.\n1137 NASA, \"Fundamental Aeronautics\", Solicitation No. NNH060000L (3 January 2006), (Exhibit\nUSA-14), pp. 6 and 7.\n\nThe interaction with the aeronautics community at the systems level is unique\nbecause NASA typically does not design and build air vehicles for operational use. We\nlook toward collaboration with industry to provide insight into issues associated with\nflight, manufacturing and design. NASA 's role at this leve l is to develop\nmultidisciplinary design, analysis, and optimization tools based on the underlying\nphysics. NASA intends to collaborate with industry consortia to provide value to\nindustry of a more enduring nature, rather than immediate design and manufac turing\nproblem-solving.1138\n8.122. In other words, even where NASA undertook efforts to shift the focus of its aeronautics\nresearch activities to fundamental research, this is still consistent with supporting collaborative\nefforts with industry, in order to advance the interests of the U.S. aerospace industry.\n8.123. Second, the United States argues that NASA has removed references to increasing industry\ncompetitiveness as an evaluation criterion and has reformulated the NASA aeronautics research\nobjectives as aiming at producing broad public goods designed to build and improve infrastructure.\nWe note, however, that NASA retains the statutory objective of \"preserv{ing} the role of the\nUnited States as a leader in aeronautical and space science and technology \".1139 Moreover, our\nreview of NASA's 2014 Budget Estimates indicates that NASA still acknowledges the continued role\nof the NASA aeronautics R&D programmes in promoting the competitiveness of the U.S.\naeronautics industry:\nNASA's investment in aeronautics research is critica lly important to advance the\nNation's global leadership in aviation, to grow the economy and increase jobs, and to\ncontinue to provide safe and efficient air travel to the flying public.\nARMD brings innovation to aeronautics through the seedling fund; expa nds\nknowledge, and develops concepts, tools, and methods in the fundamental research\nprograms; and assesses and matures the integrated benefits of the most promising\ntechnologies in the Integrated Systems Research Program. ARMD conducts this\ncutting-edge r esearch through partnerships with academia, industry, and other\ngovernment agencies. The partnerships foster a collaborative research environment\nacross which multiple communities can exchange ideas and knowledge. These\ncollaborations help ensure the future competitiveness of the Nation's aviation industry\nand strong future workforce.1140\n8.124. The objective of promoting competitiveness is also recognized in the context of particular\nprogramme budgets such as the Fundamental Aeronautics Program:\nNASA research is inh erent in every major modern U.S. aircraft, and the type of\nresearch performed by the FA program will prime the technology pipeline, enabling\ncontinued US leadership, competitiveness, and jobs in the future.1141\n8.125. NASA budget materials provide that \"many of the tools and technologies that are\ndeveloped have an immediate impact to industry \"1142 and identify specific technologies and\nprojects that maintain the competitiveness of the U.S. LCA industry, such as work conducted\nunder the Advanced Composites Project \"to focus on reducing the timeline for development and\ncertification of innovative composite materials and structures … will boost American industry and\nhelp maintain a U.S. global leadership in the field of composite materials which is a major element\nof all new aircraft development\".1143\n\n1138 NASA, \"Fundamental Aeronautics\", Solicitation No. NNH060000L (3 January 2006), (Exhibit\nUSA-14), p. 7.\n1139 Section 102(d) of the National Aeronautics and Space Act of 1958, as codified and restated by Public\nLaw No. 111–314, Stat. 3 (18 December 2010), United States Code, Title 51, section 20102(d) (current\nthrough 7 December 2012), (Exhibit EU-252), sections 20102(d)(5) and (9).\n1140 NASA Programme Budgets for FY 2014, (Exhibit EU-1015), pp. AERO-2 and AERO-3.\n1141 NASA Programme Budgets for FY 2014, (Exhibit EU-1015), p. AERO-20.\n1142 NASA Programme Budgets for FY 2014, (Exhibit EU-1015), p. AERO-20.\n1143 NASA Programme Budgets for FY 2014, (Exhibit EU-1015), p. AERO-3.\n\n8.126. Moreover, specific projects under the Fundamental Aeronautics and Integrated Systems\nResearch programmes still retain the explicit objective of promoting the competitiveness of U.S.\nindustry. In this regard, the subsonic fixed wi ng research conducted under the Fundamental\nAeronautics Program has the explicit goal of \"enabl{ing} future generations of transport aircraft \"\nthrough fundamental research that \"will prime the technology pipeline enabling continued U.S.\nleadership, competi tiveness, and jobs in the long term \", noting that \"much of the scientific\nknowledge, technologies and concepts necessary to enable these longer -term vehicles may have\nbenefit to aviation much sooner\".1144\n8.127. NASA describes opportunities for commercialization of technology, including for the U.S.\nLCA industry, from work conducted under the Active Aeroelastic Wing Project under the\nFundamental Aeronautics Program as follows:\nWith the successful demonstration of actively controlled \"wing warping\" techniques for\naircraft roll control at transonic speeds in the Active Aeroelastic Wing project,\nengineers will now have more freedom in designing more efficient, thinner, higher\naspect-ratio wings for future high -performance aircraft while reducing the structural\nweight of the wings by 10 to 20 per cent. This will allow increased fuel efficiency or\npayload capability, along with potentially reduced radar signature. The technology also\nhas application to a variety of other future aircraft, such as high -altitude, long -\nendurance unmanned aircraft, transports, and airliners.1145\n8.128. NASA explains that the work under this project, \"helps ensure that new aerospace\nconcepts are transferred quickly to the U.S. aerospace industry so they can be applied to\ntechnologies for commercial and mil itary aircraft and space vehicles \".1146 This includes \"advanced\npower-by-wire concepts and fly -by-light (fiber optic cable) systems, as well as electric -powered\nactuators and advanced flight-control computer software\".1147\n8.129. Similarly, RFIs and NRAs issued in con nection with particular aeronautics R&D projects\nunder the Fundamental Aeronautics Program specifically acknowledge the ongoing benefit of the\ncommissioned R&D to industry and the collaborative relationship between NASA and industry. A\n2006 solicitation under the Fundamental Aeronautics Program states:\nUnder this RFI, NASA solicits interest primarily from industry to collaborate at the\nsystems level in Fundamental Aeronautics. NASA seeks to enter into research\ncollaborations that benefit both industry and NASA …\n…\nNASA intends to focus its resources on fundamental technology and build upon that\ninvestment to develop system -level, multidisciplinary capabilities that enable both\ncivilian and military platforms of the future. As NASA does not typically build or\noperate military or commercial aircraft, we seek partnerships with industry at the\nsystems level.1148\n8.130. The Integrated Systems Research Program also recognizes the goal to ensure that\npromising technologies are made available to the U.S. industry:\nThe Integrat ed Systems Research Program 's goal is to demonstrate integrated\nconcepts and technologies to a maturity level sufficient to reduce risk of\n\n1144 NASA Fundamental Aeronautics Budget Estimates for FY 2007-FY 2013, (Exhibit EU-40), FY 2013,\nAERO-21.\n1145 NASA Armstrong Fact Sheet, \"F/A-18 Active Aeroelastic Wing\", 28 February 2014, (Exhibit\nEU-1374), pp. 2 and 3. NASA explains that work on the F/A-18 Active Aeroelastic wing research was\nundertaken at NASA's Dryden Flight Research Center in Edwards, CA, \"in cooperation with the US Air Force\nResearch Laboratory (AFRL) and Boeing Phantom Works\". (Ibid. p. 1).\n1146 NASA Armstrong Fact Sheet, \"F/A-18 Systems Research Aircraft\", 28 February 2014, (Exhibit\nEU-1375), p. 1.\n1147 NASA Armstrong Fact Sheet, \"F/A-18 Systems Research Aircraft\", 28 February 2014, (Exhibit\nEU-1375), p. 1.\n1148 NASA, \"Fundamental Aeronautics\", Solicitation No. NNH060000L (3 January 2006), (Exhibit\nUSA-14), p. 2.\n\nimplementation for stakeholders in the aviation community … The program conducts\nintegrated system -level research on those promising concepts and technologies to\nexplore, assess, and demonstrate the benefits in an operationally relevant\nenvironment. The program matures and integrates technologies for accelerated\ntransition to practical application.1149\n8.131. Therefore, despite th e United States ' assertions to the contrary, advancing the\ncompetitiveness of the U.S. aviation industry remains an important objective for NASA 's\naeronautics R&D activities.\n8.132. Third, the United States argues that, through the NRA process introduced in 2006, NASA\nhas reduced the role of contractors in setting research priorities and thus the scope for\ncollaboration in determining the technologies to be researched. According to the United States, in\nearly 2006, NASA undertook a process to reformulate its aeron autics research objectives to aim at\nproducing broad public goods with a substantial focus on building and improving infrastructure.\nThis process included the issuance of RFIs by each of NASA 's ARMDs relating to fundamental\naeronautics, aviation safety and airspace objectives consistent with previously -identified\nmilestones in NASA 's ten-year technological roadmap. According to the United States, the\nresponses to RFIs helped to identify \"areas of research that stakeholders considered to be of\nprimary interest\".1150 NASA researchers then created teams to develop refined technical proposals\nto achieve the objectives of each programme, incorporating the feedback from the RFI process.\nThese NASA centre proposals were then submitted \"to a rigorous review process to ensure\ntechnically credible and relevant research objectives \".1151 Finally, in May 2006, NASA issued an\nNRA for Research Opportunities in Aeronautics to solicit proposals from the \"external community\"\nfor foundational research in the areas outlined in the NAS A centre proposals. 1152 NASA issued a\nsecond NRA in 2008, followed by further NRAs in 2009, 2010, and 2011, respectively.1153\n8.133. The United States argues that NASA 's reliance on NRAs to award some of the grants,\ncooperative agreements and research contracts during the FY 2007-FY 2012 period represents \"a\nnew approach to identifying research topics and choosing suppliers of research services \"1154, and\nconstitutes a \"significant\" change from the way in which \"NASA's big aeronautics projects were\ntypically supported\".1155 The United States characterizes this as an \"open process\", wherein any\nparticipation by industry in helping to identify areas of research is \"completely voluntary \", has\nresulted in \"many bids from individual organizations as well as teams \", and has reduced the role\nthat the LCA industry plays in setting research priorities and designing research program mes.1156\nThe United States considers that the significance of the changes effected through the introduction\nof the NRA process is evident from a comparison of th e 1989-2006 period, in which NASA 's large\naeronautics projects were typically awarded through IDIQ contracts, which had general statements\nof work covering one or more aeronautics -related technical disciplines, with the more detailed\nstatements of work bei ng contained in the task order requests for proposals ( RFPs). In contrast,\nthe NRAs contain more general statements of task and are broadly open to the \"community\",\nresulting in many bids from individual organizations as well as teams.1157\n\n1149 NASA Programme Budgets for FY 2014, (Exhibit EU-1015), p. AERO-32.\n1150 United States' first written submission, para. 105.\n1151 United States' first written submission, para. 105.\n1152 United States' first written submission, para. 105.\n1153 United States' first written submission, para. 105. The 2009 and 2010 NRAs included funding for\nprojects derived from the American Recovery and Reinvestment Act, which the United States says included\nheightened requirements on transparency regarding the spending of government funds. The 2010 NRA\nadditionally solicited proposals for research under the new Integrated Systems Research Program.\n1154 United States' first written submission, para. 102.\n1155 United States' first written submission, para. 108. The United States indicates that IDIQ contracts,\nwhich were awarded during the 1989-2006 period, \"typically had general statements of work covering one or\nmore aeronautics-related technical disciplines, with much more detailed statements of work being provided in\ntask order requests for proposals\".\n1156 The United States contends that \"seeking and accepting input from interested persons is a standard\nway for governments to ensure good decision making\". (United States' second written submission, para. 131).\nSee also United States' first written submission, paras. 93, 105, and 108; response to panel question Nos. 93,\nfn 229 and para. 164, 94, para. 165, and 95, paras. 166-168; and comments on European Union's response to\nPanel question No.15, para. 88.\n1157 United States' first written submission, para. 108.\n\n8.134. The European Union disputes \"the extent and effect\" of NASA's use of NRA procedures for\nselecting research. In particular, it argues that the notion that there is no longer collaboration in\ndetermining technologies to be researched is contradicted by the United States ' own factual\ndescriptions of how the process works, including the fact that NASA issues RFIs to identify areas of\nresearch of primary interest to external stakeholders such as the U.S. aviation industry, and then\nuses their responses to set the content of resea rch solicited through NRAs. Additionally, the fact\nthat NRAs allow participants to make requests that are not \"as precise\" as requests for proposals\nrequired under IDIQ contracts suggests that NRAs provide more room for input from\ncontractors.1158 The European Union further argues that the RFIs themselves expressly confirm the\ncollaborative nature of the process. 1159 The European Union concludes that in any case , the\nUnited States has confirmed that only some of the post -2006 R&D was procured pursuant to the\nNRA process (leaving the remainder to be procured outside the NRA framework) , thereby\nundermining the significance of any alleged changes to NASA's practices.1160\n8.135. We do not consider that the mere fact that NASA solicits work pursuant to the NRA process\non certain occasions1161 necessarily supports the conclusion that the setting of research priorities\nfor the NASA aeronautics R&D programmes can no longer be considered a collaborative effort\nbetween NASA and industry. On the contrary, evidence before us suggests that collaboration with\nindustry, even if occurring through a different set of procedural mechanisms, is still an integral\npart of NASA's aeronautics R&D agenda.\n8.136. We note that, notwithstanding the introduction of the NRA process in 2006, a significant\nnumber of procurement contracts, task orders and cooperative agreements were in fact awarded\nby NASA since FY 2006 outside the NRA process. 1162 Second, we are not persuaded that the\nissuance of NRAs containing more general statements of tasks necessarily reduces the op portunity\nfor contractors to provide input into the research solicited.1163 Finally, it remains the case that both\nNASA and the U.S. LCA industry retain a mutual interest in the research commissioned by NASA,\nas acknowledged by the United States:\nBoth parties expect{} to use the result s of this work, and if any intellectual property\nrights result{}, to split them in a way that each party could use them in its sphere of\nactivity. They also recognize that, whatever the results, the knowledge gained would\nbe useful in their further activities.1164\n\n1158 European Union's second written submission, para. 185.\n1159 See European Union's comments on United States' response to Panel question No. 94, para. 246\n(referring to NASA, \"Fundamental Aeronautics\", Solicitation No. NNH060000L (3 January 2006), (Exhibit\nUSA-14), p. 2: \"{u}nder this RFI, NASA solicits interest primarily from industry to collaborate at the systems\nlevel in Fundamental Aeronautics. NASA seeks to enter into research collaborations that benefit both industry\nand NASA …\"). The European Union additionally notes the description by the U.S. GAO that RFIs were used in\n2006 \"to solicit information on key areas of interest for private industry and determine opportunities for\ncollaboration with NASA's planning and research efforts\". (European Union's comments on\nUnited States' response to Panel question No. 94, para. 243 (referring to U.S. Government Accountability\nOffice, Aerospace Industry, Progress in Implementing Aerospace Commission Recommendations, and\nRemaining Challenges, Report No. GAO-06-920, (September 2006), (Exhibit EU-1031), p. 69)).\n1160 European Union's comments on United States' response to Panel question No. 94, paras. 248-250.\n1161 United States' response to Panel question No. 95, para. 168. The United States refers to five\noccasions between 2006 and 2011 where NASA issued NRA solicitations. (See United States' first written\nsubmission, paras. 105-107 (referring to NASA, Research Opportunities in Aeronautics – 2006 (ROA-2006),\nNASA Research Announcement NNH06ZNH001, (23 May 2006), (Exhibit USA-17); NASA, Research\nOpportunities in Aeronautics – 2008 (ROA-2008), NASA Research Announcement NNH08ZEA001N,\n(7 March 2008), (Exhibit EU-91); NASA, Research Opportunities in Aeronautics – 2009 (ROA-2009), NASA\nResearch Announcement NNH10ZEA001N, (13 April 2009), (Exhibit EU-184); NASA, Research Opportunities in\nAeronautics – 2010 (ROA-2010), NASA Research Announcement NNH10ZEA001N, (2 June 2010), (Exhibit\nEU-133); and NASA, Research Opportunities in Aeronautics – 2011 (ROA-2011), NASA Research\nAnnouncement NNH11ZEA001N, (2011), (Exhibit USA-255) (HSBI))).\n1162 In response to a question from the Panel, the United States indicated that since FY 2006, NASA has\nawarded Boeing 51 contracts, task orders and cooperative agreements outside the NRA process, compared\nwith only 29 through the NRA process. (United States' response to Panel question No. 95, para. 168).\n1163 We agree with the European Union that the more generally defined NRA solicitations arguably leave\nmore scope for input from contractors than the more precisely defined RFPs under IDIQ contracts.\n(European Union's second written submission, para. 185).\n1164 United States' second written submission, para. 225 (arguing that these characteristics support the\nconclusion that the transactions are purchases of services).\n\n8.137. This is similarly reflected in the language of a 2006 RFI issued in connection with the\nFundamental Aeronautics Program:\nInteraction with the aeronautics community aligns with the {four -level approach to\ntechnology developm ent}. The first three levels reflect relationships with the\naeronautics community in which NASA seeks to ensure the national aeronautical\ntechnical expertise: (1) NASA will advance the state of knowledge of the underlying\nphysics and its modeling by partne ring with universities and companies engaged in\nfoundational research where that partnership supplements NASA capabilities, (2)\nNASA will investigate discipline -related challenges and will interact with the\naeronautics community through published reports a nd direct technology transfer, and\n(3) NASA will develop multi -disciplinary methods and technologies, and disseminate\nthem in published reports and direct technology transfer.\nThe interaction with the aeronautics community at the systems level is unique\nbecause NASA typically does not design and build air vehicles for operational use. We\nlook toward collaboration with industry to provide insight into issues associated with\nflight, manufacturing and design. NASA's role at this level is to develop\nmultidisciplinary design, analysis, and optimization tools based on the underlying\nphysics. NASA intends to collaborate with industry consortia to provide value to\nindustry of a more enduring nature, rather than immediate design and manufacturing\nproblem-solving.1165\n8.138. In our view, it is not credible that in issuing RFIs to external stakeholders, including the\nU.S. LCA industry, as a pre -cursor to NASA's development of NASA centre proposals and eventual\nissuance of NRAs, NASA is simply soliciting the views of industry (or academia) as to how best to\nmeet NASA's needs as a purchaser of research services. Rather, as previously noted, NASA retains\nthe statutory objective of preserving the U.S. LCA industry 's role as a leader in aeronautical and\nspace science and technology, an d in doing so, seeks input from those who stand to benefit from\nthe output of collaborative work as to how best to achieve this. This conclusion is supported by the\nU.S. GAO's 2006 review of NASA 's efforts to implement selected Aerospace Commission\nrecommendations (discussed above). The GAO noted that, prior to issuing a 2006 research\nannouncement, NASA had issued three RFIs \"to solicit information on key areas of interest for\nprivate industry and determine opportunities for collaboration with NASA 's planning and research\nefforts\".1166 The GAO explained that the NRAs that were subsequently issued \"were influenced by\nthe response to the requests for information \".1167 Similarly, a 2010 NRA indicates that \"external\ninput\" was provided at the \"formulation\" phase of co nceiving the Environmentally Responsible\nAviation Project under the Integrated Systems Research Program. 1168 The Environmentally\nResponsible Aviation Project has the identified objective to \"serve as a technology transition bridge\nbetween the lower technology readiness level (TRL) efforts on -going in the fundamental ARMD\nPrograms and higher TRL needs of potential users\".1169\n8.139. Fourth, the United States argues that NASA has changed its dissemination policies to\nremove restrictions that had previously limited the di ssemination of NASA -funded research,\nincluding through the elimination of LERD clauses in the post -2006 procurement contracts. The\nEuropean Union disputes that the United States has made any changes to its dissemination policies\nsince 2001 (i.e. before the conclusion of the original proceeding) and argues that NASA continues\n\n1165 NASA, \"Fundamental Aeronautics\", Solicitation No. NNH060000L (3 January 2006), (Exhibit\nUSA-14), pp. 6 and 7. (emphasis added)\n1166 U.S. Government Accountability Office, Aerospace Industry, Progress in Implementing Aerospace\nCommission Recommendations, and Remaining Challenges, Report No. GAO-06-920, (September 2006),\n(Exhibit EU-1031), p. 69.\n1167 U.S. Government Accountability Office, Aerospace Industry, Progress in Implementing Aerospace\nCommission Recommendations, and Remaining Challenges, Report No. GAO-06-920, (September 2006),\n(Exhibit EU-1031), p. 69. The GAO referred to NASA's research \"strategy\" as \"a new approach for establishing\npartnerships with universities and the private sector\".\n1168 NASA, Research Opportunities in Aeronautics – 2010 (ROA-2010), NASA Research Announcement\nNNH10ZEA001N, (2 June 2010), (Exhibit EU-133), appendix D.2 Environmentally Responsible Aviation-1,\np. D-4, embedded chart.\n1169 NASA, Research Opportunities in Aeronautics – 2010 (ROA-2010), NASA Research Announcement\nNNH10ZEA001N, (2 June 2010), (Exhibit EU-133), appendix D.2 Environmentally Responsible Aviation-1,\np. D-2.\n\nto include provisions in contracts restricting the disclosure of \"limited rights data\", and other data\nlabelled as sensitive information and technical data determined to be trade secrets.1170\n8.140. In characterizing the pre-2007 NASA procurement contracts in the original proceeding, the\nAppellate Body observed that \"some\" of the procurement contracts contained LERD clauses. 1171\nMoreover, the Appellate Body 's discussion of the limitations on the U.S. Government's rights in\ndata owing to the presence of LERD clauses in certain of the pre -2007 NASA procurement\ncontracts occurred in the context of noting that on the \"output\" side of the transactions there was\na sharing of the fruits of the research betwe en NASA and Boeing. 1172 Despite changes to NASA 's\ndissemination policies that pre -date the findings in the original proceeding, in certain instances, it\nappears that Boeing retains rights to the data derived from performing research under certain\ncontracts1173, as well as rights to inventions discovered as part of the research.1174 In sum, NASA's\ndecision to no longer use LERD clauses in its procurement contracts does not change the fact that\nBoeing retains rights to the data and inventions derived from performing r esearch under those\ncontracts, which led the Appellate Body to conclude that on the \"output\" side of the transactions,\nthere was not merely a \"straightforward exchange of monetary resources for some kind of\nnon-monetary consideration\".\n8.141. Fifth, the United S tates argues that NASA has changed its facilities policies to permit\naccess by foreign entities on the same basis as U.S. companies. The European Union disputes this,\nasserting that the policy document that the United States cites to support this position, NASA\n\n1170 European Union's second written submission, paras. 190-193.\n1171 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 596.\n1172 See Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 596.\n1173 As explained in the original proceeding, under U.S. law, the U.S. Government generally obtains\n\"unlimited rights\" in any data first produced in the performance of a contract between the U.S. Government\nand a contractor, for government purpose uses, while a contractor obtains the right to \"use, release to others,\nreproduce, distribute, or publish any data first produced or specifically used by the Contractor in the\nperformance of this contract\". A contractor may also restrict from disclosure and use any \"data, other than\ncomputer software, that embody trade secrets or are commercial or financial and confidential or privileged, to\nthe extent that such data pertain to items, components, or processes developed at private expense\". (See\nPanel Report, US – Large Civil Aircraft (2nd complaint), paras. 7.1297-7.1301; and United States Code of\nFederal Regulations, Title 48, section 52.227-14, (Exhibit EU-1034), sections 52.227-14(a)(2)(iv), (b)(1)(i),\nand (2)(ii)). The European Union has submitted evidence of at least one procurement contract that restricts\nfrom disclosure any data produced under the contract \"that will contain or reveal data which was developed\nexclusively at Private Expense\". (NASA Task Order NNL11AA00T, (Exhibit EU-126), attachment J-2, p. 11), and\na procurement contract designating \"special license rights data\", which is required to be withheld from public\ndisclosure for a period between five and 15 years. (Contract between Boeing and NASA, NND11AG03C\n(9 December 2010), (Exhibit EU-176), pp. 12 and 16, and exhibit 1 (3-1 and 3-2)). The United States contends\nthat the use of \"special license rights data\" is an \"exceptional\" case that occurred \"several years ago near the\noutset of the new program formulation\" and \"is not representative of standard practice\". (United States' first\nwritten submission, fn 358 and para. 186; see also second written submission, para. 136). Finally, we note\nthat the United States has also acknowledged that data may, in certain cases, be subject to limited distribution\nto NASA or other government agencies or government contractors only, or publication may be delayed. The\nList of NASA Technical Reports submitted by the United States indicates that, in certain cases, no report was\nprovided or \"required\" \"due to the nature and requirements of the contract{}\". Other reports are identified as\n\"classified\" or subject to International Traffic in Arms Regulations (ITAR). Finally, other reports are labelled as\n\"Releasable, not published\", which the United States explains, means the report is \"in the process of\npre‐publication internal review\". (See List of NASA Technical Reports, (revised) (formerly Exhibit US-13-312),\n(Exhibit EU-214)).\n1174 We note that, pursuant to the NASA-Boeing Patent License Agreement, Boeing grants to the U.S.\nGovernment \"an irrevocable, non-exclusive, non-transferable, royalty-free license under the Patent Rights to\nuse, make, offer for sale, sell, and import each Subject Invention for commercial purposes, without the right\nto: (A) sublicense this right; (B) exercise this right in a commercial venture of any type with a third party; or\n(C) have the Subject Invention made or sold by a third party for a commercial purpose\". (NASA-Boeing Patent\nLicence Agreement, (Exhibit EU-251) (BCI), para. 2). While the U.S. Government receives such a license in\ncases where Boeing patents a technology, Boeing as patent owner nevertheless retains the right to use the\npatented technology for commercial purposes and license that technology to other entities for commercial\nendeavours, without paying the U.S. Government anything in return. As the parties have discussed, in cases\nwhere Boeing obtains title to an invention conceived in the course of work under an R&D contract, the U.S.\nGovernment retains \"march-in\" rights, under which the U.S. Government may compel a contractor to grant a\ncommercial license to applicants on terms that are reasonable, or otherwise grant the licence itself. In this\ndispute, neither party has argued that the U.S. Government has exercised \"march-in\" rights. In any case, the\nfact remains that Boeing gains access and particular rights over the results of the research.\n\nPolicy Directive 1370.1 (NPD 1370.1), applies only to the reimbursable use of NASA facilities by\nforeign companies, which is not at issue in this proceeding.1175\n8.142. NASA Policy Directive 1370.1 is entitled \"Reimbursable Utilization of NASA Facilities by\nForeign Entities and Foreign-Sponsored Research\". It was originally effective 26 October 2007 and\nexpires on 26 October 2017. NPD 1370.1 provides a general policy direction and identifies\nprinciples to be considered by NASA officials in connection with \"reimbursable use of NASA\nfacilities by, or for the benefit of foreign entities, or conducting of research on a reimbursable basis\nin collaboration with, or for the benefit of, foreign entities \".1176 We therefore agree with the\nEuropean Union that it is not obvio us from NPD 1370.1 that NASA has in fact changed its facilities\nusage policies regarding non -reimbursable or partially -reimbursable use of NASA facilities by\nforeign companies. Moreover, NPD 1370.1 sets forth specific guidelines for the use of NASA\nfacilities by foreign entities bearing in mind that NASA 's cooperation and collaboration with foreign\nentities are subject to \"important standards and safeguards, reflecting the significant investment\nmade by the Congress and the people of the United States in NA SA's world-class facilities and\nexpertise\".1177 We are not persuaded, on the basis of the evidence submitted by the United States,\nthat foreign entities are entitled to use NASA facilities \"on the same basis as U.S. companies\".1178\n8.143. Sixth, the United States asser ts that NASA has more than halved funding for aeronautics\nresearch in the FY 2007-FY 2012 period compared to FY 1989-FY 2006, as illustrated in Chart 1\nbelow1179:\nChart 1: NASA Aeronautics Research Spending, 1990-2012\n\nSource: NASA Subsidies to Boeing's LCA Division, (Exhibit EU-36); NASA/DOD/DOC Aeronautics R&D\nSubsidies to Boeing's LCA Division, (Exhibit USA-19); and NASA, Fiscal Year 2004 Budget Estimates,\npp. S&AP 2-1 to 2-6, (Exhibit USA-20).\n8.144. The United States argues that while the European Union asserts that NASA paid Boeing\nUSD 1.8 billion for non -engine aeronautics research under the challenged aeronautics R&D\nprogrammes from FY 2007 through FY 2012, the real value of payments is vastly lower at\napproximately USD 118 million, while the value of the provision of NASA equipment under the\npost-2006 procurement contracts was approximately USD 6 million. Space Act Agreements\n\n1175 European Union's second written submission, para. 198.\n1176 NASA Policy Directive 1370.1 (26 October 2007), (Exhibit USA-256), section 1(a). (emphasis added)\n1177 NASA Policy Directive 1370.1 (26 October 2007), (Exhibit USA-256), section 1(c).\n1178 United States' first written submission, para. 110.\n1179 United States' first written submission, para. 94. The United States explains that the broken and\nunbroken lines in Chart 1 reflect that NASA moved to full cost accounting in 2004. At that time, NASA\npublished 2003 data under the previous programme cost methodology and the full-cost methodology, which\nallows construction of a 1990-2003 index series for program cost and a 2003-2012 index series for full cost.\nThe United States indicates that these data reflect the European Union's adjustments to remove certain\nexpenditures that it has not challenged. According to the United States, the real change in resource\ncommitment is even more stark, as these figures do not account for inflation.\n\nprovided access to facilities, equipment, and employees of approximately USD 12 mill ion.1180 The\nEuropean Union considers the United States' estimate is based on a flawed and overly narrow\nconceptual notion of what should be counted and valued, and is inconsistent with the approach\nfollowed by the panel and the Appellate Body in the original proceeding.1181\n8.145. In Section 8.2.2.6.2.2 of this Report, we conduct a detailed evaluation of the amount of\nthe financial contribution s provided to Boeing through the post -2006 NASA aeronautics R&D\nsubsidies. We conclude that the more credible estimate of the amount of the financial contributions\nprovided to Boeing through the post -2006 NASA procurement contracts, cooperative agreements,\nand Space Act Agreements between 2007 and 2012 is approximately [***].\n8.146. Although it does appear t hat NASA's aeronautics R&D funding has declined, and that the\namounts of payments and the value of the access to facilities, equipment, and employees to\nBoeing over the 2007-2012 period appear to be significantly less than over 1989-2006, in our view\nthis is not relevant to the characterization of the measures as financial contributions. Finally, the\nUnited States argues that NASA has reduced the value of access to equipment, facilities, and\nemployees in post -2006 procurement contracts such that the primary contribution from NASA\ninvolves payments, while on the contractor side, Boeing 's contribution consists of services. The\nEuropean Union considers the United States ' estimate is based on flawed , narrow categories of\ninformation defined by U.S. Government contracting regulations, and that the United States has\nfailed to provide a source of the listed data to confirm the accuracy of amounts.1182\n8.147. In Section 8.2.2.6.2.2 of this Report, we estimate the value of the provision of access to\nNASA facilities, equipment, and employees under the post -2006 NASA procurement contracts. As\nwe explain in that Section, of all the NASA procurement contracts under the challenged\naeronautics R&D programmes through which Boeing received funding since 2006 , less than half\nprovided for access to facilities, equipment or employees. We have estimated that the value of the\nprovision of access to such facilities (including the value of Boeing's use of NASA's computers) and\nequipment is approximately [***].1183 Additionally, the value of Boeing's access to NASA\nemployees under the NASA procurement contracts is [***], for a total value of access to facilities,\nequipment, and employees under these instruments of [***] between 2007 and 2012 . The\noriginal panel found that the value of Boeing's access to NASA facilities, equipment and employees\nunder contracts and agreements was USD 1.55 billion between 1989 and 2006.1184 This equates to\napproximately USD 91 million per year. The United States is therefore correct that the va lue of\nfacilities, equipment, and employees provided to Boeing has decreased during the 2007-2012\nperiod as compared with the 1989 -2006 period. However, the value of facilities, equipment, and\nemployees must be considered with the other aspects discussed a bove to determine whether,\noverall, the relevant characteristics of the post -2006 NASA procurement contracts differ in such\nsignificant respects from the characteristics that led the Appellate Body to characterize the pre -\n2007 procurement contracts as composite transactions that were collaborative joint ventures.\n8.148. Summarizing our evaluation of the ways in which the relevant characteristics of the\npost-2006 NASA procurement contracts are said to differ from those of the pre -2007 procurement\ncontracts which l ed to the Appellate Body 's characterization of them as \"collaborative\narrangements\" that were \"composite in nature \" and were \"akin to a species of joint venture \"1185,\nwe have concluded as follows:\na. While there may have been a shift in focus in very general ter ms to fundamental\nresearch and away from technology development under at least some of the NASA\naeronautics R&D programmes (e.g. the Fundamental Aeronautics Program), we are not\npersuaded that this shift is necessarily reflected in the nature of the work t hat Boeing\nperformed under the post -2006 procurement contracts between NASA and Boeing that\nwere funded under the relevant aeronautics R&D programmes. Our review of the nature\n\n1180 United States' first written submission, para. 113.\n1181 European Union's second written submission, paras. 258-269.\n1182 European Union's second written submission, paras. 262-269.\n1183 See paras. 8.263, 8.264 and 8.266-8.268 for explanations of the Panel's estimate of the value of\naccess to NASA facilities (including the value of Boeing's use of NASA's computers) and equipment under the\nNASA procurement contracts and cooperative agreements, and paras. 8.246 and 8.270-8.274 regarding the\nestimate of the value of access to NASA employees under the NASA procurement contracts.\n1184 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1109.\n1185 See Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 597.\n\nof the work performed by Boeing under these contracts suggests that, notwithstan ding\nhow the research is characterized, it is clearly of independent commercial interest to\nBoeing, i.e. over and above that as a provider to research services to NASA as a client.\nIn any case, it appears from a number of programme and project materials th at NASA's\nrealigned research focus in 2006 was undertaken with the ultimate goal of supporting\nU.S. leadership in aerospace.\nb. While NASA may have removed references to increasing the competitiveness of U.S.\nindustry as an evaluation criterion and reformulat ed the NASA aeronautics research\nobjectives as aiming at producing broad public goods in certain respects, NASA retains\nthe statutory objective of preserving the role of the United States as a leader in\naeronautical and space science and technology. It also continues to acknowledge the role\nof the NASA aeronautics R&D programmes in promoting the competitiveness of the U.S.\naeronautics industry in a number of budget materials, as well as project descriptions,\nRFIs and NRAs under particular programmes.\nc. We are not persuaded that NASA's issuance of NRAs rather than RFPs as a means to set\nresearch priorities and solicit research proposals from industry and academia necessarily\nreduces the role of contractors in setting research priorities and thus the scope for\ncollaboration in determining the technologies to be researched. In any case, it would\nappear that, notwithstanding the NRA process introduced in 2006, a significant number\nof procurement contracts, task orders and cooperative agreements awarded by NASA to\nBoeing since FY 2006 in fact occurred outside the NRA process.\nd. While certain post-2006 procurement contracts do not include LERD clauses or restrict\nthe dissemination of data, this does not mean that there is no longer the sort of sharing\nof the research ou tcomes that led the Appellate Body to conclude that there is not a\nsimple exchange of the outputs of the research (e.g. scientific and technical information,\ndiscoveries, and data) for monetary consideration.\ne. The United States has not adequately substantiated its assertion that NASA has changed\nits facilities usage policies to permit access by foreign entities on the same basis as U.S.\ncompanies.\nf. The amounts of funding and value of provision of access to facilities, equipment, and\nemployees to Boeing through the relevant procurement contracts have declined over the\n2007-2012 period compared with 1989 -2006, and it appears more generally that NASA\nhas significantly reduced its aeronautics research spending in FY 2007-FY 2012\ncompared to FY 1989-FY 2006. However, we do not consider this factor to be relevant to\nthe appropriate characterization of the post -2006 NASA procurement contracts that is\nundertaken as part of the financial contribution analysis.\ng. It appears that the value of the provision of access to NASA facilities, equipment, and\nemployees under the post -2006 NASA procurement contracts is significantly lower than\nthe amount of payments. However, it is not apparent to us why this should determine\nour characterization of the post -2006 NASA procurement cont racts for purposes of the\nfinancial contribution analysis in light of the other factors we have discussed above.\n8.149. We therefore are not persuaded of the United States' position that almost all of the facts\nthat led to the Appellate Body's conclusion that th e pre-2007 NASA procurement contracts were\n\"akin to a species of joint venture\" are no longer applicable with respect to the post -2006 NASA\nprocurement contracts.1186 Rather, the differences between the two sets of instruments (which the\nPanel considers are less significant than the United States contends), taken together, are not such\nthat it would no longer be accurate to characterize the post-2006 NASA procurement contracts in a\nsimilar manner to the manner in which the Appellate Body characterized the pre -2007 NASA\nprocurement contracts. The United States argues additionally that the above changes to the\npost-2006 NASA procurement contracts mean that the transactions under these instruments are in\nfact most appropriately considered to be purchases of servic es.1187 While it may be possible to\n\n1186 See United States' first written submission, para. 224.\n1187 United States' first written submission, para. 225. To recall, the United States refers to the following\nfeatures of the post-2006 NASA procurement contracts which it argues point both to the inaccuracy of\n\ndescribe the primary formal legal transaction between NASA and Boeing under the post -2006\nNASA procurement contracts as involving a purchase of research services, an important aspect of\nthe characterization exercise is to e xamine the overall context in which NASA and Boeing interact.\nThe United States does not address this factor adequately in our view. Indeed, both parties\nattempt to extract from the Appellate Body 's discussion of the characteristics of the pre -2007\nNASA procurement contracts that led to their characterization as being \"akin to a species of joint\nventure\" a \"checklist\" of featur es that are said to point to the post -2006 NASA procurement\ncontracts being either joint ventures or purchases of services , without adequately engaging with\nthe issue of the relationship between NASA and Boeing in the specific context of when NASA\ncontracts Boeing to perform R&D work under the relevant aeronautics R&D programmes.1188\n8.150. While the Appellate Body discussed the various technic al elements of the transactions\nunder the pre-2007 NASA procurement contracts, its overall conclusion was that the nature of the\nrelationship between NASA and Boeing in the particular context was essentially one of\n\"partnership\".1189 Accordingly, it considere d that NASA did more than pay Boeing to conduct\nR&D1190; the research was jointly undertaken by NASA and Boeing 1191; the direct partnership\nbetween NASA and Boeing was supported by the NASA procurement contracts and cooperative\nagreements1192; and NASA considered t he partnership with Boeing to be more significant than the\nfunding provided as such.1193\n8.151. We are not persuaded that the nature of research that NASA commissions Boeing to\nundertake under the post -2006 procurement contracts has changed significantly compared t o the\nresearch that NASA commissioned under the pre -2007 procurement contracts. Significantly,\nNASA's aeronautics R&D programmes retain the promotion of the competitiveness of the U.S.\naeronautics industry as a fundamental objective, whether in the program me budgets, the RFIs, or\nspecific project descriptions. In other words, NASA 's objectives remain closely aligned with those\nof Boeing and the U.S. aeronautics industry in that NASA essentially commissions Boeing to\nperform research that NASA hopes will, am ong other things, support and advance the competitive\ninterests of the U.S. aeronautics industry. We therefore consider that, notwithstanding that the\ntechnical elements of the transactions may consist of payments in exchange for the performance\n\ncharacterizing the transactions under these instruments as \"akin to a species of joint venture\" and to the\nconclusion that the transactions are most appropriately characterized as purchases of services: (a) that the\nsubjects to be researched are no longer determined collaboratively between NASA and industry, rather, the\nreformulation of ARMD's research programme through the NRA process means that NASA decides research\ntopics on its own; (b) the value of any access to NASA equipment, facilities, and employees is far lower under\nthe post-2006 NASA procurement contracts than the panel found under the pre-2007 procurement contracts\nand the European Union has provided no evidence that research teams engaged under post-2006 NASA\nprocurement contracts mixed industry and NASA employees; (c) there is no evidence of any post-2006\nprocurement contract in which the value of any access to NASA facilities, equipment, or employees was\nsignificantly higher than the value of the payments; (d) while the pre-2007 procurement contracts were found\nto involve NASA and Boeing pooling non-monetary resources and employees, most of the post-2006\nprocurement contracts do not provide for facilities or equipment, and none of them refers to a \"pooling\" of\nemployees; (e) while Boeing still does not pay any royalties to NASA for commercial rewards arising from the\nscientific and technical output of the research where the Boeing employee, working alone or jointly with a\nNASA employee, performs the work that results in the invention, this is not the case where a NASA employee\ninvents the invention. In that case, NASA owns the invention and Boeing would have to pay a royalty; and (f)\nNASA has discontinued the use of LERD clauses which were said to give Boeing the exclusive right to exploit\ntechnology resulting from pre-2007 NASA procurement contracts in which they were contributing a significant\namount of their own resources to the research efforts.\n1188 While the United States identifies six factors, as recounted in fns 1074 and 1187 above, the\nEuropean Union considers that the Appellate Body relied on only three characteristics to find that the pre-2007\nNASA procurement contracts were joint ventures: (a) both parties committed resources; (b) the parties share\nthe fruits of the research; and (c) the subjects to be researched are often determined collaboratively.\n(European Union's second written submission, para. 244).\n1189 See Appellate Body Report, US – Large Civil Aircraft (2nd complaint), paras. 598-600.\n1190 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 594.\n1191 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 595.\n1192 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 599.\n1193 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 600. The Appellate Body took\na similar approach when discussing the relevant characteristics of the DOD assistance instruments. In addition\nto referring to the composite nature of the transactions (as involving a combination of funding and access to\nfacilities), the collaborative nature of the transactions (as involving a pooling of monetary and non-monetary\nresources on the input side and a sharing of the fruits of the research on the output side) it said that the\nactivities were undertaken in pursuit of a common goal for the benefit of both DOD and Boeing. (Appellate\nBody Report, US – Large Civil Aircraft (2nd complaint), para. 609).\n\nof research services, NASA and Boeing nonetheless remain engaged in a collaborative enterprise,\nin pursuit of a common goal, in which they both have a stake in the risks and returns. In other\nwords, considered in their proper context, the post -2006 NASA procurement contracts are most\nappropriately characterized as collaborative R&D arrangements between NASA and Boeing, in the\nsame way that the Appellate Body characterized the pre -2007 NASA procurement contracts. While\nthere may well be a purchase of services componen t to these transactions, the characterization of\nthe post-2006 NASA procurement contracts as purchases of services is incomplete and inaccurate\nwhen the instruments are considered in their proper context, especially in light of the nature of the\nrelationship between NASA and Boeing in performing the contracted research.1194\nWhether the post -2006 NASA procurement contracts , as collaborative R&D\narrangements, involve financial contribution s within the meaning of\nArticle 1.1(a)(1) of the SCM Agreement\n8.152. The United States advances three additional arguments in support of its position that, even\nif the Panel were to conclude that the post -2006 NASA procurement contracts, in terms of their\nrelevant characteristics, are \"akin to a species of joint venture \", the particul ar characteristics of\nthe transactions do not support the conclusion that the measures are analogous to equity\ninfusions.\n8.153. First, the United States argues that the fact that funding is provided in expectation of some\nkind of return cannot be a defining cha racteristic of post -2006 NASA procurement contracts\nbecause all transactions that provide funding involve the expectation of some kind of return. In\naddition, the United States submits that the \"return\" on NASA research, unlike the return on an\nequity investment, is always a \"sure thing\", which it argues, is reflected in the Appellate Body 's\nfinding that NASA and Boeing learned valuable lessons from research that failed. Finally, the\nUnited States contends that the fact that funders ' risks are limited to th e amount of money they\ncommit and the opportunity cost of other support they provide cannot be a defining characteristic\nof a joint venture, because this is true equally in the case of a purchase of goods or of services.1195\n8.154. The European Union considers that the post-2006 NASA procurement contracts satisfy the\nAppellate Body 's criteria for demonstrating that they are \"akin to equity infusions in joint\nventures\"1196, and that the United States does not in fact dispute that the key criteria are met with\nrespect to post-2006 NASA contracts. Notably, it argues that the United States acknowledges that\nfunding of post -2006 NASA procurement contracts is provided in expectation of some kind of\nreturn, that funders ' risks are limited to the amount of money they commit and the opportunity\ncost of other support they provide, that NASA research is sometimes unsuccessful, and that\nsometimes NASA provides access to facilities , equipment and employ ees under the\narrangements.1197\n8.155. As we see it, t he United States ' arguments as to why the post-2006 NASA procurement\ncontracts, even if characterized as being like joint ventures, should not be considered analogous to\nequity infusions, would apply equally to the pre-2007 NASA procurement contracts analysed by the\nAppellate Body. As such, it seems to us that the United States' disagreement is with the analysis of\nthe Appellate Body regarding the aspects of the pre -2007 NASA procurement contracts that the\nAppellate Body considered to render them analogous to equity infusions and thus, to invol ve a\ndirect t ransfer of funds under Article 1.1(a)(1)(i). We do not consider it appropriate in this\ncompliance proceeding to depart from the legal reasoning of the Appellate Body in the original\nproceeding. Having concluded that, despite some differences b etween the relevant characteristics\nof the post-2006 NASA procurement contracts and their pre -2007 counterparts, it is nevertheless\nappropriate to characteri ze the post -2006 NASA procurement contracts before us in this\nproceeding in the same manner as the Appellate Body characterized the pre -2007 NASA\nprocurement contracts in the original proceeding, we do not consider it appropriate to depart from\n\n1194 The Panel therefore rejects the United States' argument that the transactions are more properly\ncharacterized as purchases of services and consequently, considers it unnecessary to address the\nUnited States' arguments that transactions appropriately characterized as purchases of services are excluded\nfrom the scope of Article 1.1(a)(1) of the SCM Agreement.\n1195 See United States' second written submission, paras. 221-223.\n1196 European Union's second written submission, para. 246.\n1197 European Union's second written submission, para. 246.\n\nthe reasoning of the Appellate Body as to why such measures are analogous to equity infusions\nand thus involve a direct transfer of funds within the meaning of 1.1(a)(1)(i).\n8.156. Accordingly, consistent with the Appellate Body 's findings in respect of the pre -2007 NASA\nprocurement contracts in the original proceeding, we conclude that the post -2006 NASA\nprocurement contracts have characteristics analogous to equity infusions, wherein payments under\npost-2006 NASA procurement contracts involve direct transfers of funds within the meaning of\nArticle 1.1(a)(1)(i) of the SCM Agreement, and any provision of access to NASA facilities,\nequipment, and employees provided to Boeing under those instruments constitutes the provision\nof goods or services other than general infrastructure within the meaning of Article 1.1(a)(1)(iii) of\nthe SCM Agreement.\n8.157. For these reasons, we find t hat the payments and provision of access to NASA\nfacilities, equipment, and employees to Boeing through the post -2006 NASA\nprocurement contracts funded under four NASA aeronautics R&D programmes (the\nFundamental Aeronautics Program; the Integrated Systems Research Program; the\nAviation Safety Program; and the Aeronautics Test Program) constitute financial\ncontributions within the meaning of Article 1.1(a)(1) of the SCM Agreement. 1198\nSpecifically, the payments provided by NASA constitute financial contribution s as a\ndirect transfer of fund s within the meaning of Article 1.1(a)(1)(i), and the provision of\naccess to facilities, equipment, and employees qualifies as a government provision of\ngoods or services other than general infrastructure under Article 1.1(a)( 1)(iii) of the\nSCM Agreement.\n8.158. In light of our conclusions in paragraphs 8.103 and 8.157, it is unnecessary for us to\naddress the European Union's alternative argument that what it refers to as the transfer to Boeing\nof patent and other intellectual property rights could separately be considered a financial\ncontribution within the meaning of Article 1.1(a)(1)(iii) of the SCM Agreement.1199\n8.159. Having found that the post -2006 N ASA aeronautics R&D measures at issue in this\nproceeding are financial contributions, we next consider whether these financial contributions\nconfer a benefit.\n8.2.2.4 Whether there is a benefit\n8.2.2.4.1 Main arguments of the parties and third parties\n8.160. The European Union argues that the financial contributions provided through the post-2006\nNASA procurement contracts, cooperative agreements, and Space Act Agreements under the\nchallenged NASA aeronautics R&D programmes confer a benefit within the meaning of\nArticle 1.1(b) of the SCM Agreement.\n8.161. With regard to the post -2006 NASA procurement contracts, the terms of which were\nmodified by the NASA -Boeing Patent Licence Agreement of 23 September 2012, the\nEuropean Union's arguments as to why the financial contributions provided thr ough those\ncontracts confer a benefit are the same as those it makes as to why the modifications to the\npre-2007 NASA procurement contracts , also effected by the NASA -Boeing Patent Licence\nAgreement fail to remove the benefit.1200\n8.162. The European Union argues t hat the reasoning of the Appellate Body in the original\nproceeding that the pre -2007 NASA procurement contracts and DOD assistance instruments\nconferred a benefit, applies equally to the post-2006 NASA procurement contracts and cooperative\nagreements, the terms of which have not been modified by the NASA -Boeing Patent Licence\nAgreement, as these arrangements \"have precisely the same factual and legal characteristics as\nthe pre -2007 NASA R&D contracts and agreements \" that were subject to the Appellate Body 's\nfindings on benefit in the original proceeding , and are not provided on the basis of commercial\nconsiderations.\n\n1198 We recall our explanation in fn 1133 above that the Aeronautics Test Program funded only Space\nAct Agreements (rather than procurement contracts or cooperative agreements) with Boeing.\n1199 See para. 8.87 above.\n1200 See paras. 8.8 to 8.15 above.\n\n8.163. The European Union submits that the fact that post -2006 NASA procurement contracts are\nsubject to competitive bidding should have no effect on the benefit analysis because, pursuant to\nthe Bayh -Dole regime and NASA -specific regulations for allocating intellectual property rights\nunder U.S. Government R&D contracts (which the European Union considers have the explicit,\nnon-commercial purpose of a ssisting U.S. industry), the allocation of patent rights is uniform and\nownership of any intellectual property is not open to bidding, and thus would not be a\ndeterminative element in bidding. It argues that the United States has provided no evidence to\nsupport its assertions that the intellectual property rights allocated to Boeing through any of the\naeronautics R&D contracts and agreements were provided in exchange for Boeing accepting a\nlower profit margin, lower levels of cost reimbursement, or a lower fixed-price contract. 1201 In\naddition, the European Union submits that the Appellate Body rejected a similar argument made\nby the United States in the context of the original DOD assistance instruments. 1202 Thus, the\nbenefit resulting from the post -2006 NASA pro curement contracts arises from the \"systematically\nskewed (in comparison to the market) allocation of patent rights \" in U.S. Government R&D\ncontracts.1203\n8.164. Finally, with respect to non-reimbursable and partially -reimbursable post-2006\nSpace Act Agreements, the European Union contends that the United States has made no\nallegation that they are any different in nature than the pre -2007 Space Act Agreements, and\ntherefore that the original panel finding of benefit should be sustained. 1204 In the event that the\nPanel does not base its finding on the original panel finding of benefit, the European Union argues\nthat the post -2006 Space Act Agreements provide a benefit for the same reason as the NASA\nprocurement contracts, because the transactions in the market result in an equilibrium that is\nmore favourable to the commissioning party than the transactions pursuant to post -2006\nSpace Act Agreements. The European Union submits that the United States has not demonstrated\nthat NASA receives something of genuine value in exch ange for providing Boeing with the use of\nNASA facilities and equipment through non -reimbursable and partially -reimbursable Space Act\nAgreements.1205 Moreover, the European Union argues that the allocation of intellectual property\nrights under Space Act Agree ments does not preclude the Panel from finding that Space Act\nAgreements provide a benefit for the same reasons as the NASA procurement contracts. The\nEuropean Union refers to the intellectual property provisions of one \"representative example SAA\"\nreferred to by the United States, submitting that this Space Act Agreement \"appears to have the\nsame limitations as the NASA R&D contracts and agreements at issue\".1206\n8.165. The United States argues that the European Union has failed to meet its burden to\nestablish that the post-2006 NASA procurement contracts, cooperative agreements, and Space Act\nAgreements at issue in this proceeding confer a benefit within the meaning of Article 1.1(b) of the\nSCM Agreement.\n\n1201 European Union's comments on the United States' response to Panel question No. 67, paras. 25 and\n65. Mr Razgaitis opines that the lack of bargaining power over intellectual property ownership under U.S.\nGovernment R&D contracts discredits the United States' arguments regarding the impact of competitive\nbidding on the exchange of value in DOD and NASA procurement contracts. According to Mr Razgaitis, because\nof the provisions of U.S. law that \"preclude\" DOD and NASA from bargaining over ownership of intellectual\nproperty rights, Boeing does not need to \"underbid\" to fully account for the net present value of the foreground\nintellectual property. Mr Razgaitis considers that there is no evidence that Boeing, or any other commissioned\nparty, in practice reduces its RDT&E costs because of the Bayh-Dole provisions. (Second Supplemental\nDeclaration of R. A. Razgaitis, Sr., Ph.D., CLP, 17 December 2014 (Second Supplemental Razgaitis\nDeclaration), (Exhibit EU-1398), para. 49).\n1202 European Union's second written submission, para. 311 (referring to Appellate Body Report, US –\nLarge Civil Aircraft (2nd complaint), paras. 665 and 666).\n1203 European Union's response to Panel question No. 25, para. 138 (\"{t}he benefit resulting from the\nR&D contracts and agreements at issue is evidenced, in part, by the systematically skewed (in comparison to\nthe market) allocation of patent rights in the U.S. government R&D contracts\"). See also European Union's\nresponse to Panel question No. 26, para. 162 (\"{r}ather, once, as here, it is clear that there is a benefit\nassociated with systematically gifting the relevant IP rights in advance, that should be sufficient for the\npurposes of the {benefit} analysis\").\n1204 European Union's second written submission, para. 314.\n1205 European Union's first written submission, para. 181; European Union's second written submission,\npara. 315.\n1206 European Union's second written submission, para. 317.\n\n8.166. With respect to the post -2006 NASA procurement contracts th e terms of which have not\nbeen modified by the NASA -Boeing Patent Licence Agreement 1207, the United States argues that\nthe European Union has failed to establish that such measures are more favourable to Boeing than\ncomparable commercial arrangements and the Panel should therefore find that these\narrangements do not confer a benefit within the meaning of Article 1.1(b) of the SCM Agreement.\n8.167. The United States criticizes the European Union 's approach to determining the commercial\nconsistency of the post -2006 R&D procurement contracts based on only one term of the contract\n(i.e. the allocation of patent rights). According to the United States, a thorough and systematic\nreview of the evidence indicates that the terms under which the U.S. Government commissions\nresearch work are no more advantageous to the recipient than comparable commercial\ntransactions.1208 This analysis should extend beyond patent rights to consider how other terms of\nthe contract affect the balance of value between the parties, in particular the price that commercial\ncommissioning parties pay for the rights they acquire.1209\n8.168. The United States argues that an appropriate benchmark for assessing whether the\npost-2006 NASA procurement contracts confer a benefit should properly reflect the type of\nfinancial contribution. Although the post -2006 NASA procurement contracts are properly\ncharacterized as purchases of services, the United States submits that, even if the Panel were to\nconclude that the post -2006 NASA procurement contracts are financial contributi ons, it would still\nneed to take into account that the transactions are \"in substance, purchases of services \" and that\nNASA was \"purchasing something \".1210 The context provided by Article 14(d) of the SCM\nAgreement indicates that the proper standard for asses sing whether government purchases confer\na benefit is the adequate remuneration standard. Under this standard, a benefit would exist only if\nthe U.S. Government paid too much for the rights it obtained. The adequate remuneration\nstandard therefore focuses on what the government purchased, and not what a private entity\nwould have purchased in similar circumstances, and asks whether the government paid too much\n(i.e. more than adequate remuneration) for what it sought to buy ; in this case, the purchase of\nown-use rights in patents that result from research. The United States argues that the\nEuropean Union fails to address this standard.1211\n8.169. The United States disagrees with the Eu ropean Union that whether the post-2006 NASA\nprocurement contracts involved competitive bidding is irrelevant to whether they confer a benefit ,\nbased on the Appellate Body 's rejection of a similar argument regarding the pre -2007 DOD\nassistance instruments in the original proceeding. 1212 The United States argues that the Appellate\nBody's state ment regarding competitive bidding in the original proceeding addressed only DOD\nassistance instruments, which the Appellate Body had differentiated from DOD procurement\ncontracts. The United States argues that the Appellate Body 's statements in Canada – Renewable\nEnergy / Canada – Feed-in Tariff Program indicate that the relevance of competitive bidding to the\nanalysis of benefit depends on the facts. 1213 Moreover, economically rational bidders will factor the\n\n1207 The United States does not set out specific arguments as to whether post-2006 NASA cooperative\nagreements are more favourable to Boeing than comparable commercial arrangements, as it submits that\n\"their value is so small in relation to contracts that these differences do not affect the overall outcome\".\n(United States second written submission, fn 111; response to Panel question No. 156, fn 36).\n1208 United States' response to Panel question No. 67, para. 11.\n1209 The United States argues that a \"narrow\" approach to benefit, focused on isolated terms of a\ntransaction, is contrary to the SCM Agreement. It notes that in EC and certain member States – Large Civil\nAircraft, the panel and Appellate Body considered all aspects of the transaction, including the interest rate,\nterm of loan, royalties, fees, and expected delivery schedules as part of the evaluation as to whether, as a\nwhole, the terms the EU member States offered to Airbus were more favourable than those available in the\nmarket. (United States' response to Panel question No. 67, para. 13). See also United States' first written\nsubmission, para. 238.\n1211 United States' first written submission, paras. 253 and 254; second written submission, paras. 232\nand 233.\n1212 United States' second written submission, para. 235. See Appellate Body Report, US – Large Civil\nAircraft (2nd complaint), para. 665: \"intellectual property is not open to bidding: it is determined by US law.\nBecause each bidder knows in advance that this particular aspect of the transaction will not be altered with\nrespect to its competitors, ownership of any resulting intellectual property will not be a determinative element\nin how each bidder structures its proposals.\"\n1213 Appellate Body Reports, Canada – Renewable Energy / Canada – Feed-in Tariff Program,\npara. 5.228: \"{a}lternatively, such benchmark may also be found in price-discovery mechanisms such as\n\ncost or value of a fixed term of a bid (such as t he allocation of intellectual property rights) into the\neconomic value of the overall package, and adjust the bid accordingly. 1214 Thus, there is no basis\nto treat the Appellate Body 's statement regarding competitive bidding in respect of the pre -2007\nDOD ass istance instruments as applicable to the benefit analysis for the post -2006 NASA\nprocurement contracts. The United States asserts that \"all of the NASA aeronautics research\ncontracts\" are subject to competitive bidding, and the process of competitive biddi ng confirms that\nNASA did not pay more than adequate remuneration for its post -2006 procurement contracts.\nRather, NASA 's monetary contribution under the post -2006 NASA procurement contracts is\nconsideration for the enhanced data rights it obtains, and thu s confirms that the post -2006 NASA\nprocurement contracts reflect a negotiated bargain.1215\n8.170. With respect to the post -2006 NASA procurement contracts the terms of which were\nmodified by the NASA -Boeing Patent Licence Agreement, t he United States argues that t hese\nprocurement contracts reflect the same allocation of intellec tual property rights as the amended\npre-2007 NASA procurement contracts.\n8.171. Finally, as with the pre-2007 Space Act Agreements at issue, the United States argues that\nthe European Union fails to identify any relevant benchmark to explain how post -2006 Space Act\nAgreements achieve an equilibrium that is more favourable to Boeing than comparable commercial\ntransactions. The European Union fails to take into account that Space Act Agreements do not\ninvolve any funding by the U.S. Government 1216, sometimes involve payments by Boeing to NASA,\nand include intellectual property terms that are not the same as those under the post -2006 NASA\nprocurement contracts. Accordingly, there is no basis for the Europea n Union's argument that\nSpace Act Agreements confer a benefit for the same reasons as the NASA contracts and\nagreements. As Boeing contributes its own resources under Space Act Agreements, without\nreceiving any funding from NASA, the United States contends that there is a relationship between\nthe level of patent rights and the level of contribution to the research effort, and therefore, that\nthe post-2006 Space Act Agreements do not confer a benefit within the meaning of Articles 1.1(b)\nof the SCM Agreement.1217\n8.172. Certain of the third parties (Brazil, Japan, and Korea) make arguments regarding the\nexistence of a benefit within the meaning of Article 1.1(b) of the SCM Agreement. These\narguments are summarized in Section 8.1.2 above.\n8.2.2.4.2 Evaluation by the Panel\n8.173. In this Section of the Report, we evaluate whether the following categories of post -2006\nNASA aeronautics R&D measures, which we f ind to involve financial contributions within the\nmeaning of Article 1.1(a)(1) of the SCM Agreement, con fer a benefi t within the meaning of\nArticle 1.1(b):\na. post-2006 NASA procurement contracts and cooperative agreements included in annex A\nof the United States ' Compliance Communication (these having been modified by the\nNASA-Boeing Patent Licence Agreement t o grant a commercial use licence to NASA on\nthe terms explained in Section 8.1.3.2 above);\nb. post-2006 NASA procurement contracts and cooperative agreements that have not been\nmodified by the NASA-Boeing Patent Licence Agreement; and\nc. post-2006 Space Act Agreements.\n8.174. In undertaking these evaluations, we first address the relevant approach that we should\ntake in determining whether the post -2006 NASA procurement contracts and cooperative\n\ncompetitive bidding or negotiated prices, which ensure that the price paid by the government is the lowest\npossible price offered by a willing supply contractor.\"\n1214 United States' second written submission, para. 237.\n1215 United States' first written submission, para. 255; second written submission, paras. 234-237.\n1216 The United States points out that there are \"a very limited number of funded SAAs, used by NASA's\nspace program to foster the development of commercial space transportation vehicles\". (United States' second\nwritten submission, fn 361).\n1217 United States' first written submission, para. 257; second written submission, paras. 239-244.\n\nagreements, both those that were modified by t he NASA-Boeing Patent Licence Agreement and\nthose that were not, confer a benefit.\n8.175. The European Union argues that we should adopt the same benefit analysis that the\nAppellate Body adopted in concluding that the original (pre -2007) NASA procurement contrac ts\nand DOD assistance instruments conferred a benefit. The United States argues that the proper\nstandard for assessing whether a financial contribution confers a benefit depends on the nature of\nthe financial contribution, and in the case of the post -2006 NASA procurement contracts, the fact\nthat NASA was purchasing something in the transactions must play a role in the assessment of\nbenefit. The United States acknowledges that cooperative agreements are the only NASA\ninstruments that provide for the possibi lity of \"joint funding\" by NASA and participating private\nentities, as well as non-cash in kind contributions.1218\n8.176. We recall our previous conclusion that, for the reasons set forth in Section 8.2.2.3 of this\nReport, the post -2006 NASA procurement contracts are properly characterized as collaborative\nR&D arrangements on the basis of their relevant characteristics. 1219 Accordingly, we f ind in\nSection 8.2.2.3.2 that the payments provided to Boeing through po st-2006 NASA procurement\ncontracts and cooperative agreements funded under the relevant NASA aeronautics R&D\nprogrammes are financial contributions in the form of direct transfers of fund s within the meaning\nof Article 1.1(a)(1)(i) of the SCM Agreement , while the provision of access NASA to facilities,\nequipment, and employees through such instruments is a financial contribution in the form of a\nprovision of goods or services other than general infrastructure within the mea ning of\nArticle 1.1(a)(1)(iii) of the SCM Agreement.1220\n8.177. In the original proceeding, the Appellate Body characterized the pre -2007 NASA\nprocurement contracts as collaborative R&D arrangements which involved financial contributions\nwithin the meaning of Article 1.1(a)(1) of the SCM Agreement a nd then determined whether they\nconferred a benefit by comparing the allocation of intellectual property rights under those\ncontracts with the allocations of intellectual property rights in private collaborative R&D\nagreements which it treated as evidence of market practice in this regard. We recall that this is a\ncompliance proceeding. In these circumstances, we consider it incumbent upon this compliance\nPanel to adopt the same approach to determining whether the post -2006 NASA procurement\ncontracts and cooperative agreements confer a benefit as the Appellate Body took to determining\nwhether the similarly characterized pre -2007 NASA procurement contracts at issue in the original\nproceeding conferred a benefit.\n8.178. We will therefore evaluate whether the financial contributions provided through the post-\n2006 NASA procurement contracts confer a benefit by comparing the allocation of rights to own\nand use patents between NASA and Boeing under post-2006 NASA procurement contracts with the\nevidence before us concerni ng the allocation of such rights in collaborative R&D arrangements\nbetween market actors. We will evaluate whether the financial contributions provided through the\ncooperative agreements confer a benefit in th e same way, considering that transactions under\nthese arrangements are also most appropriately characterized as collaborative R&D arrangements,\nand given that NASA provides payments to Boeing under these arrangements as it does under\nprocurement contracts. We will also evaluate whether the financial contributions provided through\nthe post-2006 Space Act Agreements confer a benefit.\n8.179. Unlike the characterization of the post -2006 NASA procurement contracts that we\nconducted in connection with our evaluation of whether those measures involved financial\ncontributions, our consideration of whether the financial contributions provided through the NASA\nprocurement contracts confer a benefit requires us to distinguish between two sub -groups of\npost-2006 NASA procurement contracts, owing to the fact that there are different intellectual\n\n1218 United States' second written submission, fn 220 (\"cooperative agreements are the only instruments\nused by NASA that provide for 'joint funding,' and they did not represent a significant share of NASA's\npayments to Boeing at any point from 1989 to the present\"). NASA will provide funding under these\narrangements, except in the case of \"no-cost extensions\". See also NASA, Grant and Cooperative Agreement\nHandbook, Part 1260, (November 2014), (Exhibit EU-1369); and United States Code of Federal Regulations,\nTitle 14, section 12.60.12(b).\n1219 We rejected the United States' argument that post-2006 NASA procurement contracts are more\nappropriately characterized as purchases of services.\n1220 See paras. 8.103 and 8.157 above.\n\nproperty allocations for certain post -2006 instruments that were modified by the NASA -Boeing\nPatent Licence Agreement, and those that were not.1221\n8.180. We begin by considering whether the post -2006 NASA procurement contracts that have\nbeen modified by the NASA -Boeing Patent Licence Agreement (these instruments are listed in\nannex A of the United States ' Compliance Communication and are listed in the appendix to the\nNASA-Boeing Patent Licence Agreement), confer a benefit within the meaning of Article 1.1(b). We\nthen conduct a benefit determination with respect to the post -2006 NASA procurement contracts\nand cooperative agreements that have not been modified by the NASA -Boeing Patent Licence\nAgreement, followed by the post -2006 Space Act Agree ments, which also have not been modified\nby the NASA-Boeing Patent Licence Agreement.\n8.2.2.4.2.1 Post-2006 NASA procurement contracts and cooperative agreements that\nhave been modified by the NASA-Boeing Patent Licence Agreement\n8.181. We find in Section 8.1.3 of this Report that the grant to NASA of commercial use rights in\nrespect of Boeing-owned patents under the pre -2007 NASA procurement contracts 1222 effected by\nthe NASA -Boeing Patent Licence Agreement has not brought those instruments into li ne with\nprevailing market practices for collaborative R&D arrangements in such a way as to remove the\nbenefit that the Appellate Body had found was conferred through the pre -2007 NASA procurement\ncontracts in the original proceeding. 1223 The analysis in Secti on 8.1.3 underlying this finding with\nrespect to the pre-2007 NASA procurement contracts and cooperative agreements modified by the\nNASA-Boeing Patent Licence Agreement applies equally to the post -2006 NASA procurement\ncontracts that have been modified by the NASA-Boeing Patent Licence Agreement.\n8.182. We therefore find that the financial contributions in the form of payments and\naccess to NASA facilities, equipment, and employees, provided through certain\npost-2006 NASA procurement contracts and cooperative agreements that have been\nmodified by the NASA -Boeing Patent Licence Agreement, confer a benefit , within the\nmeaning of Article 1.1(b) of the SCM Agreement.\n8.2.2.4.2.2 Post-2006 NASA procurement contracts and cooperative agreements that\nhave not been modified by the NASA-Boeing Patent Licence Agreement\n8.183. We next evaluate whether other p ost-2006 NASA procurement contracts and cooperative\nagreements that have not been modified by the NASA -Boeing Patent Licence Agreement (and\ntherefore, were not included in annex A of the United States ' Compliance Communication), confer\na benefit within the meaning of Article 1.1(b).\n8.184. As explained above, the NASA -Boeing Patent Licence Agreement granted NASA, as\ncommissioning party, a limited commercial use licence in respect of Boeing -owned patents arising\nfrom work performed by Boeing under the NASA procurement contracts and cooperative\nagreements to which it applies. In Section 8.1.3.2 above, we conclude, based on our assessment\nof the evidence of comparable private collaborative R&D agreements, and of the opinions of the\nparties' respective technology licensing experts, that Boeing as commissioned party under the\nmodified NASA procurement contracts, remains in a more favourable positi on as regards its ability\nto commercially exploit Boeing -owned patents than the commissioned parties under the private\ncollaborative R&D agreements.\n8.185. The \"unmodified\" post-2006 NASA procurement contracts and cooperative agreements do\nnot grant NASA a comme rcial use licence in respect of Boeing -owned patents. Boeing therefore\nhas a more extensive ability to commercially exploit its patents under these arrangements than it\nhas under the pre -2007 NASA procurement contracts and cooperative agreements and those\n\n1221 At para. 3 of its Compliance Communication, the United States advises that, in addition to modifying\nthe rights accorded to the parties under the contracts covered by the DSB recommendations and rulings to\nmake them consistent with commercial practice, \"NASA has made identical modifications, as necessary, with\nregard to contracts subsequent to those covered by the recommendations and rulings of the DSB, without\nprejudice to the U.S. view that those contracts were not subsidies causing adverse effects to the\nEuropean Union's interests. These contracts are also listed in Annex A.\"\n1222 See fn 972 above.\n1223 See para. 8.49 above.\n\npost-2006 NASA procurement contracts that have been modified by the NASA -Boeing Patent\nLicence Agreement. Given that we conclude that the pre -2007 NASA procurement contracts and\nthose post-2006 NASA procurement contracts that have been modified by the NASA -Boeing Patent\nLicence Agreement, confer a benefit on Boeing, logically we must also conclude that the post -2006\nNASA procurement contracts and cooperative agreements that have not been modified to grant\nNASA a commercial use licence, confer a benefit.\n8.186. This conclusion is also consistent with the Appellate Body's finding that the pre -2007 NASA\nprocurement contracts in the original proceeding, which contain the same allocation of rights in\nrespect of patents as the \"unmodified\", post -2006 NASA procurement co ntracts and cooperative\nagreements now before us, involved a more favourable allocation of intellectual property rights to\nBoeing as commissioned party than the allocations to commissioned parties under [***] and\ntherefore conferred a benefit on Boeing.\n8.187. We therefore find that the financial contributions in the form of payments and the\naccess to NASA facilities, equipment, and employees provided to Boeing through the\npost-2006 NASA procurement contracts and cooperative agreements that have not been\nmodified by the NASA -Boeing Patent Licence Agreement confer a benefit within the\nmeaning of Article 1.1(b) of the SCM Agreement.\n8.2.2.4.2.3 Space Act Agreements\n8.188. We next consider whether the financial contributions provided through non -reimbursable\nand partially-reimbursable Space Act Agreements entered into between NASA and Boeing confer a\nbenefit within the meaning of Article 1.1(b) of the SCM Agreement .1224 Based on the\nparties' arguments, the principal issue before us is whether the benefit analysis in respect of NASA\nprocurement contracts and DOD assistance instruments is also applicable to Space Act\nAgreements, or whether Space Act Agreements are sufficiently distinct as to warrant a different\nanalysis of whether the transactions under those instruments confer a benefit. If a different\nanalysis is required, the European Union has not provided evidence of relevant commercial\nbenchmarks, and we would have no basis to conclude that Space Act Agreements confer a benefit.\n8.189. Unlike NASA procurement contracts and cooperative agreemen ts, and as set forth in\nSection 8.2.2.2.3, NASA does not make payments to Boeing under Space Act Agreements. 1225\nHowever, transactions under Space Act Agreements share a number of features with transactions\nunder NASA procurement contracts. Under both NASA procurement contracts and Space Act\nAgreements, Boeing is provided with access to NASA facilities, equipment, and employees , and\nBoeing also participates by providing in-kind contributions. In addition, the allocation of intellectual\nproperty rights and data rights is an important aspect of the terms of both NASA procurement\ncontracts and Space Act Agreements. We f ind that the transactions under NASA procurement\ncontracts and under Space Act Agreements are both properly characteri zed as collaborative R&D\narrangements, wherein the access to NASA facilities, equipment, and employees that is provided\nto Boeing constitutes a financial contribution as a provision of goods or services other than general\ninfrastructure, within the meaning of Article 1.1(a)(1)(iii) of the SCM Agreement.1226 In the case of\nSpace Act Agreements, although Boeing does not receive payments in exchange for its\ncontribution, Boeing is not required to fully reimburse NASA for any such access to facilities,\nequipment a nd personnel provided by NASA under non -reimbursable and partially -reimbursable\nSpace Act Agreements. Taking into account these similarities, we do not consider that the fact that\nNASA does not make payments to Boeing under Space Act Agreements of itself w arrants a\ndifferent approach to determining benefit from that adopted with respect to the NASA procurement\ncontracts. The fact remains that Boeing may nevertheless advance its R&D activities and\ncommercial objectives through the commercial use rights that it retains (e.g. title to inventions\nwhere these are made by Boeing employees or jointly by NASA employees and Boeing employees,\nas well as rights to data) , in addition to contributing to NASA's particular mission or programme\n\n1224 As explained in Section 8.1.3.3 above, our assessment here of whether the financial contributions\nconfer a benefit covers both pre-2007 and post-2006 Space Act Agreements.\n1225 NASA has determined that Space Act Agreements are not \"procurement contracts\", agreements,\nunderstandings or other arrangements, within the meaning of Section 305(j) of the Space Act (NASA, Space\nAct Agreements Guide, NAII 105-1A, (15 August 2008), (Exhibit USA-469), p. 50 and fn 42). See also\nUnited States Code, chapter 35, section 201(b), and chapter 42, section 2457(j).\n1226 See Section 8.2.2.3.2.1 above.\n\nobjectives. We therefore cons ider that our approach to determining whether the NASA\nprocurement con tracts and cooperative agreements confer a benefit is also applicable to our\nassessment of benefit with respect to the non -reimbursable and partially -reimbursable Space Act\nAgreements before us.\n8.190. As explained in Sections 8.1.3, 8.2.2.4.2.1, and 8.2.2.4.2.2 above, based on our review of\ncommercial R&D arrangements, which the parties have submitted as evid ence of relevant \"market\nbenchmarks\"1227, we conclude that [***]. Based on a comparison of the allocation between NASA\nand Boeing of the rights to own and use patents arising from work performed under NASA\nprocurement contracts and cooperative agreements, wit h the allocations of such rights under a\nnumber of private collaborative R&D arrangements, we conclude that the allocation of patent\nrights under the NASA procurement contracts remains more favourable to Boeing as commissioned\nparty than the corresponding allocations to commissioned parties under the private collaborative\nR&D agreements before the Panel, and accordingly, that the financial contributions provided\nthrough NASA procurement contracts and cooperative agreements confer a benefi t within the\nmeaning of Article 1.1(b).1228\n8.191. We recognize that the distribution of intellectual property and related licence rights under\nthe Space Act Agreements before us is not necessarily identical to that under NASA procurement\ncontracts and cooperative agreements. Accordin g to the Space Act Agreements Guide , published\nby NASA and submitted as evidence in this proceeding, NASA elects to determine how rights to\npatents for inventions are allocated on a case -by-case basis, depending on whether work is likely\nto lead to inventions, and whether work is being performed \"for NASA\", or is not being performed\nfor NASA.1229\n8.192. If a nongovernmental contracting party performs work that is determined to be of an\ninventive type for NASA, the contracting party may obtain title to inventions it makes through an\nadvance or an individual waiver, and NASA retains a government purpose licence in the\ninvention.1230 NASA indicates that \"NASA liberally grants such waivers for the purpose of\ncommercializing the waived invention\" 1231, including for work that in volves design, engineering,\ndevelopment, research or experimental work. 1232 If a nongovernmental contracting party is\ndetermined not to perform work of an inventive type for NASA, NASA obtains no rights in\ninventions made solely by the contracting party. NASA indicates that, \"most {Space Act\nAgreements} do not involve work of an inventive nature being performed by the partner for\nNASA\".1233\n8.193. We observe that, in either of these circumstances, the fundamental balance of rights to\nown and use intellectual property re mains more favourable to Boeing than the corresponding\nallocations to commissioned parties under the private collaborative R&D agreements before the\nPanel. In the case of work that is deemed to be of an inventive type and is conducted for NASA,\nthrough the grant of an advance or individual waiver, the allocation of intellectual property rights\nbetween Boeing and NASA is similar to the allocation of intellectual property rights under NASA\nprocurement contracts and other R&D contracts to which the Bayh -Dole r egime applies. In the\ncase of work that is determined not to be performed for NASA, NASA obtains no rights in\ninventions made solely by the contracting party . Other evidence before us indicates that each\nparty retains the rights to its own intellectual property that is conceived in the course of work, and\nin the case of joint inventions, allocations of rights jointly belong to NASA and the contracting\n\n1227 These private R&D agreements include Contracts A through F which were also submitted in the\noriginal proceeding and a number of other private, commercial collaborative R&D agreements. Our evaluation\nof the allocation of intellectual property rights and rights resulting therefrom (i.e. licence rights) under these\ncollaborative R&D arrangements is set out in a BCI Appendix (Appendix 1).\n1228 See paras. 8.181 and 8.185-8.187 above.\n1229 NASA, Space Act Agreements Guide, NAII 105-1A, (15 August 2008), (Exhibit USA-469), pp. 50 and\n51 (emphasis original).\n1230 NASA, Space Act Agreements Guide, NAII 105-1A, (15 August 2008), (Exhibit USA-469), pp. 50 and\n51.\n1231 NASA, Space Act Agreements Guide, NAII 105-1A, (15 August 2008), (Exhibit USA-469), p. 50 and\nfn 43 (referring to Executive Order 12591, section 1, para. (b)(4)).\n1232 NASA, Space Act Agreements Guide, NAII 105-1A, (15 August 2008), (Exhibit USA-469), fn 42.\n1233 NASA, Space Act Agreements Guide, NAII 105-1A, (15 August 2008), (Exhibit USA-469), p. 51.\nNASA explains that, while it generally acquires no rights to any invention made solely by the partner, it may\nnegotiate a licence to use a partner invention for research, experimental and evaluation purposes. (NASA,\nSpace Act Agreements Guide, NAII 105-1A, (15 August 2008), (Exhibit USA-469), p. 52).\n\nparty, wherein NASA may retain a royalty -free, government purpose licence in respect of\njointly-owned inven tions.1234 Although the balance of intellectual property rights in these\ncircumstances is not identical to that which applies under the Bayh -Dole regime, the fundamental\nbalance of intellectual property rights nevertheless remains one in which the U.S. Govern ment\nlacks the right to obtain an exclusive licence in respect of Boeing -owned patents and thus,\nBoeing's ability to commercially exploit its patents is not contingent on the U.S. Government's\nelection not to exercise exclusive rights to licence those pate nts for itself. The resulting allocation\nis therefore still more favourable to Boeing than the allocation of intellectual property rights under\nthe private collaborative R&D agreements before the Panel.\n8.194. We note finally, i n addition to a more favourable allocation of intellectual property rights\nthan is evidence d under private collaborative R&D agreements before the Panel, in terms of data\nrights, c ontracting parties under non -reimbursable and partially -reimbursable Space Act\nAgreements gain access to data t hat allows use for commercial purposes, and can prevent the\nrelease of data for a periods of between one and five years. 1235 This differs from the rights in data\nunder NASA aeronautics R&D procurement contracts, where the U.S. G overnment receives\n\"unlimited rights data\", which enables it to use data for its own purposes, bot h inside and outside\ngovernment.1236\n8.195. Given that the allocation of patent rights and related licence rights is more favourable to\nBoeing than the allocation of patent rights and related licenc e rights under the private\ncollaborative R&D agreements before the Pane l, and that Boeing may additionally request that\nNASA restrict access to data that allows use for commercial purposes, we conclude that the\nfinancial contributions under NASA Space Act Agreements confer a benefit.\n8.196. Based on the foregoing, we therefore find that, notwithstanding the fact that NASA does\nnot make payments to Boeing under the challenged Space Act Agreements, and that Boeing may\ncontribute funds in addition to in -kind contribu tions under partially -reimbursable Space Act\nAgreements, the Space Act Agreements achieve an equilibrium that is more favourable to Boeing\nthan comparable commercial transactions, specifically the private collaborative R&D agreements\nbefore the Panel.\n8.197. Accordingly, we find that the financial contributions in the form of the access to\nNASA facilities, equipment, and employees provided to Boeing through the pre-2007 and\npost-2006 NASA Space Act Agreements before us confer a benefit, within the meaning of\nArticle 1.1(b) of the SCM Agreement. Therefore, we also find that by not amending the\nterms of the pre -2007 Space Act Agreements that were found to constitute actionable\nsubsidies in the original proceeding the United States has failed to withdraw the\nsubsidy, within the meaning of Article 7.8.\n\n1234 A contracting party may also obtain a royalty-bearing, commercial use license to NASA employee\ninventions or NASA's interest in any invention made jointly. See e.g. Space Act Agreement SAA1-1126\n(formerly Exhibit US-13-273), (Exhibit EU-203) (BCI), p. 7; Agreement between NASA and Boeing for\nAerospace Structures and Materials Research and Development, SAA1-757 (December 2005), (Exhibit\nUSA-82), pp. 3-6; and Agreement between NASA and Boeing for Continued Software development of P-Beat\n(processes-Based Economic Analysis Tool), SAA3-1026 (June 2009), (Exhibit USA-50) (BCI), pp. 4-8.\n1235 See United States' first written submission, para. 214 (\"{e}ach party typically takes the data rights\nits needs, with NASA maintaining the right to publish any data and use data in its other research, while Boeing\nhas the right to preclude release of proprietary information for a fixed period of time\"). The United States\nrefers to several examples: Space Act Agreement SAA1-1126 (formerly Exhibit US-13-273), (Exhibit EU-203)\n(BCI), p. 7; Agreement between NASA and Boeing for Aerospace Structures and Materials Research and\nDevelopment, SAA1-757 (December 2005), (Exhibit USA-82), pp. 3-6; and Agreement between NASA and\nBoeing for Continued Software development of P-Beat (processes-Based Economic Analysis Tool), SAA3-1026\n(June 2009), (Exhibit USA-50) (BCI), pp. 4-8. See e.g. Space Act Agreement SAA1-1145, annex 1\n(30 September 2011) (formerly Exhibit US-13-256), (Exhibit-EU-202) (BCI); Space Act Agreement SAA1-588,\nannex 25 (19 January 2007) (formerly Exhibit US-13-436), (Exhibit EU-200) (BCI); Space Act Agreement\nSAA3-1255, annex 1 (16 July 2012) (formerly Exhibit US-13-0163), (Exhibit EU-1036) (BCI); and Space Act\nAgreement SAA1-1155, annex 2 (January 2012) (formerly Exhibit US-13-0156), (Exhibit EU-191) (BCI).\n1236 The Appellate Body considered whether monetary contributions by Boeing to a joint research project\nunder DOD assistance instruments affected the net value obtained by the firm from the project, and thus\ndistorted the assessment of benefit. The Appellate Body nevertheless noted that findings by the panel did not\nsupport the proposition that Boeing's contribution to the project meant that no benefit was conferred.\n(Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 664).\n\n8.2.2.5 Whether the subsidy is specific\n8.2.2.5.1 Main arguments of the parties\n8.198. The European Union argues that the subsidies provided through the post -2006 NASA\nprocurement contracts, cooperative agreements, and Space Act Agreements are specific within the\nmeaning of Article 2.1(a) or, alternatively, Article 2.1(c) of the SCM Agreement.1237\n8.199. With regard to Article 2.1(a), the European Union relies on the original panel 's finding,\nwhich was not appealed by the United States, that the NASA aer onautics R&D subsidies were\nspecific within the meaning of Article 2.1(a) by virtue of the explicit limitation of the scope of NASA\nR&D activities to aeronautics and space and the fact that the primary users of NASA facilities were\naerospace-related. This finding continues to hold true for the original challenged measures and is\nequally applicable to successor and other closely linked programmes at issue in this proceeding.\nThis is because all NASA programmes are carried out under the authority of the Space Act, which\ncontinues to restrict the scope of the NASA R&D activities to aeronautics and these activities\npursue the same objectives that the original panel considered in making its finding of specificity\nunder Article 2.1(a).1238\n8.200. In support of its argument under Article 2.1(c), the European Union asserts that Boeing 's\nshare of NASA aeronautics R&D funding and support is disproportionate to its share of the U.S.\neconomy and that NASA exercises discretion in granting these subsidies to Boeing.1239\n8.201. The European Union rejects the argument of the United States that for purposes of the\nspecificity analysis under Article 2.1(a), \"the subsidy\" at issue is the allocation of rights in patents\non terms more favourable than in the market. 1240 The European Union submits that the subsidies\nconsist of payments and access to the government facilities, equipment, and employees provided\nto Boeing by NASA , as well as the rights to technology (and the associated intellectual property)\ndeveloped with such funding and support provided to Boeing and the non -market benefit that\naccrues from such financial contributions. The European Union explains, in this respect, that while\nit considers the intellectual property rights distribution when evaluating the benefit conferred, the\n\"benefit\" is not only the provision of intellectual property, but also the provision of payments, and\naccess to government facilities, equipment, and employees , \"for less than what a market -based\nactor would demand\". The consideration of intellectual property rights distribution, and comparison\nto intellectual property rights distribution in market benchmarks is \"just a means to the end of\ndetermining the existence of benefit from these financial contributions – it is not the 'benefit' of\nthe 'subsidy', in and of itself\".1241\n8.202. Thus, the European Union considers that the reasoning of the Appellate Body in the\noriginal proceeding regarding the non -specificity of the allocation of patent rights as a\nself-standing subsidy is not applicable to the assessment of specificity of the NASA procurement\ncontracts, cooperative agreements, and Space Act Agreements before this Panel. In this respect,\nthe European Union recalls the Appellate Body 's statement that its findings in connection with the\nspecificity of the allocation of patent rights, if considered to be a self -standing subsidy, \"do not\ntraverse\" the panel's findings related to the payments and access to NASA facilities, equipment,\nand employees. The European Union alleges that the United States is now attempting to use the\nAppellate Body 's findings to traverse the original panel 's findings, in exactly the way that the\nAppellate Body cautioned that they could not be used. 1242 The E uropean Union denies the\nUnited States' allegation that it has alleged a different subsidy with respect to NASA and DOD\naeronautics R&D funding and other support for aeronautics R&D from that in the original\nproceeding and asserts that its claims address the exact same subsidies as were found to exist in\n\n1237 European Union's first written submission, paras. 192-195.\n1238 European Union's first written submission, paras. 192-194; second written submission,\nparas. 319-321.\n1239 European Union's first written submission, para. 195; second written submission, para. 322.\n1240 European Union's second written submission, para. 324.\n1241 European Union's second written submission, para. 328.\n1242 European Union's second written submission, paras. 329-331.\n\nthe original proceedings, and the continuation of tho se subsidies through successor and closely\nrelated aeronautics R&D programmes.1243\n8.203. The United States argues that \"the patent rights subsidy alleged by the European Union\" is\nnot specific within the meaning of Article 2.1(a) of the SCM Agreement because it is available\nunder any government contract. 1244 The United States argues that the standard for determining\nspecificity under Article 2.1(a) of the SCM Agreement is whether access to the subsidy is\nlimited.1245 With respect to payments and the provision of access t o facilities, equipment, and\nemployees, the only benefit alleged by the European Union is that Boeing receives more\nfavourable rights in patents than would be the case if a commercial actor had funded the research.\n8.204. In this regard, the United States argues that the European Union incorrectly characterizes\nits claims as to the existence of a benefit with regard to NASA and DOD contracts and agreements.\nThe European Union has not argued \"that NASA paid Boeing too much for the work Boeing\nconducted and the intellectual property rights that resulted\", or \"that no market-based actor would\nmake payments, or provide facilities, equipment, and employees to obtain research results that\nthe market-based actor sought\".1246 Rather, the European Union 's allegation of the ex istence of a\nbenefit is limited to the fact that Boeing receives more favourable rights in respect of patents than\nwould be the case if a commercial actor had funded the research. Thus, the specificity analysis\nmust be limited to Boeing 's allocation of rig hts in patents that is more favourable than under a\ncommercial transaction. 1247 The United States recalls that the Appellate Body indicated that a\nsubsidy provided through a particular program, considered separately, will not be considered\nspecific where multiple authorities implement the same measure.1248\n8.205. The United States recalls that the Appellate Body in the original proceeding found that the\nattribution of patent rights, if considered as a free -standing subsidy, is not specific because it is\navailable under any U.S. Government R&D contract by any agency, in any sector. 1249 The\nUnited States considers that the Appellate Body 's statement that its findings with respect to\nwhether the allocation of patent rights , if considered as a subsidy by itself, was specific \"do not\ntraverse the panel 's findings of specificity relating to the payments and other support provided\nunder the NASA USDOD contracts and agreements\" is not germane to this proceeding because the\nEuropean Union is alleging a different financial contribution and benefit which requires a different\nanalysis of specificity.1250\n8.206. The United States considers that the European Union 's contention that specificity exists\nunder Article 2.1(a) because access to the NASA aeronautics R&D programmes is limited to\nentities that conduct aeronautics research does not address the standard established by the SCM\nAgreement (whether access to the subsidy is limited) because the European Union has never\nestablished or even claimed that NASA aeronautics R&D programmes taken as a who le are a\nsubsidy to Boeing.1251\n8.207. The United States argues that the European Union's specificity claim under Article 2.1(c) of\nthe SCM Agreement fails for the same reasons. The European Union 's argument addresses NASA\nresearch programmes and fails to provide e vidence as to access to the subsidy at issue i.e. the\nallocation of patent rights common to all U.S. Government contracts.1252\n\n1243 European Union's comments on United States' response to Panel question No. 28, para. 181.\n1244 United States' first written submission, section 3.3.3.6.6.\n1245 United States' first written submission, para. 260.\n1246 United States' second written submission, para. 252. See also United States' first written\nsubmission, paras. 259 and 260; and second written submission, paras. 248 and 255.\n1247 United States' first written submission, para. 259; second written submission, paras. 248, 252, and\n255.\n1248 United States' second written submission, para. 269.\n1249 United States' first written submission, para. 259. See also United States' second written\nsubmission, paras. 245, 246, and 255.\n1250 United States' first written submission, paras. 254 and 255.\n1252 United States' first written submission, paras. 259-261 (referring to Appellate Body Report, US –\nLarge Civil Aircraft (2nd complaint), para. 799). See also United States second written submission, paras. 245,\n246, and 255; response to Panel question No. 28, paras. 124-126; and comments on European Union's\nresponse to Panel question No. 28, paras. 153-155.\n\n8.2.2.5.2 Evaluation by the Panel\n8.208. Article 2.1 of the SCM Agreement provides:\nArticle 2\nSpecificity\n2.1 In order to determine whether a subsidy , as defined in paragraph 1 of Article 1,\nis specific to an enterprise or industry or group of enterprises or industries (referred to\nin this Agreement as \"certain enterprises \") within the jurisdiction of the granting\nauthority, the following principles shall apply:\n(a) Where the granting authority, or the legislation pursuant to which the granting\nauthority operates, explicitly limits access to a subsidy to certain enterprises, such\nsubsidy shall be specific.\n(b) Where the granting authority, or the legisl ation pursuant to which the granting\nauthority operates, establishes objective criteria or conditions {*} governing the\neligibility for, and the amount of, a subsidy, specificity shall not exist, provided that\nthe eligibility is automatic and that such criteria and conditions are strictly adhered to.\nThe criteria or conditions must be clearly spelled out in law, regulation, or other\nofficial document, so as to be capable of verification.\n(c) If, notwithstanding any appearance of non -specificity resulting fro m the\napplication of the principles laid down in subparagraphs (a) and (b), there are reasons\nto believe that the subsidy may in fact be specific, other factors may be considered.\nSuch factors are: use of a subsidy programme by a limited number of certain\nenterprises, predominant use by certain enterprises, the granting of disproportionately\nlarge amounts of subsidy to certain enterprises, and the manner in which discretion\nhas been exercised by the granting authority in the decision to grant a subsidy. {*} In\napplying this subparagraph, account shall be taken of the extent of diversification of\neconomic activities within the jurisdiction of the granting authority, as well as of the\nlength of time during which the subsidy programme has been in operation.\n\n{fn original}2 Objective criteria or conditions, as used herein, mean criteria or conditions which\nare neutral, which do not favour certain enterprises over others, and which are economic in\nnature and horizontal in application, such as number of employees or size of enterprise.\n{fn original}3 In this regard, in particular, information on the frequency with which applications\nfor a subsidy are refused or approved and the reasons for such decisions shall be considered.\n\n8.209. The first question raised by the parties ' arguments is whether the subsidies provided to\nBoeing through: (a) the payments and access to NASA facilities, equipment, and employees under\nthe post-2006 NASA procurement contracts and cooperative agreements at issue ; and (b) access\nto NASA facilities, equipment, and employees under the post -2006 Space Act Agreements , are\nspecific within the meaning of Article 2.1(a), i.e. whether \"the granting authority, or the legislation\npursuant to which the granting authority operates, explicitly limits access to th e subsidy to certain\nenterprises\".\n8.210. As to the meaning of \"explicitly limits\" in Article 2.1(a), the Appellate Body has explained\nthat \"a subsidy is specific under Article 2.1(a) if the limitation on access to the subsidy to certain\nenterprises is express, unambiguous, or clear from the content of the relevant instrument, and not\nmerely 'implied' or 'suggested\"'.1253 It has also indicated that a \"limitation on the access to the\nsubsidy (or the absence of one) may result from the legislation pursuant to which th e granting\nauthority operates or from pronouncements or other actions of the granting authority \".1254 An\nanalysis of whether \"access to the subsidy\" is explicitly limited must focus on whether the granting\n\n1253 Appellate Body Report, US – Anti-Dumping and Countervailing Duties (China), para. 372. See also\nPanel Report, US – Large Civil Aircraft (2nd complaint), paras. 7.190 and 7.192.\n1254 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 757. See also para. 750\n(explaining that the inquiry under Article 2.1(a) must examine \"the legislation pursuant to which the granting\nauthority operates, or the express acts of the granting authority\").\n\nauthority, or the legislation pursuant to which the g ranting authority operates, limits the eligibility\nto receive the subsidy to certain enterprises. 1255 With regard to the term \"certain enterprises\", the\nAppellate Body has observed that \"the relevant enterprises must be 'known and particularized', but\nnot necessarily 'explicitly identified', and that they may have 'some mutual or common relation or\npurpose', or 'degree of similarity'\".1256\n8.211. As explained by the Appellate Body, the starting point of an analysis of specificity is the\nmeasure that has been determined to constitute a subsidy under Article 1.1 of the SCM\nAgreement; namely, the financial contribution that confers a benefit. 1257 In this regard, the\nparties' arguments on whether access to the subsidy is explicitly limited reflect differing positions\nas to the nature of the subsidy at issue and the corresponding identification of the \"legislation\"\npursuant to which the \"granting authority\" operates1258, which frames the assessment of whether\naccess to the subsidy is explicitly limited to certain enterprises for purposes of Article 2.1(a).\n8.212. The European Union argues that, for purposes of determining of whether access to the\nsubsidy is explicitly limited, the subsidy should be defined, in this case, as payments and the\nprovision of access to facilities, equipment, and employees on terms more favourable than\navailable in the market and that, as such, the subsidy is exactly the same subsidy, access to which\nthe original panel found to be explicitly limited. 1259 The United States argues that the subsidy\nshould be defined in terms of the allocation of rights in patents on terms more favourable than\navailable in the market and that, as such, the subsidy is the same subsidy , access to which the\nAppellate Body found not to be explicitly limited in the original proceeding.1260\n8.213. Before addressing this question of how the relevant subsidy should be defined in this case\nin order to ensure a proper analysis of whether access to the subsidy is explicitly limited, we\nbriefly recall the relevant findings made in the original proceeding by th e panel and the Appellate\nBody that are relied upon by the parties in support of their opposing views.\n8.214. First, the original panel found that subsidies in the form of payments and access to NASA\nfacilities, equipment, and employees that NASA provided to Boe ing pursuant to the NASA\nprocurement contracts and agreements at issue were specifi c within the meaning of\nArticle 2.1(a).1261 In its assessment, the panel observed that:\nIn this case, the United States does not dispute that each of the eight aeronautics\nR&D programmes at issue would, if found to provide subsidies within the meaning of\nArticle 1, be specific under Article 2.1(a) of the SCM Agreement. It is not in dispute\nthat the Space Act explicitly limits the scope of NASA 's R&D activities (i.e. to\naeronautics and space). It is also not in dispute that each of the eight programmes at\n\n1255 See e.g. Appellate Body Report, US – Anti-Dumping and Countervailing Duties (China), para. 368\n(\"Article 2.1(a) thus focuses not on whether a subsidy has been granted to certain enterprises, but on whether\naccess to that subsidy has been explicitly limited. This suggests that the focus of the inquiry is on whether\ncertain enterprises are eligible for the subsidy, not on whether they in fact receive it\"); and US – Large Civil\nAircraft (2nd complaint), para. 753 (\"{t}his inquiry focuses not only on whether the subsidy was provided to the\nparticular recipient identified in the complaint, but focuses also on all enterprises or industries eligible to\nreceive that same subsidy\").\n1256 Appellate Body Report, US – Carbon Steel (India), para. 4.365. The Appellate Body has also stated\nthat \"{a}ny determination of whether a number of enterprises or industries constitute 'certain enterprises' can\nonly be made on a case-by-case basis\". (Appellate Body Report, US – Anti-Dumping and Countervailing Duties\n(China), para. 373 (quoting Panel Report, US – Upland Cotton, para. 7.1142)). See also Appellate Body Report,\nUS – Washing Machines, paras. 5.220 and 5.221 (explaining that the notion of \"certain enterprises\" in\nArticle 2.2 of the SCM Agreement does not depend on the legal personality of the subsidy recipients).\n1257 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 747.\n1258 While an explicit limitation on access to the subsidy may also result from \"pronouncements or other\nactions of the granting authority\". (Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 757),\nour understanding is that the European Union bases its allegation that \"access to the subsidy\" is subject to an\nexplicit limitation on what it considers to be relevant legislative and regulatory provisions pursuant to which the\nsubsidy is granted.\n1259 In this view, the relevant \"legislation pursuant to which the granting authority operates\" consists of\nthe relevant legislative and regulatory provisions that authorize, and define the objectives of, NASA 's\naeronautics and space R&D programmes.\n1260 In this view, the relevant \"legislation pursuant to which the granting authority operates\" consists of\nthe legislative framework and implementing regulations governing the distribution of intellectual property\nrights in U.S. Government R&D contracts.\n1261 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1049.\n\nissue involves R&D aimed at the \"improvement of the usefulness, performance, speed,\nsafety, and efficiency of aeronautical and space vehicles\".1262\n8.215. Thus, the apparent basis for the panel's finding that access to the subsidy was explicitly\nlimited to certain enterprises was the existence of explicit limitations on the scope of NASA 's R&D\nactivities to aeronautics and space and the objectives pursued by NASA with these activities. 1263\nThe panel also rejected the United States ' argument that NASA's wind tunnel services were \"used\nby a wide range of industries across the U.S. economic spectrum \".1264 Having concluded that the\nsubsidies were specific under Article 2.1(a), the original panel d eclined to address the\nEuropean Union's alternative argument under Article 2.1(c) of the SCM Agreement.1265\n8.216. Neither party appealed the original panel 's findings on specificity in respect of payments\nand access to NASA facilities, equipment, and employees. The parties appealed different aspects of\nthe panel's findings on financial contribution and benefit. The Appellate Body upheld the panel 's\nfindings on financial contribution and benefit in relation to the challenged NASA aeronautics R&D\nmeasures, albeit based on different reasoning.1266\n8.217. Second, the question of specificity of the original NASA aeronautics R&D measures was\nalso considered in the original proceeding in respect of the European Communities' separate claim,\nregarding the allocation of NASA and DOD paten t rights, when viewed independently from the\nprovision of payments and access to facilities, equipment, and employees , as a self -standing\nsubsidy.1267 In addressing this claim, the original panel concluded that the allocation of patent\nrights, if assumed arguendo to be a self -standing subsidy, would not in any event be specific,\ngiven that \"the allocation of patent rights is uniform under all U.S. Government R&D contracts,\nagreements, and grants, in respect of all U.S. Government departments and agencies, for all\nenterprises in all sectors \".1268 The European Union appealed this finding, as well as the panel 's\ninterpretation of Article 2.1 of the SCM Agreement.1269\n\n1262 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1045.\n1263 We also note in this respect the panel's statement that the European Communities was correct in\nobserving that the United States had not responded to the European Communities argument that the NASA\naeronautics R&D measures at issue were specific under Article 2.1(a) \"because they are explicitly limited to\ncertain enterprises that participate in aeronautics-related R&D\". (Panel Report, US – Large Civil Aircraft (2nd\ncomplaint), para. 7.1048).\n1264 Panel Report, US – Large Civil Aircraft (2nd complaint), paras. 7.1046 and 7.1047.\n1265 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1049.\n1266 As we have already described in Section 8.1.3, the Appellate Body found that the panel had not\nmade a proper comparison of the terms of the NASA procurement contracts (and DOD assistance instruments)\nwith the terms of a market transaction as required under Article 1.1(b), and that the panel's reasoning as to\nwhether the payments and access to facilities provided under the NASA procurement contracts conferred a\nbenefit could not be sustained. (Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 647).\nThe Appellate Body completed the analysis by determining whether the \"disposition of intellectual property\nrights under the NASA/USDOD measures at issue is consistent with what occurs in transactions between two\nmarket actors\". (Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 653). In the course of\nundertaking this analysis, the Appellate Body expressed the view that \"the allocation of intellectual property\nrights is pre-determined under the US legal framework\". (Appellate Body Report, US – Large Civil Aircraft (2nd\ncomplaint), para. 661). It concluded, based on a comparison of the intellectual property rights terms of certain\ncontracts, which it had decided to treat as market benchmarks for purposes of completing the analysis, that\n\"transactions in the market result in an equilibrium that is more favourable to the commissioning party than in\nthe measures before us\". (Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 662).\nConsequently, it found that the funding and support provided under the NASA procurement contracts conferred\na benefit on Boeing, within the meaning of Article 1.1(b) of the SCM Agreement. (Appellate Body Report, US –\n1267 See Panel Report, US – Large Civil Aircraft (2nd complaint), paras. 7.1276-7.1294, for a description\nof the Bayh-Dole Act, its associated legislative instruments and implementing regulations, and accompanying\nNASA-specific implementing regulations.\n1268 Panel Report, US – Large Civil Aircraft (2nd complaint), paras. 7.1276-7.1294. The panel found that\nthe U.S. Government has a general policy in place granting government contractors the option to retain title to\ninventions that arise from a funding agreement with the U.S. Government, pursuant to the Bayh-Dole Act,\n1983 Presidential Memorandum, the 1987 Executive Order, and the general and NASA-specific regulations.\n(See Panel Report, US – Large Civil Aircraft (2nd complaint), paras. 7.1276-7.1294).\n1269 On 1 December 2009, the Treaty of Lisbon amending the Treaty on European Union and the Treaty\nestablishing the European Community (done at Lisbon, 13 December 2007) entered into force. On 29\nNovember 2009, the WTO received a Verbal Note (WT/L/779) from the Council of the European Union and the\n\n8.218. The Appellate Body observed that there may have been \"some overlap\" in the relationship\nbetween the European Communities' claim that payments and access to facilities, equipment, and\nemployees were subsidies, on the one hand, and its claim that the allocation of patent rights was a\nself-standing subsidy, on the other. 1270 The Appellate Body proceeded to addres s the\nparties' appeal of the panel 's finding on the basis that neither party had appealed the panel 's\napproach to the potential overlap between the European Communities' claims; however, the\nAppellate Body emphasized that \"any findings {it} make{s} in conn ection to the specificity of the\nallocation of patent rights do not traverse the Panel 's findings of specificity relating to the\npayments and other support provided under the NASA/USDOD contracts and agreements\".1271\n8.219. While the Appellate Body expressed reserva tions regarding the panel 's use of arguendo\nreasoning1272, it ultimately upheld the panel 's finding that the allocation of patent rights under the\nchallenged NASA contracts and agreements, if conceived as a separate subsidy, was not specific\nwithin the meaning of Article 2.1(a). In particular, the Appellate Body:\na. Affirmed the panel 's assessment of whether the \"patent rights \" subsidies in question\nwere specific by reference to the legal framework that exists in the United States for the\nallocation of patent ri ghts under U.S. Government R&D contracts and agreements and\npursuant to which NASA and DOD as granting authorities operate.1273\nb. Focused on the legislative and regulatory framework regulating the allocation of patent\nrights arising from R&D funded by the U .S. Government, which revealed that the\neligibility to receive the alleged \"subsidy\" is not limited to the class of enterprises that\nconducts aerospace R&D, and thus concluded that there was no basis on which to find\nthat such a subsidy is explicitly limited t o certain enterprises and therefore specific\nwithin the meaning of Article 2.1(a) of the SCM Agreement.1274\n8.220. The Appellate Body reversed the panel for failing to address the European Union 's claim of\nde facto specificity under Articles 2.1(c).1275\n8.221. As noted above, the parties disagree on whether the subsidies at issue in this proceeding\nare the same subsidies as those that were found to exist by the original panel and should be found\nto be specific under Article 2.1(a) , based on the same analysis that led the origi nal panel to find\nthe original measures to be specific; or whether the subsidies at issue here are different, such that\nthe subsidies should be found to be non -specific, in accordance with the Appellate Body 's analysis\nof the European Union 's separate claim with respect to the allocation of NASA and DOD patent\nrights as a self-standing subsidy.\n8.222. While we disagree with the European Union 's assertion that its claim in this proceeding\nregarding the alleged post -2006 NASA aeronautics R&D subsidies concern s the e xact same\nsubsidies as were found to exist in the original proceedings and were found to be specific by the\noriginal panel, we also do not accept the United States ' argument that the subsidies at issue are\nthe same subsidies found to be non -specific by the Appellate Body in the context of its analysis of\nthe European Communities ' challenge to the allocation of patent rights under all NASA and DOD\nprocurement and assistance instruments as a self-standing subsidy.\n\nCommission of the European Communities stating that, by virtue of the Treaty of Lisbon, as of\n1 December 2009, the European Union replaces and succeeds the European Community.\n1270 See Appellate Body Report, US – Large Civil Aircraft (2nd complaint), paras. 726-728 and 740.\n1271 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 730.\n1272 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 741. The Appellate Body\nexpressed the view that the panel should have first determined whether a subsidy exists, stating that \"the\nassessment of specificity under Article 2.1 depends on how the subsidy was defined under Article 1.1, leaving\nlittle, if any, room for the adoption of an arguendo approach\". (Appellate Body Report, US – Large Civil Aircraft\n(2nd complaint), para. 739).\n1273 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 760.\n1274 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), paras. 782, 788, and 789.\n1275 The Appellate Body found that the panel's overall analysis was \"incomplete and cannot be\nsustained\" because the panel chose not to address the European Union's claim of de facto specificity under\nArticles 2.1(c) of the SCM Agreement. (Appellate Body Report US – Large Civil Aircraft (2nd complaint),\npara. 793). Having reversed the panel, the Appellate Body stated that it was not persuaded that NASA or DOD\nexercised discretionary authority with respect to the allocation of patent rights, or that the share of NASA\ncontracts and USDOD funding received by Boeing was disproportionate, to support a finding of specificity under\nArticle 2.1(c). (Appellate Body Report, US – Large Civil Aircraft (2nd complaint), paras. 799 and 800).\n\n8.223. The measures challenged by the European Unio n in this proceeding are factually the same\ntype of measures as those challenged in the original proceeding i.e. payments and the provision of\naccess to facilities, equipment, and employees under NASA aeronautics R&D contracts and\nagreements. However, we have found these measures to constitu te subsidies on a legal basis that\ndiffers from the basis upon which the panel in the original proceeding found the measures to be\nsubsidies. In our view, this different legal characterization of the measures as subsidie s means\nthat in determining whether access to the subsidy is explicitly limited we cannot presume that the\nfinding of the original panel , that the original NASA aeronautics R&D subsidies were specific under\nArticle 2.1(a), is still applicable.\n8.224. Particularly with regard to our finding on how the financial contributions at issue confer a\nbenefit on Boeing, we note that in the original proceeding the panel found a benefit on the basis\nthat \"no private entity acting pursuant to commercial considerations, would provide payments (and\naccess to its facilities and personnel) to another commercial entity on the condition that the entity\nperform R&D activities principally for the benefit and use of that other entity. At a minimum, it\nwould be expected that some form o f royalties or repayment would be required in the event that\nthe financial contributions were provided on such terms. \"1276 In this proceeding, we have found\nthat the financial contributions provided under the NASA aeronautics R&D measures confer a\nbenefit on the basis that the allocation of rights to own and use patents under those measures is\nmore favourable to Boeing as commissioned part y than the allocation of rights to own and use\npatents to commissioned parties under collaborative R&D agreements between p rivate parties. In\nour view, the different basis on which we have determined in this proceeding that the payments\nand access to NASA facilities, equipment, and employees provided through the NASA aeronautics\nR&D measures constitute financial contribution s which confer a benefit means that we cannot\nadopt the original panel 's finding of specificity regarding the original measures without first\nexamining whether such an approach remains appropriate.1277\n8.225. However, we do not consider that, as argued by the United States, the fact that the focus\nof our benefit analysis is the allocation of intellectual property rights logically leads to the\nconclusion that the subsidy at issue should be defined as the allocation of intellectual property\nrights on terms more favourab le than available in the market , and that for purposes of\ndetermining whether access to the subsidy is limited , we must treat the Bayh -Dole Act, its\nassociated legislative instruments and implementing regulations as the relevant subsidy scheme.\nSince a sub sidy within the meaning of Article 1 is defined in terms of financial contribution and\nbenefit, it stands to reason that both financial contribution and benefit must be taken into\nconsideration in an analysis of whether access to the subsidy is explicitly limited. Therefore, while\nwe agree that the nature of the benefit found to exist obviously is a key consideration in the\nspecificity analysis under Article 2.1(a), the question of whether access to the subsidy is explicitly\nlimited cannot always be answere d by focusing solely on the benefit. 1278 In our view, the\nUnited States' argument fails to properly consider the benefit in relation to the financial\ncontribution and the particular context in which that financial contribution occurs.\n8.226. We have characterized t he post -2006 NASA aeronautics R&D measures as collaborative\nR&D arrangements between NASA and Boeing that have characteristics analogous to equity\ninfusions. In that context, we observed that the Appellate Body 's overall conclusion of the various\ntechnical elements of the transactions at issue was that the nature of the relationship between\nNASA and Boeing in the particular context was essentially one of partnership. We also noted that\nthe nature of the research commissioned by NASA to Boeing and the object ives pursued by NASA\nindicate that NASA and Boeing are engaged in a collaborative enterprise, in pursuit of a common\ngoal.1279\n8.227. In light of this particular characterization of the NASA aeronautics R&D measures, we\nconsider it appropriate to assess whether the financial contributions provide a benefit on the basis\nof an examination of the allocation of intellectual property rights. As illustrated by our analysis of\n\n1276 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1039.\n1277 In this respect, we interpret the Appellate Body's statement, at paragraph 730 of its report, that any\nfindings it makes in connection with the specificity of the allocation of patent rights \"do not traverse the Panel's\nfindings of specificity relating to the payments and other support provided under the NASA USDOD contracts\nand agreements\" particularly in light of footnote 1534, as a statement regarding the scope of the appeal.\n1278 See also Appellate Body Report, US – Anti-Dumping and Countervailing Duties (China), paras. 377\nand 378.\n1279 See paras. 8.150 and 8.151 above.\n\nbenefit in relation to DOD procurement contracts, where we characterize the financial contributions\ndifferently from our characterization of the NASA aeronautics R&D measures , we find that a focus\non the allocation of intellectual property rights as a basis to determine the existence of a benefit is\nnot appropriate. Thus, in the context of our charact erization of the DOD procurement contracts as\npurchases of R&D services, the same allocation of patent rights that applies by virtue of the Bayh -\nDole Act and related legislative instruments and implementing regulations , would not result in the\nmeasures in question being subsidies.1280\n8.228. Because the role of the allocation of intellectual property rights in our analysis of whether a\nmeasure constitutes a subsidy depends upon the particular context, we consider that , in\nascertaining whether access to the subsidy i s subject to explicit limitations, we cannot treat the\nallocation of intellectual property rights on terms more favourable than available in the market as\nbeing the relevant subsidy in and of itself. Therefore we disagree with the United States that the\nmeasure can be characterized as a \"patent rights subsidy \", which is the same subsidy that the\nAppellate Body considered in its analysis of the European Union 's alternative claim regarding the\nallocation of intellectual property rights as a self -standing subs idy. As a consequence, we also\ndisagree that the Bayh -Dole Act, its associated legislative instruments and other instruments and\nimplementing regulations, constitute the appropriate legislative and regulatory framework that we\nmust consider for purposes of determining whether the legislation pursuant to which the granting\nauthority operates explicitly limits access to the subsidy to certain enterprises.1281\n8.229. We recall that the basis for the original panel 's finding of an explicit limitation of access to\nthe subsidy was the existence of restrictions on the scope of NASA 's R&D activities to aeronautics\nand space and the particular objectives pursued by NASA with these activities. Thus, the original\npanel found that the access to the subsidy was explicitly limited to \"certain enterprises\" because\nthe very nature of the research inherently limited access to the subsidy to \"certain enterprises that\nparticipate in aeronautics-related R&D\".1282 In our view, access to the subsidy that we f ind to exist\nin this proceeding in respect of the post -2006 NASA aeronautics R&D measures is subject to the\nsame explicit limitation. As the original panel found with respect to the pre -2007 measures, the\nR&D activities performed under the relevant post -2006 NASA aeronautics R&D programmes are\nfocused on aeronautics and space. There is no argumentation or evidence before us to\ndemonstrate that NASA contracts with any enterprises, industry or group of enterprises or\nindustries to conduct R&D work outside the spectrum of aeronautical and spac e activities.\nMoreover, the Space Act maintains the same objectives that the panel identified in the original\nproceeding. The specific objectives under the Space Act include \"{t}he improvement of the\nusefulness, performance, speed, safety, and efficiency o f aeronautical and space vehicles \", \"{t}he\npreservation of the role of the United States as a leader in aeronautical and space science and\ntechnology and in the application thereof to the conduct of peaceful activities within and outside\nthe atmosphere\", and \"{t}he preservation of the United States preeminent position in aeronautics\nand space through research and technology development related to associated manufacturing\nprocesses\".1283\n8.230. We conclude that the subsidies provided to Boeing through the post -2006 N ASA\nprocurement contracts, cooperative agreements, and Space Act Agreements are specific within the\nmeaning of Article 2.1(a) of the SCM Agreement. In light of this conclusion, we do not consider it\nnecessary to address the European Union's alternative argument under Article 2.1(c).\n8.231. Therefore, the Panel finds that the subsidies provided to Boeing through the\npost-2006 NASA procurement contracts, cooperative agreements, and Space Act\nAgreements are specific within the meaning of Article 2.1(a) of the SCM Agreement.\n8.232. Finally, we note that the European Union also argues that the subsidies provided to Boeing\nthrough the post -2006 NASA procurement contracts, cooperative agreements and Space Act\nAgreements are specific pursuant to Article 2.3 of the SCM Agreement. Article 2.3 provides that\n\n1280 See paras. 8.420 to 8.426 below.\n1281 Because of the need to consider financial contribution and benefit together in determining whether\n\"access to the subsidy\" is explicitly limited, we consider that this is not a situation in which \"multiple authorities\nare implementing the same measure\". (United States' second written submission, para. 246).\n1282 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1048.\n1283 Section 102(d) of the National Aeronautics and Space Act of 1958, as codified and restated by Public\nLaw No. 111–314, Stat. 3 (18 December 2010), United States Code, Title 51, section 20102(d) (current\nthrough 7 December 2012), (Exhibit EU-252).\n\n\"{a}ny subsidy falling under the provisions of Article 3 shall be deemed to be specific\". We reject\nthis argument because, in Section 10 of this Report, we find that the European Union has failed to\nestablish that any subsidy at issue in this proceeding is prohibited by Articles 3.1 and 3.2 of the\nSCM Agreement.\n8.2.2.6 Amount of the subsidy and amount of the financial contribution\n8.2.2.6.1 The amount of the post-2006 NASA aeronautics R&D subsidies to Boeing\n8.233. In the previous Section, we f ind that the post-2006 NASA aeronautics R&D measures are\nspecific subsidies within the meaning of Articles 1 and 2 of the SCM Agreement. As regards our\nsubsidy findings under Article 1 of the SCM Agreement, we find that:\na. the payments provided by NASA to Boeing unde r post-2006 procurement contracts and\ncooperative agreements and the access to facilities, equipment, and employees provided\nby NASA to Boeing under the post-2006 procurement contracts, cooperative\nagreements, and Space Act Agreements , funded under four NA SA aeronautics R&D\nprogrammes (the Fundamental Aeronautics Program; the Integrated Systems Research\nProgram; the Aviation Safety Program; and the Aeronautics Test Program) , are financial\ncontributions within the meaning of Article 1.1(a)(1) of the SCM Agreement; and\nb. the foregoing financial contributions provided through the post -2006 procurement\ncontracts, cooperative agreements , and Space Act Agreements confer a benefit, within\nthe meaning of Article 1.1( b) of the SCM Agreement, because the allocation of\nintellectual property rights and related licence rights under those instruments is more\nfavourable to Boeing as commissioned party than the allocations to commissioned\nparties under the collaborative R&D arrangements that have been submitted to the Panel\nas evidence of market benchmarks.\n8.234. In this Section, we address the parties ' arguments regarding the amount of the post-2006\nNASA aeronautics R&D subsidies provided to Boeing. The amount of the subsidy, in our view,\nrefers to the amount or magnitude of the ben efit conferred by the financial contribution; i.e. the\nquantification of the advantage conferred on Boeing by the respective financial contributions,\ncompared to what Boeing would have obtained in a market transaction.1284\n8.235. We also address the parties ' arguments concerning the amount of the financial\ncontribution, represented by the amount of payments and value of the provision of access to NASA\nfacilities, equipment, and employees under the relevant NASA aeronautics R&D subsidies. We\nrecall that in the origin al proceeding, the panel treated the full amount of the financial\ncontributions provided to Boeing as the amount of the \"subsidy\" to Boeing. It justified this on the\nbasis that it was not under an obligation to quantify precisely the amount of the subsidy, and\nbecause the United States had advanced no argument or evidence to support an alternative\napproach to calculating the amount of the subsidy to Boeing.1285 We do not consider that the same\njustification applies in this proceeding. Notably, as explained in paragraph 8.237 below, the United\nStates in this proceeding does propose an approach to calculating the amount of the subsidy other\nthan treating the full amount of the financial contributions provided to Boeing as the amount of the\nsubsidy.\n8.2.2.6.1.1 Main arguments of the parties\n8.236. The European Union does not propose a specific estimate of the amount of the benefit\nconferred by the payments and provision of access to NASA facilities, equipment, and employees\nto Boeing under the NASA procurement contracts, cooperative agreements, and Space Act\nAgreements funded through the challenged aeronautics R&D programmes. Rather, it argues that\nthe amount of the benefit is a \"multiple\" of the amount of the financial contribution. According to\n\n1284 See Appellate Body Report, US – Large Civil Aircraft (2nd complaint), paras. 690 and 691 (explaining\nthat the original panel, in seeking to estimate the amount of funds transferred to Boeing under the relevant\nNASA procurement contracts, as well as the value of Boeing's access to NASA facilities, equipment, and\nemployees under the NASA instruments, had been estimating the amount of the \"financial contribution\", rather\nthan the amount of the \"benefit\").\n1285 See Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1101.\n\nthe European Union, NASA has no interest in using the intellectual property generated through its\nrelationship with Boeing. 1286 A commissioning party operating in the marketplace would, in that\nposition, require some financial return other than intellectual property rights from its investment,\nfor example , royalties or licence fees. 1287 The quantification of the benefit should therefore be\nbased on the value of the technology that Boeing, because of the subsidies, is able to access for\nfree, without paying royalties or licence fees. 1288 This can be assessed ex ante , in view of\nexpectations of the potential value of the technologies to be develop ed, and in light of past\nexperience.1289 The European Union considers that its reasoning is supported by the original\npanel's statement that the aeronautics R&D subsidies \"multiply the benefit from a given\nexpenditure\".1290\n8.237. The United States argues that the European Union improperly takes an ex post approach\nto the valuation of the amount of the subsidy , by looking at what actually resulted from the\nsubsidy, rather than what Boeing initially received. 1291 Further, the United States argues that the\nEuropean Union confuses the issues of benefit and adverse effects; the original panel and\nAppellate Body made clear that the effect of research spend ing pertains to the assessment of\nadverse effects, and does not go to the valuation of benefit. 1292 Finally, the United States notes\nthat, given that the European Union argues that the NASA aeronautics R&D measures confer a\nsubsidy because the allocation of i ntellectual property rights under the instruments in question is\nmore favourable to Boeing as commissioned party than the corresponding allocations to\ncommissioned parties under market -based collaborative R&D arrangements, the amount of the\nsubsidy should, therefore, correspond to the value of that difference. 1293 This understanding of\nwhat constitutes the benefit of the subsidy is inconsistent with the position that the value of the\nbenefit amounts to an unspecified multiple of the full amount of the financial contribution.1294\n8.2.2.6.1.2 Evaluation by the Panel\n8.238. As noted above, the amount of the subsidy corresponds to the amount or magnitude of the\nbenefit conferred by the financial contribution ; i.e. the difference between the terms on which the\nfinancial contribution was provided to Boeing, and the terms on which the financial contribution\nwould have been provided to Boeing in a market -based transaction.1295 The Panel f inds that the\npayments and provision of access to NASA facilities, equipment, and employees to Boeing throug h\nthe procurement contracts and cooperative agreements funded under the relevant aeronautics\nR&D programmes, confer a benefit on Boeing because the allocation of intellectual property rights\nand related licence rights under those instruments is more favour able to Boeing as commissioned\nparty than the corresponding allocations to commissioned parties under the private collaborative\nR&D agreements before the Panel which evidence prevailing market practices for collaborative\nR&D arrangements. Similarly, the provision of access to NASA facilities, equipment, and employees\nto Boeing through the Space Act Agreements funded under the relevant aeronautics R&D\nprogrammes confers a benefit because the allocation of intellectual property rights and related\nlicence rights under those instruments is more favourable to Boeing as commissioned party than\nthe corresponding allocations to commissioned parties under the private collaborative R&D\nagreements before the Panel which evidence prevailing market practices for collabor ative R&D\narrangements. Accordingly, the amount of the benefit (and thus, the subsidy) must logically\ncorrespond to the value of the difference between the terms regarding the allocation of intellectual\nproperty rights and related licence rights on which t he financial contributions were provided to\nBoeing under the NASA procurement contracts , cooperative agreements , and Space Act\n\n1286 European Union's response to Panel question No. 26, para. 160.\n1287 European Union's response to Panel question No. 26, paras. 160 and 161 (citing Razgaitis\nDeclaration, (Exhibit EU-1262) (BCI), paras. 56 and 104 and attachment B).\n1288 European Union's response to Panel question No. 26, paras. 160 and 161 (citing Razgaitis\nDeclaration, (Exhibit EU-1262) (BCI), paras. 56 and 104, attachment B).\n1289 European Union's response to Panel question No. 26, para. 162.\n1290 European Union's response to Panel question No. 26, para. 163 (citing Panel Report, US – Large\nCivil Aircraft (2nd complaint), para. 7.1760).\n1291 United States' first written submission, para. 59.\n1292 United States' comments on the European Union's response to Panel question No. 26, paras. 146\nand 147 (citing Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1760); response to Panel\nquestion No. 32, para. 142 (citing Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 641).\n1293 United States' comments on the European Union's response to Panel question No. 26, para. 147.\n1294 United States' comments on the European Union's response to Panel question No. 26, para. 147.\n1295 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 691.\n\nAgreements, and the terms regarding the allocation of intellectual property rights and related\nlicence rights under which the fin ancial contributions would have been provided in a market -based\ncollaborative R&D arrangement.\n8.239. The European Union's argument as to how the benefit should be quantified is not based on\nthese notions of benefit and thus cannot yield a meaningful estimate of the amount of the NASA\naeronautics R&D \"subsidy\". It conflates the concept of benefit with the concept of effects of the\nsubsidy. The European Union uses certain statements from the original proceeding that \"by their\nnature, the aeronautics R&D subsidies 'multiply the benefit from a given expenditure '\" in support\nof its argument that the value of the benefit is a multiple of the value of the financial\ncontribution.1296 This and other statements of the Appellate Body to which the European Union\nrefers, however, were made in the context of the Appellate Body 's adverse effects findings, not its\nbenefit findings. There is nothing in the panel report or Appellate Body report in the original\nproceeding, or in any other case of which we are aware, to support the noti on that the amount of\na subsidy (as opposed to its effects) is a multiple of the financial contribution.\n8.240. There is insufficient evidence on the record as to the amount of the subsidy in the sense of\nthe advantage conferred on Boeing resulting from the diffe rence between the terms regarding the\nallocation of intellectual property rights and related licence rights on which financial contributions\nwere provided to Boeing under the post -2006 NASA procurement contracts, cooperative\nagreements, and Space Act Agree ments at issue and the terms regarding the allocation of\nintellectual property rights and related licence rights on which financial contributions would have\nbeen provided to Boeing in a market-based collaborative R&D arrangement.\n8.241. In light of the foregoing , we are unable to accept the European Union 's arguments\nregarding the amount of the benefit provided to Boeing through the post-2006 NASA procurement\ncontracts, cooperative agreements, and Space Act Agreements under the relevant aeronautics\nR&D programmes. We therefore find that there is insufficient evidence on the record as to\nthe amount of the subsidy.\n8.2.2.6.2 The amount of the financial contribution provided to Boeing through the NASA\naeronautics R&D subsidies\n8.242. As previously noted, the European Union also pur ports to estimate the amount of the\nfinancial contribution , in the sense of the value of the payments and access to facilities,\nequipment, and employees provided to Boeing under the post -2006 NASA procurement contracts,\ncooperative agreements, and Space Act Agreements.\n8.2.2.6.2.1 Main arguments of the parties\n8.243. The European Union estimates the amount of the payments and value of access to\nfacilities, equipment, and employees to Boeing under the post -2006 NASA procurement contracts,\ncooperative agreements, and Space Act Agreements as USD 1.818 billion between 2007 -2012.1297\nThe United States estimates the amount of the financial contribution as [***] between\n2007-2012.1298\n8.244. In arriving at its estimate, the European Union takes the full amount of each of the\nchallenged NASA aeronautics R&D programme budgets that is dedicated to non -engine,\nLCA-related R&D. 1299 From this total, made up of each challenged programme 's non -engine,\n\n1296 European Union's first written submission, para. 191 (citing Appellate Body Report, US – Large Civil\nAircraft (2nd complaint), para. 945).\n1297 The European Union provided an updated estimate of USD 2.554 billion between 2007 and 2014.\n(NASA Subsidies to Boeing's LCA Division, (Exhibit EU-36), p. 1; and Subsidies to Boeing's LCA Division\n(2013-2014 Update), (Exhibit EU-1451), p. 2). The European Union estimates that for the 2012-2014 period,\nthe amount of the financial contribution was approximately USD 1.12 billion (USD 384.5 million,\nUSD 348.5 million, and USD 387.2 million in 2012, 2013, and 2014, respectively).\n1298 This figure covers not only those payments, access to facilities, equipment, and employees provided\npursuant to post-2006 contracts and Space Act Agreements, but also those provided after 2006, but pursuant\nto pre-2007 contracts and Space Act Agreements. (See United States' second written submission, paras. 104\nand 641 and fn 111).\n1299 European Union's first written submission, para. 178; and NASA Subsidies to Boeing's LCA Division,\n(Exhibit EU-36).\n\nLCA-related budget, plus a share of NASA 's Cross Agency Support Program (CASP) budget1300, the\nEuropean Union then allocates a portion to Boeing using a ratio determined by dividing the number\nof Boeing commercial aircraft sales by the total number of civil aircraft sales in the United States in\nthe relevant period.1301\n8.245. The European Union considers that this estimat e is the \"best available evidence \" of the\nvalue of the payments and provision of access to NASA facilities, equipment, and employees,\nbecause the United States failed to cooperate in providing information that would have been\nnecessary to replicate the val uation method used by the original panel. The Euro pean Union\nargues that a contract-by-contract analysis is not possible because the United States has failed to\nprovide a \"full set of un -redacted NASA contracts and agreements funded through the NASA R&D\nprogrammes at issue\". 1302 The European Union explains that it is not possible or appropriate to\ndetermine the existence or value of the NASA aeronautics R&D subsidies on a\n\"contract-by-contract\" basis in any case because, aside from the flaws in the United Stat es'\ncompilation and provision of NASA contract data, the \"extent of the subsidisation is not captured\nby the NASA contracts and agreements, which massively under -identify the value of the access to\nNASA facilities, equipment, and employees provided to Boei ng for LCA -related R&D \".1303 While\ncontracts and Space Act Agreements establish the particular mechanisms by which NASA provides\nsubsidies, the amount of the subsidy cannot only be found \"within the four corners of these\ninstruments\".1304 This is because, throughout the course of their collaborative relationship, Boeing\nbenefits from the investments NASA makes in its own physical and human capital, which do not\nappear on the face of a particular contract or Space Act Agreement and cannot be quantified from\na single payments or use of property. 1305 The United States ' estimate ignores this, and therefore\n\"massively undercounts \" the real value of the financial contribution by not recogni zing the\ncollaborative, iterative nature of NASA and Boeing's R&D efforts.1306\n8.246. The United States arrives at its estimate of the amount of the financial contribution s\ninvolved in the NASA aeronautics R&D subsidies by combining the estimated value of the\ncategories of \"funding\" and \"support\" that the European Union alleges constitute fin ancial\ncontributions: payments and the provision of access to equipment, facilities (including computer\nusage) and NASA employees.1307 The United States estimates that the amount of payments to\nBoeing under procurement contracts between 2007 and 2012 for non -engine aeronautics R&D is\n[***]1308 and that, based upon the amounts waived in reimbursement, the value of access to\nfacilities, equipment , and employ ees provided to Boeing under Space Act Agreements over the\n\n1300 The European Union determines this share by allocating to Boeing a percentage of the CASP budget\nthat is equivalent to the percentage of each's programme's non-engine, LCA related funding. (See European\nUnion's second written submission, para. 178; comments on the United States' response to Panel question\nNo. 99, paras. 262-270; and NASA subsidies to Boeing's LCA Division, (Exhibit EU-36)).\n1301 The European Union argues that NASA's CASP programme constitutes \"institutional support\" to\nBoeing. (European Union's first written submission, para. 178; and NASA Subsidies to Boeing's LCA Division,\n(Exhibit EU-36), pp 3-9). The number of U.S. civil aircraft sales is provided in Aerospace Industries Association,\n\"2012 Year-End Review and Forecast, Aerospace Industry Sales by Product Group (Current Dollars), Calendar\nYears 2002-2013\", available at:\n<http://www.aia-aerospace.org/assets/YE_2012_Table_1_Industry_Sales_by_Product_Group_(1).pdf>,\naccessed 29 August 2016, (Exhibit EU-526). The number of Boeing sales is provided in Boeing, Annual Form\n10-K Report to the U.S. Securities and Exchange Commission for the Fiscal Year Ending 31 December 2011,\n(Exhibit EU-488).\n1302 European Union's response to Panel question Nos. 88, para. 81, and 89, para. 97. By contrast, in its\nfirst written submission, the European Union said that the required information was the amounts paid to all\ncontractors under the challenged NASA aeronautics R&D programmes, which the original panel had subtracted\nfrom the total NASA programme budgets in order to determine the total value of facilities, equipment, and\nemployees provided under the programmes. (European Union's first written submission, para. 179 and fn 423).\n1303 European Union's response to Panel question No. 89, para. 97.\n1304 European Union's second written submission, para. 262.\n1305 European Union's second written submission, paras. 260-265; response to Panel question No. 89,\npara. 100; and comments on the United States' response to Panel question No. 100, paras. 272-275. See also\nEuropean Union's comments on the United States' response to Panel question Nos. 97, paras. 252 and 253 (in\nrelation to the value of Boeing's use of High-End Computing Capability Project supercomputer), and 100, para.\n285 (in relation to Space Act Agreement and the value of Boeing's access to NASA employees).\n1306 European Union's second written submission, paras. 263-265; response to Panel question No. 89,\npara. 97; and comments on the United States' response to Panel question No. 100, para. 285.\n1307 United States' second written submission, paras. 111-123.\n1308 United States' second written submission, para. 111; Obligations under NASA contracts with Boeing\nfor FY 2007-FY 2012 (formerly Exhibit US-13-1), (Exhibit USA-37) (BCI).\n\nsame period is [***].1309 The United States estimates that the value of access to equipment and\ncomputers provided to Boeing under NASA procurement contracts is [***]1310 and [***]1311\nrespectively. Finally, the United States estimates that the value of access to NASA employees\nprovided to Boeing under NASA procurement contracts is [***].1312 The total value of these\nfinancial contributions is [***].\n8.247. The United States argues that its evidence, which was submitted in response to the Panel's\nrequest for information pursuant to Article 13 of the DSU , is the only reliable evid ence as to the\namount of the financial contribution. 1313 It consider s that the European Union has not\ndemonstrated a failure on the part of the United States to cooperate , or to respond to\nquestions.1314 The United States also emphasi zes that the original panel and the Appellate Body\nultimately endorsed the United States' methodology for calculating the amounts of the aeronautics\nR&D subsidies .1315 The United States argues that the European Union 's \"top-down\" valuation\nmethodology \"grossly overstates\" the value of t he financial contribution, and was rejected in the\noriginal proceeding. 1316 In response to the European Union 's argument that Boeing receives\n\"significant value \" beyond the face -value of individual contracts , agreements , or Space Act\nAgreements, the United St ates argues that the value of access to a facility or piece of equipment\nto Boeing consists solely of the value of the use of that facility or equipment. 1317 With respect to\nemployees, the United States argues that Boeing has access to NASA employees for a li mited\nperiod of time only, and the value of this access is reflected in its reported figures. 1318 The\nUnited States emphasi zes that since the European Union frames the financial contribution as\nspecific transactions between NASA and Boeing, the amount of the financial contribution must be\nlimited to those transactions; i.e. the value of specific payments, and access to facilities,\nequipment, and employees as provided through the relevant instruments, and funded under the\nrelevant programmes.1319\n8.248. The United States also considers that the European Union improperly includes a portion of\nthe CASP budget in its estimate of the financial contribution, since, not having challenged that\nNASA aeronautics R&D programme, it is outside the Panel's terms of reference. 1320 Further, the\nUnited States notes that the European Union does not actually include payments made to Boeing\nthrough CASP, but rather allocates a percentage of the CASP budget to Boeing, based on the\npercentage of other, challenged NASA aeronautics R&D programmes that the European Union\nallocates to Boeing. The United States does not consider that an allocation determined in this way\nconstitutes a proper calculation of the amount of financial contribution under Article 1.1(a)(1).1321\n\n1309 United States' first written submission, para. 113, 198; second written submission, para. 118; and\nNASA SAAs with Boeing (formerly Exhibit US-13-2), (Exhibit USA-60) (BCI).\n1310 United States' second written submission, para. 119; and Equipment provided under NASA contracts\nand agreements (revised 1 December 2014), (Exhibit USA-271) (BCI).\n1311 United States' first written submission, paras. 113 and 200; and Boeing use of NASA computers,\n2007-2012, (Exhibit USA-270) (BCI) (the United States incorrectly refers to his exhibit to as Exhibit USA-248\nat fn 167, para. 113 of its first written submission). The United States filtered data from monthly usage reports\nprepared by NASA's Advanced Supercomputing Division, to show the Standard Billing Units used by the\nprojects associated with Boeing. The values assigned to Standard Billing Units each year are those NASA uses\nfor internal budgeting purposes. See United States' response to Panel question No. 100, para. 184; and\nEquipment provided under NASA contracts and agreements (revised 1 December 2014), (Exhibit USA-271)\n(BCI).\n1312 United States' second written submission, para. 121; and Estimate of NASA's Employee Time in\nSupport of Contracts with Boeing, (Exhibit USA-321) (BCI).\n1313 United States' second written submission, section II.A.1.a.\n1314 United States' first written submission, paras. 45-48.\n1315 United States' second written submission, paras. 112 and 114; comments on the European Union's\nresponse to Panel question No. 89, paras. 107 and 108.\n1316 United States' second written submission, para. 123 (citing Panel Report, US – Large Civil Aircraft\n(2nd complaint), para. 7.1104).\n1317 United States' second written submission, para. 115; comments on the European Union's response\n1318 United States' second written submission, para. 122; comments on the European Union's response\n1319 United States' response to Panel question No. 99, para. 180.\n1320 United States' response to Panel question No. 99, para. 178.\n1321 United States' response to Panel question No. 99, para. 180.\n\n8.2.2.6.2.2 Evaluation by the Panel\n8.249. The parti es' estimates of the amount of the financial contribution provided through the\npost-2006 NASA aeronautics R&D subsidies differ significantly because they are based on\nfundamentally different methodologies. As in the original proceeding, the European Union takes a\n\"top-down\" approach, based on total budgeted costs of the NASA aeronautics R&D programmes\nthrough which the NASA procurement contracts, cooperative agreements, and Space Act\nAgreements with Boeing are funded, and Boeing 's share of the U.S. civil ai rcraft industry\n(represented by Boeing commercial airplane sales as a percentage of sales of U.S. civil aircraft\nproducts and services). The United States takes a \"bottom-up\" approach, which values the\naggregate payments made, and the provision of access to facilities, equipment, and employees, to\nBoeing through the individual procurement contracts, cooperative agreements, and Space Act\nAgreements funded under the relevant NASA aeronautics R&D programmes.\n8.250. In the original proceeding, the European Communities estimated the amount of the\nfinancial contribution provided through the NASA aeronautics R&D subsidies to be USD 10.4 billion\nbetween 1989 and 2006, of which USD 3 billion was allocated to the 2004 -2006 period.1322 The\nUnited States, by contrast, estimated the amount in question as \"less than\" USD 855 million. 1323\nThe panel ultimately concluded that the amount of payments and access to NASA facilities,\nequipment, and employees provided by NASA to Boeing through the NASA procurement contracts\nand Space Act Agreements between 1989-2006 was approximately USD 2.6 billion.1324 The original\npanel based this estimate on the methodology employed by the United States. 1325 This\n\"bottom-up\" methodology estimates the aggregate values of individual payments, and access to\nfacilities, equipment, and employees provided to Boeing by NASA through the NASA procurement\ncontracts and Space Act Agreements funded under the challenged aeronautics R&D programmes.\n8.251. As explained above, the United States' estimate of the amount of the financial c ontribution\ncovers the transactions that correspond to those found to constitute financial contributions:\npayments under NASA procurement contracts and cooperative agreements; the provision of access\nto NASA equipment and facilities (including computer usa ge) and employees under NASA\nprocurement contracts and cooperative agreements; and the provision of access to NASA facilities\nequipment and employees under Space Act Agreements . While the methodology that the\nUnited States uses to determine the value of pa yments mirrors that adopted by the original panel,\nthe methodology for estimating the other types of transactions differs somewhat. In the original\nproceeding, owing to the incompleteness of data concerning the value of access to NASA facilities,\nequipment, and employees, the panel (at the United States' suggestion) estimated the value of\nsuch access based on Boeing's share of overall payments made under the challenged NASA\naeronautics R&D programmes. 1326 By contrast, the United States ' evidence in this procee ding,\nsubmitted in response to the Panel 's request for information pursuant to Article 13 of the DSU, is\nmore extensive, and the United States argues that it can form the basis of the Panel 's estimate of\nnot only payments, but also the value of Boeing 's ac cess to NASA facilities, equipment, and\nemployees. The European Union nonetheless maintai ns its position that the\nUnited States' evidence is unreliable and cannot form the basis of the Panel's estimate of the value\nof any of the categories of financial contribution that it identifies.\n8.252. We therefore evaluate the European Union 's sp ecific criticisms of the\nUnited States' evidence in detail, to ascertain whether we agree that flaws in the United States'\nevidence are such that the United States' estimate cannot form the basis for the Panel's estimate\nof the amount of the financial contribution.\nEvidence regarding the amount of payments under NASA procurement contracts and\ncooperative agreements\n8.253. The evidence on which the United States relies for its estimate of t he value of payments\nunder procurement contracts and cooperative agreements is contained in Exhibits US-13-1 and\n\n1322 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1050.\n1323 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1054.\n1324 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1110.\n1325 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1081.\n1326 Panel Report, US – Large Civil Aircraft (2nd complaint), paras. 7.1094 and 7.1095.\n\nUSA-37.1327 Exhibit US-13-1 contains a list of NASA Contracts and Cooperative Agreements which\nwas compiled in response to Questions 5 and 7 of th e Panel's request for information pursuant to\nArticle 13 of the DSU, which sought:\n{A} list of all NASA contracts involving Boeing under the programs listed below that\nwere entered into or that have provided funding and support from FY 2006 – present.\n…\n Fundamental Aeronautics\n Aviation Safety\n Integrated System Research\n Aeronautics Strategy and Management\n Aeronautics Test Program\n High End Computing\n Strategic Capabilities Assets Program1328\n\n…\n\n{A} list of all grants or cooperative agreements involving Boeing un der the programs\nlisted in question 5 or relating to NASA assets provided (i.e., managed) or funded\nunder those programs, that were entered into or that have provided funding and\nsupport from FY 2006-present.1329\n\n8.254. To generate the list of procurement contracts and coopera tive agreements that the\nUnited States submits as evidence for its estimate, the United States identified the procurement\ncontracts and cooperative agreements between NASA and Boeing that were funded through the\nchallenged NASA aeronautics R&D programmes, based on a listing generated by the Federal\nProcurement Data Base -Next Generation (FPDS-NG).1330 Unlike in the original proceeding, the\nUnited States did not subsequently eliminate from that listing instruments that were considered by\nNASA personn el to relate to non -aeronautics re search. According to the United States, the\nmethodology it adopted for this proceeding inquired only into the source of the funds for each\ninstrument, rather than excluding payments based on an evaluation of the type of re search\nconducted under each instrument. 1331 The United States submits evidence of every payment\nreceived by Boeing under the resulting list of procurement contracts and cooperative agreements.\nExcluding those payments received from an unchallenged programme, these add up to\napproximately [***].1332\n\n1327 List of NASA Contracts and Cooperative Agreements, (Exhibit US-13-1) (BCI); and Obligations under\nNASA contracts with Boeing for FY 2007-FY 2012 (formerly Exhibit US-13-1), (Exhibit USA-37) (BCI).\n1328 United States' response to the Panel's request for information pursuant to Article 13 of the DSU,\ndated 28 February 2013, response to question No. 5, para. 17. The United States provided a \"List of NASA\nContracts and Cooperative Agreements\" as Exhibit US-13-1 (BCI) which subsequently became Exhibit USA-37\n(BCI).\n1329 United States' response to the Panel's request for information pursuant to Article 13 of the DSU,\ndated 28 February 2013, response to question No. 7, para. 17. The United States provided a \"List of NASA\nContracts and Cooperative Agreements\" as Exhibit US-13-1 (BCI) which subsequently became Exhibit USA-37\n(BCI).\n1330 As in the original proceeding, the United States first generated a list of all payments made by the\nfour NASA aeronautics research centres as reported in the FPDS-NG and identified payments funded through\nthe challenged NASA aeronautics R&D programmes. (See United States' second written submission,\nparas. 111-114). The four NASA research centres are Dryden, Langley, Ames, and Glenn. In the original\nproceeding, the panel found that these four centres accounted for more than 99% of NASA's aeronautics R&D,\nand confirmed, for the purposes of accepting the United States' methodology of generating a list of contracts\nbetween Boeing and the United States, that \"substantially all NASA aeronautics expenditures were undertaken\nby these four centers\". (See Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1079 (emphasis\noriginal)).\n1331 United States' second written submission, paras. 112 and 113.\n1332 Obligations under NASA contracts with Boeing for FY 2007-FY 2012 (formerly Exhibit US-13-1),\n(Exhibit USA-37) (BCI). A number of contracts and cooperative agreements at issue received funding from\nmultiple NASA programmes. The United States only includes in its estimate of payments those payments that\nwere received from challenged programmes.\n\n8.255. The European Union argues that the United States relies on the same flawed set of data as\nin the original proceeding which led the original panel to find that the amount of payments\nreceived by Boeing was significantly higher than that submitted by the United States.1333\n8.256. We note that i n the original proceeding, the panel found that the FPDS -NG was the best\nsource of information for compiling a list of contracts between NASA and Boeing. 1334 The panel did\nrevise the United Stat es' estimate upwards, but this was because it disagreed with a final step in\nthe United States' methodology in that proceeding, in which NASA personnel had excluded certain\npayments from its estimate.1335 The United States did not take this step in arriving at its estimate\nin the current proceeding.1336 Otherwise, the United States ' methodology for estimating payments\nremains the same as the methodology that was accepted by the panel in the original proceeding.\n8.257. The European Union makes no other specific criticis ms of the United States ' methodology\nfor estimating the amount of the payments under the NASA procurement contracts and\ncooperative agreements . We consider that the United States ' evidence is the best evidence\navailable as to the amount of payments receive d by Boeing under NASA procurement contracts\nand cooperative agreements.\nEvidence regarding the value of the provision of access to equipment and facilities under\nNASA procurement contracts and cooperative agreements\n8.258. In arriving at its estimate of the valu e of the access to equipment provided to Boeing\nunder the NASA procurement contracts and cooperative agreements, the United States takes the\nlist of procurement contracts and cooperative agreements provided in response to the Panel's\nrequest for informatio n pursuant to Article 13 of the DSU 1337, and submits a separate exhibit\ndetailing the value of access to equipment provided by those instruments .1338 The United States\nnotes that the values it provides in USA -Exhibit 271 for access to equipment provided to Boein g\nunder the procurement contracts and cooperative agreements (and the values it provides in\nExhibit USA-270 for Boeing's access to facilities) indicate, for the most part, the value of NASA's\nacquisition cost, rather than the value of the temporary use of the equipment, which is what\nBoeing generally receives under these instruments. Since the value of the acquisition cost tends to\nbe larger than the value of temporary use, the United States considers that, if anything, its figures\noverstate the value of Boeing's access to equipment (and the value of Boeing's access to facilities)\nunder procurement contracts and cooperative agreements.1339\n\n1333 European Union's second written submission, para. 261.\n1334 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1073.\n1335 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 695.\n1336 United States' second written submission, para. 113.\n1337 See para. 8.254 above.\n1338 The United States appears to regard its estimates of the value of Boeing's use of NASA computers in\nExhibit USA-270, and of equipment provided under NASA contracts and agreements in Exhibit USA-271 (BCI),\nas representing the value of access to NASA facilities and equipment under the NASA procurement contracts\nand cooperative agreements. (See United States' second written submission, para. 115 and fn 128, referring to\nthese exhibits). In its first written submission, the United States asserts that access to NASA facilities under\nprocurement contracts, other than with respect to NASA computers, \"was also quite limited, although the\nUnited States does not at this time have an estimate\". (United States' first written submission, para. 113; see\nalso United States' second written submission, para. 200: \"NASA contracts with Boeing did not provide for\nextensive usage of facilities. Use of NASA computers by Boeing for work on NASA contracts had a value of\napproximately [***] in the 2007-2012 period\"). We note that in response to the Panel's request for\ninformation pursuant to Article 13 of the DSU, for the total value of the access to government facilities,\nequipment, personnel, and other institutional support provided to Boeing at the four NASA aeronautics\nresearch centres, the United States explained that the relevant procurement contract, cooperative agreement,\nor Space Act Agreement is the only record maintained by NASA that describes the provision of government\nproperty, government data, and access to government facilities, equipment, personnel, and other institutional\nsupport. (United States' response to the Panel's request for information pursuant to Article 13 of the DSU,\ndated 28 February 2013, response to question No. 14, paras. 31 and 32). In its first written submission, when\ndiscussing the payments provided to Boeing through the procurement contracts (including BOAs and tasks),\ncooperative agreements, and Space Act Agreements under the challenged NASA aeronautics R&D programmes,\nthe United States refers to the instruments that provide for use of NASA facilities, and those where there was\nno government property or access to government facilities provided under the relevant instrument. (See\nUnited States' first written submission, paras. 126, 128, 130, 133, 139, 142, 158, 163, 165, 173, 182, 183,\n185, and 186).\n1339 United States' second written submission, para. 119.\n\n8.259. In response to the European Union 's argument that it is not possible to confirm the\nreported values listed in Exhibit USA-271, the United States notes that the value of access to\nequipment under procurement contracts and cooperative agreements is recorded in the instrument\nitself.1340 It notes that, according to NASA acquisition regulations, NASA cannot provide such\naccess to co ntractors without recording in the instrument the item provided and its acquisition\ncost.1341 Where a contractor seeks to use property for non -governmental work, general Federal\nAcquisition Regulations require the payment of rent to be agreed with the contracting officer.1342\n8.260. The European Union argues that the acquisition regulations to which the United States\nrefers only apply to procurement contracts, and not to cooperative agreements, implying that it is\ntechnically possible for NASA to have provided Boeing wi th access to property, facilities or\nequipment through a cooperative agreement, without having recorded the fact in the instrument\nitself.1343 Further, the European Union argues that the se regulations were replaced in 2011 with\nregulations that do not require an itemised list or indication of value for the furnishing of\ngovernment property.1344 However, having reviewed the exhibit submitted by the European Union\nin support of this argument, we note that, where government property is supplied in the course of\na pr ocurement contract, NASA is still required to insert a clause into the contract stating \"a\ndescription of the item(s), acquisition date, quantity, acquisition cost and applicable equipment\ninformation\".1345\n8.261. The European Union also argues that the United Stat es' list does not appear to include all\nof the NASA procurement contracts and cooperative agree ments with Boeing during the\nFY 2007-FY 2012 period; this is because not every instrument listed on Exhibit USA -37 (the list of\nall procurement contracts and coo perative agreements between NASA and Boeing that were\nfunded by the challenged NASA aeronautics R&D programmes) appears on Exhibit USA -271. The\nPanel has cross -referenced Exhibit USA -271 against Exhibit USA -37. We note that, of the 101\nprocurement contracts and cooperative agreements which are listed as having received payments\nfrom the challenged NASA aeronautics R&D programmes, 16 are not recorded on Exhibit USA-271.\nOf those 16, five are purchase orders, which the United States explains involve no resear ch on\nBoeing's part, or the provision of facilities, property, or equipment to Boeing. 1346 With respect to\ntwo further instruments, the United States has submitted the instruments themselves as exhibits,\nand we are able to confirm that they do not provide for access to facilities, equipment, or\nemployees.1347\n8.262. For the nine remaining instruments that appear on Exhibit USA -37 but are not listed on\nExhibit USA -271, the Panel is unable to confirm , based on the evidence provided by the\nUnited States, whether they prov ided Boeing with access to facilities or equipment. Not all of the\ninstruments listed on Exhibit USA -37 as having received payments under the challenged NASA\naeronautics R&D programmes necessarily provided access to NASA facilities or equipment; in fact,\nthe majority did not involve such access. 1348 It is possible that the nine unaccounted -for\ninstruments simply provided Boeing with payments, but no other access, which is why they are not\nrecorded in Exhibit USA-271. However, Exhibit USA-271 does contain other procurement contracts\n\n1340 The United States notes that Exhibit USA-271 records the value of access to equipment as it is\nrecorded in the contract instrument itself except where indicated. (See United States' response to Panel\nquestion No. 100, para. 185). Exhibit USA-271 provides a more detailed methodology for assessing the value\nof equipment for five contracts.\n1341 United States' second written submission, para. 115; United States Code of Federal Regulations,\nTitle 14, section 1845, (Exhibit USA-300); and United States Code of Federal Regulations, Title 48,\nsection 1852.245, (Exhibit USA-301).\n1342 United States' second written submission, para. 115.\n1343 European Union's comments on the United States' response to Panel question No. 100, para. 280.\n1344 European Union's comments on the United States' response to Panel question No. 100, para. 280;\nUnited States Code of Federal Regulations, Title 14, section 1845, (Exhibit USA-300); United States Code of\nFederal Regulations, Title 48, section 1852.245, (Exhibit USA-301); and United States Code of Federal\nRegulations, Title 48, section 1852.245-76 (2013), (Exhibit EU-1427).\n1345 United States Code of Federal Regulations, Title 48, section 1852.245-76 (2013), (Exhibit EU-1427).\n(emphasis added)\n1346 United States' first written submission, para. 187.\n1347 NASA Contract NNL08AA02B (3 April 2008), (Exhibit US-13-132); NASA Purchase Order\nNND08AA04P (formerly Exhibit US-13-84), (Exhibit USA-52) (HSBI).\n1348 Equipment provided under NASA contracts and agreements (revised 1 December 2014), (Exhibit\nUSA-271) (BCI). Of the total number of instruments listed in Exhibit USA-271, less than half provided for\naccess to government property, facilities or equipment.\n\nand cooperative agreements that provided no access to facilities or equipment, so this alone may\nnot explain the absence of the nine instruments from Exhibit USA -271.1349 It is clear that there\nappear to be some errors in Exhibit USA -271, whether they involve the omission of instruments\nthat did involve the provision of access to NASA facilities and equipment, or the addition of\ninstruments that did not involve such provision. However, we do not consider that the nature and\nsignificance of such errors warrants the Panel disregarding the United States' estimate altogether.\nWe note that the vast majority of instruments listed in Exhibit USA -37 (92 out of 101) are\naccounted for in Exhibit USA -271. Rather, in order to ensure that the Panel's estimate of the\namount of the financial contribution s is comprehensive, we propose to revise the United States'\nfigure upwards to reflect the value of any access to NASA facilities and equipment that may have\nbeen provided by the nine unaccounted-for instruments.\n8.263. The nine instruments together received approximately USD 11 million in payments from\nthe challenged NASA aeronautics R&D programmes during the FY 2007 -FY 2012 period, which is\napproximately 10% of the total amount of payments received by Boeing under those\nprogrammes.1350 We consider that the amount of funding received by these instruments provides a\nreasonable approximation of the scope of work performed under them, and can be used as a proxy\nto estimate the extent of access to any equipment provided by those instruments. We therefore\nadd 10% to the United States' estimated [***] as the value of access to equipment, which brings\nthe total estimate of the value of access to equipment under the NASA procurement contracts and\ncooperative agreements to [***].\n8.264. Lastly, the European Union considers that the United States ' figure ignores altogether the\nvalue of Boeing 's access to NASA facilities (as opposed to equipment or property). 1351 The\nUnited States' list, however, contains a number of specific references to facilities, so we see no\ngrounds for the European Union 's general assertion that the United States' estimate ignores the\nvalue of access to NASA facilities .1352 While the United States ' list in Exhibit USA -271 does not\ninclude a value for access to facilitie s provided for by NASA Contract NNL09AD50T, t he\nUnited States specifically refers to facilities provided by this contract in its submissions, and values\nBoeing's access at approximately [***].1353 We therefore also consider it appropriate to revise the\nUnited States' figure upwards, to [***], to take account of this omission.\n8.265. We acknowledge that the United States ' failure to include NASA Contract NNL09AD50T in\nExhibit USA-271, despite referencing this procurement contract in its submissions, suggests that\nthere may have been errors in the process of compiling the evidence on which the United States\nbases its amount estimate. Like the original panel, however, we consider that the fact that NASA\nmay have made mistakes in compiling the relevant information, and th at NASA 's records\nthemselves are not perfect, does not indicate that the United States ' evidence is, as a whole,\nunreliable.1354 We are not obliged, in estimating the amount of the subsidy let alone the amount of\nthe financial contribution s, to arrive at a pr ecise quantification 1355, and having reviewed the\nUnited States' evidence in light of the European Union's criticisms, we conclude that it is\nsufficiently reliable and comprehensive to constitute the best available evidence for an estimate of\nthe value of acc ess to facilities and equipment provided under the NASA procurement contracts\nand cooperative agreements funded under the relevant NASA aeronautics R&D programmes.\n8.266. The United States provides a separate estimate of [***] for the value of Boeing 's\ncomputer use, as a component of the value of access to NASA facilities. 1356 In response to the\n\n1349 United States' response to Panel question No. 100, para. 187.\n1350 Equipment provided under NASA contracts and agreements (revised 1 December 2014), (Exhibit\nUSA-271) (BCI); and Obligations under NASA contracts with Boeing for FY 2007-FY 2012 (formerly Exhibit\nUS-13-1), (Exhibit USA-37) (BCI).\n1351 European Union's comments on the United States' response to Panel question No. 100, para. 283.\n1352 For example, Exhibit USA-271 includes values for facilities provided by NASA contracts NNC07CB38C\nand NNC12AA01A.\n1353 United States' first written submission, para. 126; and NASA Contract NNL04AA11B, task order\nNNL09AD50T, (Exhibit USA-26) (BCI).\n1354 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1081.\n1355 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1101 (citing Appellate Body Report,\nUS – Upland Cotton, para. 467).\n1356 United States' first written submission, paras. 113 and 200; and Boeing use of NASA computers,\n2007-2012, (Exhibit USA-270) (BCI) (the U.S. incorrectly refers to his exhibit to as USA-248 at fn 167,\npara. 113 of its first written submission). The United States notes that this figure, if anything, overstates the\n\nEuropean Union's argument that the United States provides no explanation of its methodology for\ncalculating this figure, the United States explains that NASA compiled data fr om 2006 to 2013\nusing monthly usage reports prepared by NASA 's Advanced Supercomputing Division, which show\nusage assigned to each project expressed in terms of Standard Billing Units (SBU). 1357 These\nreports were then filtered to display the projects associated with Boeing. The value assigned to the\nresulting set of SBUs is the value that NASA uses for its internal budgeting period.1358\n8.267. The European Union considers that the value of Boeing 's computer usage seems\n\"extraordinarily low\", and argues that it likely accounts only for the cost of resources consumed by\nthe usage, rather than the market value of the resource. 1359 It notes that, according to SBU\nvalues, one hour of computer usage costs 73 cents, and compares this to one hour of internet use\nin an internet cafe, where the same costs between USD 3.50-4.1360\n8.268. We do not consider that the European Union establishes that the United States ' evidence\nas to the value of Boeing 's computer use cannot be relied upon. The European Union only\nspeculates that NASA's SBUs take into account only the cost of Boeing's use of the supercomputer;\nthere is no evidence that this is actually the case. Moreover, the European Union does not explain\nwhy a proper valuation of the financial contribution should take into account the market value of\nthe supercomputer itself, rather than the value of Boeing 's use of the supercomputer. Finally, we\nare not persuaded that the European Union's comparison between the computing costs incurred by\na large-scale organization like NASA and the per -hour retail costs charged in an internet cafe is\nprobative as to the accuracy or otherwise of the United States' figures.\n8.269. We see no flaws in the United States ' methodology for estimating the value of computer\nusage that would warrant dismissing its estimate, and conclude, therefore, that it remains the best\navailable evidence as to the value of Boeing's use of NASA's computers.\nEvidence regarding the value of the provision of access to NASA employees under NASA\nprocurement contracts and cooperative agreements\n8.270. With r espect to the United States ' estimate of the value of Boeing 's access to NASA\nemployees under procurement contracts and cooperative agreements, the United States relies on\nevidence contained in Exhibit USA -321.1361 The United States argues that Boeing had acc ess to\nNASA employees only for a limited period of time, and for a limited purpose. The work of NASA\nemployees in relation to procurement contracts and cooperative agreements with Boeing was\nlimited to financial administration and management, technical mon itoring to ensure that the\ncontractor complied with the terms of the instrument, and managing logistics. NASA estimates\nthat the value of these activities represented USD 17.4 million.1362\n8.271. The European Union does not dispute the methodology or selection proce ss through which\nthe United States generates its estimate of the value of Boeing 's access to NASA employees. The\nEuropean Union argues that, even if NASA employees spend relatively little time working with\nBoeing directly under the particular procurement c ontract or cooperative agreement, the value of\nBoeing's access to NASA employees is affected by the amount that NASA invests in those aspects\n\nvalue of Boeing's computer use, since it includes Boeing's use of computers for hypersonic research, which has\nno application to LCA. (See United States' second written submission, para. 119).\n1357 A Standard Billing Unit is a common rate used for allocating and tracking computing time at NASA's\nAdvanced Supercomputing facility. (See United States' response to Panel question No. 100, para. 184).\n1358 United States' response to Panel question No. 100, para. 184.\n1359 European Union's comments on the United States' response to Panel question No. 100, paras. 278\nand 279.\n1360 European Union's comments on the United States' response to Panel question No. 100, para. 279;\nNASA, The HEC Environment, Allocations & Accounts, Common Standard Billing Unit (SBU) Rates, available at:\n<http://www.nas.nasa.gov/hecc/support/kb/Common-Standard-Billing-Unit-(SBU)-Rates_271.html>, accessed\n1 September 2016, (Exhibit EU-1424); J. Santo Domingo, \"Comparing Dual-Core vs. Quad-Core CPUs\", PC\nMagazine, 5 July 2012, (Exhibit EU-1425); and Examples of Internet Cafe Pricing, (Exhibit EU-1426).\n1361 Estimate of NASA's Employee Time in Support of Contracts with Boeing, (Exhibit USA-321) (BCI).\n1362 United States' second written submission, para. 121. The United States explains that, for budget\npurposes, NASA values its professional personnel time at USD 150,000 per full-time equivalent (which\ntranslates to the work performed by one person over the course of a year). NASA estimates that the work of\nNASA personnel involved in the activities referred to above (i.e. financial administration and management,\ntechnical monitoring to ensure that the contractor complied with the terms of the contract and satisfied all\ndeliverables, and managing logistics), occupied 115.8 units of full-time equivalent.\n\nof its own physical and human capital relevant to Boeing 's research efforts.1363 This is a version of\nthe European Union's argument that, regardless of any flaws it has identified in the United States\nevidence, the United States ' overall methodology for estimating the financial contribution\n\"massively undercounts \" the real value of the financial contribution by not recog nizing the\ncollaborative, iterative nature of NASA and Boeing 's R&D work. Along with the European Union 's\nconcerns as to the United States' evidence, it is this argument that underlies the European Union 's\n\"top-down\" approach for calculating the value of the financial contribution.\n8.272. Unlike the United States' methodology for calculating the value of the financial contribution\nto Boeing under the procurement contracts, cooperative agreements, and Space Act Agreements ,\nthe European Union 's \"top-down\" methodology for estimating the amount of the financial\ncontribution provided through the NASA aeronautics R&D subsidies does not correspond to the\nnature of the financial contributions as argued by the parties and as found by the Panel (i.e. as\npayments and the pro vision of access to NASA facilities, equipment, and employees through\ncertain legal instruments funded under identified NASA aeronautics R&D programmes). Rather, the\nEuropean Union's methodology is based on an allocation of the portion of the NASA programm e\nbudgets to Boeing based on the value of Boeing 's commercial airplane sales as a proportion of\ntotal U.S. civil aircraft sales. It is not an estimate of the value of the \"financial contributions \"\nbecause the financial contributions that the Panel has foun d to exist are not all or a portion of the\nNASA aeronautics R&D programme budgets, but particular transactions between NASA and Boeing\nthat occur through certain legal instruments which are funded by those aeronautics R&D\nprogrammes.\n8.273. The European Union argues that the value of the access to NASA facilities, equipment, and\nemployees extends beyond the \"four corners \" of the instruments because of the value of\ninvestments that NASA makes in itself , which cannot be quantified from payments and use of\nfacilities, equipment, and employees . This argument is similar to an argument that the European\nCommunities made in the original proceeding, which the panel rejected. 1364 We are not persuaded\nby the European Union's argument that the amount of the financial contributi ons cannot be\ncaptured within the \"four corners \" of the transactions found to constitute the financial\ncontributions for the same reasons that the original panel rejected the European\nCommunities' argument in the original proceeding. First, because it is a t odds with the nature of\nthe financial contributions that we f ind to exist; namely, the payments and access to NASA\nproperty facilities, equipment, and employees provided through procurement contracts,\ncooperative agreements, and Space Act Agreements with Boeing which are funded through\nparticular NASA aeronautics R&D programmes. Second, because the European Union does not\nidentify the \"investments\" that NASA allegedly makes in its own physical and human capital, or the\ntypes of transactions through which these investments are made and are shared to transmit to\nBoeing. Finally, we have previously found that a number of the challenged NASA programmes did\nnot actually fund any procurement contracts, cooperative agreements , or Space Act Agreements\nbetween NASA and Boeing. 1365 In other words, these programmes did not provide financial\ncontributions to Boeing . Despite this, the European Union 's methodology impermissibly includes\nportions of the budgets of these programmes in its estimate of the financial contributio n made by\nNASA to Boeing.\n8.274. Nor are we persuaded that all, or a portion of, the CASP Program should be included in an\nestimate of the amount of the financial contribution, as a way of capturing NASA funding and\nsupport that allegedly operates outside of the \"four corners\" of the instruments that constitute the\nfinancial contributions to Boeing. First, the European Union did not include the CASP Program as\none of the challenged NASA aeronautics R&D measures in section I.A of its panel request, and in\nour view, funding and support provided through an unchallenged programme is outside our terms\nof reference. Second, the European Union 's justification for including funding under the CASP\nProgram in its estimate is that its panel request covers the entirety of any \"contracts, assistance\ninstruments and other agreements\" that are funded by the challenged NASA aeronautics R&D\nprogrammes, meaning that if a particular instrument is funded by a challenged programme, any\n\n1363 European Union's second written submission, fn 413 and para. 264.\n1364 The European Communities argued that the United States' \"bottom-up\" estimates of the amounts in\nthe original proceeding should be rejected because they failed to account for the fact that NASA allegedly\nprovided Boeing with access to the results of the R&D performed by NASA in-house and by other contractors.\n(Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1102).\n1365 These programmes are: Aeronautics Strategy and Management Program, High End Computing\nProgram, and Strategic Capabilities Assets Program. See paras. 8.67 to 8.72 above.\n\nother payments made by additional programmes, such as CASP, to that same instrument are also\ncovered by the European Union 's panel request. 1366 The European Union 's methodology for\nincluding CASP payments in its estimate of the financial contribution does not, however,\ncorrespond to this reasoning. The European Union does not identify specific instruments funded by\nboth a challenged aeronautics R&D programme and the CASP Program, which would allow it to\naccount for what each instrument actually received from the CASP Program. Instead, it\n\"apportions\" percentages of the CASP Program budgets to each challenged aeronautics R&D\nprogramme based on each programme 's share of NASA 's total funding. This, as explained earlier,\ndoes not correspond to what, in the European Union 's own arguments, actually constitutes the\nfinancial contribution. We are therefore unable to accept both the European Union 's overall\nmethodology for estimating the financial contribution, and its inclusion of a portion of the\nunchallenged CASP Program in that estimate.\nEvidence regarding the value of access to facilities, equipment and employees provided\nunder Space Act Agreements\n8.275. Finally, the United States relies on evidence contained in Exhibit USA -60 and Exhibit\nUS-13-2 for its estimate of the value of access to facilities, equipment , and employees provided\nunder the Space Act Agreements. This list was compiled in response to Question 6 of the Panel's\nrequest for information pursuant to Article 13 of the DSU, which sought:\n{A} list of all non -reimbursable or partially reimbursable Space Act Agree ments\n(\"SAAs\") that were entered into or that have provided funding and support from FY\n2006-present, involving Boeing under the programs listed in question 5 or relating to\nNASA assets provided (i.e., managed) or funded under those programs.1367\n8.276. The United S tates generated the list of Space Act Agreements it provided in response to\nthe Panel through a five -step process. First, NASA generated a list of all Space Act Agreements\nentered into between NASA's four aeronautics research centres and Boeing, using NASA 's Space\nAct Agreement Maker System, into which, as required by NASA Policy Directive 1050 1H, every\nSpace Act Agreement must be entered. 1368 Second, ARMD had the list reviewed by all Center\nAgreement Managers to validate data and add any missing information. Third, these officials also\nprovided copies of any instruments not already in the possession of ARMD and verified their values\nwith the Chief Financial Officers of the four aeronautics research centres. Fourth, ARMD\ndetermined the programme responsible fo r the funding of each Space Act Agreement, and\nidentified whether each Space Act Agreement was fully, partially, or non -reimbursable. Finally, in\naccordance with the parameters of the Panel's request for information pursuant to Article 13 of the\nDSU, fully-reimbursable Space Act Agreements, along with Space Act Agreements funded through\nprogrammes that the European Union had not challenged, were removed from the list. 1369 In the\noriginal proceeding, the panel rejected the United States' estimate of the value o f goods and\nservices provided under Space Act Agreements, because it considered that there were limitations\nin the evidence that the United States relied on to support its estimate. 1370 The European Union\nargues that, for the same reason, the Panel should rej ect the United States' figures for the\ntransactions in this proceeding.1371\n8.277. More specifically, the European Union points out that a number of the Space Act\nAgreements on the list provided by the United States contain no valuation information, and argues\ntherefore that the list cannot be used as a basis for the Panel's estimate. The United States\n\n1366 European Union's comments on the United States' response to Panel question No. 99, para. 263.\n1367 United States' response to the Panel's request for information pursuant to Article 13 of the DSU,\ndated 28 February 2013, response to question No. 6, para. 18. The United States provided a \"NASA SAA List\"\nas Exhibit US-13-2 which subsequently became Exhibit USA-60 (BCI).\n1368 NASA Policy Directive on Authority to Enter into Space Act Agreements, NPD 1050.1I\n(23 December 2008), (Exhibit USA-303). These research centres are: Dryden, Langley, Ames, and Glenn. In\nthe original proceeding, the panel found that these four centres accounted for more than 99% of NASA's\naeronautics R&D, and confirmed, for the purposes of accepting the United States' methodology of generating a\nlist of contracts between Boeing and the United States, that \"substantially all NASA aeronautics expenditures\nwere undertaken by these four centers\". (See Panel Report, US – Large Civil Aircraft (2nd complaint),\npara. 7.1079 (emphasis original)).\n1369 United States' second written submission, para. 117.\n1370 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1094.\n1371 European Union's comments on the United States' response to Panel question No. 100, para. 286.\n\nresponds, first, that certain of the Space Act Agreements on its list are \"umbrella\" instruments,\nwhich do not provide valuation information and merely set out the overarching terms for work that\nis then memorialised in subsequent annexes, which provide valuation information. 1372 Second, the\nUnited States explains that the list contains some Space Act Agreements that were signed, but for\nwhich costs were not ultimately in curred.1373 The United States acknowledges that, of the\napproximately 40 Space Act Agreements on its list, NASA is missing value information for two.\nThese instruments are SAA2-402214 and SAA3-402268.\n8.278. In the original proceeding, of the 38 Space Act Agreements identified by the United States,\n17 were missing value information. 1374 Unlike in the original proceedin g, the United States'\nevidence concerning the value of access to facilities, equipment , and employees provided to\nBoeing under the Space Act Agreements w as supplied in response to a specific request from the\nPanel pursuant to Article 13 of the DSU. It is far more comprehensive than the information\nprovided by the United States in the original proceeding. In our view, the factors which led the\noriginal pane l to reject the United States' valuation of the access to facilities, equipment , and\nemployees provided to Boeing under Space Act Agreements are not present in respect of the\nevidence submitted by the United States in relation to that issue in this proceeding.\n8.279. The European Union also argues that the United States does not indicate how NASA arrives\nat a valuation of the access to facilities, equipment , and employees provided to Boeing. The\nUnited States responds that each of NASA's four research centres is r equired to prepare a cost\nestimate in accordance with guidance from NPR 9090.1A, which requires a determination of the\nfull cost of the Space Act Agreements, including direct and indirect costs. In accordance with this\nguidance, NASA values the costs waive d in a Space Act Agreement by taking into account direct\ncosts, which include: salaries and other benefits for employees who work directly on the output;\nmaterials and supplies used in the work; various costs associated with office space, equipment,\nfacilities, utilities that are used exclusively to produce the output; costs of goods or services\nreceived from other segments or entities that are used to produce the output; and other costs\nrelated to the production of the output. Indirect costs include \"costs of resources that are jointly or\ncommonly used to produce two or more types of outputs, but are not specifically identifiable with\nany of the outputs \". This includes costs of general and administrative services, general research\nand technical support, security, rent, employee health, and recreation facilities.1375\n8.280. The European Union argues that the requirement in NPR 9090 -1A to value costs waived\nunder a Space Act Agreement only applies to reimbursable Space Act Agreements, and not to the\nnon-reimbursable or partially-reimbursable Space Act Agreements that are at issue here. 1376 The\nUnited States' submissions state, however, that while formally speaking, the above -referenced\ndirective only applies to reimbursable Space Act Agreements, another directive, NPD 1050 .1I, also\nrequires preparation of cost estimates for non - or partially -reimbursable Space Act\nAgreements.1377 Although this latter directive does not set forth its own, separate methodology for\ncalculating these costs, we understand that the methodology in NPR 9090-1A also applies here.\n8.281. In light of the foregoing, we find that there is no basis not to accept the estimate provided\nby the United States as the best evidence available regarding the value of the access to facilities,\n\n1372 The United States resubmitted Exhibit USA-60 (BCI) to indicate which of the listed Space Act\nAgreements were \"umbrella\" instruments. These instruments are: Non-reimbursable Space Act Agreement\nbetween the Boeing company and National Aeronautics and Space Administration for environmentally\nresponsible air vehicle concept research, SAA1-1018 (May 2010), (Exhibit USA-100) (BCI);\nPartially-reimbursable Space Act Agreement between the Boeing company and National Aeronautics and Space\nAdministration for Aerospace Research and Development, SAA1-1145 (September 2011), (Exhibit\nUSA-13-254); Non-reimbursable Space Act Agreement between the Boeing company and National Aeronautics\nand Space Administration for Aerospace Research and Development, SAA1-1155 (November 2011), (Exhibit\nUSA-87); and Space Act Agreement SAA1-640 between the National Aeronautics and Space Administration and\nthe Boeing company for the cooperative investigation of a cruise-efficient hybrid wing-body concept at the\nLangley Research Center National Transonic Facility, (\"umbrella\" agreement not submitted as a separate\nexhibit). (See NASA SAAs with Boeing (formerly Exhibit US-13-2), (Exhibit USA-60) (BCI)).\n1373 These instruments are: DRFC-276, SAA1-757, annex 13, and SAA2-401097, annex 15.\n1374 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1092.\n1375 United States' response to Panel question No. 100, para. 182; and NASA Procedural Requirements,\nReimbursable Agreements, 9090.1A, (25 February 2013), (Exhibit USA-486).\n1376 European Union's comments on the United States' response to Panel question No. 100, para. 273.\n1377 United States' response to Panel question No. 100, fn 249 and para. 182; and NASA Policy Directive\non Authority to Enter into Space Act Agreements, NPD 1050.1I (23 December 2008), (Exhibit USA-303).\n\nequipment, and employees provide d to Boeing under the post -2006 Space Act Agreements at\nissue.\n8.282. We have conducted an extensive review of the United States' evidence supporting its\nestimate of the amount of the financial contributions provided through the NASA aeronautics R&D\nsubsidies, in light of the numerous criticisms of the European Union regarding different aspects of\nthe methodology and evidence. We consider the United States' methodology for arriving at its\nestimates, for each of the categories of transactions it identifies as compr ising the financial\ncontribution, to be reasonable and appropriate. We identify where the United States has made\nerrors, and have endeavoured to make adjustments to the United States' estimates to account for\nthose errors. We conclude that none of the errors or omissions is so serious that it undermines the\noverall reliability of the United States' estimates.\n8.283. We would add that we do not accept the European Union 's allegation that the\nUnited States has failed to cooperate in providing the information that is necessary to arrive at a\nreliable estimate of the amount of the financial contributions. 1378 We note that, in February 2013,\nin response to requests made by the Panel pursuant to Article 13 of the DSU, the United States\nprovided the following lists of NASA instruments related to the European Union's claims:\na. A list of all NASA procurement contracts with Boeing funded under the challenged NASA\naeronautics R&D programmes, that were entered into or that provided funding and\nsupport, from FY 2006 until 2012.1379\nb. A list of all grants or cooperative agreements involving Boeing under the challenged\nNASA aeronautics R&D programmes relating to NASA assets provided or funded under\nthose programmes that were entered into or that have provided funding or support from\nFY 2006 to 2012.1380\nc. A list of all non -reimbursable or partially-reimbursable Space Act Agreements that were\nentered into or that provided funding and support from FY 2006 to 2012, involving\nBoeing under the challenged NASA aeronautics R&D programmes.1381\nd. A list of a ll additional contracts, task orders, non -reimbursable or partially-reimbursable\nSpace Act Agreement s, grants , or agreements involving Boeing that were related to\naeronautics R&D and that were entered into or have provided funding and support from\nFY 2006 to 2012 that were not previously listed.1382\n8.284. Moreover, the United States provided a list of every revenue -related action that occurred\nfor the items listed in (a) through (d) above in the FY 2007-FY 2012 period, showing the obligation\namount associated with e ach contract and the fiscal year of the obligation on a contract action\ninventory.1383 It also provided information as to the total amount of funds obligated or disbursed to\nBoeing for each year since FY 2006 for each of the four NASA aeronautics research centres, and\ninformation regarding the total value of access to government facilities, equipment, personnel, and\nother institutional support provided to Boeing for each year since FY 2006 at or by such\n\n1378 European Union's first written submission, para. 179.\n1379 United States' response to the Panel's request for information pursuant to Article 13 of the DSU,\ndated 28 February 2013, response to question No. 5 para. 17. The United States provided a \"List of NASA\nContracts and Cooperative Agreements\" as Exhibit US-13-1 (BCI) which subsequently became Exhibit USA-37\n(BCI).\n1380 United States' response to the Panel's request for information pursuant to Article 13 of the DSU,\ndated 28 February 2013, response to question No. 7, para. 19. The United States provided a \"NASA List of\nNASA Contracts and Cooperative Agreements\" as Exhibit US-13-1 (BCI) which subsequently became Exhibit\nUSA-37 (BCI).\n1381 United States' response to the Panel's request for information pursuant to Article 13 of the DSU,\ndated 28 February 2013, response to question No. 6, para. 18. The United States provided a \"NASA SAA List\"\nas Exhibit US-13-2 which subsequently became Exhibit USA-60 (BCI).\n1382 United States' response to the Panel's request for information pursuant to Article 13 of the DSU,\ndated 28 February 2013, response to question No. 8, para. 20.\n1383 United States' response to the Panel's request for information pursuant to Article 13 of the DSU,\ndated 28 February 2013, response to question No. 10, para. 23.\n\ncentres.1384 In light of the above information provided by t he United States, we are unable to see\nwhy the European Union considers it necessary to receive a full set of un -redacted NASA contracts\nand agreements in order to arrive at an estimate of the amount of the financial contribution.1385\n8.285. In response to a Panel question in its third set of questions in September 2015, seeking\ninformation regarding the magnitude of difference in Airbus and Boeing pricing in sales campaigns,\nthe European Union submitted an update for 2013 and 2014 of the amounts of the financial\ncontribution from the U.S. subsidi es that are alleged to cause adverse effects through a price\ncausal mechanism.1386 This information included updated estimates of the amounts of the financial\ncontributions for the NASA aeronautics R&D subsidies for 2013 and 20 14, based on the\nEuropean Union's \"top-down\" methodology.1387 Although there is no corresponding updated\ninformation regarding the amounts of the financial contributions for 2013 and 2014 based on the\nUnited States ' methodology, this does not in our view, pro vide a reason to accept the\nEuropean Union's estimates for the 2013 and 2014 amounts as the best available evidence of the\namounts of the financial contributions for those years. This is because, as we have explained\npreviously, the legal deficiencies in the European Union's methodology are too significant.1388\n8.286. In light of our above findings regarding financial contribution, benefit, and specificity, we\nconclude that the European Union has established that certain transactions pursuant to post -2006\nNASA procurement contracts, cooperative agreements, and Space Act Agreements involve specific\nsubsidies, within the meaning of Articles 1 and 2 of the SCM Agreement. We are unable to\nestimate the amount of the subsidy on the basis of the evidence on the record. T o the extent that\nthe amount of the financial contribution provided through these subsidies is relevant to the Panel's\nassessment of whether the United States has withdrawn the subsidy, or taken appropriate steps to\nremove the adverse effects, within the meani ng of Article 7.8, the United States' methodology\nprovides a reliable and appropriate basis for arriving at the relevant estimate. On the basis of this\nmethodology, after making certain adjustments to the United States' estimates, the Panel\nestimates that the amount of the financial contribution provided to Boeing through the\nNASA procurement contracts, cooperative agreements, and Space Act Agreements\nfunded under the relevant aeronautics R&D programmes between 2007 and 2012 is\napproximately [***].\n8.2.2.7 Conclusion\n8.287. In light of our above findings regarding financial contribution, benefit, and specificity, we\nconclude that the European Union has established that certain transactions pursuant to post -2006\nNASA procurement contracts, cooperative agreements, and Space Act Agreements involve specific\nsubsidies within the meaning of Articles 1 and 2 of the SCM Agreement. While we are unable to\nestimate the amount of the subsidy on the basis of the evidence on the record, to the extent it is\nrelevant to the Panel's assessm ent of whether the United States has withdrawn the subsidy or\ntaken appropriate steps to remove the adverse effects within the meaning of Article 7.8 of the SCM\nAgreement, we find the United States' estimate of the financ ial contributions at [***] between\n2007 and 2012 to be the most credible estimate.\n\n1384 United States' response to the Panel's request for information pursuant to Article 13 of the DSU,\ndated 28 February 2013, response to question Nos. 13 and 14, paras. 30 and 31-33; and NASA Obligations by\nCenter, (Exhibit US-13-450) (BCI).\n1385 We recall that the European Union objected to redaction of portions of certain NASA procurement\ncontracts referenced in the United States' first written submission in a communication to the Panel dated\n9 September 2013 and requested the Panel to require the United States to produce un-redacted versions. That\nobjection, however, related to assertions made by the United States that the fact that such instruments were\nexport-controlled, classified or otherwise restricted demonstrated that the work performed under them could\nnot be applied to or used to produce large civil aircraft. The European Union did not allege that the un-redacted\nportions of the contracts in question were necessary in order to enable it to arrive at the amounts of the\nfinancial contributions involved in those instruments. In any case, we declined the European Union's request in\na ruling on that request dated 23 October 2013, attached at Annex F-2 to this Report.\n1386 European Union's response to Panel question No. 164, para. 114; and Subsidies to Boeing's LCA\nDivision (2013-2014 Update), (Exhibit EU-1451). The United States did not submit a corresponding update of\nits estimate of the amount of the financial contributions.\n1387 Subsidies to Boeing's LCA Division (2013-2014 Update), (Exhibit EU-1451), pp. 2 and 5-22.\n1388 The European Union's estimates also include allocations from NASA aeronautics R&D programmes\nfor which the Panel has found there are no measures in existence. This is the case with respect to the Strategic\nCapabilities Assets Program, the Aeronautics Strategy and Management Program and the High End Computing\nProgram. See Section 8.2.2.2.2 above.\n\n8.2.3 Post-2006 DOD aeronautics R&D measures\n8.2.3.1 Introduction\n8.288. In this Section of our Report, we evaluate the European Union's allegations that the DOD's\nResearch, Development, Test & Evaluation (RDT&E) Program involves specific subsidies within the\nmeaning of Articles 1 and 2 of the SCM Agreement , and that by granting or maintaining these\nsubsidies after the end of the implementation period , the United States has failed to withdraw the\nsubsidy, within the meaning of Article 7.8 of the SCM Agreement.\n8.289. This evaluation concerns post -2006 DOD aeronautics R&D measures that we have found\nto be within the scope of this proceeding in Section 7.3.1389 It also includes an evaluation of\nwhether the pre-2007 DOD procurement contracts involve specific subsidies within the meaning of\nArticles 1 and 2 of the SCM Agreement. This is because there were no subsidy findings, and\ntherefore no adverse effects findings, regarding the pre -2007 DOD procurement contracts at the\nconclusion of the original proceeding. Therefore, the United States did not have a compliance\nobligation in relation to these pre -2007 aeronautics R&D measures, unlike the pre -2007 NASA\naeronautics R&D subsidies and the pre -2007 DOD assistance instruments discussed in Section 8.1\nabove. However, for the reasons explained in Section 7.3, we have ruled that the pre-2007 DOD\nprocurement contracts are within the scope of this proceeding. We there fore consider whether\nboth the pre -2007 and post -2006 DOD procurement contracts are specific subsidies in this\nSection, as the legal issues raised are the same.\n8.290. Before the original panel, the European Communities claimed that payments and access to\nDOD fac ilities provided to Boeing under 23 RDT&E program elements to conduct research into\n\"dual-use\" technologies1390, in the sense of technologies having potential application to LCA 1391,\nwere specific subsidies which ca used adverse effects to the interests of the Eu ropean\nCommunities.1392 The original panel identified two types of legal instruments through which DOD\nprovided payments and access to DOD facilities to Boeing under the various RDT&E program\nelements; namely procurement contracts and assistance instruments.1393\n8.291. The panel and the Appellate Body found that the payments and access to DOD facilities\nprovided to Boeing under the assistance instruments at issue constituted specific subsidies within\nthe meaning of Articles 1 and 2 of the SCM Agreement. There were ulti mately no findings as to\nwhether the payments and access to DOD facilities provided to Boeing through the procurement\ncontracts entered into under the 23 RDT&E program elements constituted specific subsidies, or\ncaused adverse effects. Rather, as explained in greater detail in Section 7.3.2.2 of this Report, the\nAppellate Body declared moot the original panel 's finding that the DOD procurement contracts\nwere properly characterized as \"purchases of services \" and thus were not fin ancial contributions\nwithin the meaning of Article 1.1(a)(1).1394\n8.292. The European Union disputes that the actions taken by the United States, as set forth in its\nCompliance Communication, including those with respect to the relevant DOD aeronautics R&D\nmeasures, bring the United States into compliance with the DSB recommendations and rulings.1395\n\n1389 We recall that with regard to pre-2007 DOD assistance instruments at issue in the original\nproceeding we find that the DOD-Boeing Patent Licence Agreement does not constitute a withdrawal of the\nsubsidy, within the meaning of Article 7.8 of the SCM Agreement. See Section 8.1.3 above.\n1390 The European Communities based its assessment of whether R&D conducted by Boeing under any of\nthe RDT&E program elements was likely to give rise to technologies with civil applications on an expert\nevaluation of the RDT&E program budgets. (CRA Report, (Exhibit EU-29), para. 1.1, p. 1). The European Union\nalso relies on the 2006 CRA Report in this proceeding, along with an additional expert evaluation pertaining to\npost-2006 RDT&E budget activities. See also Rumpf Report, (Exhibit EU-23).\n1391 Panel Report, US – Large Civil Aircraft (2nd complaint), paras. 7.1116 and 7.1117. We explain the\ndifferent senses in which the concept of \"dual-use\" technologies is used in this proceeding in paras. 8.341 to\n8.344 below.\n1392 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1116. The specific RDT&E program\nelements identified in the European Communities' panel request in the original proceeding appear at\nparagraph 7.1113 of that report.\n1393 See para. 8.298 below.\n1394 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), fn 1298.\n1395 European Union's request for the establishment of a panel, para. 6.\n\n8.293. We evaluate i n Section 8.2.3.3 whether the post -2006 DOD aeronautics R&D measures\nthat we have found to be within the scope of this compliance proceeding1396 involve financial\ncontributions within the meaning of Article 1.1(a)(1) of the SCM Agreement and evaluate in\nSection 8.2.3.4 whether any such financial contributions confer a benefit within the meaning of\nArticle 1. 1(b). Our evaluation of whether any measures that we f ind to be subsidies within the\nmeaning of Article 1 are specific within the meaning of Article 2 of the SCM Agreement appears in\nSection 8.2.3.5 of this Report.\n8.294. Before discu ssing the subsidy and specificity issues, we provide relevant background\nfactual and legal information regarding the DOD aeronautics R&D measures at issue.\n8.2.3.2 The measures at issue\n8.2.3.2.1 The European Union's panel request\n8.295. In its panel request in this proceeding, the European Union alleges that U.S. DOD\nmaintains subsidies benefiting U.S. LCA producers: (a) through the RDT&E Program; as well as (b)\nthrough contracts, assistance instruments, and other agreements (as modified) entered into under\nthe RDT&E Program; in addition to (c) through specified U.S. Air Force, Navy, Army, and Defense-\nWide program elements of the RDT&E Program; as well as (d) through contracts, assistance\ninstruments, and other agreements (as modified) under these RDT&E program elements ; and to\nthe extent not entered into pursuant to the foregoing programmes (e) by entering into and\nfollowing the terms of contracts and other agreements (as modified) with Boeing listed in annex B\nof the United States' Compliance Communication.1397\n8.296. The forms of the su bsidies are described as: (a) the provision to Boeing of funding and\naccess to government facilities, equipment, and employees for R&D applicable to the development,\ndesign, and production of LCA on terms more favourable than would be available on the\ncommercial market; as well as (b) the provision to Boeing of royalty -free use of the technologies\ndeveloped with such funding and support or use of such technologies on preferential terms.1398\n8.297. Although the European Union's panel request suggests that the European Union challenges\nboth DOD's RDT&E Program as a whole and certain individual RDT&E program elements funded\nunder (and as part of) the RDT&E Program, it is clear from the European Union's first written\nsubmission that its challenge is confined to particula r \"funding\" and \"access to government\nfacilities, equipment and employees\" provided to Boeing under specified RDT&E program elements,\nrather than DOD 's RDT&E Program more generally. Hence, the \"funding\" and \"access to\ngovernment facilities, equipment and e mployees\" challenged under those RDT&E program\nelements refers to payments made, and access to DOD facilities, equipment, and employees\nprovided, to Boeing and not to other recipients. Such payments and access are provided through\nparticular legal instrume nts entered into between DOD and Boeing (namely, procurement\ncontracts, and assistance instruments) which are funded under the relevant RDT&E program\nelements.1399 In other words, the funding and access to government facilities, equipment, and\nemployees provided to Boeing under the relevant RDT&E program elements set forth in the\nEuropean Union's panel request refer to the payments and access to facilities, equipment, and\nemployees provided to Boeing through procurement contracts and assistance instruments entered\ninto between DOD and Boeing and funded under the specifically identified RDT&E program\n\n1396 See para. 7.548 above.\n1397 European Union's request for the establishment of a panel, paras. 11-13. The panel request\nindicates that \"Annex B of the 23 September 2012 notification is attached to this request, and the contracts\nlisted therein are incorporated into this request\". (Ibid. para. 13, p. 5 and annex B).\n1398 European Union's request for the establishment of a panel, paras. 11 and 12.\n1399 See para. 8.298 below. See Panel Report, US – Large Civil Aircraft (2nd complaint), paras. 7.1115\n(noting that it was not in dispute that DOD made payments to Boeing (and granted Boeing access to\ngovernment facilities) to perform R&D pursuant to two different categories of R&D arrangements, namely,\n\"procurement contracts\" and \"assistance instruments\"), 7.1119 (noting that the scope of the European Union's\nDOD-related claim was limited to payments and access to facilities provided to Boeing, as distinguished from a\nbroader challenged to the DOD RDT&E Program per se), and 7.1122 (noting that the European Communities\nhad clarified that it did not challenge DOD allowing Boeing to \"participate\" in RDT&E program elements as a\ndistinct measure).\n\nelements.1400 We briefly summarize the principal features of DOD procurement contracts and\nassistance instruments below.\n8.2.3.2.2 DOD procurement contracts and assistance instruments\n8.298. Boeing is commissioned to perform R&D work funded through the RDT&E program\nelements by means of particular legal instruments. DOD procurement activities, including for\nRDT&E, are generally governed by three sets of U.S. Federal Government regulations: the Federal\nAcquisition Regulation (FAR) which applies to the entire U.S. federal government, including DOD\n(unless stated otherwise); the Defense Federal Acquisition Supplement; and the unique FAR\nsupplements for each of the Army, Air Force, Navy and Marine Corps, Defense Logistics Agency ,\nand U .S. Special Operations Command. 1401 The original panel discussed the legal framework\ngoverning the various legal instruments through which DOD commissions R&D under the RDT&E\nprogram elements.1402 We note several salient aspects of that discussion.\na. First, DOD has authority to fund certain kinds of R&D by means of specific legal\ninstruments; namely \"contracts\", \"cooperative agreements \", \"grants\" and \"technology\ninvestment agreements \".1403 The latter three (cooperative ag reements, grants and\ntechnology investment agreements) are defined as \"assistance and other\nnonprocurement instruments \".1404 In the original proceeding, these three legal\ninstruments were referred to collectively as \"assistance instruments\". We use the same\nterm to describe these three types of instruments in this proceeding. Assistance\ninstruments are distinct from \"contracts\", which we refer to in this Report as\n\"procurement contracts\".\nb. Second, U.S. procurement laws and regulations require that specific legal instruments be\nused in particular defined situations, and not otherwise. Accordingly, assistance\ninstruments are legal instruments used to provide \"assistance\" which is defined in the\nDOD Grant and Agreement Regulations as the \"transfer of a thing of va lue to a recipient\nto carry out a public purpose of support or stimulation authorized by a law of the United\nStates\".1405 Under assistance instruments, the recipient is required to contribute its own\nfunds to the R&D on a cost -shared basis.1406 Moreover, at least as concerns cooperative\nagreements, the U.S. Government is required to have substantial involvement in the\nwork performed, including collaboration, participation or intervention.1407\nc. A procurement contract, by contrast, is a legal instrument which \"reflects a relationship\nbetween the Federal Government and a State, a local government, or other recipient\nwhen the principal purpose of the instrument is to acquire property or services for the\n\n1400 In Section 7.3.1, we explain the RDT&E Program, the particular RDT&E program elements and the\nrelationship of the program elements challenged by the European Union to the DOD procurement contracts and\nassistance instruments. As explained in Section 7.3, the United States made a number of objections to the\ninclusion of various aspects of the DOD aeronautics R&D measures within the scope of this proceeding. Our\nrulings on those objections are summarized in Section 7.3.5.\n1401 M. Schwartz, Congressional Research Service, Defense Acquisitions: How DOD Acquires Weapon\nSystems and Recent Efforts to Reform the Process, (2 January 2013) (Schwartz Report), (Exhibit USA-115),\np. 2.\n1402 Panel Report, US – Large Civil Aircraft (2nd complaint), paras. 7.1140-7.1146.\n1403 Panel Report, US – Large Civil Aircraft (2nd complaint), paras. 7.1140 and 7.1141 (referring to\nUnited States Code, Title 10, section 2358).\n1404 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1142 (referring to the DOD Grant and\nAgreement Regulations, United States Code of Federal Regulations, Title 32, sub-chapter c, part 21).\n1405 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1142 (referring to the United States\nCode of Federal Regulations, Title 32, section 21.615). Consistent with the character of \"assistance\ninstruments\" as legal vehicles through which a thing of value is transferred to a recipient for the purpose of\n\"support or stimulation\", the payment of a \"fee\" or \"profit\" is prohibited under assistance instruments. (Panel\nReport, US – Large Civil Aircraft (2nd complaint), para. 7.1152 (referring to sections 34.18 and 37.230)).\n1406 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1149. See also Appellate Body\nReport, US – Large Civil Aircraft (2nd complaint), para. 605 (explaining that the assistance instruments\nreviewed by the Appellate Body committed Boeing to contribute financial resources, although in all cases, DOD\nfunded at least 50% of the costs).\n1407 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 606 (referring to\nUnited States' response to Panel question No. 20(a), para. 45 in the original proceeding).\n\ndirect benefit or use of the Federal Government \".1408 Consistent with th e character of\nprocurement contracts as the legal vehicles through which the U.S. Government acquires\nproperty or services for its direct benefit or use, the DOD Grant and Agreement\nRegulations mandate that a procurement contract, rather than an assistance instrument,\nbe used in all cases where a fee or profit is to be paid or the instrument is to be used to\ncarry out a program me where a fee or profit is necessary to achieving program me\nobjectives.1409\n8.299. Given that our evaluations of the subsidy issues presented by the European Union's\nDOD-related subsidy claims involve a consideration of the RDT&E program elements through which\nthe procurement contracts and assistance instruments are funded, we set forth in the following\nsections relevant information concerning the nature of R&D commissioned under the various\nRDT&E program elements, and the processes through which that R&D is commissioned from\ncontractors like Boeing.1410\n8.2.3.2.3 R&D conducted under the RDT&E program elements\n8.300. The R&D commissioned by DOD through the RDT&E P rogram falls into two general\ncategories. The first consists of R&D commissioned under program elements that fund basic\nresearch, applied research and advanced technology development to meet a variety of current and\nfuture military needs. The second compri ses R&D commissioned under program elements that\nfund development of technologies for specific new weapon systems or components.1411\n8.301. Program elements in the former category are referred to as science and technology (S&T)\nprogram elements and correspond to th e program elements identified by the European Union and\nits experts as \"general aircraft\" program elements. The S&T/general aircraft category consists of\nbasic research to gain knowledge and understanding, applied research to identify technologies that\nthe knowledge might enable, and advanced technology development to evaluate how the\ntechnologies work together and perform in a relevant environment. 1412 As the United States\nexplains, the key link among these program elements is that DOD is \"seeking knowledge o r\ngeneralized technology options in support of current and future military missions – they do not\nhave the objective of purchasing a particular {weapon} system\".1413 Fourteen of the 23 original\nRDT&E program elements challenged by the European Union are S&T/g eneral aircraft program\n\n1408 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1142 (referring to the United States\nCode of Federal Regulations, Title 32, section 21.670). See also United States' response to Panel question\nNo. 69, para. 42; and United States Code of Federal Regulations, Title 48, section 2.101, (Exhibit USA-452).\n1409 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1152 (referring to section 22.205 of\nthe DOD Grant and Agreement Regulations).\n1410 The relationship between the RDT&E program elements and the legal instruments through which\nfunding under the program elements is provided to contractors such as Boeing is discussed further in\nparas. 8.335 and 8.336 below.\n1411 The parties recognize this basic distinction in categories of RDT&E program elements in their\nsubmissions, although they use different terminology for each category. (See United States' first written\nsubmission, para. 316; and CRA Report, (Exhibit EU-29), p. 5). See also Panel Report, US – Large Civil Aircraft\n(2nd complaint), para. 7.1114 (where the European Communities applied the same distinction between \"general\naircraft\" and \"military aircraft\" RDT&E program elements).\n1412 United States' first written submission, para. 316. Research conducted under S&T program elements\ncorresponds generally to technology readiness levels 1 through 6 on NASA's scale. As explained by the original\npanel, NASA categorizes technologies according to a system reflecting the level of maturity (or technology\nreadiness level), ranging from the highest risk, lowest maturity technology (TRL 1) to the lowest risk, highest\nmaturity technology (TRL 9). NASA's research efforts focus on the development of higher risk technologies up\nto TRL 6, which is prototype demonstration. (See Panel Report, US – Large Civil Aircraft (2nd complaint),\npara. 7.1748).\n1413 United States' first written submission, para. 316. \"Effort under S&T contracts typically revolves\naround researching a specific scientific or engineering question, developing technology on the basis of the\nresulting knowledge or understanding, or testing application of a particular principle in a particular\nenvironment. The deliverable will typically be a report or a briefing on the results of the work, or in some\ninstances a test article or technology prototype for further evaluation by DOD. The objective is not to acquire a\n{weapon} system, but to study the problem presented so the knowledge gained in doing so can be used to\nsolve broad problems or provide technology options for future systems acquisition.\" (United States' first written\nsubmission, para. 320).\n\nelements.1414 In addition, measures funded under a further three \"additional\" program elements\nthat are within the scope of this proceeding are S&T/general aircraft program elements.1415\n8.302. S&T/general aircraft research activities may be contrasted with R&D funded under program\nelements that develop specific new weapon systems or components. 1416 R&D directed specifically\nto the development of particular weapon systems or components is funded through systems\nacquisition program elements, which c orrespond to the \"military aircraft \" category of program\nelements identified by the European Union and its experts. Nine of the 23 original RDT&E program\nelements are systems acquisition/military aircraft program elements.1417\n8.2.3.2.4 How R&D is commissioned under the RDT&E program elements\n8.303. The processes by which DOD procures the RDT&E services (which are the necessary\nprecursor to the larger -scale production and deployment of the weapons systems that DOD\nultimately acquires) are complex. For present purposes, we pro vide an outline of what we regard\nas the basic but important aspects of that process in order to aid in our characterization of the\nDOD aeronautics R&D measures. The procurement process varies in general terms for\nS&T/ general aircraft program elements, as compared to systems acquisition/military aircraft\nprogram elements. We begin by outlining the basic features of the procurement process for\nS&T/general aircraft program elements.\n8.304. S&T/general aircraft procurement is managed by the research organizations wi thin DOD,\nsuch as the Air Force Research Laboratory (AFRL) for the U .S. Air Force and the Office of Naval\nResearch for the U .S. Navy. The United States describes the procurement process using the\nexample of Air Force S&T procurement managed by AFRL and sta tes that a similar process occurs\nwith respect to all DOD research organizations.1418\n8.305. First, AFRL obtains information on \"user needs\" and \"technology opportunities\". User needs\nare identified based on sources such as \"Defense Planning Guidance\", issued by the U.S. Secretary\nof Defense, along with various other strategic documents identifying future missions and\ncapabilities that war fighter s will need in order to accomplish those missions. In addition, AFRL\nmanagers are expected to be aware of the various role s the Air Force performs in support of\nnational defense. AFRL obtains information on technology opportunities by instructing its officials\nto remain up -to-date on the state of the art in all of the fields relevant to the Air Force, such as\n\n1414 (a) Defense Research Sciences (PE 0601102F); (b) Materials (PE 0602102F); (c) Aerospace Flight\nDynamics/Aerospace Vehicle Technologies (PE 0602201F); (d) Aerospace Propulsion (PE 0602203F); (e)\nAerospace Avionics/Aerospace Sensors (PE 0602204F); (f) Dual-Use Science & Technology (PE 0602805F); (g)\nAdvanced Materials for Weapons Systems (PE 0603112F); (h) Flight Vehicle Technology (PE 0603025F); (i)\nAerospace Structures/Aerospace Technology Dev/Demo (PE 0603211F); (j) Aerospace Propulsion and Power\nTechnology (PE 0603216F); (k) Flight Vehicle Technology Integration (PE 0603245F); (l) RDT&E for Aging\nAircraft (PE 0605011F); (m) Manufacturing Technology Industrial Preparedness – Air Force\n(PE 0603680F/0708011F); and (n) Manufacturing Technology Industrial Preparedness – Navy (PE 0708011N).\n1415 The \"additional\" RDT&E program elements that are S&T/general aircraft program elements and fund\nmeasures that are within the scope of this proceeding are: (a) Materials and Biological Technology\n(PE 0602715E); (b) Sustainment Science & Technology (PE 0603199F); and (c) Aviation Safety Technologies\n(PE 0606301D8Z).\n1416 \"Weapon systems\" refers to technically complex items such as aircraft, missiles, ships, and tanks\nthat DOD purchases and includes the subsystems, logistical support and software needed to operate and\nsupport them.\n1417 The following original RDT&E program elements are systems acquisition/military aircraft program\nelements: (a) V-22/CV-22 (PE 0604262N/0401318F); (b) F/A-18 Squadrons (PE 0204136N); (c) Joint Strike\nFighter (PE 0603800F/0603800N/0603800E/0604800F/0604800N); (d) C-17 (PE 0401130F/0604231F); (e)\nF-22 (PE 0604239F); (f) B-2 Advanced Technology Bomber (PE 0604240F); (g) Comanche (PE 0604223A);\n(h) A-6 Squadrons (PE 0204134N); and (i) AV-8B Aircraft (PE 0604214N). Although the European Union's\npanel request identified an additional four systems acquisition/military aircraft RDT&E program elements:\nAWACS (PE 0207417F); KC-46, Next Generation Aerial Refueling Aircraft (PE 0605221F); Multi-Mission\nMaritime Aircraft (P-8A) (PE 0605500N); and Long Range Strike Bomber (PE 060415F). The Panel rules in\nSection 7.3.3 that the measures in question are outside the scope of the proceeding, or that the Panel is not\nsatisfied of the existence of measures falling in the scope of the European Union's claims as identified by the\nEuropean Union.\n1418 United States' first written submission, para. 319.\n\naerospace system s, air vehicles, space vehicles, directed energy devices, information systems,\nmaterials and manufacturing processes, munitions, and sensors.1419\n8.306. Based on the inputs as to user needs and technology opportunities, AFRL issues a Program\nObjective Memorandum ea ch year, which forms the basis for an annual Corporate Investment\nStrategy, setting the balance between basic research, applied research and advanced technology\ndevelopment, and levels of S&T/general aircraft funding for different technology areas. Within this\nframework, AFRL decides for each S&T objective whether to conduct the research in -house or to\ncommission it from external sources such as industry or academia. In the latter case, the\nacquisition strategy depends on whether the objective of the resear ch is within the scope of an\nexisting effort, a follow -on effort, or requires a new effort. That decision guides the choice of an\nacquisition strategy.1420\n8.307. ARFL may then commission research by issuing a Broad Agency Announcement which sets\nout a research objective and invites white papers on how to achieve that goal. It may also issue a\nan RFP. AFRL evaluates all proposals based on, at minimum, technological merit, contribution to\nagency mission, cost and realism, and selects the offer that represents the best combination of all\nof them. A similar process occurs for all DOD research organizations.1421\n8.308. Systems acquisition/military aircraft program elements involve a different process for\nprocuring the R&D required to develop a specific weapon system or component. F rom concept to\ndeployment, a weapon system goes through a three -step process of: (a) identifying the required\nweapon system ; (b) establishing a budget ; and (c) acquiring the system. 1422 These three\nprocesses, which are intended to work in concert, are as follows1423:\na. the Joint Capabilities Integration and Development System (JCIDS), for identifying\nrequirements. The process involves the identification, assessment and prioritization of\ncapabilities the military requires to fulfil the military 's mission (sometimes referred to as\na requirements generation process). The JCIDS process analyses the military 's capability\nneeds and gaps, and recommends both materiel and non -materiel (e.g. a change in\ntraining or strategy) ways to address them1424;\nb. the Planning, Programming, Budgeting, and Execution System (PBBES), for allocating\nresources and budgeting. During the planning phase of PBBES, the needs of combatant\ncommands are analysed and the findings are published in the Joint Programming\nGuidance document, which guides the DO D components' efforts to propose acquisition\nprogrammes. The programming and budgeting phases occur concurrently1425; and\n\n1419 United States' first written submission, para. 318.\n1420 United States' first written submission, para. 319.\n1421 The United States asserts that a similar arrangement is in place for all other DOD research\norganizations beyond the AFRL. (United States' first written submission, para. 319).\n1422 Schwartz Report, (Exhibit USA-115), pp. 2 and 3.\n1423 A 2012 Instruction of the Chairman of the Joint Chiefs of Staff explains that together, the three\nprocesses provide a means to determine, validate and prioritize capability requirements and associated\ncapability gaps and risks, and then fund, develop and field non-materiel and materiel capability solutions for\nthe warfighter in a timely manner. (Chairman of the Joint Chiefs of Staff Instruction, \"Joint Capabilities\nIntegration and Development System\", 3170.01, 10 January 2012, (Exhibit USA-114), p. A-5).\n1424 The JCIDS is managed by the Joint Staff and military services. If a materiel solution such as a\nweapon system is considered, it must be justified on the basis of an initial capabilities document which must be\napproved by the Joint Requirements Oversight Council, the organization responsible for identifying and\nprioritizing warfighter requirements. (Schwartz Report, (Exhibit USA-115), pp. 3 and 4).\n1425 During these phases, Program Objective Memoranda (which outline the anticipated missions and\nobjectives of the proposed weapon programmes and anticipated budget requirements) are submitted to\npropose these programmes. These memoranda are reviewed and, as deemed appropriate, integrated into an\noverall Defense programme. Budgets are reviewed and program budget decisions are issued. Simultaneously\nwith the programme and budget reviews, programmes are evaluated and measured against established\nperformance metrics, including the rates of funding obligations and expenditures. (Schwartz Report, (Exhibit\nUSA-115), p. 5).\n\nc. the Defense Acquisition System (DAS), for developing and/or buying the item . The\nDefense Acquisition System is the management process by which DOD develops and\nbuys weapon and other systems.1426\n8.309. There are five major phases of the DAS process: (a) materiel solution analysis; (b)\ntechnology development; (c) engineering and manufacturing development; (d) production and\ndeployment; and (e) operations and support.1427\n8.310. The Materiel Solution Analysis phase involves assessment of potential materiel solutions\nfor a military need, conduct of an \"Analysis of Alternatives \" to explore alternative methods of\nmeeting the identified requirement and creation of a \"Technology Development Strategy \". The\nMaterial Solution Analysis phase ends when the Analysis of Alternatives is completed, the lead\ncomponent recommends materiel solutions identified by the initial capabilities document , and the\nprogramme meets criteria for the DAS milestones. \"Milestones\" are used by DAS as a way to\noversee and manage acquisition program mes. There are three formal milestones for determining\nwhether an acquisition is ready to move forward. At each milestone, a program me must meet\nspecific statutory and regulatory requirements before it can proceed to the next phase of the\nacquisition process. The milestones are: A (technology development); B (engineering and\nmanufacturing development); and C (production and deployment):\nMilestone A Techno logy Development phase. During this phase, technologies are\ndeveloped, matured and tested. In order to be considered sufficiently mature for\nproduct development, technologies must be tested and demonstrated in either a\n\"relevant\" or \"operational\" environment. In this phase, a \"Capability Development\nDocument\", which details the operational performance parameters for the anticipated\nsystem is developed. In addition, a \"Reliability, Availability and Maintainability \"\nstrategy is developed. 1428 Competitive prototy ping occurs in this phase. The\nTechnology Development phase is complete when, among other things, an affordable\nprogramme (or increment) is identified and the technology and manufacturing\nprocesses have been demonstrated in a relevant environment.\nMilestone B Engineering and Manufacturing Development (EMD) phase: To enter this\nphase, the acquisition program must have mature technology, approved requirements\nand full funding. 1429 In addition, the \"Milestone Decision Authority \" must have\napproved the acquisition strategy, the acquisition program me baseline (which details\nthe performance, schedule and cost goals of the program me) and the type of contract\nthat will be used to acquire the system. 1430 It is at this stage that DOD conducts a\nprocess to choose a contracto r to integrate the technologies and capabilities into a\nsingle system in preparation for the manufacturing process. 1431 A Program Office will\nbe created to oversee the execution of the contract and with responsibility to ensure\nthat the contractor completes t he work in the appropriate amount of time. EMD\nconsists of two sub -stages: (a) system integration, and (b) system demonstration.\nDuring system integration, various sub -systems are integrated into one system and a\ndevelopment model or prototype is produced. During system demonstration, the\n\n1426 DAS is managed by the Under Secretary for Acquisition, Technology, and Logistics. Each acquisition\nprogramme for a weapon system is managed by an Acquisition Program Office, which is headed by a Program\nManager, and who is usually supported by a staff that can include engineers, logisticians, contracting officer\nand specialists, budget and financial managers, and test and evaluation personnel. The line of reporting is such\nthat Program Managers usually report to Program Executive Officers, who themselves report to a component\nacquisition executive, who generally reports to the Under Secretary of Defense for Acquisition, Technology, and\nLogistics (who also serves as the Defense Acquisition Executive). (Schwartz Report, (Exhibit USA-115), p. 6).\n1427 Chairman of the Joint Chiefs of Staff Instruction, \"Joint Capabilities Integration and Development\nSystem\", 3170.01, 10 January 2012, (Exhibit USA-114), p. A-6.\n1428 Schwartz Report, (Exhibit USA-115), p. 8. \"Reliability, Availability and Maintainability\" is a term of\nart encompassing, respectively, the probability of a system performing a specific function under stated\nconditions for a specified time, the time a system is operable and able to be committed to a mission, and the\nextent to which a system can be kept in or restored to a specific operating condition.\n1429 Schwartz Report, (Exhibit USA-115), p. 9.\n1430 Schwartz Report, (Exhibit USA-115), p. 9.\n1431 United States' first written submission, para. 324. The United States explains that some of the effort\nin the EMD phase will involve development activities, particularly with regard to integrating multiple\ntechnologies into a functioning whole and devising a production process that ensures the necessary quality at\nan affordable price.\n\nmodel or prototype enters into developmental testing to demonstrate its military\nusefulness, and that the system can be supported through manufacturing processes.\nMuch of the testing and evaluation of the system occurs in this sub -stage.1432 The\nEMD phase is complete when, among other things, the system meets performance\nrequirements as demonstrated by a model in an intended environment, and when\nmanufacturing processes have been demonstrated.1433\nMilestone C Production and Deployment phase: The Production and Deployment phase\nis the phase in which a weapon system is produced and deployed. To enter this phase,\na program must have: (a) passed developmental testing and operational assessment,\n(b) demonstrated that it is interoperab le with other relevant systems and can be\nsupported operationally, (c) shown that it is affordable, (d) be fully funded, and (e)\nhad the Milestone Decision Authority authorize the beginning of low -rate initial\nproduction.1434 Once operational test and evaluation is complete, and adequate control\nover manufacturing processes has been demonstrated, a program me can, with the\napproval of the Milestone Decision Authority, go into full-rate production.1435\n8.2.3.2.5 Legal restrictions on the dissemination of military technologies and data\n8.311. Information generated by work performed under DOD procurement contracts and\nassistance instruments is subject to a number of legal restrictions such as export -controls and\nclassification.\n8.312. The export control regime comprises the International Tra ffic in Arms Regulations (ITAR),\nwhich govern military items and technologies, and the Export Administration Regulations (EAR)\nwhich govern other items and technologies. The ITAR implement the Arms Export Control Act\n(AECA).1436\n8.313. Section 2778(a) of the AECA authorizes the U.S. President to control the import and export\nof defense articles and defense services and to provide foreign policy guidance to U .S. persons\ninvolved in the import and export of such articles and services. 1437 The AECA authorizes the\nPresident to designate items as defense articles and defense services and to promulgate\nregulations for the import and export of such articles and services. The items so designated\nconstitute the United States Munitions List. The AECA defines \"defense items\" as \"defense articles,\ndefense services and related technical data \". The lengthy definitions of \"defense articles \" and\n\"defense services \" set forth in the AECA in general terms cover weapons, munitions, or other\nimplements of war and the services used in making sales of such articles.1438\n8.314. In other words, information controlled under the ITAR generally covers technical data\nrelated to weapons, munitions, or other implements of war or the services used in making sales of\nsuch articles. 1439 The EAR govern other items and technologies.1440 The rationale for EAR is\n\n1432 Schwartz Report, (Exhibit USA-115), p. 10. To move from system integration to system\ndemonstration, the \"Milestone Decision Authority\" must complete a post-preliminary design review assessment\n(reviewing the extent to which the system meets requirements) and a post-critical design review assessment\n(reviewing whether the overall design is mature).\n1433 Schwartz Report, (Exhibit USA-115), p. 10.\n1434 Low-rate initial production is intended to both prepare manufacturing and quality control processes\nfor a higher rate of production and provide test models for operational test and evaluation. (Schwartz Report,\n(Exhibit USA-115), p. 10).\n1435 Schwartz Report, (Exhibit USA-115), p. 10.\n1436 United States Code, Title 22, sections 2751-2799aa-2.\n1437 The rationale for export controls under the ITAR is expressed in section 2778(a)(2) of the AECA:\nDecisions on issuing export licences under this section shall take into account\nwhether the export of an article would contribute to an arms race, aid in the\ndevelopment of weapons of mass destructions {WMD}, support international\nterrorism, increase the possibility of outbreak or escalation of conflict, or prejudice\nthe development of bilateral or multilateral arms control or non -proliferation\nagreements or other arrangements.\n1438 Arms Export Control Act, United States Code, Title 22, section 2794, (Exhibit USA-477), paras. 3\nand 4.\n1439 United States' response to Panel question No. 86, para. 146.\n1440 Specifically, EAR, part 730.3 provides that the EAR control:\n\ngenerally to serve the national security, foreign policy, non -proliferation of weapons of mass\ndestruction, and other interests of the United States. 1441 In the original proceeding, the panel\naccepted that, although th e scope and coverage of the ITAR was not entirely clear, the ITAR\nrestrict Boeing's ability to use certain R&D performed for DOD towards its civil aircraft, that Boeing\ncomplies with the ITAR in general, and took steps to ensure that the 787 would be \"ITAR-free\".1442\n8.315. Another less prevalent but more restrictive limitation is the classification of information\nunder Executive Order 12958. 1443 Certain types of information, including information concerning\nmilitary plans, weapon systems or operations, and scientific, technological or economic matters\nrelated to the national security, can be subjected to three levels of classification ( \"Top Secret\",\n\"Secret\" and \"Confidential\") based on the harm that could reasonably be expected to result from\nunauthorized disclosure.1444 Classified information (as well as information derived from classified\ninformation) cannot be shared with persons lacking the requisite security clearance and a need to\nuse that information for government purposes. Executive Order 12958 also provides for s pecial\naccess program mes for specific classes of classified information that impose safeguarding and\naccess requirements that exceed those normally required for information at the same classification\nlevel, in certain defined situations.1445\n8.316. Pursuant to its a uthority to establish policies for R&D for all DOD program elements, DOD\nadopted Instruction 5230.24 to establish a standard framework and markings for managing,\nsharing, safeguarding, and disseminating technical documents. 1446 These different \"distribution\nstatements\" indicate the classes of persons permitted to access the information contained in a\ndocument.1447\n8.2.3.3 Whether there is a financial contribution\n8.2.3.3.1 Introduction\n8.317. In Section 7.3 of this Report, we make rulings regarding certain DO D aeronautics R&D\nmeasures that were identified by the European Union in its panel request, which the United States\nchallenged as being outside the scope of this proceeding. In Section 7.8 above, we set forth the\ncategories of DOD aeronautics R&D measures that are properly before the Panel based on the\nmeasures identified by the European Union in its panel request, and the outcomes of the Panel's\nrulings regarding the various scope-related challenges brought by the United States .1448 These are\n\n{A}ny item warranting control that is not exclusively controlled for export,\nreexport, or transfer (in -country) by another agency of the U.S. Government or\notherwise excluded from being subject to the EAR pursuant to § 734.3(b) of the\nEAR.\nThus, items subject to the EAR include purely civilian items, items with both civil and military, terrorism or\npotential WMD-related applications, and items that are exclusively used for military applications but that do not\nwarrant control under the ITAR.\n1441 Export Administration Regulations, part 730, (Exhibit USA-482), para. 730.6.\n1442 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1160.\n1443 Executive Order 12958, \"Classified National Security information\", 17 April 1995, (Exhibit USA-483).\n1444 Executive Order 12958, section 1.3(a) provides for a \"Top Secret\" classification for exceptionally\ngrave damage to the national security that the original classification authority is able to identify or describe, a\n\"Secret\" classification for serious damage to the national security that the original classification authority is\nable to identify or describe, and a \"Confidential\" classification for damage to the national security that the\noriginal classification authority is able to identify or describe.\n1445 Executive Order 12958, \"Classified National Security information\", 17 April 1995, (Exhibit USA-483),\nsections 4.1(h) and 4.4. A special access programme applied to the Long-Range Strike Bomber program\nelements after 2011. (See Long Range Strike Bomber Budgets for FY 2007-FY 2013 (PE 0604015F), (Exhibit\nEU-78), frame 37/47, p. 1).\n1446 DOD Instruction, \"Distribution Statements on Technical Documents\", 5230.24, 23 August 2012,\n(Exhibit USA-485), p. 1.\n1447 \"Distribution A\" statements are for materials available to the general public, \"Distribution B\"\nstatements for information restricted to U.S. Government agencies, \"Distribution C\" for information restricted\nto U.S. Government agencies and contractors, \"Distribution D\" for information restricted to DOD and DOD\ncontractors, and \"Distribution E\" for information restricted to DOD. \"Distribution F\" is a residual category\ncovering non-standard access restrictions, allowing the DOD entity that sponsored the work that generated the\ninformation to specify permitted uses of information. (DOD Instruction, \"Distribution Statements on Technical\nDocuments\", 5230.24, 23 August 2012, (Exhibit USA-485), pp. 19 and 27).\n1448 See para. 7.548 above.\n\nthe \"DOD aeronautics R&D measures \" to which we refer in our subsidy analysis in this and\nsubsequent sections of the Report.\n8.318. We first consider whether: (a) the post-2006 assistance instruments ; and (b) both\npre-2007 and post-2006 procurement contracts, involve financial contributions within the meaning\nof Article 1.1(a)(1) of the SCM Agreement. 1449 We then consider whether the financial\ncontributions so identified confer a benefit , within the meaning of Article 1.1(b) of the SCM\nAgreement.\n8.2.3.3.2 Main arguments of the parties and third parties\n8.319. The European Union submits that the parties appear to be in agreement that the DOD\nassistance instruments (both pre-2007 and post-2006) are financial contributions.1450 Moreover, it\nconsiders that the characterization of transactions between DOD and Boeing under U .S. law as\neither assistance instruments or procurement contracts does not change the fact that all of the\ntransactions are \"akin to a species of joint venture \". Both DOD assistance instruments and DOD\nprocurement contracts involve more than simply payments in exchange for research.\n8.320. The European Union argues that DOD procurement contracts funded through \"general\nresearch\" program elements and DOD procurement contracts funded through \"military aircraft \"\nprogram e lements, like the DOD assistance instruments before the original panel, constitute\ntransactions that are \"akin to a species of joint venture \", which are \"analogous to a type of equity\ninfusion\", and therefore constitute financial contribution s under Articl e 1.1(a)(1)(i) of the SCM\nAgreement. In particular, the European Union considers that payments under the DOD\nprocurement contracts are a direct transfer of funds under Article 1.1(a)(1)(i), while the provision\nof access to facilities, equipment, and employees constitutes a government provision of goods and\nservices other than general infrastructure within the meaning of Article 1.1(a) (1)(iii) of the SCM\nAgreement.\n8.321. Like the DOD assistance instruments and NASA procurement contracts before the original\npanel, under the DOD procurement contracts: (a) both parties commit resources; (b) the parties\nshare the fruits of their research; and (c) the subjects to be researched are often determined\ncollaboratively. The European Union submits that the Appellate Body relie d on these three primary\ncharacteristics to find that the measures were \"akin to a species of joint venture \". Moreover, in\nfinding that the funds were \"analogous\" to an equity infusion under Article 1.1(a)(1)(i) of the SCM\nAgreement, the European Union sub mits that the Appellate Body underscored the following four\ncharacteristics: (a) funding is provided in expectation of some kind of return; (b) there is no\ncertainty that research will be successful; (c) the funders' risks are limited to the amount of money\nthey commit and the opportunity cost of other support they provide; and (d) the funder s also\ncontribute to the project by providing access to facilities, equipment, and employees , as some\nequity investors would also do.1451 The European Union considers that all of the DOD procurement\ncontracts feature all of these characteristics.\n8.322. In respect of procurement contracts for systems acquisitions under the \"military aircraft\"\nprogram elements, the European Union rejects the United States ' argument that the procur ement\ncontracts are in some cases a \"purchase of goods \". The European Union argues that there is a\ndistinction between \"RDT&E\" appropriation and \"procurement\" appropriation, where the latter is\nthe category resulting in the purchase of goods. The European Union clarifies that it does not\nchallenge procurement appropriations. It also notes that the United States itself disagreed with the\nargument that RDT&E appropriations could be purchases of goods in the original proceedings.1452\n8.323. The European Union submits that the United States has failed to demonstrate that, even if\ncertain of the DOD procurement contracts were considered to be \"purchases of services \",\n\n1449 See para. 8.289 for an explanation of why we include within our evaluation of the post-2006 DOD\naeronautics R&D measures in this Section 8.2.3 an evaluation of whether the pre-2007 procurement contracts\nthat are within the scope of this proceeding involve specific subsidies to Boeing.\n1450 European Union's second written submission, para. 441 (referring to United States' first written\nsubmission, paras. 280 and 383).\n1451 European Union's first written submission, paras. 363-369; second written submission,\nparas. 442-445 and 452-455; and response to Panel question No. 17, paras. 115-119.\n1452 European Union's second written submission, paras. 459-462.\n\npurchases of services are excluded from the scope of Article 1.1(a)(1). The United States has\nfailed to demonstrate on the basis of a proper Vienna Convention analysis of Article 1.1(a)(1) that\npurchases of services are excluded. In light of the Appellate Body 's decision to declare the panel 's\ninterpretation of this issue \"moot and of no legal effect \", the United States has no basis to argue\nthat the Appellate Body would have agreed with the panel 's reasoning as to why purchases of\nservices are excluded from the scope of Article 1.1(a)(1).1453\n8.324. The European Union also argues, in the alternative, that \"the transfer to Boeing of patent\nand other intellectual property rights in the technologies and data developed under the NASA and\nDOD aeronautics R&D programmes additionally constitutes a provision of 'goods … other than\ngeneral infrastructure ' within the meaning of Art icle 1.1(a)(1)(iii) of the SCM Agreement \". The\nEuropean Union does not ask the Panel to consider this \"alternative\" conception of the financial\ncontribution \"unless it rejects the European Union 's primary contentions, with respect to the\ncharacterisation of the challenged aeronautics R&D measures\".1454\n8.325. The United States does not dispute that, consistent with the findings of the Appellate Body\nwith regard to the pre -2007 DOD assistance instruments, the DOD assistance instruments involve\nfinancial contributions in the form of a collaborative relationship \"akin to a species of joint venture\"\nhaving \"characteristics analogous to equity infusions \".1455 It agrees that the DOD assistance\ninstruments \"operate basically the same today as they did in the period covered by t he original\npanel and Appellate Body findings\".1456\n8.326. However, the United States also makes a number of factual assertions regarding the DOD\nassistance instruments. It asserts that, of the 50 assistance instruments between Boeing and DOD\nat issue in the origina l proceeding, DOD only made additional payments under six in the\nFY 2007-FY 2012 period, for a total of USD [***].1457 Moreover, these assistance instruments did\nnot provide for use of DOD facilities. It states that DOD has only entered into three post -2006\nassistance instruments with Boeing funded through the original 23 RDT&E program elements, and\nsubmits evidence that these provided a total of USD [***].1458 The United States also submits\nevidence that Boeing entered into three post -2006 assistance instruments which received funding\nthrough the \"additional\" RDT&E program elements for a total value of USD [***] in FY 2007-FY\n2012.\n8.327. As to DOD procurement contracts , the United States argues that the European Union has\nfailed to establish that the payments and access to facilities that DOD provided to Boeing through\nany of the DOD procurement contracts identified in this proceeding constitute financial\ncontributions within the meaning of Article 1.1(a)(1) of the SCM Agreement. The European Union's\nanalysis addresses only whether the DOD procurement contracts can possibly be characterized as\njoint ventures, without also examining whether they would be more appropriately characterized as\npurchases of services. The United States considers that, following the guidance fro m the Appellate\nBody, a panel should take account of all of the relevant characteristics of the measure, and the\nfeatures which are most central to the measure itself. As the Appellate Body acknowledged in\nCanada – Renewable Energy / Canada – Feed-in Tarif f Program , one transaction may have\nmultiple aspects and a panel's analysis must take those complexities into account.1459 Thus, even if\nthe European Union were correct that the DOD procurement contracts had characteristics that\n\n1453 European Union's second written submission, paras. 450, 451, and 463.\n1454 European Union's response to Panel question No. 32, para. 197. The European Union explains that\nthis is an alternative manner of bringing the aeronautics R&D contracts within the scope of Article 1.1(a)(1) of\nthe SCM Agreement.\n1455 United States' first written submission, paras. 279 and 280; second written submission, para. 257.\n1456 United States' second written submission, para. 257.\n1457 United States' first written submission, para. 278. Funds Obligated to Air Force Agreements with\nBoeing for FY 2007-FY 2012, by program element, (Exhibit USA-108) (BCI).\n1458 These assistance instruments are: N001-08-2-C009, FA8650-08-2-3834, and FA8650-11-2-2138.\nThe United States says that the only access to U.S. Government facilities involved was the use of NASA\nLangley's 14x22 foot V/STOL wind tunnel in connection with FA8650-08-2-3834. (See United States' first\nwritten submission, para. 274).\n1459 United States' second written submission, para. 371 (referring to Appellate Body Report, US – Large\nCivil Aircraft (2nd complaint), para. 586).\n\nwere \"akin to a joint venture \", the Panel would still need to weigh the relative merits of each\npossible characterization, which the European Union's arguments fail to do.1460\n8.328. The United States distinguishes between two types of DOD procurement contracts: those\nfunded under S&T program elements (which the European Union refers to as \"general research\"\nprogram elements); and those funded under \"systems acquisition\" program elements (which the\nEuropean Union refers to as \"military aircraft\" program elements). In both cases, the United States\nsubmits that the R&D has a military objective and that any potential civil uses are not in\nthemselves an objective of the procurement contracts. 1461 The United States argues that the\nEuropean Union fails to \"thoroughly scrutinize the measure \" in order to ide ntify all relevant\ncharacteristics of the DOD procurement contracts so as to establish the existence of a financial\ncontribution. Thus, it submits that the European Union has failed to demonstrate that any of the\nDOD procurement contracts have the same characteristics as the NASA procurement contracts and\nDOD assistance instruments addressed by the original panel.1462\n8.329. Taking into account the operation of the DOD procurement contracts under law, their\nparticular purpose, and the fact that DOD's primary contrib ution consists of payments (as\nprovision of equipment and employees is either outside the Panel 's terms of reference, or is\notherwise \"minimal or non -existent\" and \"rarely\" made available), the United States argues that\nthe DOD procurement contracts are no t \"akin to a species of joint venture \", but rather, are either\npurchases of research services to assist DOD in developing technologies to be available for\nincorporation into products and processes to meet military needs, or in certain cases, purchase s of\ngoods. Specifically, the United States contends that the DOD procurement contracts funded under\n\"general research \" program elements and those \"for improvements and upgrades under the\nmilitary aircraft \" program elements are purchases of services. Otherwise, DOD procurement\ncontracts that are specifically for systems acquisitions under the \"military aircraft\" program\nelements are purchases of goods, under Article 1.1(a)(1)(iii) of the SCM Agreement.1463\n8.330. Regarding the procurement contracts that it considers are p roperly characterized as\npurchases of services, the United States argues that the measures do not involve financial\ncontributions under any of the subparagraphs of Article 1.1(a)(1) of the SCM Agreement. While the\nAppellate Body declared \"moot\" the original panel's interpretation of Article 1.1(a)(1)(i) of the SCM\nAgreement as excluding transactions properly characterized as \"purchases of services \", such a\ndeclaration means only that the panel should not have reached the issue. 1464 The original panel 's\nreasoning is nevertheless still compelling and persuasive. 1465 Accordingly, the procurement\ncontracts that are properly characterized as purchases of services do not fall within the definition\nof a financial contribution under Article 1.1(a)(1) of the SCM Agreement.1466\n\n1460 United States' second written submission, paras. 371 and 415.\n1461 United States' second written submission, para. 272. Moreover, the United States argues that\nprocurement contracts or assistance instruments are the only mechanisms through which DOD is legally\nauthorized to provide payments, facilities, or equipment to private entities, and therefore, contracts pursuant\nto these are the only evidence to determine whether DOD provides any payments or support to Boeing.\n(United States' second written submission, para. 274).\n1462 United States' first written submission, paras. 312, 317, 379-388, and 412-414. In addition, the\nUnited States argues that the European Union has failed to provide evidence on \"military aircraft\" program\nelements for the period after 2006, and that all evidence prior to that time \"consists exclusively of\ncross-references to the 2006 CRA Report\", which, according to the United States, \"relies almost entirely on the\nsubjective impressions of CRA staff at that time\". For one, the United States submits that the failure to include\nevidence cited in the CRA reports as exhibits to its submission in this dispute violates the Panel's Working\nProcedures. In addition, it submits that reliance on the CRA Report, amounts to \"an entirely ex post and\nspeculative approach to the facts\" that runs afoul of the \"ex ante, fact-based examination\" that is required by\nthe SCM Agreement. Thus, the United States argues \"{t}here is nothing identifying the relevant transactions,\nexplaining their terms or putting them in the context of the time at which the parties entered into the\nagreement\", thereby preventing the Panel from thoroughly scrutinizing the measures, and signifying that the\nEuropean Union failed to make a prima facie case in respect of these transactions. (United States' first written\nsubmission, para. 399 and fns 664 and 665 (citing Appellate Body Report, US – Large Civil Aircraft (2nd\ncomplaint), para. 706)). See also United States' response to Panel question No. 30, para. 133.\n1463 United States' first written submission, para. 309; second written submission, paras. 363, 388, and\n390.\n1464 United States' second written submission, para. 383.\n1465 United States' second written submission, paras. 383, 401, and 425. See also ibid. paras. 226-231.\n1466 United States' first written submission, paras. 310, 389, and 419-424. Moreover, the United States\nconsiders the logic of the Appellate Body in Canada – Renewable Energy / Canada – Feed-In Tariff Program, in\n\n8.331. Finally, the United States argues that the European Union has failed to establish that\nintellectual property rights accruing to Boeing pursuant to activities conducted under the\naeronautics R&D measures are financial contributions. First, as a factual matter, the United States\nargues that there is no transfer of intellectual property rights to Boeing under U.S. law, as the\npatent is the property of the person who made the invention. Second, intellectual property is not a\n\"good\" and therefore cannot be the subject of a financial contribution in the form of a government\nprovision of goods within the meaning of Article 1.1(a)(1)(iii) of the SCM Agreement. Third, any\nintellectual property rights developed as a result of work under a DOD procurement contract ar e\nan effect of the contract, not an independent financial contribution.1467\n8.332. Certain of the third parties (Brazil, Canada, Japan, and Korea) make arguments as to the\nappropriate scope of Article 1.1(a)(1) of the SCM Agreement in relation to the aeronautics R&D\nmeasures and transactions that may be characterized as involving purchases of services. These\narguments are summarized in our assessment of whether the post -2006 NASA aeronautics R&D\nmeasures involve financial contributions, in Section 8.2.2.3.1 above.\n8.2.3.3.3 Evaluation by the Panel\n8.333. The task before us is to determine whether the DOD aeronautics R&D measures involve\nfinancial contributions to Boeing within the meaning of Article 1.1(a)(1) of the SCM Agreement.\nThis requires us to deter mine whether the DOD aeronautics R&D measures can properly be\ncharacterized as involving any of the particular forms of financial contribution identified in\nsubparagraphs (i) through (iii) of Article 1.1(a)(1).\n8.334. In order to undertake that evaluation, we mus t first examine the measures to determine\ntheir relevant characteristics, and then consider whether, in light of a proper interpretation of\nArticle 1.1(a)(1), these measures, properly characterized, fall within the scope of that\nprovision.1468\n8.335. There are aspec ts of the DOD aeronautics R&D measures that it is important to bear in\nmind as part of this characterization exercise. First, the measures involve payments and the\naccess to DOD facilities (and for some of the measures, equipment, and employees). Second,\nthose payments and access to DOD facilities, equipment, and employees occur through particular\ncategories of legal instruments, namely \"assistance instruments \" and \"procurement contracts \".\nFinally, those legal instruments are funded through particular RDT&E program elements with\nparticular programmatic objectives that are reflected also in the objectives of the legal instruments\nfunded under them.\n8.336. In examining the relevant characteristics of the DOD aeronautics R&D measures, it is\nimportant to consider both the program elements as well as the legal instruments which are the\nmeans through which the research goals of those program elements are implemented, and which\nset forth the terms and conditions on which particular aspects of the research work are to be\nconducted. The program elements and legal instruments are integrally connected with each other.\nWhile the characterization exercise ultimately focuses on the assistance instruments and\nprocurement contracts as the direct legal means through which the paymen ts and access to\nfacilities (and in some cases equipment and employees) are provided, which is consistent with the\napproaches taken by the panel and the Appellate Body in the original proceeding, these legal\ninstruments cannot be characterized in the abstr act, but only in the context of the DOD RDT&E\nprogram elements through which they are funded.\n8.337. In Sections 8.2.3.2.3 and 8.2.3.2.4 of this Report, we describe the nature of R&D\nconducted under the tw o general categories of RDT&E program elements, namely, S&T/general\naircraft and systems acquisition/military aircraft program elements, and the differing procedures\nby which that R&D is commissioned. It is clear to us from that discussion, as well as from our\n\nconcluding that a purchase of goods under Article 1.1(a)(1)(iii) occurs \"when a 'government' … obtains\npossession … over a good by making a payment of some kind (monetary or otherwise)\" means that where a\ngovernment obtains entitlement to the supply of a service by making a payment of some kind, there would\nlikewise be a purchase of a service. (United States' first written submission, para. 390 (citing Appellate Body\nReports, Canada – Renewable Energy / Canada – Feed-In Tariff Program, para. 5.123)).\n1467 United States' second written submission, paras. 443-447.\n1468 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 589.\n\nreview of the RDT&E program budgets, procurement contracts, assistance instruments, and other\nevidence concerning the RDT&E program elements, that the acquisition of a weapon system is a\nlarge and complex engineering development project that occurs ov er many years, covers a\nmultitude of technical and bureaucratic processes and phases and involves a wide variety of\nparticipants.\n8.338. Systems acquisition/military aircraft RDT&E procurement commences with the JCIDS\nprocess, which is a \"requirements generation\" process for analysing the military 's capability needs\nand gaps. 1469 The materiel solutions are those that are determined to meet the military needs\nidentified in the JCIDS process. 1470 The technologies that are developed, matured, and tested are\nthose that will be integrated into the weapon system.1471 The integration of the technologies into a\nsingle weapon system and the development of manufacturing processes that occurs during the\nEMD phase are all necessary prerequisites to production and deployment of the wea pon\nsystem.1472 In other words, these long-term, highly complex research and engineering projects are\nultimately directed towards equipping the U .S. armed forces with highly specialized , technical\nitems, for which DOD is the only buyer in the United States an d the predominant buyer in the\nworld.\n8.339. Similarly, S&T/general aircraft RDT&E procurement, while not directed toward s technology\nsolutions for a specific weapon system, is directed towards the same objective of equipping the\nU.S. armed forces. With the exception of the explicitly \"dual-use\" RDT&E program elements, which\nwe discuss in paragraph 8.346 below, there is no reference in the objectives of the S&T/general\naircraft program elements to the goal of promoting the competitive ness of the U.S. aeronautics\nindustry. This is an important and fundamental distinction between the NASA aeronautics R&D\nprogrammes and the DOD RDT&E program elements before us.\n8.340. In addition, the DOD assistance instruments and procurement contracts should b e\nunderstood in the broader context of the function and activities of DOD. The mission of the DOD is\nto provide the military forces needed to deter war and protect the security of the United States.\nTitle 10 of the United States Code governs the organizati on, structure and operation of the U .S.\nArmed Forces. Several sections within the title charge the secretaries of the military departments\n(Army, Navy, and Air Force) with responsibility to \"equip\" the armed forces. 1473 DOD is the\nexclusive buyer of air weapo nry and weapons technology in the United States. 1474 The products\nthat DOD ultimately procures are highly sophisticated and technically complex weapon systems\ndesigned to meet identified military needs of the United States Government. They require\nextensive technological development over a period of many years as a necessary precursor to their\nproduction and deployment.\n8.341. As we have explained in Section 8.2.3.2.3 of this Report, DOD assistance instruments and\nprocurement contracts fund R&D work to produce military technologies for military purposes, with\nthe exception of DOD assistance instruments funded under RDT&E program elements that have\nthe explicit objective of developing dual -use technologies. Th is concept of \"dual-use\", which\ndescribes the explicit objectives of certain of the DOD RDT&E program elements , encompasses\nboth the application to military needs of technology solutions developed by industry for civilian\napplication (military in -bound) and the flow of technologies from military-developed contexts to\ncommercially useful application in civilian contexts.1475\n8.342. It is important to note that the European Union uses the term \"dual-use\" in a different\nsense from the sense outlined in the preceding paragraph.\n\n1469 Schwartz Report, (Exhibit USA-115), pp. 3 and 4.\n1470 Schwartz Report, (Exhibit USA-115), p. 7.\n1471 Schwartz Report, (Exhibit USA-115), p. 8.\n1472 Schwartz Report, (Exhibit USA-115), p. 10.\n1473 Schwartz Report, (Exhibit USA-115), p. 2.\n1474 The United States also has the largest defence budget of any country in the world. For example, the\nU.S. defence budget was estimated to be USD 600.4 billion in 2013, compared to the next largest defence\nbudgets of USD 112.2 billion for China and USD 68.2 billion for Russia. (IISS, Military Balance 2014 Press\nStatement, 5 February 2014, (Exhibit USA-487), p. 2). The U.S. defense budget is divided into five broad\nbudget categories: military personnel, operations & maintenance, procurement, RDT&E and military\nconstruction. (CRA Report, (Exhibit EU-29), p. 4).\n1475 Second Supplemental Razgaitis Declaration, (Exhibit EU-1398) (BCI), para. 14.\n\n8.343. The European Union us es the term \"dual -use\" to refer to the military technologies\ndeveloped by Boeing under the various RDT&E program elements that the European Union\nconsiders, based on the opinions of its experts, have potential applicability to Boeing LCA. 1476 As\nexplained in paragraph 8.296 the European Union 's DOD-related subsidy challenge concerns the\nfunding and access to facilities, equipment, and employees provided to Boeing for \"R&D applicable\nto the development, design and production of LCA \".1477 In paragraphs 7.86 to 7.88 of\nSection 7.3.1 of this Report, we explain the process by which the European Union identified the\nspecific aspects of the various RDT&E pr ogram elements that it considers could potentially have\napplication to Boeing's LCA development.1478\n8.344. Accordingly, the European Union's conception of what it considers to be \"dual-use\" R&D\nshould not be confused with the meaning of \"dual -use\" used to describe the explicit objectives of\ncertain of the DOD RDT&E program elements.\n8.345. In the original proceeding, the panel identified the Dual -Use Applications and Dual -Use\nScience and Technology (PE 0602805F) program element, and the Manufacturing\nTechnology/Industrial Preparedness program elements for both the Air Force (PE 0603771F and\n0708011F) and Navy (PE 0708011N) , as having the explicit objective of developing \"dual-use\"\nR&D.1479 As the budget estimates for the Air Force Dual Use Science & Technology (DUS&T)\nprogram element explain, the policy underlying the DUS&T program element was to enable the Air\nForce to leverage industry investments in advanced technologies that are mutually advantageous\nto both the Air Force and Industry (i.e. military in -bound dual-use).1480 A DOD Directive explains\nthat the fundamental policy underlying the various ManTech program elements is to address the\nsituations in which the private sector cannot or will not make the necessary investments in\nmanufacturing technologies that are necessary to produce DOD materiel on a timely basis.1481\n8.346. The European Union 's claims in this proceeding cover the DUS&T and Air Force and Navy\nManTech program elements.1482 In addition, the European Union 's claims cover the Defense -Wide\nManTech (PE 0603860Z) program element which funded two assistance instruments with Boeing in\nthe 2007 -2012 period. 1483 These RDT&E program elements have explicit dual -use objectives.\nMoreover, these program elements have funded only assistance instruments with Boeing, so are\nnot relevant to our characterization of the DOD procurement contracts.1484\n8.347. In identifying the relevant characteristics of the DOD assistance instruments and\nprocurement contracts, below, we bear in mind the foregoing aspects which we consider relevant\nto their proper characterization.\n\n1476 See also Section 7.3.6 of this Report.\n1477 European Union's request for the establishment of a panel, paras. 11 and 12.\n1478 The European Union's expert, Mr Rumpf, describes his assignment as being to estimate the amounts\nof funding provided to Boeing by the RDT&E program elements that could benefit Boeing's commercial airplane\ndivision. (Rumpf Report, (Exhibit EU-23), para. 1.1). Rumpf indicates that his identification of the relevant\nS&T/general aircraft RDT&E program elements is based on his opinion as to the program elements and\nactivities that he considers involve \"dual-use\", non-engine aircraft R&D. (See Rumpf Report, (Exhibit EU-23),\npara. 2.1). Similarly, Mr Rumpf's discussion of the systems acquisition/military aircraft RDT&E program\nelements often refers to his opinion regarding the \"potential\" applicability to Boeing LCA, or \"potential\" to\nbenefit Boeing's LCA development. (See e.g. Rumpf Report, (Exhibit EU-23), para. 4.2 in relation to the C-17\nand KC-46, and para. 4.3.4 in relation to the P-8A).\n1479 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1148. The original panel appears to\nhave counted the Air Force and Navy ManTech program elements as a single program element.\n1480 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1147.\n1481 U.S. DOD Directive, \"Manufacturing Technology (ManTech) Program\", No. 4200.15\n(19 September 2002), (Exhibit EU-295), p. 2.\n1482 We note that Boeing received no funding under the DUS&T or ManTech (Navy) program elements\nover the 2007-2012 period. (United States' first written submission, paras. 348 and 365).\n1483 The European Union also challenges particular projects under both the IP ManTech (PE 0708011S)\nprogram element and Technology Transfer (PE 0604317F) program element, but as explained in Section 7.3.3\nof this Report, the Panel is not satisfied that any measures exist under these program elements and\naccordingly does not further consider these alleged measures in its analysis of whether the DOD aeronautics\nR&D measures involve specific subsidies that cause adverse effects.\n1484 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1149.\n\n8.2.3.3.3.1 DOD assistance instruments\n8.348. The assistance instruments before us encompass those that were funded under the 23\noriginal RDT&E program elements since the original proceeding, and certain post -2006 assistance\ninstruments funded under \"additional\" RDT&E program elements that we have found to be within\nthe scope of this proceeding (collectively, post-2006 assistance instruments).1485\n8.349. In the original proceeding, the Appellate Body found that the payments and access to DOD\nfacilities provided to Boeing under the DOD assistance instruments constituted financial\ncontributions within the meaning of Article 1.1(a)(1) of the SCM Agreement.1486\n8.350. As we explain in Section 8.1.3 of this Report, the United States has modified the pre -2007\nDOD assistance instruments, and certain post -2006 DOD assistance instruments, to grant a\ncommercial use licence to DOD in respect of Boeing -owned patents. 1487 We note that the\nUnited States does not allege that it has modified the terms of any post -2006 assistanc e\ninstruments in a way that results in those assistance instruments no longer constituting financial\ncontributions.1488\n8.351. Moreover, the United States concedes that those post -2006 assistance instruments that\nhave not been modified by the DOD -Boeing Patent Lice nce Agreement operate in the same\nmanner as the DOD assistance instruments that were before the panel and Appellate Body in the\noriginal proceeding, and that the Appellate Body's characterization of those assistance instruments\nwould apply to those post-2006 assistance instruments.\n8.352. We agree that there is nothing in the nature or terms of the modified post -2006 DOD\nassistance instruments, or the unmodified post -2006 DOD assistance instruments, that would\nwarrant characterizing them, under Article 1.1(a)(1), any differently from the way that the\nAppellate Body had characterized the DOD assistance instruments before it in the original\nproceeding.\n8.353. We therefore find that the payments and access to DOD facilities, equipment, and\nemployees, provided to Boeing thr ough the post -2006 assistance instruments are\nfinancial contributions within the meaning of Article 1.1(a)(1) of the SCM Agreement.\nSpecifically, the payments provided by DOD constitute financial contributions as a direct\ntransfer of funds within the meani ng of Article 1.1(a)(1)(i), and the provision of access\nto facilities, equipment, and employees qualifies as a government provision of goods or\nservices other than general infrastructure within the meaning of Article 1.1(a)(1)(iii) of\nthe SCM Agreement.\n8.2.3.3.3.2 DOD procurement contracts\n8.354. We now consider the proper characterization of the DOD procurement contracts for\npurposes of Article 1.1(a)(1). The procurement contracts before us encompass those that were at\nissue in the original proceeding which, for reasons we explain in Section 7.3.2 of this Report, we\nhave found to be within the scope of this compliance proceeding, as well as post -2006\nprocurement contracts funded under the 23 original RDT&E program elements and certain\npost-2006 p rocurement contracts funded under \"additional\" RDT&E program elements that we\nhave found to be within the scope of this proceeding.\n8.355. As there were no findings at the conclusion of the original proceedings as to whether the\nDOD procurement contracts constituted financial contributions, the United States has not modified\nthe terms of the pre -2007 procurement contracts, whether through the DOD -Boeing Patent\nLicence Agreement or otherwise. There is accordingly no basis for distinguishing between pre-2007\n\n1485 Para. 7.548 above provides a summary of the DOD aeronautics R&D measures that we have found\nare within the scope of this proceeding, including the DOD assistance instruments funded under the\n\"additional\" RDT&E program elements.\n1486 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 625.\n1487 DOD-Boeing Patent Licence Agreement, (Exhibit EU-401) (BCI). See Section 8.1.3.2 for a summary\nof the relevant terms of the DOD-Boeing Patent Licence Agreement.\n1488 Rather, the modifications to those assistance instruments are said to go to the issue of whether the\nmeasures continue to confer a benefit.\n\nand po st-2006 procurement contracts in our analysis of whether these instruments involve\nfinancial contributions. Our analysis of the relevant characteristics of the DOD procurement\ncontracts therefore covers both the pre -2007 procurement contracts that were bef ore the original\npanel and the post -2006 procurement contracts challenged for the first time in this compliance\nproceeding.\n8.356. The European Union argues that the DOD procurement contracts share all of the relevant\ncharacteristics of the pre-2007 NASA procurement contracts and DOD assistance instruments that\nled the Appellate Body to conclude that those instruments were collaborative research\narrangements \"akin to a species of joint venture\", which involved financial contributions to Boeing.\nThe United States responds that pointing to certain common characteristics is not sufficient, and\nthat a proper consideration of all of the characteristics of the DOD procurement contracts in fact\nleads to the conclusion that some are properly characterized as purchases of services and outside\nthe scope of Article 1.1(a)(1), or as purchases of goods under Article 1.1(a)(1)(iii).\n8.357. In the original proceeding, the Appellate Body examined various aspects of the NASA\nprocurement contracts and DOD assistance instruments, and ultima tely concluded that both sets\nof measures were most properly characterized as collaborative research undertakings. For\nexample, with respect to the NASA procurement contracts, the Appellate Body said:\nThe transactions are collaborative arrangements that a re composite in nature in that\nthey involve various elements that are interlinked. The arrangements are akin to a\nspecies of joint venture.1489\n8.358. Of particular significance, the Appellate Body referred to evidence suggesting that the\nrelationship between NASA and Boeing in the particular context was one of \"partnership\".1490\nSimilarly, when discussing the DOD assistance instruments, the Appellate Body referred to the\ncomposite nature of the transactions (as involving a combination of funding and access to\nfacilities), the collaborative nature of the transactions (as involving a pooling of monetary and non-\nmonetary resources on the input side and a sharing of the fruits of the research on the output\nside) and crucially, that th ese transactions were undertaken in pur suit of a common goal for the\nbenefit of both DOD and Boeing.1491\n8.359. We will examine the relevant characteristics of the DOD procurement contracts with a view\nto determining whether, like the NASA procurement contracts and DOD assistance instruments\nbefore the A ppellate Body, the relationship between DOD and Boeing in the particular context is\none of partnership, involving collaboration in pursuit of a common goal for the mutual benefit of\nDOD and Boeing.\n8.360. To begin, we recall that under U.S. law, procurement contr acts are used where the U .S.\nGovernment is acquiring property or services for its direct benefit or use. 1492 The original panel\nnoted that all of the DOD procurement contracts that had been submitted in that proceeding\nprovided for the payment of a fee. 1493 The vast majority of the DOD procurement contracts before\nthe Panel follow the same structure: Boeing as the contractor receives reimbursement of its costs\nactually incurred (primarily in the form of salaries, materials and overheads) and in most cases, a\nfixed fee (as opposed to an \"incentive\" fee). According to the United States, the fee typically\nrepresents between [[HSBI]] of the reimbursable costs.1494\n8.361. Although the European Union 's claims cover the provision of DOD facilities, and in some\ncases, equipment an d employees to Boeing under the procurement contracts, there is nothing\nbefore us to suggest that the provision of facilities, equipment, and employees is anything but\nmarginal. We note that the European Union does not specifically identify any facilities, equipment\nor employees that DOD allegedly provides to Boeing under any of the DOD procurement contracts.\nIndeed, in summarizing the reasons why the DOD procurement contracts \"satisfy the Appellate\nBody's test\" for demonstrating that they are \"akin to joint ventures that provide equity infusions \",\n\n1489 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 597.\n1490 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), paras. 598-600.\n1491 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 609.\n1492 See para. 8.298(c) above.\n1493 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1151.\n1494 United States' response to Panel question No. 67, para. 33.\n\nthe European Union notes only that DOD commits to provide financial resources, and argues that\nthe absence of any provision of non-monetary resources and employees by DOD is not fatal to the\ncharacterization of th e DOD procurement contracts as \"akin to joint ventures that provide equity\ninfusions\".1495\n8.362. In short, under the DOD procurement contracts, DOD provides payments to Boeing, in\nreturn for which Boeing performs specific R&D work as set forth in the various deliv ery orders and\nas described in accordance with statements o f work or performance requirements. The payments\nfor the most part represent Boeing 's costs of performing the R&D work, plus a negotiated fee,\nrepresenting Boeing's profit.\n8.363. The European Union argues that Boeing additionally contributes financial resources such as\nnon-reimbursed Independent Research and Development ( IR&D) expenditures, which it uses to\ndevelop its background intellectual property to the \"joint undertaking\" between DOD and Boeing\nunder the procurement contracts. 1496 These expenditures are internal costs that contractors like\nBoeing incur in order to maintain the technological competence and expertise that enable them to\nprovide the R&D services for which they are contracted. These expendi tures are not specified in\nthe procurement contracts as contributions to be made by Boeing and we do not consider that\nBoeing's privately funded IR&D expenditures can be considered a contribution of \"financial\nresources\" to a \"joint undertaking\" with DOD. Nor do we consider that, in making use of its own\nintellectual property and know-how in order to carry out the R&D work for DOD, Boeing can be\nsaid to be \"contributing\" its intellectual property to a joint venture with DOD.\n8.364. While there are payments provide d by DOD in exchange for the performance of R&D by\nBoeing, it is important to understand that this exchange occurs in a particular commercial context.\nAs is clear from our discussion in Section 8.2.3.2.4 of the way in which R&D is commissioned\nunder the RDT&E program elements, the research topics are set by DOD and are based primarily\non \"user needs \"; i.e. military needs identified by DOD on the basis of strategic defense\nimperatives. In the systems acquisition/military aircraft context, those user needs are further\nrefined in that they are directed to the development of specific technologies necessary for the\ncreation or upgrading of specific weapon systems. Given the scale and complexity of the R&D\nwork, it is reasonable that contractors such as Boeing would have input into the process in order to\nensure that they are able to perform the work, and that the R&D will meet DOD 's requirements\nand presumably, ultimately lead to full -rate production of weapon systems. However, unlike the\nsituation where NASA commissions aeronautics research, the R&D commissioned under DOD\nprocurement contracts is solely directed to meeting DOD 's military needs, independent of\nenhancing the competitive position of contractors such as Boeing. The interac tion between DOD\nand Boeing therefore takes place in this different commercial context, and while it necessarily\ninvolves DOD and Boeing working together, the nature and purpose of this interaction is not the\nsame as when two partners work together to set research topics based on their aligned interests in\nthe outcomes.\n8.365. The European Union also points to the allocation of intellectual property rights between\nDOD and Boeing under the DOD procurement contracts as a \"sharing of the fruits of the research \"\nthat is indicative of a joint undertaking or collaborative arrangement. As the original panel\nexplained, the allocation of patents is uniform across all U.S. Government R&D contracts and\nagreements, including NASA procurement contracts, DOD assistance instrumen ts and DOD\n\n1495 European Union's second written submission, paras. 446-448. The United States responds that any\nsuch access to facilities, equipment, and employees is \"not significant\" with respect to S&T/general aircraft\nprocurement contracts and is \"rare\" as regards systems acquisition/military aircraft procurement contracts.\n(United States' first written submission, paras. 388 and 418; second written submission, paras. 375 and 377).\nThe United States asserts that in any case, the European Union has provided no evidence in support of its\ncontention that DOD provides Boeing with access to DOD facilities or employees, and any provision of\nequipment is highly limited. (United States' first written submission, para. 385; second written submission,\npara. 367).\n1496 European Union's second written submission para. 446, as clarified in European Union's response to\nPanel question No. 16, paras. 112 and 113. Specifically, the European Union clarifies that it does not argue\nthat Boeing's non-reimbursed, internal IR&D expenditures are a contribution of financial resources under the\nDOD procurement contracts in the same way as Boeing shares costs under DOD assistance instruments.\nRather, with respect to the former, there is a time lag between the time that Boeing funds its own IR&D and\nthen uses the background intellectual property created from that IR&D as its \"contribution\" to the \"joint\nundertaking\" pursuant to a particular procurement contract.\n\nprocurement contracts.1497 For present purposes, we note that where DOD employees and Boeing\nemployees work together under a DOD procurement contract on a research effort that results in an\ninvention, the allocation of ownership of patent rights is as follows:\na. Where a DOD employee makes an invention in the course of work, the U.S. Government\nwill have sole ownership of the invention, and thus the right to obtain a patent. This is\nbecause the U.S. Government employee who made the invention would be recognized as\nthe inventor, and his or her interest in the patent that would issue in that employee 's\nname would pass to the U.S. Government.1498\nb. Where a Boeing employee makes an invention in the course of work, Boeing has title to\nthe invention and thus the r ight to obtain a patent. 1499 This results from the application\nof the Bayh -Dole Act and associated legislative instruments and implementing\nregulations. The U.S. Government receives a government use license in Boeing\ninventions made in the performance of a DOD procurement contract.1500\nc. Where DOD and Boeing employees jointly make an invention in the course of work, the\nresulting patent would issue jointly in the names of the DOD and Boeing employees, and\nby operation of the laws, regulations and contract clauses discussed in (a) and (b)\nabove, DOD and Boeing would each own an undivided share in rights under the\npatent.1501\n8.366. In respect of rights to technical data, such as research results developed or delivered\nunder DOD procurement contracts, any data delivered under an R&D contract funded solely by the\nU.S. Government (such as the DOD procurement contracts) is \"unlimited rights data \", meaning\nthat the U.S. Government obtains unlimited rights to use the technical data as it sees fit, both\ninside and outside the government.1502\n8.367. Therefore, under a DOD procurement contract, there is a \"sharing\" of intellectual property\nrights resulting from Boeing's performance of the R&D work, which occurs by operation of U.S. law\nin relation to all U.S. Government R&D contracts, regardless of the agency or the contractor.\nHowever, as we explain in Section 8.2.3.4, contextual factors suggest that the \"balance\" of that\nsharing is substantially more in DOD 's favour and less in Boeing 's favour than under the DOD\nassistance instruments, or NASA procurement contracts. Most significantly, DOD is commissioning\nR&D services to support the development of military systems for DOD 's own distinct purposes.\nUnlike the DOD assistance instruments, or NASA procurement contracts, DOD's objectives do not\ninclude, or align with, advancing Boeing 's development of technologies applicable to LCA. With\n\n1497 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1149.\n1498 This is by virtue of a U.S. regulation which provides for the U.S. Government to obtain the title to\nany invention made by a U.S. Government employee. The United States Code of Federal Regulations, Title 37,\nsection 501.6 provides that, with certain limited exceptions, the U.S. Government obtains title to any invention\nmade by a U.S. Government employee during working hours, or with a contribution of government facilities,\nequipment, materials, funds or information, or of time or services of other government employees on official\nduty, or which bears a direct relation to or is made in consequence of the official duties of the inventor.\n1499 As Razgaitis explains, in the United States, patent ownership generally vests with the party whose\nemployees are its inventors. (Razgaitis Declaration, (Exhibit EU-1262) (BCI), para. 24).\n1500 United States Code of Federal Regulations, Title 48, section 52.227-12, (Exhibit USA-368). This\ngovernment use license gives the U.S. Government the rights to: (a) use the invention without paying\nadditional fees or royalties to Boeing in all future contracts between Boeing and any agency of the U.S.\nGovernment anywhere in the world; and (b) authorize other contractors to use the invention without any\nadditional fees or royalties in all future contracts between that contractor and any agency of the U.S.\nGovernment anywhere in the world (thereby providing such other contractors with a license defence against an\ninfringement proceeding covering the contractor's use of the patented invention in the performance of a\ncontract for the U.S. Government).\n1501 United States Code of Federal Regulations, Chapter 37, section 501.6, (Exhibit USA-310); Patent\nRights in Inventions Made with Federal Assistance, United States Code, chapter 35, sections 200-212, (Exhibit\nEU-220), sections 201 (c), (e) and (i), and 202(a); Memorandum on Government Patent Policy, (Exhibit\nEU-1062); Executive Order 12591, \"Facilitating access to science and technology\", 10 April 1987, (Exhibit\nEU-238); and United States Code of Federal Regulations, Title 48, sections 27.300-306, (Exhibit EU-221),\nsections 27.303(a) and (b).\n1502 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1300. As the original panel explained,\ndata rights apply to so-called \"technical data\", which means \"recorded information (regardless of the form or\nmethod of the recording) of a scientific or technical nature (including computer databases and computer\nsoftware documentation)\". (Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1298).\n\nrespect to Boeing -owned patents that may arise from performing the R&D work for DOD, DOD\nobtains a government use licence that enables it to fully exploit Boeing 's patents for DOD 's\npurposes, as we explain more fully in paragraphs 8.422 and 8.423. DOD also obtains unrestricted\nrights to the data. Boeing 's ownership of the patents to inventions made by its employees in the\ncourse of work under a DOD procurement contract does give Boeing the legal right to exploit the\nmilitary technologies in question for commercial purposes. Howev er, as we explain in\nparagraphs 8.422 to 8.425 the particular commercial context means that this legal right is in\npractice restricted.\n8.368. This different \"balance\" of allocation of intellectual property rights that results from the\nperformance of work unde r a DOD procurement contract also affects our assessment of whether\nDOD and Boeing can be said to share in the \"risks and rewards\" of the commissioned R&D. While\nthe outcome of R&D performed under many of the DOD procurement contracts (especially under\nS&T/general aircraft program elements) is uncertain, the risks and rewards are borne principally\nby DOD. Under the vast majority of the DOD procurement contracts, Boeing is paid its costs for\nperforming the R&D and earns a negotiated fee or profit, which is a smaller proportion of the\noverall cost.1503 Boeing does not appear to risk very much at all, as it is paid its costs and will\nmake a profit regardless of whether the research yields the desired outcomes for DOD. Aside from\nthe fee or profit that Boeing earns on completion of the contracted research tasks, the rewards of\nthe successful outcome of the research are primarily and in practical terms captured by the\ngovernment use licence, owing to the fact that the technologies in question are military and DOD\nis Boeing's only customer for such technologies. Although some of the military technologies may\nalso have potential civil applications, Boeing's practical ability to exploit those technologies for civil\napplications is limited by legal restrictions on the use of information and technologies developed\nunder the DOD procurement contracts outside the military context.1504\n8.369. We have considered the relevant characteristics of the DOD procurement contracts in their\nparticular context, including: the objectives of the RD T&E program elements through which the\nprocurement contracts are funded, which are purely military in nature and independent of\nobjectives such as promoting the competitiveness of the U.S. aeronautics industry (an important\ndifference we see between DOD an d NASA in commissioning aeronautics R&D) ; the nature of the\nresearch conducted under the RDT&E program elements ; the ways in which R&D is commissioned\nunder the RDT&E program elements ; as well as the nature of the respective performance\nobligations of DOD and Boeing under the procurement contracts. 1505 We have considerable\ndifficulty in concluding that the DOD procurement contracts are functionally like or equivalent to\njoint venture arrangements or collaborative undertakings. We do not see enough in the\nrelationship between DOD and Boeing under the DOD procurement contracts that points to it being\none of \"partnership\", \"collaboration\" or \"joint-venture\", in which both parties act in pursuit of a\ncommon goal for their mutual benefit.\n8.370. As we have explained, we d o not regard the allocation of intellectual property rights\nbetween DOD and Boeing under DOD procurement contracts as transforming the relationship\nbetween DOD and Boeing under DOD procurement contracts from purchaser and seller to joint\nventure partners.1506 We regard the risks and rewards of the R&D as being principally for DOD.\n8.371. In sum, we are not persuaded, when we consider all of the relevant characteristics of the\nDOD procurement contracts in their totality and proper context, that DOD and Boeing can be\n\n1503 Mr Razgaitis explains that the essential feature of \"cost plus a fee\" or \"profit\" R&D contracts from\nthe perspective of the commissioned party is that it does not expect to lose money on the R&D. If the\nchallenges of performing the R&D are greater than proposed, the commissioned party will either receive\nadditional funding (at the commissioning party's option) or will reduce the scope of work. All that is at risk for\nthe commissioned party is possibly the relatively small fee. (Second Supplemental Razgaitis Declaration,\n(Exhibit EU-1398), para. 40). We do not consider that the same conclusion applies with respect to the NASA\nprocurement contracts that involve payment of a fee to Boeing because, as we explain in para. 8.151, the fact\nthat one of the objectives of the NASA commissioned R&D is to promote the competitiveness of the U.S.\naeronautics industry means that Boeing indirectly shares the risks of the R&D being unsuccessful.\n1504 The principal legal restrictions on the dissemination of military technologies and data are described\nin Section 8.2.3.2.5 above.\n1505 These characteristics are discussed in detail in Sections 8.2.3.2.2 through 8.2.3.2.4 above.\n1506 If it were, it would effectively mean that every time the U.S. Government commissions R&D under a\nprocurement contract, regardless of the identity of the agency or commissioned party, the objectives of the\nresearch, or the other terms of the contract, the parties would be considered to be in a form of joint venture or\ncollaborative undertaking. We do not think this would be a reasonable outcome.\n\nconsidered to be parties with broadly aligned interests engaging in a collaborative enterprise in\nwhich they both have a significant stake in the risks and returns. 1507 Rather, their relationship is\nprincipally one in which DOD acquires R&D services from Boeing.\n8.372. We acknowledge that there are special features of the DOD procurement contracts that in\nsome respects obscure what we see as this basic relationship between DOD and Boeing of buyer\nand seller. DOD procurement contracts are the legal instruments through which DOD commissions\ncontractors such as Boeing to undertake complex process es of developing and maturing\ntechnologies for application to particular military systems in various stages and over long periods\nof time.1508 However, the interaction that occurs b etween DOD and Boeing in connection with this\nengagement is qualitatively different from the collaboration that occurs between partners in a\ncollaborative venture, in which both are mutually invested in the outcome. The interaction between\nDOD and Boeing under the DOD procurement contracts is fundamentally directed to DOD acquiring\nwhat DOD needs (independently of Boeing 's commercial interests), and to Boeing performing the\nwork that meets DOD's needs.\n8.373. The United States argues that certain of the procuremen t contracts that are for systems\nacquisition (i.e. \"military aircraft \" program elements) are most appropriately characterized as\ninvolving purchases of goods within the meaning of Article 1.1(a)(1)(iii) of the SCM Agreement.\nAccording to the United States, where the work performed by Boeing under a procurement\ncontract involves modifying an existing aircraft, the proper characterization of that procurement\ncontract is as a purchase of services because Boeing would not be producing a new good.\nHowever, if th e work requires Boeing to either bring a product into service (e.g. bringing a\nsystems acquisition project to the point where full rate production could begin) or to produce a\nnew component for integration into the aircraft, the transaction should be treat ed as a purchase of\ngoods.1509\n8.374. We note, first, that whether we characterize the payments and access to DOD facilities,\nand where applicable, DOD equipment and employees, provided to Boeing through the\nprocurement contracts as purchases of services , or as purchases of goods , this characterization\ndoes not affect the outcome of our analysis of whether the measures are subsidies. 1510 The key\npoint emerging from our analysis above is that the DOD procurement contracts involve purchases\nby DOD as buyer, from Boeing a s seller, and that, as such, there is no basis to characterize these\ncontracts in the same way that the Appellate Body characterized the NASA procurement contracts\nand DOD assistance instruments in the original proceeding. This conclusion does not depend u pon\nwhether the objects of the purchases are services or goods. Moreover, as discussed below, in view\nof our characterization of the transactions as purchases of services, our determination of whether\nthese measures confer a benefit, assuming that they are financial contributions, involves an\nexamination of whether DOD paid more than adequate remuneration for these services. If we\ntreated the transactions as purchases of goods, we obviously would apply the same approach,\nconsistent with Article 14(d) of the SCM Agreement, and arrive at the same conclusion.\n8.375. In any event, we consider that while the work performed by Boeing under DOD\nprocurement contracts funded under the military aircraft RDT&E program elements is directly\nrelated to the development of partic ular weapon systems , and may result in a new product or a\nnew version of an existing system, this does not alter the fact that the immediate object s of these\ncontracts are activities, including research, testing and evaluation, which are best characterized as\n\n1507 The DOD procurement contracts differ from the NASA procurement contracts in this fundamental\nrespect.\n1508 The processes through which DOD commissions R&D under the RDT&E program elements are\ndescribed in general terms in Section 8.2.3.2.4 above.\n1509 United States' first written submission, paras. 309 and 419-423; second written submission,\nparas. 390, 400, 405, and 413. Thus, the United States argues that the pre-2007 funding for the V-22/CV-22\nand Joint Strike Fighter projects is most appropriately characterized as a purchase of goods, as was certain of\nthe F/A-18 project funding that involved bringing the new version into service, and the C-17 product\ndevelopment funding for bringing the C-17 into service. This work can be contrasted with procurement\ncontracts involving upgrades to existing systems, which the United States considers are better characterized as\npurchases of services. (United States' second written submission, para. 388).\n1510 We also recall that, in respect of a number of the program elements that the United States considers\nto involve purchases of goods, we have found in Section 7.3 that there is either no measure in existence\ninvolving the particular program element, or the measures involving such program elements are not within the\nscope of this proceeding.\n\nservices.1511 As we have previously explained, the weapon systems that DOD ultimately buys are\ncomplex. Their acquisition necessarily entails an extensive period of technological development,\nwhich is the work that Boeing performs under the DOD procuremen t contracts at issue in this\nproceeding. Boeing is paid for performing the R&D work, which may involve integrating various\nsub-systems and producing models or prototypes for developmental testing and evaluation.\nHowever, this aspect of producing a product for the purpose of development and testing is part of\nthe overall R&D activity, and is distinct from the full -rate production of a weapon system, which is\ncovered by distinct contractual arrangements between DOD and its contractors.1512\n8.376. We therefore find our selves unable to characterize the DOD procurement contracts in a\nsimilar manner to the way in which the Appellate Body: (a) characterized the NASA procurement\ncontracts and DOD assistance instruments ; and (b) through an interpretive process that involved\nanalogizing them to equity infusions, concluded that the payments that were part of the joint\nventure arrangement constituted a direct transfer of fund s within the meaning of\nArticle 1.1(a)(1)(i), and that the provision of facilities, equipment, and employe es constituted a\nprovision of goods or services within the meaning of Article 1.1(a)(1)(iii). 1513 Given the nature of\nthe research that DOD commissions Boeing to undertake under the DOD procurement\ncontracts, DOD's objectives in commissioning that research an d the consequent nature\nof the relationship between DOD and Boeing in performing their respective obligations\nunder the DOD procurement contracts, we regard payments and access to DOD facilities,\nand where applicable, DOD equipment and employees, provided to Boeing through the\nDOD procurement contracts , as most appropriately characterized as purchases of\nservices.\n8.377. The issue that next arises is whether the se transactions, properly characterized as\npurchases of R&D services, fall within the scope of transacti ons that are financial contributions\nwithin the meaning of Article 1.1(a)(1) of the SCM Agreement.\n8.378. We have concluded that it is not necessary for us to definitively address this interpretive\nissue because, even if we were to consider that the DOD procurem ent contracts, properly\ncharacterized as purchases of R&D services, constitut e financial contributions within the meaning\nof Article 1.1(a)(1), we would ultimately conclude, for the reasons we explain in Section 8.2.3.4 of\nthis Report, that the European Union has failed to establish that the DOD procurement contracts\nconfer a benefit within the meaning of Article 1.1(b).\n8.379. Since we do not make a finding on the primary argument of the European Union that the\npayments and provision of access to facilities, equipment, and employees pursuant to DOD\nprocurement contracts funded under the challenged RDT&E program elements constitute financial\ncontributions, within the meaning of Article 1.1(a)(1) of the SCM Agreement, we now proceed to\nconsider an argument made by the European Union in the alternative with respect to how the DOD\naeronautics R&D measures constitute financial contributions.\n8.380. According to this alternative argument, \"the transfer to Boeing of patent and other\nintellectual property rights in the technologies and data developed under the RDT &E Program\nadditionally constitutes a provision of 'goods … other than general infrastructure' within the\nmeaning of Article 1.1(a)(1)(iii) of the SCM Agreement\".1514 The European Union argues, first, that\n\n1511 See also Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1162.\n1512 The European Union also notes that DOD itself distinguishes RDT&E appropriations, which fund the\ndevelopment, test and evaluation of equipment, materiel or computer application software from \"procurement\"\nappropriations, which fund the purchases of major end items and defense systems. The European Union\nsubmits therefore that the \"procurement\" appropriations category of DOD's budget funds purchases of goods,\nnot the RDT&E appropriations category. (European Union's second written submission, para. 462; and Defense\nAcquisition University, \"Lesson 10: Financial Management: Program/Budget Execution\", available at:\n<https://learn.dau.mil/CourseWare/1_9/rem/summary_L10.html>, accessed 1 September 2016, (Exhibit\nEU-1101), pp. 2/9 and 3/9).\n1513 See Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 624.\n1514 European Union's first written submission, para. 370; second written submission, para. 464. The\nEuropean Union has explained that while it agrees that \"the intellectual property rights are an effect of the\ncontract\" it considers that \"in the alternative, it is possible to conceptualise one of the financial contributions\narising from that same contract as a provision of goods\". The European Union indicates in this connection that,\nunlike the original proceeding, in this compliance proceeding it \"is not challenging the provision of patent rights\nas a separate subsidy distinct from the DOD RDT&E contracts from which they arise, as it did before the\noriginal panel\". (European Union's second written submission, para. 465).\n\npatents, rights to trade secrets, and rights to data are goods on the basis that the term \"good\" is\ngenerally defined as \"property or possessions\" and that therefore \"the transfer of a patent, as well\nas of rights to trade secr ets and undisclosed data, constitutes the transfer of property – i.e. the\ntransfer or provision of a good\". 1515 Second, the European Union submits that \"the United States\n'provides' Boeing with these patents and other rights in association with the RDT&E fund ing\nagreements\" because U .S. law and regulations generally provide contractors with the right to\nreceive title to inventions that arise from a funding agreement with the U.S. Government.1516\n8.381. The European Union's alternative argument as to how the DOD procurement contracts give\nrise to financial contributions , within the meaning of Article 1.1(a)(1)(iii) of the SCM Agreement\nraises two questions: (a) whether patents and other intellectual property rights can be treated as\n\"goods\" within the specific sense of t he term as used in Article 1.1(a)(1)(iii) of the SCM\nAgreement; and, if so, (b) how under the transactions at issue the government could be construed\nas \"providing\" such goods to Boeing.\n8.382. While there is wide and uncertain use of the term \"goods\" in general parlance, the term is\ntypically applied to tangible products, as distinguished from intangible services (a distinction made\nin the context of trade law and trade policy). 1517 Specifically with respect to Article 1.1(a)(1)(iii),\nthe Appellate Body has observed that the ordinary meaning of the term \"goods\" \"includes items\nthat are tangible and capable of being possessed\" and that \"'goods' are tangible items\". 1518 The\nEuropean Union argues that intellectual property rights are \"goods\" within the meaning of\nArticle 1.1(a)(1)(iii) because: (a) the term \"good\" is defined as \"property or possessions\" ; and (b)\npatents, rights to trade secrets and rights to data are considered intellectual property, as\nevidenced by the fact that U.S. law explicitly states that \"patents sha ll have the attributes of\npersonal property\".1519 However, in making these arguments the European Union fails to take into\naccount the fact that the Appellate Body has only defined \"goods\" as used in Article 1.1(a)(1)(iii)\nin terms of tangible items. Given the context of this term, and the use of the term \"services\" in the\nsame sentence, the dictionary definition, as well as the Appellate Body's earlier finding, we see no\nbasis to extend the sense of goods in this context to encompass all possible forms of property.\n8.383. We note, in this connection, that intellectual property rights are generally understood to be\neconomic assets and, in the form of patents, are tradeable categories of property; they are usually\ntreated by national jurisdictions and international or ganizations as immaterial property 1520, or\nintangible assets.1521\n8.384. Patent law distinguishes a product or process from the patent right which can prevent third\nparties from making, using, offering for sale, selling, or importing the product that is the subject\nmatter of a patent, or in case of patent-protected process, from using the process, and from using,\noffering for sale, selling, or importing a product obtained directly by this process. 1522 Similarly, the\n\n1515 European Union's first written submission, para. 370.\n1516 European Union's first written submission, para. 370.\n1517 This practice conforms with the Oxford English Dictionary's most pertinent definition of \"goods\" as\n\"{t}hings that are produced for sale; commodities and manufactured items to be bought and sold;\nmerchandise, wares … Now also (Econ.): economic assets which have a tangible, physical form (contrasted\nwith services).\" (Oxford English Dictionary online, definition of \"good\", available at:\n<http://www.oed.com/view/Entry/79925>, accessed 1 September 2016).\n1518 Appellate Body Report, US – Softwood Lumber IV , para. 59. (\"{i}n particular, we agree with the\nPanel that the ordinary meaning of the term 'goods', as used in Article 1.1(a)(1)(iii), includes items that are\ntangible and capable of being possessed.\") See also ibid. paras. 58 -60 and 64. See also Appellate Body Report,\nUS – Large Civil Aircraft (2nd complaint), para. 619 and fn 1295 (\"'{g}oods' are tangible items. They are often\ncontrasted against services, which are intangible\").\n1519 European Union's first written submission, para. 370. We recall that, as in other contexts, the\nAppellate Body emphasized that \"municipal law classifications are not determinative\" in the context of\ncharacterizing \"goods\" for purposes of Article 1.1(a)(1) of the SCM Agreement. (See Appellate Body Report, US\n– Softwood Lumber IV, para. 56).\n1520 See e.g. the reference to \"Immaterialgüterrechte\" for industrial property in Germany.\n1521 WIPO defines intellectual property rights as intangible assets. (See e.g. The Value of Intellectual\nProperty Assets at <http://www.wipo.int/sme/en/ip_business/ip_asset/value_ip_assets.htm>, accessed\n1 September 2016). The Oxford Dictionary lists \"intangible\" as a synonym of \"immaterial\": \"{n}ot tangible;\nincapable of being touched; not cognizable by the sense of touch; impalpable.\" (Oxford English Dictionary\nonline, definition of \"intangible\", available at:\n<http://www.oed.com/view/Entry/97332?redirectedFrom=intangible#eid>, accessed 1 September 2016).\n1522 See TRIPS Agreement, Article 28.1.\n\ndata rights that have been discussed in this dispute refer to the right to prevent a party from using\ndata or disseminating data to third parties for their use for a period of time.\n8.385. As property rights and assets, intellectual property rights are thus usually distinguished\nfrom goods as such: This is apparent in the TRIPS Agreement itself, which distinguishes between\ngoods, and intellectual property rights that are embedded in such goods. Consequently, the TRIPS\nAgreement refers, for example, to \"goods or services protected by the trademark\" and defines the\nfunction of trademarks as distinguishing goods or services of one enterprise from another, setting\nsuch an intellectual property right in a different category from goods as such . S imilarly, a\ntrademark is \"applied\" to a good and trademarks are registered \"in respect of\" goods.1523 The\nTRIPS Agreement's requirements relating to the enforcement of intellectual property rights,\nincluding border measures, systematically distinguish intellectual property rights from goods that\ninvolve such rights, involve the infringeme nt of intellectual property rights, or that are protected\nby them.1524\n8.386. In sum, in light of the foregoing considerations, we find unpersuasive the European Union's\nargument that intellectual property rights are goods within the meaning of Article 1.1(a)(1)(iii).\n8.387. On the basis of this conclusion, we do not, strictly speaking, need to address the second,\nconsequent question, that of whether \"the United States 'provides' Boeing with these patents and\nother rights in association with the RDT&E funding agreements\". 1525 For the sake of completeness,\nhowever, we turn to that question, assuming arguendo that intellectual property rights may be\nconsidered as goods under Article 1.1(a)(1)(iii).\n8.388. The European Union argues that the United States \"provides\" Boeing with patents and\nother rights on the grounds that \"US law and regulations generally provide contractors with the\nright to receive title to inventions that arise from a funding agreement with the US\ngovernment\".1526 Hence, this use by the European Union of the term \"provid es\" does not refer to\nthe transfer or assignment to Boeing of existing intellectual property rights, and particularly of\npatents, actually held by the U .S. Government. The intellectual property rights that may be\nconcerned are \"foreground\" intellectual property, based on inventions developed in the course of\nthe contracted research. By definition, no such intellectual property rights could have existed at\nthe time of the contract ; they could only come into existence subsequently. None of the\nintellectual property rights resulting from DOD procurement contracts were at any stage owned by\nthe U .S. Government, and could therefore not have been transferred or assigned by the\nGovernment.\n8.389. Accordingly, the use of the term \"provide\" in this context would need to enc ompass the\nenactment of legislation that allocated to Boeing the entitlement \"to receive title to\" inventions\nthat result from research undertaken by Boeing pursuant to a U.S. Government R&D contract. This\nis the view that the European Union appears to tak e; i.e. that where a law lays down the\nconditions under which rights to title to inventions can be obtained, the government thereby\n\"provides\" these rights within the meaning of Article 1.1(a)(1)(iii). The Appellate Body has\nobserved that the term \"provide \" has been defined as \"supply or furnish for use; make available\"\nand \"to put at the disposal of\". 1527 The Appellate Body has also explained that there must be a\n\"reasonably proximate relationship\" between the governmental action of providing the good or\nservice and the use or enjoyment of the good or service by the recipient. 1528 It stated that \"a\ngovernment must have some control over the availability of a specific thing being 'made\navailable'\".1529 The European Union does not explain how its interpretation of \"pr ovide\" can\nencompass situations where a law merely defines the conditions under which a \"right to take title\"\ncan be acquired in the future, in the event that a patentable invention, yet to exist, is\nsubsequently developed, and in particular does not explain how its reading is consistent with these\nAppellate Body pronouncements.\n\n1523 See TRIPS Agreement, Articles 15, 16, 19, and 20.\n1524 See TRIPS Agreement, Articles 53, 51, and 44.\n1525 European Union's first written submission, para. 370.\n1526 European Union's first written submission, para. 370.\n1527 Appellate Body Report, US – Softwood Lumber IV, para. 69.\n1528 Appellate Body Report, US – Softwood Lumber IV, para. 71.\n1529 Appellate Body Report, US – Softwood Lumber IV, para. 71. (emphasis original)\n\n8.390. For the foregoing reasons, we reject the European Union's alternative argument\nthat the alleged \"transfer to Boeing of patent and other intellectual property rights in\nthe technolo gies and data developed under the challenged DOD RDT&E programmes\"\nconstitutes a financial contribution in the form of government provision of goods within\nthe meaning of Article 1.1(a)(1)(iii) of the SCM Agreement.\n8.391. In light of our findings in this Section, we address in the next section: (a) whether the\npayments and access to DOD facilities, equipment, and employees provided through DOD\nassistance instruments, which we f ind to be financial contribution s within the meaning of\nArticle 1.1(a)(1), confer a benefit within the meaning of Article 1.1(b ); and (b) whether, assuming\narguendo that the payments and provision of access to DOD facilities, and where applicable, DOD\nequipment and employees, provided through DOD procurement contracts, properly characterized\nas purchases of R&D services, are financial contributions within the meaning of Article 1.1(a)(1),\nthese measures confer a benefit within the meaning of Article 1.1(b).\n8.2.3.4 Whether there is a benefit\n8.2.3.4.1 Main arguments of the parties and third parties\n8.392. The European Union argues that the financial contributions provided through the post-2006\nDOD assistance instruments, the terms of which were modified by the DOD -Boeing Patent Licence\nAgreement of 23 September 2012, confer a benefit for the same reasons as in the case of the pre-\n2007 DOD assistance instruments modified by the DOD-Boeing Patent Licence Agreement.1530\n8.393. In addition, with respect to the DOD procurement contracts, the European Union argues\nthat the Appellate Body 's reasoning in the original proceeding ; i.e. that the NASA procurement\ncontracts and DOD assistance instruments conferred a benefit based on the distribution of patent\nrights, applies equally to the DOD procurement contracts, given the finding that the distribution of\npatent rights between DOD and i ts contractors is uniform across all DOD procurement contracts\nand assistance instruments.1531 The European Union considers that the market -based comparisons\nperformed by the Appellate Body to determine whether the NASA procurement contracts and DOD\nassistance instruments conferred a benefit on Boeing are highly relevant to the benefit\ndetermination in respect of other aeronautics R&D measures, such as the DOD procurement\ncontracts. However, the Panel may also consider additional evidence provided by the parties in this\nproceeding to establish a market benchmark for those other aeronautics R&D measures.1532\n8.394. The European Union refers to the examples of collaborative R&D agreements\ncommissioned by non -U.S. Government entities discussed by its technology licensing e xpert,\nMr Razgaitis. The private collaborative R&D agreements surveyed and discussed by Mr Razgaitis\ndemonstrate that the U.S. Government offers Boeing better terms with respect to the allocation of\nintellectual property rights than Boeing could receive in the market.1533 Similarly, the Bayh -Dole\nregime for allocating intellectual property rights under U.S. Government R&D contracts, as well as\nDOD's elimination of its recoupment policy (both of which the European Union considers have the\nexplicit, non -commercial purpose of assisting U .S. industry), demonstrate that the financial\ncontributions with respect to DOD procurement contracts are not provided on the basis of\ncommercial considerations. 1534 Indeed, the European Union considers that the benefit resulting\n\n1530 See paras. 8.8 to 8.15 above.\n1531 European Union's first written submission, para. 374. See also European Union's opening statement\nat the meeting with the Panel, para. 28. The European Union argues that, based on precisely the same\nevidence considered by the Appellate Body in its own analysis of \"benefit\", it demonstrates that the \"funding\nand support\" provided to Boeing by DOD, whether through procurement contracts or assistance instruments,\nconfers exactly the same benefit in the same manner. (European Union's second written submission,\npara. 482).\n1532 European Union's opening statement at the meeting with the Panel, para. 28.\n1533 European Union's response to Panel question No. 24, para. 135.\n1534 European Union's second written submission, para. 520 (referring to U.S. DOD, Final Rule,\n\"Recoupment of Nonrecurring Costs on Sales of U.S. Items\", 58 FR 16497 (29 March 1993), (Exhibit EU-279));\nresponse to Panel question No. 24, para. 135.\n\nfrom the DOD procurement contracts is evidenced, in part, by the \"systematically skewed (in\ncomparison to the market) allocation of patent rights\" in U.S. Government R&D contracts.1535\n8.395. The European Union argues that the fact that the primary objective of the \"LCA-relevant\"\nR&D at issue in this dispute may be military does not affect the overall conclusion that the DOD\nprocurement contracts (and assistance instruments) provide a benefit to Boeing. Under all such\nprocurement contracts and assistance instruments, the U.S. Government \"systematically receives\nless than a commissioning party would in a market -based transaction, and Boeing systematically\nreceives more than a commissioned party would in a market -based transaction\".1536 In any case,\none would also expect the U .S. Government, if it were acting according to market considerations,\nto \"use its tremendous bargaining power to extract economic benefit from the dual use aspects of\nthe resulting technologies\" so that it could re-invest in further R&D with a military objective.1537\n8.396. The European Union rejects the arguments of the United States that competitive bidding in\nthe award of DOD procurement contracts ensures that DOD did not pay more than adequate\nremuneration in its DOD procurement contracts. It argues that the App ellate Body rejected a\nsimilar argument made by the United States in the context of the original DOD assistance\ninstruments, and submits that these arguments can be rejected by the Panel on the same\nbasis.1538\n8.397. The European Union considers that both evidence of the terms that the market would have\noffered, and evidence of whether a financial contribution was provided on the basis of commercial\nconsiderations, can be relevant to determining the existence of benefit. 1539 In the present case,\nboth types of evidence indicate that the DOD procurement contracts provide a benefit. In addition,\nthe United States has provided no evidence to support its assertions that the intellectual property\nrights allocated to Boeing through any of the aeronautics R&D contracts and agre ements were\nprovided in exchange for Boeing accepting a lower profit margin, lower levels of cost\nreimbursement, or a lower fixed-price contract.1540\n8.398. The United States argues, that , for the same reasons as in the case of the pre -2007\nassistance instruments 1541, the financial contributions provided through the DOD post -2006\nassistance instruments modified by the DOD -Boeing Patent Licence Agreement , do not confer a\nbenefit.\n\n1535 European Union's response to Panel question No. 25, para. 138. See also European Union's response\nto Panel question No. 26, para. 162: \"{r}ather, once, as here, it is clear that there is a benefit associated with\nsystematically gifting the relevant IP rights in advance, that should be sufficient for the purposes of the\n{benefit} analysis.\" European Union's comments on the United States' response to Panel question No. 67,\nparas. 13 and 65: \"{t}he distribution of IP {under DOD procurement contracts and assistance instruments} is\nalways the same, and it is always more favourable to Boeing than it is to any commissioned party in the\nmarket, and less favourable to DOD than any commissioning party in the market. As the development of\ntechnology and IP is the whole purpose of the R&D contracts, this necessarily leads to a finding that benefit\nexists, as was well understood by the Appellate Body\". Mr Razgaitis also opines that the lack of bargaining\npower over intellectual property ownership under U.S. Government R&D contracts discredits the\nUnited States' arguments regarding the impact of competitive bidding on the exchange of value in DOD and\nNASA procurement contracts. According to Mr Razgaitis, because of the provisions of U.S. law that \"preclude\"\nDOD and NASA from bargaining over ownership of intellectual property rights, Boeing does not need to\n\"underbid\" to fully account for the net present value of the foreground intellectual property. Mr Razgaitis\nconsiders that there is no evidence that Boeing, or any other commissioned party, in practice reduces its\nRDT&E costs because of the Bayh-Dole provisions. (Second Supplemental Razgaitis Declaration, (Exhibit\nEU-1398), para. 49).\n1536 European Union's comments on the United States' response to Panel question No. 67, para. 13.\n1537 European Union's comments on the United States' response to Panel question No. 67, para. 13.\n1538 European Union's second written submission, para. 519; response to Panel question No. 25,\npara. 140. The European Union also argues that the discussion by the Appellate Body of the potential relevance\nof competitive bidding to the benefit determination in the Canada – Renewable Energy / Canada – Feed-in\nTariff Program case should be understood in the context of the market situation in that case: a standard\ncontract established by a provincial power authority vis-à-vis a large number of suppliers for a fungible good\n(electricity) at a standard price. By contrast, the present situation involves a small number of\nprivately-informed, heterogeneous suppliers submitting bids to asymmetrically informed government agencies\nover a heterogeneous product (R&D) with an uncertain outcome. (European Union's response to Panel question\nNo. 25, para. 137; comments on the United States' response to Panel question No. 83, para. 119 and fn 201).\n1539 European Union's response to Panel question No. 24, para. 134.\n1540 European Union's comments on the United States' response to Panel question No. 67, para. 25.\n1541 See paras. 8.16 to 8.22 above.\n\n8.399. With respect to DOD procurement contracts, the United States argues that the fact DOD\nwas \"buying something\" in the transactions must play a role in the benefit analysis, even if the\nPanel ultimately rejects the United States ' arguments that these measures are not financial\ncontributions because they are purchases of services.1542\n8.400. The context prov ided by Article 14(d) of the SCM Agreement indicates that the proper\nstandard for assessing whether government purchases confer a benefit is the adequate\nremuneration standard. Under this standard, a benefit would exist only if the U.S. Government\npaid too much for the rights it obtained. The European Union fails to address this standard.1543 The\nUnited States considers this a critical point because governments often seek to buy things that a\ncommercial actor would not want or does not need. The adequate remuneration standard therefore\nfocuses on what the government purchased, and not what a private entity would have purchased\nin similar circumstances, and asks whether the government paid too much (i.e. more than\nadequate remuneration) for what it sought to buy.1544\n8.401. The United States disagrees with the European Union that the Appellate Body's rejection of\nthe relevance of competitive bidding to the question whether the pre -2007 DOD assistance\ninstruments conferred a benefit, applies also to DOD procurement contrac ts.1545 The United States\nargues that the Appellate Body 's statement regarding competitive bidding in the original\nproceeding addressed only DOD assistance instruments, which the Appellate Body had\ndifferentiated from DOD procurement contracts. The Appellate Body's statements regarding\ncompetitive bidding in Canada – Renewable Energy / Canada – Feed-in-Tariff Program indicate\nthat the relevance of competitive bidding to the analysis of benefit depends on the facts. 1546\nMoreover, economically a rational bidder will factor the cost or value of a fixed term of a bid into\nthe economic value of the overall package, and adjust its bid accordingly.1547\n8.402. The United States asserts that most DOD procurement contracts were subject to full and\nopen competition, and those that we re not arose primarily because Boeing was doing follow -on\nwork, or had been down -selected from contracts that had been subject to full and open\ncompetition. The Panel can therefore have a high degree of confidence that DOD did not pay more\nthan adequate remuneration in its procurement contracts.1548\n8.403. The United States criticises the European Union 's approach to determining the commercial\nconsistency of the aeronautics R&D contracts and agreements as being based on only one term of\nthe contract (i.e. the allocat ion of patent rights). According to the United States, a thorough and\nsystematic review of the evidence indicates that the terms under which the U.S. Government\ncommissions research work are no more advantageous to the recipient than comparable\n\n1542 United States' first written submission, paras. 391 and 425.\n1543 United States' first written submission, paras. 392 and 426; second written submission, paras. 384\nand 426.\n1544 United States' second written submission, paras. 232 and 233. Although this argument appears in\nthe section of the United States' submission concerning the NASA aeronautics R&D measures, the\nUnited States explains that its observations as to why the post-2006 NASA procurement contracts do not\nconfer a benefit apply also to the DOD procurement contracts. (United States' second written submission,\npara. 384).\n1545 United States' second written submission, para. 235. See Appellate Body Report, US – Large Civil\nAircraft (2nd complaint), para. 665: \"intellectual property is not open to bidding; it is determined by US law.\nBecause each bidder knows in advance that this particular aspect of the transaction will not be altered with\nrespect to the competitors, ownership of any resulting intellectual property will not be a determinative element\nin how each bidder structures its proposals.\"\n1546 Appellate Body Reports, Canada – Renewable Energy / Canada – Feed-in-Tariff Program,\npara. 5.228: \"{a}lternatively, such benchmark may also be found in price-discovery mechanisms such as\ncompetitive bidding or negotiated prices, which ensure that the price paid by the government is the lowest\npossible price offered by a willing supply contractor.\"\n1547 United States' second written submission, para. 237.\n1548 United States' first written submission, paras. 393 and 427. The United States asserts that 23 out of\n30 NASA procurement contracts and 41 out of 61 DOD procurement contracts were subject to \"full and open\ncompetition\", which involved a public solicitation of proposals and consideration of all offers. Where that was\nnot the case, U.S. procurement regulations gave DOD and NASA \"alternative strategies to inject competition\ninto the process\". The United States asserts that only three of 29 NASA procurement contracts and 19 of 61\nDOD procurement contracts resulted from \"sole source\" solicitation. (United States' response to Panel question\nNo. 83, para. 82; Competition in DOD contracts with Boeing for FY 2007-FY 2012, (Exhibit USA-508); and\nCompetition in NASA contracts with Boeing for FY 2007-FY 2012, (Exhibit USA-509)).\n\ncommercial transactions.1549 This analysis should extend beyond patent rights to consider how\nother aspects of the contract affect the balance of value between the parties, in particular the price\nthat commercial commissioning parties pay for the rights they acquire.1550\n8.404. Moreover, the United States considers that the evidence of commercial collaborative R&D\narrangements before the Panel shows that, except for the issue of ownership of patent rights\n\"where NASA and DOD contracts mirror the most prevalent commercial practice \", there is no\nstandard division of intellectual property rights. Rather, parties to commercial research contracts\ndelineate patent rights in a variety of ways to suit their interests and objectives. The only normal\nmarket practice is for the parties to pay for the intellectual property rights that they require, and\nnot to pay for the rights they do not require.1551\n8.405. In this context, the United States notes that DOD is the exclusive buyer of modern air\nweaponry and weapons technology in the United States. Thus, when it comes to military\napplications of an invention invented during work under a DOD or NASA procurement contract, the\ngovernment use licence is de facto exclusive, in the sense that the contractor \"loses the economic\nleverage provided by ownership of the intellectual property rights with respect to future sales to its\nprimary customer, DoD \".1552 For an invention with purely or predominantly military applications,\nthe government use licence represents essentially all of the economic value of a patent. In t his\nrespect, the United States argues that the area covered by the government use licence granted to\nDOD (and NASA) under the procurement contracts is broader than the comparable rights granted\nto commissioning parties in the non -government collaborative R &D arrangements in evidence\nbefore the Panel and discussed by Messrs Berneman and Razgaitis. [***].1553\n8.406. Certain of the third parties (Brazil, Japan, and Korea) make arguments regarding the\nexistence of a benefit within the meaning of Article 1.1(b) of the SCM Agreement. These\narguments are summarized in Section 8.1.2 above.\n8.2.3.4.2 Evaluation by the Panel\n8.407. In this Section of the Report, we evaluate whether three categories of DOD aeronautics\nR&D measures confer a benefit on Boeing within the meaning of Article 1.1(b) o f the SCM\nAgreement:\na. six post-2006 DOD assistance instruments included in annex B of the United\nStates' Compliance Communication (these having been amended by the DOD -Boeing\nPatent Licence Agreement)1554;\nb. post-2006 DOD assistance instruments that have not be en modified by the DOD -Boeing\nPatent Licence Agreement; and\nc. DOD procurement contracts (both pre-2007 and post-2006).\n\n1549 United States' response to Panel question No. 67, para. 11.\n1550 The United States argues that a narrow approach to benefit, focused on isolated terms of a\ntransaction, is contrary to the SCM Agreement. It notes that in EC and certain member States – Large Civil\nAircraft, the panel and Appellate Body considered all aspects of the transaction, including the interest rate,\nterm of loan, royalties, fees, and expected delivery schedules as part of the evaluation as to whether, as a\nwhole, the terms the EU member States offered to Airbus were more favourable than those available in the\nmarket. (United States' response to Panel question No. 67, para. 13).\n1551 United States' response to Panel question No. 67, para. 28.\n1552 United States' response to Panel question No. 67, para. 15.\n1553 United States' response to Panel question No. 67, paras. 24 and 27.\n1554 Annex B to the United States' Compliance Communication lists the DOD assistance instruments that\nwere subject to the DSB recommendations and rulings in the original proceeding (the pre-2007 DOD assistance\ninstruments), along with a further six DOD assistance instruments that came into existence after the panel\nrequest in the original proceeding. These \"modified post-2006 DOD assistance instruments\" are referred to in\nparagraph 5 of the United States' Compliance Communication and are explicitly identified in the United States'\nresponse to the Panel's request for information pursuant to Article 13 of the DSU, dated 28 February 2013,\nresponse to question No. 23(c), para. 48.\n\n8.2.3.4.2.1 Certain post-2006 DOD assistance instruments that have been modified by\nthe DOD-Boeing Patent Licence Agreement\n8.408. We find in Section 8.1.3 of this Report that the grant to DOD of commercial use rights in\nrespect of Boeing-owned patents under the pre -2007 DOD assistance instruments effected by the\nDOD-Boeing Patent Licence Agreement has not brought those instrument s into line with prevailing\nmarket practices for collaborative R&D arrangements in such a way as to remove the benefit that\nthe Appellate Body had found was conferred through the pre -2007 DOD assistance instruments in\nthe original proceeding. This finding and the underlying analysis equally apply to the six post -2006\nassistance instruments that have been modified by the DOD-Boeing Patent Licence Agreement.1555\n8.409. We therefore find that the financial contributions in the form of payments and\naccess to DOD facilities, equipment, and employees, provided through certain post-2006\nassistance instruments that have been modified by the DOD -Boeing Patent Licence\nAgreement, confer a benefit within the meaning of Article 1.1(b) of the SCM Agreement.\n8.2.3.4.2.2 Post-2006 assistance i nstruments that have not been modified by the DOD -\nBoeing Patent Licence Agreement\n8.410. The United States confirms that the DOD -Boeing Patent Licence Agreement applies only to\nthe agreements listed in Attachment A thereto, and does not affect patent rights in re spect of any\nother DOD assistance instruments, such as the post -2006 assistance instruments (other than the\nsix post -2006 assistance instruments specifically identified as having been modified by the\nDOD-Boeing Patent Licence Agreement).1556\n8.411. As explained abo ve, the DOD -Boeing Patent Licence Agreement granted DOD , as\ncommissioning party, a limited commercial use licence in respect of Boeing -owned patents arising\nfrom work performed by Boeing under the DOD assistance instruments to which it applies. In\nSection 8.2.3.4.2.1 above, we conclude, based on our assessment of the evidence of comparable\nprivate collaborative R&D agreements , and of the opinions of the parties ' respective technology\nlicensing experts, that Boeing as commissione d party under the modified DOD assistance\ninstruments remains in a more favourable position as regards its ability to commercially exploit\nBoeing-owned patents than the commissioned parties under the private collaborative R&D\nagreements.\n8.412. The \"unmodified\" DOD assistance instruments do not grant DOD a commercial use licence\nin respect of Boeing-owned patents. Boeing therefore has a more extensive ability to commercially\nexploit its patents under these DOD assistance instruments than it has under the pre -2007 DOD\nassistance instruments and those post-2006 DOD assistance instruments that have been modified\nby the DOD -Boeing Patent Licence Agreement. Given that we conclude that the pre -2007 DOD\nassistance and those post -2006 DOD assistance instruments that have been modified by the\nDOD-Boeing Patent Licence Agreement , confer a benefit on Boeing, logically we must also\nconclude that the post-2006 DOD assistance instruments that have not been modified to grant\nDOD a commercial use licence, confer a benefit.\n8.413. This conclusion is also consistent with the Appellate Body 's finding that the pre -2007 DOD\nassistance instruments in the original proceeding, which contain the same allocation of rights in\nrespect of patents as the \"unmodified\", post -2006 DOD assistance instrume nts now before us,\ninvolved a more favourable allocation of intellectual property rights to Boeing as commissioned\nparty than the allocations to commissioned parties under [***] and therefore conferred a benefit\non Boeing.\n8.414. We therefore find that the finan cial contributions in the form of payments and\naccess to DOD facilities, equipment, and employees , provided to Boeing through the\npost-2006 DOD assistance instruments that have not been modified by the DOD -Boeing\nPatent Licence Agreement , confer a benefit within the meaning of Article 1.1(b) of the\nSCM Agreement.\n\n1555 See para. 8.49 above.\n1556 United States' response to Panel question No. 87, para. 158.\n\n8.2.3.4.2.3 DOD procurement contracts\n8.415. In Section 8.2.3.3.3, we characterize the payments and access to DOD facilities, and\nwhere applicable, DOD equipment and employees, provided to Boeing through the DOD\nprocurement contracts as principally and predominantly being purchases of R&D services by DOD\nfrom Boeing. In this Section of the Report, we evaluate whether, assuming arguendo that these\ntransactions constitute financial contributions within the meaning of Article 1.1(a)(1), they confer a\nbenefit within the meaning of Article 1.1(b).\n8.416. We recall that the original panel made no benefit findings as regards the DOD procurement\ncontracts, owing to its view that the DOD procurement contr acts were properly characterized as\n\"purchases of services\" and thus were outside the scope of Article 1.1(a)(1). The issue of whether\nthe payments and access to DOD facilities provided to Boeing through the DOD procurement\ncontracts constitute financial contributions that confer a benefit, was not addressed on appeal.1557\n8.417. In evaluating whether the payments and access to DOD facilities, and where applicable,\nDOD equipment and employees, provided to Boeing through the DOD procurement contracts\nproperly before us in this proceeding confer a benefit, we must first address the relevant standard\nthat we should apply. The European Union argues that we should apply the same benefit analysis\nas that applied by the Appellate Body in concluding that the original NASA pro curement contracts\nand DOD assistance instruments conferred a benefit. The United States argues that the proper\nstandard for assessing whether a financial contribution confers a benefit depends on the nature of\nthe financial contribution, and in the case o f the DOD procurement contracts, the fact that DOD\nwas \"buying something\" in the transactions must play a role.\n8.418. Given our characterization of the DOD procurement contracts as principally and\npredominantly involving purchases of R&D services by DOD from Bo eing, we consider that,\nconsistent with Article 14(d) of the SCM Agreement, the determination of whether the payments\nand access to DOD facilities, and where applicable, DOD equipment and employees, provided to\nBoeing through the DOD procurement contracts confer a benefit on Boeing , involves an\nassessment of whether Boeing was paid adequate remuneration for performing the R&D work.\n8.419. The European Union's benefit arguments in respect of the DOD procurement contracts are\npremised on the assumption that the DOD procurement contracts, like the NASA procurement\ncontracts and DOD assistance instruments, are properly characteri zed as composite transactions\nthat are \"akin to a species of joint venture \", which are \"analogous to \" equity infusions, and\ntherefore involve financial contributions within the meaning of Article 1.1(a)(1)(i) and (iii) of the\nSCM Agreement. The European Union has presented evidence of private actor collaborative R&D\narrangements, which it regards as demonstrating that DOD essentially \"paid too much\" because\nBoeing, as the commissioned party , obtained ownership of the inventions resulting from the R&D\nwork that it performed (and thus the rights to obtain patents in respect of those inventions), while\nDOD obtained a government use licence in respe ct of those patents. According to the European\nUnion, such an allocation of ownership of inventions is inconsistent with what market actors\ncommissioning and performing R&D would negotiate, as evidenced by the various private actor\ncollaborative R&D arrangements submitted into evidence and discussed in the BCI Appendix.1558\n8.420. As we explain in Section 8.2.3.3.3, we do not characterize the DOD procurement contracts\nas collaborative R&D arrangements. We therefore do not consider that a focus on the allocation of\nintellectual property rights as the \"output\" of a joint venture undertaking is an appropriate means\nof determining whether DOD as the purchaser of R&D services from Boeing, paid too much for\nwhat it acquired. The question of whether Boeing was paid adequate remuneration for performing\nthe R&D work for DOD requires a consideration of all of the terms of the transaction, including how\nmuch DOD paid in relation to the work that Boeing performed.\n\n1557 The Appellate Body declared moot the panel's finding that DOD procurement contracts are properly\ncharacterized as \"purchases of services\", and thus not financial contributions under Article 1.1(a)(1). It then\nindicated that it did not \"complete the analysis regarding the USDOD procurement contracts at issue in this\ndispute\" as neither party had requested it to do so. (Appellate Body Report, US – Large Civil Aircraft (2nd\ncomplaint), para. 620, fn 1298).\n1558 See Appendix 1.\n\n8.421. Even if we were to assess whether the financial contributions assumed to be provided\nthrough the DOD procurement contracts confer a benefit on Boeing by focusing solely on the\nallocation of the intellectual property rights arising from the performance of the R&D, in isolation\nfrom the other t erms of the transaction, we would not regard the private collaborative R&D\nagreements as appropriate benchmarks. As we note in paragraph 8.337, the DOD procurement\ncontracts involve complex, long-term purchases of R&D services by DOD from Boeing for the\ndevelopment of weapon systems. While the examples of private collaborative R&D agreements\nsubmitted in evidence (and discussed in greater detail in the BCI Appendix 1559) sufficiently\nresemble the relevant characteristics of the NASA procurement contracts and DOD assistance\ninstruments, in terms of the mutuality of interests that is an inherent feature of collaborative R&D\narrangements or R&D alliances, there is no such similarity between the private collaborative R&D\nagreements and the DOD procurement contracts. 1560 Unlike DOD assistance instruments, there is\nno cost-sharing between DOD and Boeing, and no relationship of collaboration between DOD and\nBoeing wherein they can be said to undertake a project of mutual interest. Unlike the NA SA\nprocurement contracts, the objectives of the commissioned R&D do not include enhancing the\ncompetitiveness of the U .S. aerospace industry. Rather, as we have said, the fundamental nature\nof the DOD-Boeing relationship under the DOD procurement contracts is one of purchaser of R&D\nservices for DOD and supplier of those services for Boeing.\n8.422. In the context of the DOD procurement contracts, it appears to us that the government\nuse licence granted to DOD in respect of Boeing -owned patents that may result fro m the\nperformance of the R&D work captures the economic value of the R&D for DOD. The\nEuropean Union's technology licensing expert, Mr Razgaitis, says that the value of intellectual\nproperty rights depends upon what such rights permit the recipient to do \"in real commercial\nterms\".1561 Under the DOD procurement contracts, the government use licence enables DOD to\nuse Boeing -owned patents without paying royalties. Third-party contractors to the\nU.S. Government (including Boeing 's competitors) also have the righ t to practice those patents\nroyalty-free in any work they conduct for the U .S. Government. As DOD is the sole purchaser of\nmodern air weaponry in the United States, Boeing 's ability to commercially exploit the R&D is, in a\npractical sense, limited. Moreover, Boeing's practical ability to exploit any military technologies for\ncommercial purposes outside the military context is circumscribed by U .S. legal restrictions on the\nuse of military technologies and data, such as classification of in formation under Ex ecutive\nOrder 12958 and export-controls under the ITAR and EAR.1562\n8.423. Boeing's practical ability to commercially exploit patents that it owns as a result of\nperforming R&D work for DOD, and the practical consequences of the government use licence\ngranted to DO D, differ in the context of DOD assistance instruments and DOD procurement\ncontracts. Although the formal allocation of patent ownership and use rights is the same under\nboth types of instrument, DOD assistance instruments by definition involve \"assistance\" in the\nsense of a transfer of a thing of value to a recipient.1563\n8.424. It is reasonable to assume that the nature of R&D undertaken in such a collaborative\ncontext would be expected by the parties to yield outcomes that Boeing would have the practical\nability to commercially exploit, otherwise a commercial actor like Boeing would be unlikely to\ncontribute to the costs of performing the R&D and there would be no legal basis for the DOD to\nhave selected an assistance instrument as the appropriate instrument for t he transaction with\nBoeing. Indeed, the fact that many of the assistance instruments were funded through program\nelements with explicitly dual-use objectives would tend to support this conclusion.\n\n1559 See Appendix 1.\n1560 We discuss the relevant characteristics of the DOD procurement contracts in Section 8.2.3.3.3 of\nthis Report. Our discussion of the private collaborative R&D agreements submitted in evidence is set forth in\nthe BCI Appendix (Appendix 1).\n1561 Razgaitis Declaration, (Exhibit EU-1262) (BCI), para. 43. We note also that the European Union\nsuggests that the \"formal ownership over patents\" is not nearly as relevant as a focus on the \"actual effective\ndistribution of the rights, taking into account the value of various non-exclusive and exclusive licences\", noting\nthat the value of patent ownership can be, and often is, redistributed through licensing, including through\nexclusive licences. (European Union's comments on the United States' response to Panel question No. 67,\npara. 46). (emphasis original)\n1562 See Section 8.2.3.2.5 for a description of the main legal restrictions on the dissemination of military\ntechnologies and data.\n1563 See Section 8.2.3.2.2 for a discussion of the legal framework governing the use of DOD\nprocurement contracts and assistance instruments.\n\n8.425. On the other hand, DOD and Boeing engage with each other o n a different footing in the\ncontext of the DOD procurement contracts. As we have explained above, in this context, the\ngovernment use licence would, as a practical matter, occupy the field of possibilities for\ncommercial exploitation of the military techn ologies, and Boeing's practical ability to commercially\nexploit its patented technologies, whether in a military or non -military context, is consequently\nmore limited. We therefore disagree with the assertions made by the European Union that,\nwhether the R&D in question is funded through procurement contracts or assistance instruments,\n\"the US Government systematically receives less than a commissioning party would in a\nmarket-based transaction, and Boeing systematically receives more than a commissioned pa rty\nwould in a market-based transaction.\"1564\n8.426. For the foregoing reasons, we do not regard the evidence of allocation of intellectual\nproperty rights under the private actor collaborative R&D agreements discussed in the BCI\nAppendix1565 as being probative of whet her the payments and access to DOD facilities, and where\napplicable, DOD equipment and employees, provided to Boeing through the DOD procurement\ncontracts, confer a benefit on Boeing.\n8.427. We also wish to address a line of argumentation advanced by the Europea n Union\nconcerning the relevance of DOD 's termination of its recoupment policy in 1992 to the question of\nwhether the payments and access to DOD facilities, and where applicable, DOD equipment and\nemployees, provided to Boeing through the DOD procurement contracts, confer a benefit.\n8.428. Between 1967 and 1992, the U.S. Government required contractors to reimburse DOD for\nnonrecurring costs when contractors made or intended to make commercial sales using dual -use\ntechnologies that had been funded with DOD invest ment.1566 DOD's stated purpose of this policy\nwas as follows:\nIt is the policy of the Department of Defense to recover a fair share of its investment\nin nonrecurring costs related to products, and/or a fair price for its contribution to the\ndevelopment of rel ated technology, when the products are sold, and/or when\ntechnology is transferred … .1567\n8.429. The U.S. Government terminated the DOD recoupment policy in June 1992. 1568 In doing\nso, it noted that the change in policy \"will assist the U.S. defense industry to be mor e competitive\non a global basis by reducing contracting costs through economies of scale, pricing incentives, and\nreduced administrative burdens\".1569\n8.430. The European Union argues that the recoupment policy that was in place from 1967 until\n1992 had been implem ented by the U.S. Government to ensure that DOD did not subsidize\nindustry. It refers in this regard to a U.S. Government response to a report on U.S. Government\nsupport to the U .S. commercial aircraft industry that had been commissioned by the European\nCommunities:\nThese policies also recognize the potential for crossover into development and\nproduction of civilian aircraft of benefits that may result from government support of\nresearch and development (R&D) on military items. … One of the objectives in\n\n1564 See e.g. European Union's opening statement at the meeting with the Panel, para. 30; response to\nPanel question No. 67, paras. 69 and 74; and comments on the United States' response to Panel question\nNo. 67, paras. 13, 17-22, and 63-67.\n1565 See Appendix 1.\n1566 Letter from GAO to D. B. Fascell, Chairman, Committee on Foreign Affairs, House of\nRepresentatives, B-214394, 6 September 1984, (Exhibit EU-274), p. 2.\n1567 United States Code of Federal Regulations, Title 48, section 271.002 (1989), (Exhibit EU-275),\nsection 271.002(a). (emphasis added)\n1568 Statement of M. Fitzwater, White House Press Secretary, \"New Policy on Federal Defense\nProcurement\", Dispatch, Vol. 3, No. 26, 29 June 1992, (Exhibit EU-277); U.S. DOD Directive, No. 2140.2\n(13 January 1993), (Exhibit EU-278), reference (a). The 1992 Agreement between the European Communities\nand the Government of the United States of America concerning the application of the GATT Agreement on\nTrade in Civil Aircraft on trade in large civil aircraft, which was the subject of a serious prejudice claim by the\nEuropean Communities in the original proceeding entered into force on 17 July 1992.\n1569 U.S. DOD, Final Rule, \"Recoupment of Nonrecurring Costs on Sales of U.S. Items\", 58 FR 16497\n(29 March 1993), (Exhibit EU-279), p. 1.\n\nimplementing this policy is to ensure that civil aircraft companies remain commercially\ncompetitive based on their own investment and technology.1570\n8.431. The European Union considers that the recoupment policy \"is evidence that DOD research\nin-fact has dual -use benefits for civil aircraft \" and demonstrates the United States ' knowledge of\nthe technological and pricing advantages for LCA that contractors receive from participating in\nDOD research.1571 Furthermore, by \"maintaining its policy of not recouping a fair share of DOD's\ncontribution to commercial sales\" since 1992, it can be inferred that the United States intends that\nBoeing receive such advantages.1572\n8.432. The United States argues that the change in recoupment policy in 1992 is irrelevant to this\nproceeding and does not support the European Union 's contentions. 1573 This is because the\nrecoupment regulations, when they were in effect, would not have applied to the research\nchallenged in this proceeding, or to the Boeing aircraft that allegedly applied those\ntechnologies.1574 Moreover, the United States argues that DOD did not terminate the recoupment\npolicy to give industry free access to commercially applicable technology. Rather, as DOD\nexplained in 1992 when implementing the final rule terminating the recoupment policy, \"this final\nrule will assist the U.S. defense industry to be more competitive on a global basis by reducing\ncontracting costs through economies of scale, pricing incentives, and reduced administrative\nburdens\".1575 The United States asserts that the recoupment policy was terminated because it\nimposed unnecessary burdens on both the U.S. Government and on contractors.1576 In addition, as\nmany of DOD 's procurement contracts are cost -based, the anticipated cost reductions would\ntranslate directly to lower acquisition costs for DOD. Consequently, the United States argues, the\nrecoupment regulations and their subsequent cancellation do not indicate that the challenged\nRDT&E program elements have the objective of conferring commercial advantages on commercial\nproducts.1577\n8.433. We are satisfied that the termination of the 1992 recoupment policy suggests that the U.S.\nGovernment recognizes \"the potential for crossover into development and production of civilian\naircraft of benefits that may result from government support of resea rch and development (R&D)\non military items \".1578 However, this recognition is expressed in very general terms and is not\n\n1570 European Union's first written submission, para. 240(emphasis original); second written submission,\npara. 396; response to Panel question No. 29, para. 176 (referring to U.S. Government, Response to the EC-\nCommissioned Report \"U.S. Government Support of the U.S. Commercial Aircraft Industry\", (March 1992),\n(Exhibit EU-276), p. 13).\n1571 European Union's second written submission, para. 397; response to Panel question No. 29,\npara. 176.\n1572 European Union's second written submission, para. 397 (emphasis original); response to Panel\nquestion No. 29, para. 176.\n1573 United States' second written submission, para. 325; comments on the European Union's response\n1574 United States' second written submission, para. 325; comments on the European Union's response\nto Panel question No. 29, para. 164. The United States notes that this issue was raised by the European\nCommunities in the original proceeding and that the United States had explained the application of the former\nrecoupment rules in comments on a question posed by the original panel:\nUnder those rules, DoD required recoupment fe es only for commercial sales of a \"DoD developed\nitem or a derivative of a DoD developed item.\" A \"DoD developed item\" would be a weapons\nsystem itself or other product whose development costs DoD paid, while a \"derivative\" of a DoD\ndeveloped item was defi ned as one that \"consists of common parts equal to, or more than\n10 percent of the Defense item.\" DoD does not develop large civil aircraft, and Boeing's large\ncivil aircraft do not have a commonality of more than ten percent with any DoD -developed\narticle. Therefore, the old recoupment rules would not have applied to sales of large civil aircraft.\n(United States' comments on the European Communities' response to Panel question No. 196(ii), para. 340\n(fns omitted))\nThe United States emphasizes that current Boeing LCA do not meet the definition of a derivative defense\nproduct for purposes of the former recoupment policy because they do not use parts that represent 10 percent\nof the value of a defense item. (United States' comments on the European Union's response to Panel question\nNo. 29, para. 164 and fn 236).\n1575 U.S. DOD, \"Recoupment of Nonrecurring Costs on Sales of U.S. Items\", United States Code of\nFederal Regulations, Title 58, No. 16497 (29 March 1993), (Exhibit USA-400), p. 1.\n1576 United States' comments on the European Union's response to Panel question No. 29, para. 164.\n1577 United States' second written submission, para. 325; comments on the European Union's response\n1578 U.S. Government, Response to the EC-Commissioned Report \"U.S. Government Support of the U.S.\nCommercial Aircraft Industry\", (March 1992), (Exhibit EU-276), p. 13.\n\nsufficiently linked to the DOD -sponsored R&D at issue in this proceeding. Indeed, we are not\npersuaded, based on the evidence before us, that DOD's previous recoupment policy would have\napplied to the DOD-sponsored R&D at issue in this proceeding. This is because there is insufficient\nevidence before us that would enable us to conclude that Boeing LCA would have fallen within the\ndefinition of a \"derivative\" of a DOD developed item under the previous recoupment rules. In sum,\nwe do not regard DOD 's termination of the recoupment policy in 1992 as providing probative\nevidence in support of an inference that the DOD procurement contracts (or as sistance\ninstruments) before us in this proceeding confer a benefit on Boeing.\n8.434. In sum, the European Union has not discharged its burden of demonstrating that the\npayments and access to DOD facilities, and where applicable, DOD equipment and employees,\nprovided to Boeing through the DOD procurement contracts, assuming these transactions involved\nfinancial contributions, confer a benefit on Boeing.\n8.435. The United States has presented evidence that in its view demonstrates that DOD\nemployed competitive practices in awarding the DOD procurement contracts to ensure that DOD\ndid not pay too much for the services that it contracted Boeing to perform. In light of our\nconclusion that the European Union has failed to discharge its burden to demonstrate that the\npayments and access to DOD facilities, and where applicable, DOD equipment and employees,\nprovided to Boeing through the DOD procurement contracts, confer a benefit on Boeing, we do not\nconsider it necessary to further address this evidence, or the United States ' arguments that the\nDOD procurement contracts were awarded on a competitive basis and that this demonstrates that\nDOD did not pay more for the R&D than it should have.\n8.436. Therefore, the Panel finds that, assuming arguendo that the payments and access to DOD\nfacilities, and where applicable, equipment and employees, provided to Boeing through DOD\nprocurement contracts funded under the relevant RDT&E program elements, which we have\ncharacterized as principally purchases of R&D services by DOD from Boeing, were t o involve\nfinancial contribution s within the meaning of Article 1.1(a)(1), the European Union has not\nestablished that the y confer a benefit within the meaning of Article 1.1(b). As a consequence,\nthere is no basis to find that the United States has failed to withdraw the subsidy within the\nmeaning of Article 7.8 of the SCM Agreement through these measures.\n8.437. In this Section 8.2.3.3 of the Report, we find that:\na. Transactions between DOD and Boeing under post -2006 DOD assistance\ninstruments, whether or not modified by the DOD -Boeing Patent Licence\nAgreement, involve financial contributions that confer a benefit.\nb. Assuming arguendo that the payments and access to any DOD facilities, and\nwhere applicable, equipment or employees provide d to Boeing through DOD\nprocurement contracts funded under the relevant RDT&E program elements,\nwhich we have characterized as principally purchases of R&D services by DOD\nfrom Boeing, were to involve financial contribution s within the meaning of\nArticle 1 .1(a)(1), the European Union has not established that they confer a\nbenefit within the meaning of Article 1.1(b).\n8.438. In light of this finding, we next evaluate whether the subsidies provided through the\npost-2006 DOD assistance instruments are specific withi n the meaning of Article 2 of the SCM\nAgreement.\n\n8.2.3.5 Whether the subsidy is specific\n8.2.3.5.1 Main arguments of the parties\n8.439. The European Union argues that the subsidies provided through the post-2006 DOD\nassistance instruments are specific within the meaning of Articl es 2.1(a) and 2.1(c) of the SCM\nAgreement.1579\n8.440. With regard to Article 2.1(a), the European Union relies on the original panel 's finding that\nthe DOD aeronautics R&D subsidies were specific to a \"group of enterprises or industries \" within\nthe meaning of Artic le 2.1(a) \"given the fairly narrow focus of R&D performed \" under the\nchallenged RDT&E program elements.1580 With regard to Article 2.1(c), the European Union recalls\nthat the original panel found that the DOD aeronautics R&D subsidies were specific because ,\nwhether viewed at the level of the individual RDT&E program elements, or the RDT&E Program as\na whole, DOD RDT&E went predominantly to firms in the defence industry. 1581 The European Union\nnotes that the United States did not appeal these findings, and argues that they should continue to\nhold true for the original RDT&E program elements and are fully applicable to any additional\nRDT&E program elements , given that these additional program elements have the same relevant\ncharacteristics and are funded pursuant to the same overarching DOD RDT&E Program.1582\n8.441. The European Union rejects the argument of the United States that , for purposes of the\nanalysis under Article 2.1(a), the subsidy at issue is the allocation of rights in patents on terms\nmore favourable than availa ble in the market. The European Union submits that the subsidies\nconsist not just of patent rights but also the provision of funding and support to Boeing for\nLCA-relevant R&D through certain of the original program elements, royalty-free beneficial use of\nLCA technologies developed with the subsidies provided under the original RDT&E program\nelements and additional subsidies to Boeing in the form of funding and access to government\nfacilities, equipment, and employees provided under additional program elem ents. The\nEuropean Union explains, in this respect, that while it considers the intellectual property rights\ndistribution when evaluating the benefit conferred, the \"benefit\" comprises not only the provision\nof intellectual property, but also the provision of payments, and access to government facilities,\nequipment, and employees , \"for less than what a market -based actor would demand \". The\nconsideration of intellectual property rights distribution, and comparison to intellectual property\nrights distribution in market benchmarks is \"just a means to the end of determining the existence\nof benefit from these financial contributions – it is not the 'benefit' of the 'subsidy', in and of\nitself\".1583\n8.442. Thus, the European Union considers that the reasoning of the Appell ate Body in the\noriginal proceeding , regarding the non -specificity of the allocation of patent rights as a\nself-standing subsidy , is not applicable to the assessment of specificity of the DOD aeronautics\nR&D subsidies before this Panel. The European Union recalls the Appellate Body 's statement that\nits findings in connection with the specificity of the allocation of patent rights, if considered to be a\nself-standing subsidy, \"do not traverse \" the original panel's findings related to the payments and\naccess to NASA facilities, equipment, and employees . The Europea n Union alleges that the\nUnited States is now attempting to use the Appellate Body 's findings to traverse the original\npanel's findings, in exactly the way that the Appellate Body cautioned that they could not be\nused.1584 The European Union denies the United States ' allegation that it has alleged a different\nsubsidy with respect to DOD aeronautics R&D funding and other support for aeronautics R&D from\nthat in the original proceeding , and asserts that it s claims address the exact same subsidies as\nwere found to exist in the original proceedings, and the continuation of those subsidies through\nsuccessor and closely-related aeronautics R&D programmes.1585\n\n1579 European Union's first written submission, paras. 386 and 387. We note that the European Union\ndoes not appear to make its argument under Article 2.1(c) in the alternative.\n1580 European Union's first written submission, para. 386; second written submission, para. 523.\n1581 European Union's first written submission, para. 386; second written submission, para. 523.\n1582 European Union's second written submission, para. 524.\n1583 European Union's second written submission, paras. 526-530. (emphasis original)\n1584 European Union's second written submission, paras. 531-533.\n1585 European Union's comments on United States' response to Panel question No. 28, para. 181.\n\n8.443. The United States argues that \"the patent rights subsidy alleged by the European Union\" is\nnot specific, within the meaning of Article 2.1 (a) of the SCM Agreement , because it is available\nunder any U.S. G overnment contract.1586 The standard addressed by Article 2.1(a) of the SCM\nAgreement is whether access to th e subsidy is limited. With respect to DOD assistance\ninstruments, which the European Union alleges involve financial contributions in the form of\npayments and provision of goods and services, the only benefit alleged is that Boeing receives\nmore favourable rights in patents than would be the case if a commercial actor had funded the\nresearch. The specificity analysis should therefore be based on that subsidy.1587\n8.444. The United States argues that the European Union incorrectly characterizes its claims as to\nthe existence of a benefit with regard to NASA and DOD contracts and agreements. According to\nthe United States, the European Union has not argued \"that {DOD} paid Boeing too much for the\nwork Boeing conducted and the intellectual property rights that resulted \", or \"that no\nmarket-based actor would make payments, or provide facilities, equipment, and employees to\nobtain research results that the market -based actor sought \".1588 Rather, the European Union 's\nallegation of the existence of a benefit is limited to the f act that Boeing receives more favourable\nrights in respect of patents than would be the case if a commercial actor had funded the research.\nThus, the specificity analysis must be limited to Boeing's allocation of rights in patents that is more\nfavourable than under a commercial transaction.1589\n8.445. The United States recalls, in this respect, that the Appellate Body in the original proceeding\nfound that the attribution of patent rights, if considered as a \"free-standing subsidy\" is not specific,\nbecause it is available under any U.S. Government R&D contract, by any agency, in any sector.1590\nThe United States also recalls that the Appellate Body indicated that a subsidy provided through a\nparticular program me, considered separately, will not be considered specific whe re multiple\nauthorities implement the same measure.1591\n8.446. The United States considers that the Appellate Body 's statement that its findings with\nrespect to whether the allocation of patent rights , if considered as a subsidy by itself, was specific\n\"do not trav erse the panel 's findings of specificity relating to the payments and other support\nprovided under the NASA USDOD contracts and agreements \", is not germane to this proceeding\nbecause the European Union is alleging a different financial contribution and ben efit, which\nrequires a different analysis of specificity.1592\n8.447. The United States considers that the European Union 's contention that specificity exists\nunder Article 2.1(a) because R&D performed is limited to defence topics , does not address the\nstandard established by the SCM Agreement (whether access to the subsidy is limited) because\nthe European Union has never established or even claimed that DOD aeronautics R&D\nprogrammes, taken as a whole, are a subsidy to Boeing.1593\n8.448. The United States argues that the Eur opean Union 's specificity arguments concerning\nArticle 2.1(c) are similarly flawed in that they address only the DOD aeronautics R&D programmes.\nThe European Union has presented no evidence as to de facto specificity because access to the\ntreatment in ques tion (the allocation of patent rights) is available through U.S. Government\ncontracting.1594\n8.2.3.5.2 Evaluation by the Panel\n8.449. The issue before us is whether the subsidies provided through the post -2006 DOD\nassistance instruments are specific within the meaning of Article 2.1 (a); i.e. whether \"the granting\n\n1586 United States' first written submission, section 3.3.4.4.4.\n1588 United States' second written submission, paras. 252, and 269. See also United States' first written\nsubmission, paras. 259 and 260; second written submission paras. 248 and 255.\n1589 United States' first written submission, para. 259; second written submission, paras. 248, 252, 255,\nand 269.\n1590 United States' first written submission, para. 291.\n1591 United States' second written submission, para. 269.\n1592 United States' first written submission, paras. 254 and 255.\n1594 United States' first written submission, para. 293.\n\nauthority, or the legislation pursuant to which the granting authority operates, explicitly limits\naccess to the subsidy to certain enterprises\".1595\n8.450. The disagreement between the parties on whether access to the subsi dy is explicitly\nlimited pertains to the same issue that we considered above in Section 8.2.2.5 in relation to the\npost-2006 NASA procurement contracts and Space Act Agreements ; namely, the appropriate\ncharacterization of the \"subsidy\" provided to Boeing through the DOD assistance instruments and\nthe corresponding identification of the \"legislation\" pursuant to which the \"granting authority \"\noperates1596, which frames the assessment of whether access to the subsidy is explicitly li mited to\ncertain enterprises for purposes of Article 2.1(a).\n8.451. The European Union argues that, for purposes of determining of whether access to the\nsubsidy is explicitly limited, the \"subsidy\" should be defined, in this case, as payments and the\nprovision of access to facilities, equipment, and employees on terms more favourable than\navailable in the market and that, as such, the subsidy is exactly the same \"subsidy\", access to\nwhich the original panel found to be explicitly limited. 1597 The United States argues that the\nsubsidy should be defined in terms of the allocation of rights in patents on terms more favourable\nthan available in the market and that, as such, the subsidy is the same \"subsidy\", access to which\nthe Appellate Body found not to be explicitly limited in the original proceeding.1598\n8.452. Before addressing this question of how the relevant subsidy should be defined in this case\nin order to ensure a proper analysis of whether access to the subsidy is explicitly limited, we\nbriefly recall the relevant findi ngs made in the original proceeding by the panel and the Appellate\nBody which are relied upon by the parties in support of their opposing views.\n8.453. First, in the original proceeding, the panel found that the payments and access to DOD\nfacilities provided to Boeing through DOD assistance instruments were financial contributions that\nconferred a benefit on Boeing, on the basis that no commercial entity would provide payments and\naccess to its facilities and personnel to another commercial entity on the conditio n that the other\nentity perform R&D activities principally for the benefit and use of that other entity. 1599 The panel\nthen assessed whether these subsidies were specific within the meaning of Article 2 on the basis\nthat the individual RDT&E program elements appeared to be the \"relevant frame of reference\".1600\nThus, the question the panel asked was whether the individual RDT&E program elements were\n\"specific\" for purposes of Article 2 of the SCM Agreement. Answering that question in the\naffirmative, the panel fo und that the \"fairly narrow focus of R&D \" performed under the 23\nindividual RDT&E program elements indicated that the subsidies provided through the assistance\ninstruments under those program elements were specific within the meaning of Article 2.1(a) of\nthe SCM Agreement.1601\n8.454. Although the panel 's specificity findings were not appealed, its financial contribution and\nbenefit findings were. The Appellate Body upheld the panel 's findings on financial contribution and\n\n1595 See paras. 8.208 through 8.210 above.\n1596 While an explicit limitation on access to the subsidy may also result from \"pronouncements or other\nactions of the granting authority\" (Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 757),\nour understanding is that the European Union bases its allegation that \"access to the subsidy\" is subject to an\nexplicit limitation on what it considers to be relevant legislative and regulatory provisions pursuant to which the\nsubsidy is granted.\n1597 In this view, the relevant \"legislation pursuant to which the granting authority operates\" consists of\nthe relevant legislative and regulatory provisions that authorize, and define the objectives of, DOD aeronautics\nand space R&D programmes.\n1598 In this view, the relevant \"legislation pursuant to which the granting authority operates\" consists of\nthe legislative framework and implementing regulations governing the distribution of intellectual property\nrights in U.S. Government R&D contracts.\n1599 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1184.\n1600 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1195.\n1601 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1196. The panel also considered that,\neven if it were necessary to examine specificity at the level of the RDT&E Program as a whole, the European\nCommunities had demonstrated de facto specificity, within the meaning of Article 2.1(c) of the SCM\nAgreement, by showing that between 1991 and 2005, almost half of all RDT&E funding went to five\nenterprises, all of which form part of the same industry. (Panel Report, US – Large Civil Aircraft (2nd\ncomplaint), para. 7.1197).\n\nbenefit, but on the basis of significantly di fferent reasoning, particularly as regards the benefit\ndetermination.1602\n8.455. Second, the question of specificity of the subsidies provided through the original DOD\nassistance instruments was also considered in the original proceeding in respect of the European\nCommunities' separate claim regarding the allocation of NASA and DOD patent rights, when\nviewed independently from the provision of payments and access to facilities, equipment, and\nemployees, as a self -standing subsidy.1603 In addressing this claim, the orig inal panel concluded\nthat the allocation of patent rights, if assumed arguendo to be a self -standing subsidy, would not\nin any event be specific, given that \"the allocation of patent rights is uniform under all\nU.S. Government R&D contracts, agreements, an d grants, in respect of all U.S. Government\ndepartments and agencies, for all enterprises in all sectors \".1604 The European Union appealed this\nfinding, as well as the panel's interpretation of Article 2.1 of the SCM Agreement.\n8.456. The Appellate Body observed that there may have been \"some overlap\" in the relationship\nbetween the European Communities' claim that payments and access to facilities, equipment, and\nemployees were subsidies, on the one hand, and its claim that the allocation of patent rights was a\nself-standing subsidy, on the other. 1605 The Appellate Body proceeded to address the\nparties' appeal of the panel 's finding on the basis that neither party had appealed the panel 's\napproach to the potential overlap between the European Communities' claims; howev er, the\nAppellate Body emphasized that \"any findings {it} make{s} in connection to the specificity of the\nallocation of patent rights do not traverse the Panel 's findings of specificity relating to the\npayments and other support provided under the NASA/USDOD contracts and agreements\".1606\n8.457. While the Appellate Body expressed reservations regarding the panel 's use of arguendo\nreasoning1607, it ultimately upheld the panel 's finding that the allocation of patent rights under the\nchallenged DOD assistance instruments, if conceived as a separate subsidy, was not specific within\nthe meaning of Article 2.1(a). In particular, the Appellate Body:\na. Affirmed the panel 's assessment of whether the \"patent rights \" subsidies in question\nwere specific by reference to the legal fram ework that exists in the United States for the\n\n1602 The Appellate Body found that the panel had not made a proper comparison of the terms of the\nDOD assistance instruments (and NASA procurement contracts) with the terms of a market transaction, as\nrequired under Article 1.1(b), and that the panel's reasoning as to whether the payments and access to\nfacilities provided under the DOD assistance instruments conferred a benefit could not be sustained. (Appellate\nBody Report, US – Large Civil Aircraft (2nd complaint), para. 647). The Appellate Body completed the analysis\nby determining whether the \"disposition of intellectual property rights under the NASA/USDOD measures at\nissue is consistent with what occurs in transactions between two market actors\". (Appellate Body Report, US –\nLarge Civil Aircraft (2nd complaint), para. 653). In the course of undertaking this analysis, the Appellate Body\nexpressed the view that \"the allocation of intellectual property rights is pre-determined under the US legal\nframework\". (Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 661). It concluded, based\non a comparison of the intellectual property rights terms of certain contracts, which it had decided to treat as\nmarket benchmarks for purposes of completing the analysis, that \"transactions in the market result in an\nequilibrium that is more favourable to the commissioning party than in the measures before us\". (Appellate\nBody Report, US – Large Civil Aircraft (2nd complaint), para. 662). Consequently, it found that the funding and\nsupport provided under the DOD assistance instruments conferred a benefit on Boeing, within the meaning of\nArticle 1.1(b) of the SCM Agreement. (Appellate Body Report, US – Large Civil Aircraft (2nd complaint),\npara. 666).\n1603 See Panel Report, US – Large Civil Aircraft (2nd complaint), paras. 7.1276-7.1294, for a description\nof Bayh-Dole Act, its associated legislative instruments and implementing regulations, and accompanying\nNASA-specific implementing regulations.\n1604 Panel Report, US – Large Civil Aircraft (2nd complaint), paras. 7.1276-7.1294. The panel found that\nthe U.S. Government has a general policy in place granting government contractors the option to retain title to\ninventions that arise from a funding agreement with the U.S. Government, pursuant to the Bayh-Dole Act,\n1983 Presidential Memorandum, the 1987 Executive Order, and the general and NASA-specific regulations.\n(See Panel Report, US – Large Civil Aircraft (2nd complaint), paras. 7.1276-7.1294).\n1605 See Appellate Body Report, US – Large Civil Aircraft (2nd complaint), paras. 726-728 and 740.\n1606 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 730.\n1607 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 741. The Appellate Body\nexpressed the view that the panel should have first determined whether a subsidy exists, stating that \"the\nassessment of specificity under Article 2.1 depends on how the subsidy was defined under Article 1.1, leaving\nlittle, if any, room for the adoption of an arguendo approach\". (Appellate Body Report, US – Large Civil Aircraft\n(2nd complaint), para. 739).\n\nallocation of patent rights under U.S. Government R&D contracts and agreements , and\npursuant to which NASA and DOD as granting authorities operate.1608\nb. Focused on the legislative and regulatory framework regulati ng the allocation of patent\nrights arising from R&D funded by the U .S. Government, which revealed that the\neligibility to receive the alleged \"subsidy\" is not limited to the class of enterprises that\nconducts aerospace R&D, and thus concluded that there wa s no a basis on which to find\nthat such a subsidy is explicitly limited to certain enterprises , and therefore specific\nwithin the meaning of Article 2.1(a) of the SCM Agreement.1609\n8.458. The Appellate Body reversed the panel for failing to address the European Communities'\nclaim of de facto specificity under Articles 2.1(c).1610\n8.459. As noted above, the parties disagree on whether the subsidies at issue in this proceeding\nare the same subsidies as those that were found to exist by the original panel , and should be\nfound to be specific under Article 2.1(a) based on the same analysis that led the original panel to\nfind the original measures to be specific; or whether the subsidies at issue here are different, such\nthat the subsidies should be found to be non -specific, in acco rdance with the Appellate Body 's\nanalysis of the European Union 's separate claim with respect to the allocation of NASA and DOD\npatent rights as a self-standing subsidy.\n8.460. While we disagree with the European Union 's assertion that its claim in this proceedin g\nregarding the alleged post-2006 DOD assistance instruments concerns the exact same subsidies as\nwere found to exist in the original proceeding and were found to be specific by the original panel,\nwe also do not accept the United States ' argument that the subsidies at issue are the same\nsubsidies found to be non -specific by the Appellate Body in the context of its analysis of the\nEuropean Communities ' challenge to the allocation of patent rights under all NASA and DOD\nprocurement contracts and assistance instruments as a self-standing subsidy.\n8.461. The measures challenged by the European Union in this proceeding are factually the same\ntype of measures as those challenged in the original proceeding i.e. payments and the provision of\naccess to facilities, (and in some cases) equipment and employees , under DOD assistance\ninstruments. However, we have found these measures to constitute subsidies on a legal basis that\ndiffers from the basis upon which the panel in the original proceeding found the measures to be\nsubsidies. In our view, this different legal characterization of the measures as subsidies means\nthat in determining whether \"access to the subsidy \" is explicitly limited , we cannot presume that\nthe finding of the original panel , that the subsidies granted through the original DOD assistance\ninstruments were specific under Article 2.1(a), is still applicable.\n8.462. Particularly with regard to our finding on how the financial contributions at issue confer a\nbenefit on Boeing, we note that in the original proceeding t he panel found a benefit on the basis\nthat \"no private entity acting pursuant to commercial considerations, would provide payments (and\naccess to its facilities and personnel) to another commercial entity on the condition that the entity\nperform R&D activi ties principally for the benefit and use of that other entity. At a minimum, it\nwould be expected that some form of royalties or repayment would be required in the event that\nfinancial contributions were provided on such terms. \"1611 In this proceeding, we f ind that the\nfinancial contributions provided under the DOD assistance instruments confer a benefit on the\nbasis that the allocation of rights to own and use patents under those measures is more favourable\nto Boeing as commissioned party than the allocation of rights to own and use patent is to\ncommissioned parties under collaborative R&D agreements between private parties. In our view,\nthe different basis on which we determine in this proceeding that the payments and any access to\nDOD facilities, equipment, and employees provided through the DOD assistance instruments\n\n1608 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 760.\n1609 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), paras. 782, 788, and 789.\n1610 The Appellate Body found that the panel's overall analysis was \"incomplete and cannot be\nsustained\" because the panel chose not to address the European Communities' claim of de facto specificity\nunder Article 2.1(c) of the SCM Agreement. (Appellate Body Report US – Large Civil Aircraft (2nd complaint),\npara. 793). Having reversed the panel, the Appellate Body stated that it was not persuaded that NASA or DOD\nexercised discretionary authority with respect to the allocation of patent rights, or that the share of NASA\ncontracts and DOD funding received by Boeing was disproportionate, so as to support a finding of specificity\nunder Article 2.1(c). (Appellate Body Report, US – Large Civil Aircraft (2nd complaint), paras. 799 and 800).\n1611 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1039.\n\nconstitute a financial contribution that confers a benefit means that we cannot adopt the original\npanel's finding of specificity regarding the pre-2007 DOD assistance instruments without first\nexamining whether such an approach remains appropriate.1612\n8.463. However, we do not consider that, as argued by the United States, the fact that the focus\nof our benefit analysis is the allocation of patent rights logically leads to the conclusion that the\nsubsidy at issue should be defined as the allocation of patent rights on terms more favourable than\navailable in the market and that , for purposes of determining whether access to the subsidy is\nlimited we must treat the Bayh -Dole Act, its associated legislative instruments and implementing\nregulations as the relevant subsidy scheme. Since a subsidy within the meaning of Article 1 is\ndefined in terms of financial contribution and benefit, it stands to reason that both financial\ncontribution and benefit must be ta ken into consideration in an analysis of whether access to the\nsubsidy is explicitly limited. Therefore, while we agree that the nature of the benefit found to exist\nobviously is a key consideration in the specificity analysis under Article 2.1(a), the que stion of\nwhether access to the subsidy is explicitly limited cannot always be answered by focusing solely on\nthe benefit.1613 In our view, the United States ' argument fails to properly consider the benefit in\nrelation to the financial contribution and the par ticular context in which that financial contribution\noccurs.\n8.464. As is clear from Sections 8.1.3 and 8.2.3.5.2, our benefit assessment has been conducted\nin the context of a characterization of the DOD assistance instruments as collaborative R&D\nagreements between DOD and Boeing. In this context, we considered it appropriate to assess\nwhether the financial contributions provide a benefit on the basis of an examination of how the\nR&D partners agree to al locate the ownership of inventions, the right to licence patents obtained\nfrom inventions discovered in the course of the collaboration, and the use of data generated from\nthe collaboration. Whether this will be the case for other R&D contracts and agreeme nts concluded\nbetween NASA, DOD or indeed , any other U.S. Government agencies, will depend very much on\nthe programmes in question, and a consideration of all of the terms of the transaction s, including\nthose relevant to the characterization of the financial contribution and benefit.\n8.465. For example, our characterization of the payments (and any access to DOD facilities,\nequipment or employees) provided to Boeing through DOD procurement contracts, as principally\ninvolving purchases of R&D services, has led us to conclude that, even assuming such transactions\ninvolved financial contributions, it would not be appropriate to undertake the benefit determination\nby focusing exclusively on the allocation of patent rights, or intellectual property rights more\ngenerally, in isolation from the other terms of the purchase. Thus, in the context of our\ncharacterization of the DOD procurement contracts as purchases of R&D services, the same\nallocation of patent rights that applies by virtue of the Bayh -Dole Act and related le gislative\ninstruments and implementing regulations would not result in the measures in question being\nsubsidies.1614\n8.466. Because the role of the allocation of intellectual property rights in our analysis of whether a\nmeasure constitutes a subsidy depends upon the particular context, we consider that , in\nascertaining whether access to the subsidy , is explicitly limited, we cannot treat the allocation of\nintellectual property rights on terms more favourable than available in the market as being the\nrelevant \"subsidy\" in and of itself. We therefore disagree with the premise on w hich the\nUnited States' argument is based, namely, that the \"subsidy\" at issue is the \"same subsidy\" that\nthe Appellate Body addressed in the context of the European Communities ' challenge to t he\nallocation of patent rights under all NASA procurement contracts and DOD assistance instruments\nwith Boeing as a \"self-standing subsidy\". While our benefit determinations in respect of the DOD\nassistance instruments do turn in certain respects on the allocation of patent rights set forth in the\nBayh-Dole regime, this is not because of the Bayh -Dole regime itself, but because , in the context\nof the DOD assistance instruments, a focus on the allocation of patent rights is appropriate. This is\nnot necessari ly the case for every U.S. Government R&D procurement contract, agreement or\ngrant, as is demonstrated by our conclusion that a focus on the same allocation of patent rights in\n\n1612 In this respect, we interpret the Appellate Body's statement, at para. 730 of its report, that any\nfindings it makes in connection with the specificity of the allocation of patent rights \"do not traverse the Panel's\nfindings of specificity relating to the payments and other support provided under the NASA USDOD contracts\nand agreements\" particularly in light of footnote 1534, as a statement regarding the scope of the appeal.\n1613 See also Appellate Body Report, US – Anti-Dumping and Countervailing Duties (China), paras. 377\nand 378.\n1614 See paras. 8.420 through 8.426 above.\n\nthe context of the DOD procurement contracts is inadequate to demonstrate that those measures,\nassuming they are financial contributions, confer a benefit.\n8.467. This being so, we consider that the appropriate legislative and regulatory framework for\nassessing whether the payments (and any access to DOD facilities, equipment or employees)\nprovided to Boeing through DOD assistance instruments , are specifi c within the meaning of\nArticle 2 of the SCM Agreement, involves DOD as the granting authority, and the RDT&E program\nelements which fund the DOD assistance instruments. Given that the focus of R&D performed\nunder the RDT&E program elements is narrowly directed toward research to meet current and\nfuture military needs in relation to the development of specific weapon systems, and that even\nthose few RDT&E program elements that have explicitly dual-use objectives concern development\nof technologies with military and civil applications that are narrowly-focused, we conclude that the\nsubsidies provided to Boeing through the post-2006 DOD assistance instruments funded under the\nRDT&E program elements are specific within the meaning of Article 2.1(a) of the SCM Agreement.\n8.468. In light of this finding, we do not consider it necessary to address the European Union 's\nargument under Article 2.1(c).\n8.469. Therefore, the Panel finds that subsidies provided to Boe ing through the\npost-2006 DOD assistance instruments are specific within the meaning of Artic le 2.1(a)\nof the SCM Agreement.\n8.470. Finally, we note that the European Union also argues that the subsidies provided to Boeing\nthrough the post-2006 DOD assistance instruments are specific pursuant to Article 2.3 of the SCM\nAgreement. Article 2.3 provides that \"{a}ny subsidy falling under the provisions of Article 3 shall\nbe deemed to be specific\". We reject this argument because, in Section 10 of this Report, we find\nthat the European Union has failed to establish that any subsidy at issue in this proceeding is\nprohibited by Articles 3.1 and 3.2 of the SCM Agreement.\n8.2.3.6 Amount of the subsidy and amount of the financial contribution\n8.2.3.6.1 Amount of the subsidy provided to Boeing through the DOD assistance\ninstruments\n8.471. In the previous Section, we f ind that payments and access to DOD facilities, equipment,\nand employees , provided to Boeing through the post -2006 DOD assistance instruments funded\nunder the relevant RDT&E program elements are specific subsidies within the meaning of Articles 1\nand 2 of the SCM Agreement.\n8.472. In this Section, we address the parties ' arguments regarding the amount of the subsidy\nprovided to Boeing by the post -2006 DOD assistance instruments. The amount of the subsidy\nrefers to the amount or magnitude of the benefit conferred by the financial contribution; i.e. the\nquantification of the advantage conferred on Boeing by the financial contribution, compared to\nwhat Boeing would have obtained in a market transaction.1615\n8.473. The European Union does not propose a specific estimate of the amount of the benefit\nconferred by the payments and provision of access to DOD facilities, equipment, and employees\nunder the DOD assistance instruments funded through the relevant RDT&E p rogram elements.\nRather, as with the NASA procurement contracts, cooperative agreements, and Space Act\nAgreements, the European Union argues that the amount of the benefit is a multiple of the\nfinancial contribution. Specifically, the European Union argues that, given the Appellate Body 's\n\"focus on the allocation of IP rights \", the value of the benefit conferred on Boeing by the DOD\nassistance instruments is based on the value of the technology developed from those aeronautics\nR&D instruments.1616\n\n1615 See Appellate Body Report, US – Large Civil Aircraft (2nd complaint), paras. 690 and 691 (explaining\nthat the original panel, in seeking to estimate the amount of funds transferred to Boeing under the relevant\nNASA procurement contracts, as well as the value of Boeing's access to NASA facilities, equipment, and\nemployees under the NASA instruments, had been estimating the amount of the \"financial contribution\", rather\nthan the amount of the \"benefit\").\n1616 European Union's first written submission, para. 385.\n\n8.474. To recall, in Section 8.2.3.4.2, the Panel finds that the payments and provision of access to\nDOD facilities, equipment , and employees to Boeing through the post -2006 DOD assistance\ninstruments (those that were modified by the DOD -Boeing Patent Licence Agreement, as well as\nthose that were not so modified), funded under the relevant RDT&E program elements, confer a\nbenefit on Boeing because the allocation of intellectual property rights and related licence rights\nunder those instruments is more favourable to Boeing as commissioned party than the\ncorresponding allocations to commissioned parties under the private collaborative R&D agreements\nbefore the Panel which evidence prevailing market practices for collaborative R&D arrangements.\nAccordingly, the amount of the benefit (and thus, th e subsidy) must logically correspond to the\nvalue of the difference between the terms regarding the allocation of intellectual property rights\nand related licence rights on which the financial contributions we re provided to Boeing under the\nDOD assistance instruments, and the terms regarding the allocation of intellectual property rights\nand related licence rights under which the financial contributions would have been provided in a\nmarket-based collaborative R&D arrangement.\n8.475. We address above the European Union's argument that the value of the benefit conferred\non Boeing by the NASA aeronautics R&D subsidies is a multiple of the financial contributions\nprovided by those instruments.1617 In doing so, we conclude that the European Union's approach is\nnot based on a correct legal understanding of what constitutes the benefit conferred by the\naeronautics R&D subsidies, and conflates the concept of the \"benefit\" conferred by the financial\ncontribution with the \"effects\" of a subsidy. 1618 Consistent with its arguments on this issue in the\ncontext of the NASA aeronautics R&D subsidies, the European Union cites as support for its\napproach statements by the Appellate Body in the original proceeding .1619 However, these\nstatements were made in the context of the Appellate Body's adverse effects findings, not its\nbenefit findings. We reject the European Union's arguments that the value of the benefit conferred\nby the DOD assistance instruments is a multiple of the financial contributio n for the same reasons\nthat we reject this argument in the context of the NASA aeronautics R&D subsidies.1620\n8.476. There is insufficient evidence on the record as to the amount of the subsidy in the sense of\nthe advantage conferred on Boeing resulting from the di fference between the terms regarding the\nallocation of intellectual property rights and related licence rights on which financial contributions\nwere provided to Boeing under the post -2006 DOD assistance instruments at issue and the terms\nregarding the allocation of intellectual property rights and related licence rights on which financial\ncontributions would have been provided to Boeing in a market -based collaborative R&D\narrangement.\n8.477. In light of the foregoing, we are unable to accept the European Union's arguments\nregarding the amount of the benefit provided to Boeing through the post -2006 DOD assistance\ninstruments under the relevant aeronautics R&D programmes. We therefore find that there is\ninsufficient evidence on the record as to the amount of the subsidy.\n8.2.3.6.2 Amount of the financial contribution provided to Boeing through the DOD\nassistance instruments\n8.478. The European Union estimates that the total amount of the financial contribution,\ncomprising all post-2006 payments as well as the value of access to DOD facilities, equipment, and\nemployees, under both procurement contracts and assistance instruments, is USD 2. 895 billion\nbetween 2007 and 2012.1621 The United States submits evidence valuing the payments received by\nBoeing under the DOD assistance instruments at [***] between 2007 and 2012.1622 With respect\n\n1617 See paras. 8.238 to 8.240 above.\n1618 See paras. 8.238 to 8.240 above.\n1619 See European Union's first written submission, para. 385 (citing Appellate Body Report, US – Large\nCivil Aircraft (2nd complaint), para. 945, quoting Panel Report, US – Large Civil Aircraft (2nd complaint),\npara. 7.1760: \"by their nature, the aeronautics R&D subsidies 'multiply the benefit from a given expenditure'\").\n1620 See paras. 8.238 to 8.240 above.\n1621 European Union's first written submission, para. 371. The European Union also provides an updated\nestimate of USD 4.513 billion between 2007 and 2014. (See Subsidies to Boeing's LCA Division (2013-2014\nUpdate) (Exhibit EU-1451), p. 3).\n1622 Funds Obligated to Air Force Agreements with Boeing for FY 2007-FY 2012, by program element,\n(Exhibit USA-108) (BCI); Funds obligated to other DOD entities' contracts and agreements with Boeing,\nFY 2007-FY 2012 (revised 1 December 2014), (Exhibit USA-157) (BCI); and Funds obligated to Navy contracts\nand agreements with Boeing, FY 2007-FY 2012, (Exhibit USA-273) (BCI). This figure includes payments\n\nto access to DOD facilities, equipment, and employees , the United States argues that only one\nagreement provided for access to facilities, the value of which is negligible.1623\n8.2.3.6.2.1 Main arguments of the parties\n8.479. In arriving at its estimate of the amount of the financial contribution, the European Union\ntakes as a starting point the full amount of the annual budget appropriation for each of the\nchallenged DOD RDT&E program elements. To recall, these are the program elements identified by\nthe European Union under which so -called \"dual -use\" research that allegedly contributed to\nBoeing's LCA division was conducted. These program elements can be divided into two categories;\nS&T/general aircraft program elements, and system s acquisition/military aircraft program\nelements.1624 The European Union's approach to the valuation of the amount of the financial\ncontributions provided by the relevant RDT&E program elements varies depending on the category\nof program element.\n8.480. For the S&T/general aircraft program elements, after having identified the total amounts of\nannual DOD funding for the relevant program element, the European Union allocates to Boeing a\nportion of that total based on the percentage of Boeing 's share of the market for U .S. military\nproducts.1625\n8.481. For the systems acquisition/military aircraft program elements, the European Union first\ndetermines the amount of total annual funding for each program element that was provided to\nBoeing, and then determines, based on the opinion of its expert Mr Rumpf, the percentage of\nfunding received under each such program element that can be deemed to be associated with so-\ncalled \"dual-use\" R&D.1626\n8.482. This methodology results in a figure of USD 5.275 billion between 2007 and 2012.1627 The\nEuropean Un ion notes, however, that this figure represents DOD spending on \"dual-use\"\ntechnology; i.e. technology with both military and civil application s, and that it is appropriate to\nconsider on ly the portion related to civil application as constituting the finan cial contribution to\nBoeing. The European Union therefore allocates to Boeing a percentage of this total figure, based\non the percentage of Boeing's total revenue represented by Boeing's LCA division.1628 The resulting\nfigure, which the European Union treats as its estimate of the total annual amount of the financial\ncontribution provided to Boeing by DOD, is USD 2.895 billion between 2007 and 2012 , and\nUSD 4.513 billion between 2007 and 2014.\n8.483. The European Union acknowledges that this \"top -down\" methodology fo r calculating the\namount of DOD's financial contribution to Boeing does not distinguish between procurement\ncontracts and assistance instruments, but argues that this is irrelevant because the original panel's\ndistinction between these types of instruments was rendered moot by the Appellate Body. 1629 The\nEuropean Union considers that the United States ' evidence of the amounts paid to Boeing under\nspecific assistance instruments and procurement contracts is unreliable, pointing to a U.S.\nGovernment Accountabili ty Office report criticising DOD 's financial management systems.1630\n\nreceived under the Long Range Strike Bomber program element, for which we have previously found there is\nno measures in existence within the scope of the European Union's claims regarding that RDT&E program\nelement. (See para. 7.216 above).\n1623 This was assistance instrument FA8650-08-2-3834, which provided access to NASA Langley's\nV/STOL wind tunnel. The United States notes that the assistance instrument does not place a value on this\naccess but asserts that Boeing had limited access, the value of which would be unlikely to modify the total\nvalue of DOD contributions appreciably. (See United States' first written submission, para. 277; and Air Force\nAgreement FA8650-08-2-3834, SOW, (Exhibit USA-110) (HSBI), p. 1).\n1624 See Section 8.2.3.2.3.\n1625 Rumpf Report, (Exhibit EU-23). This is calculated using data from Boeing's annual financial reports,\nand industry-wide data compiled by the Aerospace Industries Association.\n1626 Rumpf Report, (Exhibit EU-23), pp 9-16.\n1627 European Union's first written submission, para. 371.\n1628 European Union's first written submission, para. 371; and DOD Subsidies to Boeing's LCA Division\n(Exhibit EU-37).\n1629 European Union's second written submission, para. 469 (citing Appellate Body Report, US – Large\nCivil Aircraft (2nd complaint), fn 1298).\n1630 European Union's second written submission, para. 472 (citing U.S. Government Accountability\nOffice, \"DOD Financial Management: Improved Controls, Processes and Systems Are Needed for Accurate and\nReliable Financial Information\", No. GAO-11-933T, 23 September 2011, (Exhibit EU-1102)).\n\nFurther, the European Union argues that the value of the financial contribution is not limited to the\nvalue of payments made to Boeing, and thus the United States ' estimate impermissibly exc ludes\nthe value of other forms of support that DOD has provided.1631\n8.484. The United States submits evidence of the payments made under the assistance\ninstruments funded by the challenged RDT&E program elements since 2006.1632 The United States\nconfirms that this evi dence is based on reporting by DOD agencies responsible for overseeing the\nexpenditure of funds under the challenged program elements. 1633 The United States also argues\nthat, while the European Union criticises the United States' figures for being based on allegedly\nunreliable DOD financial management systems, the European Union 's figures, which are based on\nDOD budget data for each program element, are also the product of DOD's financial management\nsystems.1634\n8.485. The United States considers that the European Union 's \"top-down\" methodology for\ncalculating DOD's financial contribution to Boeing is based on a number of impermissible\nassumptions. First, the European Union's methodology assumes that the amount of funding\nreceived by Boeing under a particular program ele ment is in proportion to Boeing 's share of the\nmilitary aircraft market.1635 Further, there is no basis for the European Union's assumption that the\npercentage of so-called \"dual-use\" funding received by Boeing that is \"attributable\" to LCA has any\nrelationship to the percentage of total Boeing revenue s that is represented by Boeing's LCA\nsales.1636 Finally, the European Union 's methodology fails to distinguish between payments\nreceived by Boeing under DOD procurement contracts and those received under DOD assist ance\ninstruments.1637 The United States concludes that its evidence is the more probative as to the\nvalue of the financial contributions.1638\n8.2.3.6.2.2 Evaluation by the Panel\n8.486. The parties' estimates of the amount of the financial contribution provided to Boeing by\nDOD through the assistance instruments differ significantly because they are based on different\ncalculation methodologies.\n8.487. Like its estimate of the financial contribution provided by the NASA aeronautics R&D\nsubsidies, the European Union adopts a \"top-down\" methodology, based on estimating the\nproportion of the total annual budgets of the relevant DOD RDT&E program elements through\nwhich DOD's procurement contracts and assistance instruments with Boeing are funded that can\nbe allocated to Boeing. The United States adopts a \"bottom-up\" methodology, which estimates the\nvalue of payments made to Boeing under the individual DOD assistance instruments which , since\n2006, received funding under the challenged RDT&E program elements.\n8.488. We recall that in the original proceeding, the European Communities estimated the amount\nof the financial contribution represented by the DOD aeronautics R&D measures as USD 2.4 billion\nbetween 1991 and 2006, using broadly the same methodology for estimating the amount of the\nfinancial contrib ution that the European Union uses in th is proceeding.1639 The original panel\nrejected the European Communities' estimate because it did not distinguish between payments\nreceived by Boeing under procurement contracts, and those received under assistance\ninstruments.1640 This was significant because the panel had previously found that, while the DOD\n\n1631 European Union's second written submission, para. 471.\n1632 Funds obligated to Air Force Agreements with Boeing, FY 2007-FY 2012, by program element,\n(Exhibit USA-108) (BCI); Funds obligated to other DOD entities' contracts and agreements with Boeing,\nFY 2007-FY 2012 (revised 1 December 2014), (Exhibit USA-157) (BCI); and Funds obligated to Navy contracts\nand agreements with Boeing, FY 2007-FY 2012, (Exhibit USA-273) (BCI).\n1633 United States' second written submission, para. 261.\n1634 United States' second written submission, para. 260.\n1636 United States' first written submission, para. 300.\n1637 United States' first written submission, para. 301.\n1638 United States' second written submission, para. 260.\n1639 Panel Report, US – Large Civil Aircraft (2nd complaint), paras. 7.1199-7.1204.\n1640 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1206.\n\nassistance instruments constituted a specific subsidy to Boeing, the DOD procurement contracts\ndid not.1641\n8.489. We are similarly unable to accept the European Union 's estimat e of the amount of the\nfinancial contribution for the DOD aeronautics R&D subsidies in this proceeding . The\nEuropean Union's estimate suffers from the same legal deficiencies as its \"top-down\" estimate of\nthe financial contribution element of the NASA aero nautics R&D subsidies. 1642 First, it does not\ncorrespond to the nature of the financial contributions as found by the Panel; i.e. as payments and\nthe provision of access to DOD facilities (and where applicable, DOD equipment and employees)\nprovided to Boeing through assistance instruments funded under the relevant RDT&E program\nelements. Additionally, there is no rational basis to justify the main assumptions underpinning the\nEuropean Union 's methodology; namely, that the portion of the total annual budget for each\nRDT&E program element received by Boeing corresponds to Boeing 's share of the U.S. military\naviation market, or that the share of DOD funding of \"dual -use\" R&D that is applicable to LCA\ncorresponds to the percentage of Boeing 's total revenues represe nted by Boeing's LCA sales.\nThese deficiencies are compounded by the fact that it is impossible under the European Union 's\nmethodology to distinguish between payments and access provided under procurement contracts,\nand payments and access provided under assistance instruments. We have previously determined\nthat only payments and access provided under assistance instruments involve specific subsidies to\nBoeing. It would therefore be improper to adopt an estimate of the payments and access to\nfacilities (and equipment and employees) provided to Boeing under DOD assistance instruments\nthat includes the value of payments and access to facilities (and equipment and employees )\nprovided to Boeing under DOD procurement contracts. We do not consider, therefore, that the\nEuropean Union's methodology for estimating the amount of the financial contributions provided to\nBoeing through the DOD aeronautics R&D subsidies is capable of yielding an estimate that is\nprobative of the value of those financial contributions.\n8.490. The United States' estimate of the value of the financial contribution s provided to Boeing\nby the DOD aeronautics R&D subsidies is based on evidence submitted originally in response to the\nPanel's request under Article 13 DSU . Question 23 of the Panel's reques t to the United States\nsought:\n{A} list describing all technical data developed by Boeing, in whole or in part in the\ncourse of work performed, or with the use of government facilities, equipment,\nproperty, funds , or services of government employees, under each of the program\nelements listed in question 26, and any additional program elements identified in\nresponse to question 25, from FY 2006 – present … .1643\n8.491. In response, the United States submitted a list of all DOD assistance agreements under\nwhich Boeing received payments or access to facilities, equipment or employees under the\nchallenged RDT&E program elements. 1644 The United States later submitted, for those assistance\ninstruments which received payments after 2006, a list of the specific payments received .1645 This\nlist covers payments received by Boeing under the three categories of assistance instruments that\nwe find involve specific subsidies to Boeing:\na. pre-2007 DOD assistance instruments funded under the original challenged RDT&E\nprogram elements that re ceived payments from the relevant program elements in the\npost-2006 period1646;\n\n1641 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1206.\n1642 See paras. 8.272 and 8.273 above.\n1643 United States' response to the Panel's request for information pursuant to Article 13 of the DSU,\ndated 28 February 2013, response to question No. 23, para. 76. The United States provided a \"List of DOD\nCooperative Agreements, TIAs and OTAs\" as Exhibit US-13-6.\n1644 List of DOD Cooperative Agreements, TIAs and OTAs, (Exhibit US-13-6).\n1645 Funds Obligated to Air Force Agreements with Boeing for FY 2007-FY 2012, by program element,\n(Exhibit USA-108) (BCI); Funds obligated to other DOD entities' contracts and agreements with Boeing,\nFY 2007-FY 2012 (revised 1 December 2014), (Exhibit USA-157) (BCI); and Funds obligated to Navy contracts\nand agreements with Boeing, FY 2007-FY 2012 (Exhibit USA-273) (BCI).\n1646 There is some discrepancy in the United States' submissions as to the number of DOD assistance\ninstruments funded by the \"additional\" challenged RDT&E program elements. A review of the United States'\nevidence indicates that only one such program element which has been found to be within the scope of the\n\nb. post-2006 assistance instruments funded under the original RDT&E program elements\nthat received payments from the relevant program elements in the post-2006 period1647;\nc. post-2006 ass istance instruments funded under the \"additional\" RDT&E program\nelements that the Panel has ruled are within the scope of this proceeding and which\nreceived payments from those program elements in the post-2006 period.1648\n8.492. According to the United States ' evidence, the total amount of post -2006 payments\nreceived under the aforementioned three categories of assistance instruments is approximately\n[***].1649\n8.493. As regards the value of access to DOD facilities, and where applicable, DOD equipment and\nemployees, provided to Boeing through the DOD assistance instruments, the United States argues\nthat only one assistance instrument provided such access. This was Air Force Agreement\nFA8650-08-2-3834, which provided Boeing with access to the NASA 's Langley 14x22 foot V/STOL\nwind tunnel for a \"defined series of tests \".1650 The United States argues that, given the relatively\nlimited nature of Boeing 's access to the wind tunnel facilities, it is \"unlikely to modify the total\nvalue of DOD's contributions appreciably\".1651 The European Union did not specifically address this\nissue, and there is no indication in the United States' evidence with respect to Air Force Agreement\nFA8650-08-2-3834 as to the value of the temporary access provided to the NASA wind tunnel\nfacility.1652 We note, howeve r, that the United States ' evidence with respect to the NASA\naeronautics R&D subsidies estimates the value of access to a different wind tunnel model at\napproximately [***].1653 We consider it reasonable for present purposes to treat this figure as the\nbest a vailable evidence before us as to the value of access provided to the NASA wind tunnel\nfacility under Air Force Agreement FA8650-08-2-3834.\n8.494. The European Union argues that the United States' data as to the value of payments made\nunder individual DOD instrum ents is unreliable because DOD 's financial management systems\n\nproceeding, the Materials and Biological Technology (PE 0602715E) program element funded any assistance\ninstruments. These were: HR011-06-2-0008, FA8650-07-2-7716 and HR0011-10-2-0001. (See Funds\nobligated to Air Force Agreements with Boeing, FY 2007-FY 2012, by program element, (Exhibit USA-108)\n(BCI); and Funds obligated to other DOD entities' contracts and agreements with Boeing, FY 2007-FY 2012\n(revised 1 December 2014), (Exhibit USA-157) (BCI)). None of the remaining \"additional\" RDT&E program\nelements funded any assistance instruments.\n1647 These are the following assistance instruments: N00173-08-2-C009 (this instrument was funded by\nan \"unknown PE\" but the United States nonetheless includes it in an \"abundance of caution\", (see\nUnited States' first written submission, para. 274); FA8650-08-2-3834; and FA8650-11-2-2834. (See\nUnited States' first written submission, para. 271; second written submission, para. 258; Funds obligated to Air\nForce Agreements with Boeing, FY 2007-FY 2012, by program element, (Exhibit USA-108) (BCI); and Funds\nobligated to Navy contracts and Agreements with Boeing, FY 2007-FY 2012, (Exhibit USA-273) (BCI)).\n1648 These are the following assistance instruments: F49620-00-2-0384, F33615-03-2-2200,\nF3315-03-2-5202, FA8650-04-2-3449, FA8650-04-2-5000, and FA8650-2-3503. (See United States' first\nwritten submission, para. 278; and Funds obligated to Air Force Agreements with Boeing, FY 2007-FY 2012, by\nprogram element, (Exhibit USA-108) (BCI)).\n1649 Funds obligated to Air Force Agreements with Boeing, FY 2007-FY 2012, by program element,\n(Exhibit USA-108) (BCI); Funds obligated to other DOD entities' contracts and agreements with Boeing,\nFY 2007-FY 2012 (revised 1 December 2014), (Exhibit USA-157) (BCI); and Funds obligated to Navy contracts\nand agreements with Boeing, FY 2007-FY 2012 (Exhibit USA-273) (BCI). Unlike in the original proceeding, the\nUnited States' evidence includes post-2006 payments made under both procurement contracts and assistance\ninstruments funded by all of the challenged RDT&E program elements, including the systems\nacquisition/military aircraft program elements. This figure of USD 39.97 million represents USD 44.37 million\nless the USD 4.4 million in pre-2011 payments made under the Long Range Strike Bomber program element\nwhich we have previously ruled is outside the scope of the European Union's claims regarding that program\nelement. (See para. 7.216 above).\n1650 United States' first written submission, para. 277; Air Force Agreement FA8650-08-2-3834, SOW,\n(Exhibit USA-110) (HSBI), p. 1.\n1651 United States' first written submission, para. 277.\n1652 Air Force Agreement FA8650-08-2-3834, SOW, (Exhibit USA-110) (HSBI), p. 1.\n1653 Equipment provided under NASA contracts and agreements (revised 1 December 2014),\n(Exhibit USA-271) (BCI). This exhibit also values access to different wind tunnel facilities, provided under a\ndifferent procurement contract, at USD 2,000, but this figure represents only the cost of sending the wind\ntunnel model to Boeing. (See Equipment provided under NASA contracts and agreements (revised\n1 December 2014), (Exhibit USA-271) (BCI), fn 3).\n\nhave been criticised by the U.S Government Accountability Office. 1654 We do not consider that a\nreview that is generally critical of DOD 's financial management systems necessarily impugns the\nspecific reports that the United States received from the DOD agencies responsible for overseeing\nthe expenditure of funds under the challenged program elements, wh ich is the basis for the\nUnited States' evidence.1655 To the extent that it does, the European Union 's methodology, which\nrelies on DOD's reported RDT&E program element budget data, would be equally affected. In any\ncase, we do not consider that the European Union 's generalized criticism of DOD's financial\nmanagement systems justifies rejecting the evide nce on which the United States ' estimate is\nbased.\n8.495. Finally, we note that in response to a Panel question seeking information regarding the\nmagnitude of difference in Airbus and Boeing pricing in sales campaigns, the European Union\nsubmitted an update for 2 013 and 2014 of the amounts of the financial contribution provided by\nthe U.S. subsidies that are alleged to cause adverse effects through a price causal mechanism.\nThis information includes estimates of the amounts of the financial contributions provided through\nthe DOD aeronautics R&D measures for 2013 and 2014, based on the European Union 's\n\"top-down\" methodology.1656 There is no corresponding updated information regarding the\namounts of the financial contributions provided through the DOD assistance instru ments for 2013\nand 2014 based on the United States ' methodology. The absence of an estimate for 2013 and\n2014 based on the United States' methodology does not, however, mean that the Panel considers\nit appropriate to adopt the European Union's 2013 and 2014 figures as the best available evidence\nof the amounts of the financial contributions provided to Boeing through the DOD assistance\ninstruments for those years. This is because the legal deficiencies in the European Union 's\nmethodology are too significant.1657\n8.496. We find that, to the extent that the amount of the financial contribution provided\nto Boeing through the DOD aeronautics R&D subsidies is relevant to the Panel 's\nassessment of whether the United States ' has withdrawn the subsidy or taken\nappropriate steps to remove the adverse effects, within the mea ning of Article 7.8, the\nUnited States' estimate of approximately [***] is a more credible estimate of the\namount of the financial contribution provided to Boeing through the DOD assistance\ninstruments funde d under the relevant RDT&E program elements between 2007 and\n2012.\n8.2.3.7 Conclusion\n8.497. In light of our findings above regarding financial contribution, benefit, and specificity, we\nconclude that:\na. The European Union has established that certain transactions between DOD and Boeing\npursuant to post -2006 DOD assistance instruments involve specific subsidies within the\nmeaning of Articles 1 and 2 of the SCM Agreement. While we are unable to estimate the\namount of the subsidy on the basis of the evidence on the record, to the extent that it is\nrelevant to the Panel's assessment of whether the United States has withdrawn the\nsubsidy or taken appropriate steps to remove the adverse effects within the meaning of\nArticle 7.8 of the SCM Agreement, we find the United States' estimate of the amount of\n\n1654 European Union's second written submission, para. 472 (citing U.S. Government Accountability\nOffice, \"DOD Financial Management: Improved Controls, Processes and Systems Are Needed for Accurate and\nReliable Financial Information\", No. GAO-11-933T, 23 September 2011, (Exhibit EU-1102)).\n1655 United States' second written submission para. 261.\n1656 European Union's response to Panel question No. 164, para. 114; and Subsidies to Boeing's LCA\nDivision (2013-2014 Update), (Exhibit EU-1451), pp. 2 and 23-26. The United States did not submit an update\nof its estimates of the amount of the financial contribution provided to Boeing through the DOD assistance\ninstruments in its comments on the European Union's responses to the third set of Panel questions.\n1657 The European Union's estimates also include allocations from RDT&E program elements for which\nthe Panel has found there are no measures in existence, or the measures are outside the scope of this\nproceeding. This is the case with respect to the AWACS (PE 0207417F) program element, the KC-46, Next\nGeneration Aerial Refueling Aircraft (PE 0605221F) program element, the Multi-Mission Maritime Aircraft (P-8A)\n(PE 0605500N) program element, the Technology Transfer (PE 0604317F) program element, the IP ManTech\n(PE 0708011S) program element, and the Long Range Strike Bomber (PE 0604015F) program element. (See\nSection 7.3.3.3).\n\nthe financial contribution provided through the DOD assistance instruments of [***]\nbetween 2007 and 2012 to be the most credible estimate.\nb. The European Union has not established that certain transactions between DOD and\nBoeing purs uant to DOD procurement contracts involve specific subsidies within the\nmeaning of Articles 1 and 2 of the SCM Agreement, on the grounds that, assuming\narguendo that these measures were to involve a financial contribution within the\nmeaning of Article 1.1( a)(1)(i) of the SCM Agreement, they do not confer a benefit\nwithin the meaning of Article 1.1(b) of the SCM Agreement.\n8.2.4 FAA aeronautics R&D measure\n8.2.4.1 Introduction\n8.498. In this Section of the Report, we evaluate the European Union 's claim that the FAA\naeronautics R&D measure is a specific subsidy within the meaning of Articles 1 and 2 of the SCM\nAgreement and that, by granting or maintaining th is subsidy after the end of the implementation\nperiod, the United States has failed to withdraw the subsidy within the meani ng of Article 7.8 of\nthe SCM Agreement. The Panel concluded in Section 7.4 above that Boeing 's participation in the\nFAA CLEEN Program pursuant to the Boeing CLEEN Agreement constitutes a measure taken to\ncomply within the scope of this proceeding.\n8.499. Our analysis proceeds as follows:\na. In Section 8.2.4.2, we clarify aspects of the Boeing CLEEN Agreement identified by the\nEuropean Union as a specific subsid y which it alleges the United States grants or\nmaintains after the end of the implementation period and provide relevant background\ninformation.\nb. We evaluate whether the Boeing CLEEN Agreement challenged by the European Union\ninvolves a financial contribution ( Section 8.2.4.3) which confers a benefit\n(Section 8.2.4.4) within the meaning of Article 1 of the SCM Agreement.\nc. To the extent that we find that the Boeing CLEEN Agreement involves a financial\ncontribution that confers a benefit, we evaluate in Section 8.2.4.5 whether any such\nsubsidy is specific within the meaning of Article 2 of the SCM Agreement.\nd. We address the question of the amount of the subsidy and the amount of the financial\ncontribution in Section 8.2.4.6.1.\n8.2.4.2 The measure at issue\n8.2.4.2.1 The European Union's panel request\n8.500. In its panel request in this proceeding, the European Union alleges that the FAA, working\nin collaboration with NASA under the FAA Continuous Lower Energy, Emissions and Noise (CLEEN)\nProgram, maintains subsidies that presently benefit U.S. LCA producers by: ( a) \"provid{ing}\nBoeing with funding and access to government facilities, equipment, and employees for R&D\napplicable to the development, design, and production of LCA\"; or ( b) \"providing Boeing with\nroyalty-free use of the technologies developed with such funding and support, or use of such\ntechnologies on preferential terms \".1658 The European Union 's panel request states that \"{s}uch\nR&D support is authorized by 49 U .S.C. §§ 44501 -44517, 48102, and periodic reauthorization\nlegislation\".1659\n\n1658 European Union's request for the establishment of a panel, para. 15.\n1659 European Union's request for the establishment of a panel, para. 15.\n\n8.501. In the European Union's first written submission, its financial contribution arguments refer\nto the proper characterization of the Boeing CLEEN Agreement, an Other Transaction Agreem ent\nwhich governs Boeing's work under the FAA CLEEN Program.1660\n8.502. In response to a question from the Panel, the European Union explained that its challenge\nis directed at the Boeing CLEEN Agreement, as this \"is the only contract or agreement with Boeing\nunder the FAA CLEEN Program \".1661 The European Union indicates that its challenge includes\n\"CLEEN Program funding for Boeing 's ecoDemonstrator\" which, it submits, funded a series of test\nflights pursuant to the Boeing CLEEN Agreement.1662\n8.503. Taking into account the Euro pean Union's panel request and its subsequent clarification,\nwe consider that the European Union 's challenge is directed at the Boeing CLEEN Agreement, in\nparticular, the \"funding and access to government facilities, equipment, and employees \" provided\ndirectly to Boeing pursuant to the Boeing CLEEN Agreement. The funding and access is limited to\nthose payments made, and facilities, equipment, and employees provided, to Boeing and not\nfunding or support allocated to other CLEEN participants.\n8.2.4.2.2 The FAA CLEEN Program and the Boeing CLEEN Agreement\n8.504. The FAA inaugurated the FAA CLEEN Program in early 2008 in furtherance of the National\nAeronautics Research and Development Plan, with the objective to develop aeronautics R&D\nprogrammes focused on inter -agency environ mental and performance goals for the \"N+1\ngeneration\" of LCA designed to enter service in the 2015 to 2018 time -frame, focusing on the\nmost well -developed, near -term commerciali zable technologies. 1663 The FAA created the FAA\nCLEEN Program, while NASA created the Environmentally Responsible Aviation (ERA) Project under\nits Integrated Systems Research Program, to \"guid{e} coordinated efforts to bring to maturity new\ntechnologies to reduce fuel burn, emissions, and noise\".1664 In 2009, the FAA, whose R&D activities\nare focused on \"civil aviation research and development \", solicited research proposals for the FAA\nCLEEN Program from industry.1665 In June 2010, the FAA entered into five -year R&D agreements\nwith Boeing and four propulsion -focused companies on a 50 % cost-sharing basis: Boeing, General\nElectric, Honeywell, Pratt & Whitney, and Rolls -Royce North America. The total FAA contribution\nunder all of the agreements was set at USD 125 million.1666\n8.505. Boeing's work under the FAA CLEEN Program is governed by the CLEEN Other Tr ansaction\nAgreement DTFAWA -10-C-0030 (the Boeing CLEEN Agreement), which entered into effect on\n22 June 2010.1667 Under this agreement, the FAA maintains the authority to determine the work\nthat will be undertaken 1668, while Boeing manages the project, conducts the work and prepares\nreports on that work for the FAA. 1669 Specifically, Boeing is responsible for the integrated\nmanagement of the FAA CLEEN Program as well as two categories of R&D activities1670:\n\n1660 European Union's first written submission, para. 218; and Boeing CLEEN Agreement, (Exhibit\nEU-17).\n1661 European Union's response to Panel question No. 11, para. 77.\n1662 European Union's response to Panel question No. 11, para. 78.\n1663 R. Jefferies, FAA, \"CLEEN (Continuous Lower Energy, Emissions and Noise) Program Technologies\nDevelopment\" Presentation at the NASA ERA Bidder's Conference, 19 February 2010, (Exhibit EU-253), pp. 5,\n6 and 8; Executive Office of the President, National Science and Technology Council, National Aeronautics\nResearch and Development Plan, (December 2011), (Exhibit EU-254), pp. 27-30 and 50-53; and J. Wolfe,\nNASA, \"Aeronautics Research Mission Directorate Update with Emphasis on Integrated Systems Research\",\nPresentation at the 48th AIAA Aerospace Sciences Meeting, 4 January 2010, (Exhibit EU-255), p. 10.\n1664 See para. 7.280 above and Executive Office of the President, National Science and Technology\nCouncil, National Aeronautics Research and Development Plan, (2 February 2010), (Exhibit EU-16), p. 11.\n1665 CLEEN Solicitation, (Exhibit EU-20); and R. Jefferies, FAA, \"Continuous Lower Energy, Emissions,\nand Noise (CLEEN) Program Technologies Development\", Presentation, 27 October 2010, (Exhibit EU-256),\np. 6.\n1666 FAA Fact Sheet, \"Continuous Lower Energy, Emissions, and Noise (CLEEN) Program\", 24 June 2010,\n(Exhibit EU-257).\n1667 Boeing CLEEN Agreement, (Exhibit EU-17), p. 1. Note that the period of performance commenced to\nrun on 21 June 2010.\n1668 Boeing CLEEN Agreement, (Exhibit EU-17), parts B.3 and F.2.\n1669 Boeing CLEEN Agreement, (Exhibit EU-17), parts C and E.3.\n1670 Boeing CLEEN Agreement, (Exhibit EU-17), part I, sections C.1.2 and C.3.\n\na. technology maturation – research to mature specified technolog ies through to the\nprototype development stage on three research projects: wing adaptive trailing edges,\nceramic matrix composite acoustic exhaust nozzles, and the use of alternative fuels; and\nb. flight testing and assessment, including flight testing of a broad suite of technologies\nthrough Boeing's ecoDemonstrator programme.\n8.2.4.3 Whether there is a financial contribution\n8.2.4.3.1 Main arguments of the parties and third parties\n8.506. The European Union argues that the Boeing CLEEN Agreement has the same\ncharacteristics as the NASA procurement contracts and DOD assistance instruments before the\noriginal panel, and that the Panel should therefore conclude that the payments and access to\ngovernment facilities, equipment, and employees provided to Boeing under the Boeing CLEEN\nAgreement are similarly financial contributions under Article 1.1(a)(1) of the SCM Agreement.\n8.507. The European Union argues that the Boeing CLEEN Agreement shares many of the same\ncharacteristics that led the Appellate Body to conclude that the NASA procurement c ontracts and\nDOD assistance instruments before the original panel constitute d transactions that were \"akin to a\nspecies of joint venture\", which were analogous to a type of equity infusion, and therefore financial\ncontributions within the meaning of Articl e 1.1(a)(1) of the SCM Agreement. Specifically, the\nEuropean Union considers that payments under the Boeing CLEEN Agreement qualify as a direct\ntransfer of funds within the meaning of Article 1.1(a)(1)(i) while the provision of access to\nfacilities, equipment, and employees qualifies as a government provision of goods or services other\nthan general infrastructure under Article 1.1(a)(1)(iii).1671\n8.508. The European Union contends that, l ike the NASA procurement contracts and DOD\nassistance instruments before the ori ginal panel, the Boeing CLEEN Agreement involves payments\nby the FAA as well as the commitment of non -monetary resources. In addition, the\nEuropean Union argues that there is an element of collaboration in determining what research is to\nbe done, that Boeing develops valuable intellectual property rights, including patents, data rights ,\nand Boeing-owned trade secrets, and that the FAA and Boeing share the fruits of their research on\nthe basis of patent and data rights provided under the Agreement. 1672 The European Union further\ncontends that the transactions in question possess the same features that led the Appellate Body\nto conclude that the NASA procurement contracts and DOD assistance instruments before the\noriginal panel were analogous to equity infusions. These include that funding is provided in\nexpectation of some kind of return in the form of scientific and technical information, discoveries,\nand data expected to result from the research performed; there is no certainty that research will\nbe successful; the funders ' risks are limited to the amount of money they commit and the\nopportunity cost of other support they provide; and the FAA as the funder contributes to the\nproject by providing access to facilities, equipment, and employees, as some equity inve stors\nwould also do.1673\n8.509. The European Union also argues, in the alternative, that \"the transfer to Boeing of patent\nand other intellectual property rights in the technologies and data developed under the FAA CLEEN\nProgram additionally constitutes a provision of 'goods … other than general infrastructure ' within\nthe meaning of Article 1.1(a)(1)(iii) of the SCM Agreement \".1674 As in the case of NASA\naeronautics R&D measures, the European Union requests the Panel not to consider this alternative\nconception of the financial contribution \"unless it rejects the European Union's primary contentions\nwith respect to the characterization of the challenged aeronautics R&D measures\".1675\n8.510. The United States does not dispute that the Boeing CLEEN Agreement provides Boeing with\nfunding in the form of payments. 1676 The United States di sagrees that Boeing is provided with\n\n1671 European Union's first written submission, para. 218.\n1672 European Union's first written submission, para. 218.\n1673 European Union's first written submission, para. 218; second written submission, para. 338.\n1674 European Union's first written submission, para. 219. (emphasis added)\n1675 European Union's response to Panel question No. 32, para. 197.\n1676 United States' first written submission, para. 481 (\"{t}he {European Union} asserts that the CLEEN\nProgram provides a financial contribution to Boeing in the form of (i) funding; (ii) access to government\n\naccess to government facilities, equipment or employees under the Boeing CLEEN Agreement. The\nUnited States argues that contractual language in the Boeing CLEEN Agreemen t referring, for\ninstance, to USD 1,610,150.00 as \"Facilities and Equipment \", does not indicate that Boeing was\nprovided facilities or equipment of this value by FAA , but instead, refers to a \"type of funding\navailable in FAA 's system (i.e., Operations, R& D, F&E, etc.) \".1677 In addition, the United States\nargues that the fact that Boeing may have been granted access to NASA test facilities pursuant to\nwork under the FAA CLEEN Program is irrelevant to the question of whether the Boeing CLEEN\nAgreement provided facilities to Boeing.1678 The United States considers that Boeing's participation\nin a \"CLEEN kick off meeting\" or Boeing's participation in semi -annual government-led consortium\nmeetings to discuss CLEEN research does not constitute access to government employees.1679\n8.511. Finally, the United States argues that the European Union has failed to establish prima\nfacie that intellectual property rights accruing to Boeing pursuant to activities conducted under the\nBoeing CLEEN Agreement constitute a financial contribution. As a factual matter, the United States\nargues that there is no transfer of intellectual property rights to Boeing under U.S. law, as the\npatent is the property of the person who made the invention, and FAA does not transfer any\npatent to Boeing. Moreover, intellectual property is not a \"good\" within the meaning of the covered\nagreements and therefore cannot be a financial contribution in the form of a government provision\nof goods within the meaning of Article 1.1(a)(1)(iii) of the SCM Agreement.1680\n8.512. Certain of the third parties ( Brazil, Canada, Korea, and Japan) make arguments as to the\ndetermination of the existence of a financial contribution within the meaning of Article 1.1(a)(1) of\nthe SCM Agreement. These arguments are summarized in paragraphs 8.96-8.99 above.\n8.2.4.3.2 Evaluation by the Panel\n8.513. The question before us is whether payments to Boeing and the alleged provision to Boeing\nof access to government facilities, equipment, and employees pursuant to the Boeing CLEEN\nAgreement constitute s a financial contribution within the meaning of Article 1 of the SCM\nAgreement. We recall our discussion in paragraphs 8.106 to 8.111 above of the Appellate Body 's\ncharacterization of the NASA procurement contracts and DOD assistance instruments in the\noriginal proceeding as involving financial contributions.\n8.514. The United States does not dispute that Boeing receives payments under the Boeing\nCLEEN Agreement. However, the United States disagrees that under this Agreement the FAA\nprovides Boeing with access to government facilities, equipment or employees.\n8.515. We note that, much like the transactions pursuant to the NASA procurement contracts and\nDOD assistance instruments in the original proceeding, both parties under the Boeing CLEEN\nAgreement contribute to the arrangement. Boeing may make either cash or non -cash\ncontributions, including contributions of items such as equipment, facilities, labour, and office\nspace.1681 In ad dition, both parties share the output of their research. Boeing has title to\ninventions made by Boeing employees (and thus the right to ownership of the patents in respect of\nsuch inventions) while the U.S. Government receives a nonexclusive, royalty-free license to patent\nrights for inventions for government use. 1682 Boeing may also restrict from disclosure de signated\n\"limited rights data\".1683\n8.516. Regarding whether Boeing receives access to government facilities and equipment , t he\nEuropean Union argues that the ref erence to \"Facilities and Equipment \" in the Boeing CLEEN\n\nfacilities, equipment and employees; and (iii) the transfer of patent and intellectual property rights. However,\nthe {European Union}'s assertions regarding categories (ii) and (iii) are wrong\").\n1677 United States' first written submission, para. 482.\n1678 United States' second written submission, para. 434.\n1679 United States' second written submission, para. 432. See also United States' first written\n1680 United States' first written submission, paras. 484 and 485; second written submission, para. 437.\n1681 Boeing CLEEN Agreement, (Exhibit EU-17), part I, section B.3.\n1682 Boeing CLEEN Agreement, (Exhibit EU-17), section I.1 (incorporating clause 3.5-10); and FAA\nAcquisition Management System (AMS), Clause 3.5-10, \"Patent Rights – Ownership by Contractor\"\n(January 2009), (Exhibit EU-1063), section (d).\n1683 Boeing CLEEN Agreement, (Exhibit EU-17), section I.3(a)(iii).\n\nAgreement makes clear that agency policy allows for the provision of facilities and equipment.1684\nIn addition, the European Union submits that Boeing was provided access to NASA test facilities for\nits CLEEN Program research. The United States argues that the reference to \"Facilities and\nEquipment\" as a category of funding does not indicate that Boeing was actually provided facilities\nor equipment of this value by FAA. Instead, this is an account that is used to \"pay for research and\ndevelopment that improves air navigation facilities and equipment and aviation safety\nsystems\".1685 The United States therefore objects to including any specific amounts designated as\n\"Facilities and Equipment \" in our estimat e of the amount of payments made to Boeing. 1686 The\nUnited States also objects that any access to NASA test facilities provided to Boeing should be\nconsidered in relation to the Boeing CLEEN Agreement.\n8.517. The Boeing CLEEN Agreement includes several references to t he phrase \"Facilities and\nEquipment\", referring to specific funding amounts in the appended amendments, and modifications\nin specific years. 1687 FAA Order 2500.8B , which the European Union has submitted, states that\n\"Facilities and Equipment\" funding may be generally used for a number of purposes including, \"the\nconstruction, capital lease, or lease to purchase of facilities, land, equipment development and\nacquisition, initial training, initial spares , and software required to establish an operational\ncapability in connection with an air navigation, or experimental facility\".1688\n8.518. The Boeing CLEEN Agreement does not designate specific facilities or equipment items that\nare to be provided to Boeing. The European Union has not provided other evidence that indicates\nthat FAA provides access to specific facilities or equipment to Boeing. The European Union points\nto obligated amounts designated for \" Facilities and Equipment \" in the Boeing CLEEN Agreement,\nand argues that Boeing was provided access to NASA test facilities pursuant to the Boeing CLEEN\nAgreement.1689 We do not consider that the mere fact that Boeing used NASA test facilities or\nequipment necessarily indicates that such access to NASA facilities was provided pursuant to the\nBoeing CLEEN Agreement (as opposed to being provided pursuant to a NASA procurement\ncontract, cooperative agreement or Space Act Agreement ).1690 While we consider that the\nreference to obligated amounts designated for \"Facilities and Equipment\" is not sufficient to\nsubstantiate the European Un ion's assertion that the Boeing CLEEN Agreement involves the\nprovision of access to facilities and equipment to Boeing, we conclude that it is nevertheless\nrelevant to our assessment of whether there is a financial contribution. The Boeing CLEEN\nAgreement indicates that specified amounts designated as \"Facilities and Equipment\" were\nallocated to Boeing in certain years. These amounts were allocated to Boeing in the same way that\nother funding was allocated to Boeing under the Boeing CLEEN Agreement.1691 We therefore treat\nthese obligated amounts designated for \"Facilities and Equipment\" as further payments to Boeing.\n8.519. Regarding whether Boeing receives access to government employees, the European Union\ncontends that it is clear that government employees assisted in defining and carrying out research\nunder the program me. As an example of this, the European Union submits that FAA, NASA , and\nAFRL employees provided \"feedback\" to Boeing that \"helped the team focus on customer needs,\ninterests, and concerns\", as part o f work done on an adaptive trailing edge. 1692 It further submits\nthat section C.4.1 of the Boeing CLEEN Agreement refers to Boeing 's participation in semi -annual\n\n1684 European Union's second written submission, fn 515.\n1685 United States' first written submission, para. 482.\n1686 United States' first written submission, para. 482; second written submission, para. 434 and fn 603.\n1687 See Boeing CLEEN Agreement, (Exhibit EU-17), amendment/modification Nos. 0002, 0003 and 0004\n1688 U.S. Department of Transportation, Federal Aviation Administration, Funding Criteria For Operations,\nFacilities and Equipment, Research, Engineering and Development, and Grants-In-Aid For Airports Accounts,\nOrder 2500.8B, (1 October 2006), (Exhibit EU-1059), p. 4.\n1689 The United States has not provided lists of equipment and facilities provided to Boeing under the\nFAA CLEEN Agreement as it did in respect of particular NASA procurement contracts, cooperative agreements,\nand Space Act Agreements (See Equipment provided under NASA contracts and agreements, (revised\n1 December 2014) (Exhibit USA-271) (BCI); NASA SAAs with Boeing, (Exhibit USA-60) (BCI); and Boeing use\nof NASA computers, 2007-2012, (Exhibit USA-270) (BCI)).\n1690 In paras. 8.263 and 8.264 above, we find that Boeing was provided access to NASA facilities and\nequipment totalling approximately USD 9.36 million between FY 2007-FY 2012.\n1691 See Boeing CLEEN Agreement, (Exhibit EU-17), amendment/modification Nos. 0002, p. 2 (referring\nto \"Additional Funding\" of USD 1,610,150); 0003, p. 2 (referring to \"Add Funding\" USD 201,298); and 0004,\np. 2 (referring to \"F&E FUNDING\" of USD 4,490,050).\n1692 European Union's second written submission, para. 338 (referring to Boeing Engineering Operations\nand Technology, Monthly Technical progress report for June 2010, CLEEN Program, 15 July 2010 (formerly\nExhibit US-13-672), (Exhibit EU-1061) (BCI), p. 2).\n\nconsortium meetings to \"present the progress and results of ongoing work to both Government\nand non-Government attendees\".1693 The United States disagrees that feedback provided to Boeing\nby FAA, NASA , and the AFRL staff during a \"CLEEN kick off meeting \" is relevant because this\nfeedback does not constitute employees assisting Boeing in defining and carr ying out its research\nunder the Boeing CLEEN Agreement in a way that \"defrays any of Boei ng's research -related\nexpenses\".1694 The feedback exercise is not tantamount to a \"service\" to the contractor or \"an\neffort to help Boeing for its own sake\", but is to ensure that Boeing delivers what it was committed\nto deliver. 1695 Similarly, the United States argues that Boeing's participation in semi -annual\ngovernment-led consortium meetings to discuss CLEEN research is \"simply a mechanism for the\ngovernment parties to ke ep apprised of Boeing 's research \" and does not demonstrate that the\nBoeing CLEEN Agreement provides goods and services to Boeing.1696\n8.520. We are unconvinced by the United States ' argument that Boeing employees ' interaction\nwith FAA staff during CLEEN kick off meetings and other meetings relating to Boeing's participation\nin the FAA CLEEN Program does not involve the provision of access to FAA employees . We recall\nthat, in its discussion of post -2006 NASA-Boeing transactions at issue, the United States refer s to\nthree basic types of NASA staff activity when discussing employees provided through NASA\nprocurement contracts and Space Act Agreements. These are: ( a) contract specialists who are\nresponsible for \"administration and management aspects \" of specific contracts ; ( b) technical\nmonitors who are responsible for \"evaluating whether the contractor is performing the specified\nwork, determining whether a task is complete, and assessing whether the final report … is\ncomplete and meets the stated objectives \"; and ( c) NRA managers who \"coordinate operational\naspects\" such as \"organizing logistics for reviews {and} gathering input from technical leads \"\namong other responsibilities. 1697 The United States explain s that these employees \"ensure that\ncontractors are doing the work they are paid to do \" and that this is the access to employees that\nNASA provides. 1698 Given the United States ' view that these types of NASA staff participation\nconstitute \"access\" to employees under NASA contracts and agreements, we fail to see how\nfeedback provided by FAA employees to Boeing, ensuring that Boeing delivers what it is committed\nto deliver, or gathering information regarding Boeing 's research progress under the FAA CLEEN\nProgram is not the provision of \"access\" to employees in relation to the Boeing CLEEN Agreement.\n8.521. Based on the foregoing, we therefore conclude that the Boeing CLEEN Agreement is most\nappropriately characterized as a collaborative R&D arrangement under which FAA provides\npayments to Boeing and access to FAA employees. We do not identify on the evidence before us\nthat Boeing is provided access to particular U.S. Government facilities and equipment, although we\nconclude that specific amounts designated as \"Facilities and Equipment \" should be considered\npayments to Boeing. Accordingly, consistent with the approach of the Appellate Body in respect of\nthe NASA procurement contracts and DOD assistance instruments in the original proceeding, we\nconclude that the payments under the Boeing CLEEN Agreement involve direct transfer(s) of fund s\nwithin the meaning of Article 1.1(a)(1)(i) of the SCM Agreement , while the provision of access to\nFAA employees constitutes the provision of goods or services other than general infrastructure ,\nwithin the meaning of Article 1.1(a)(1)(iii) of the SCM Agreement.\n8.522. For these reasons, in light of the Appellate Body's reasoning in its\ncharacterization of the NASA procurement contracts and DOD assistance instruments in\nthe original proceeding, we therefore find that payments and access to government\nemployees pro vided to Boeing under the Boeing CLEEN Agreement constitute s a\nfinancial contribution within the meaning of Article 1.1( a)(1) of the SCM Agreement.\nSpecifically, the payments constitute a direct transfer of funds within the meaning of\nArticle 1.1(a)(1)(i), and the provision of access to FAA employees constitutes a\n\n1693 European Union's second written submission, paras. 337 and 338 (referring to Boeing CLEEN\nAgreement, (Exhibit EU-17), section C.4.1; and Boeing CLEEN Monthly Technical Progress Report for\nJune 2010, (15 July 2010) (formerly Exhibit US-13-672), (Exhibit EU-1061) (BCI), p. 2).\n1694 United States' second written submission, para. 432. See also United States' first written\nsubmission, para. 483; and second written submission, paras. 432-436.\n1695 United States' second written submission, para. 435.\n1696 United States' second written submission, para. 436.\n1697 United States' first written submission, para. 201. The United States additionally provided estimates\nfor the amounts of time each of these staff types contributed to procurement contracts and Space Act\nAgreements.\n1698 United States' second written submission, paras. 121 and 122.\n\ngovernment provision of goods or services other than general infrastructure under\nArticle 1.1(a)(1)(iii).\n8.523. In light of our finding above, we decline to address the European Union 's alternative\nargument that, what it refers to as the transfer to Boeing of patent and other intellectual property\nrights, could separately be considered a financial contribution under Article 1.1(a)(1)(iii) of the\nSCM Agreement.\n8.524. Having found that the payments to Boeing and the provision of access to FAA employees\npursuant to the Boeing CLEEN Agreement involve a financial contribution, we next consider\nwhether this financial contribution confers a benefit.\n8.2.4.4 Whether there is a benefit\n8.2.4.4.1 Main arguments of the parties and third parties\n8.525. The European Union argues that the financial contribution arising from the Boeing CLEEN\nAgreement confers a benefit within the meaning of Article 1.1(b) of the SCM Agreement for the\nsame reasons that the financial contributions provided through the NASA and DOD aeronautics\nR&D programmes confer a benefit. 1699 The relevant question to determine the existence of a\nbenefit is whether Boeing has received financial contributions on terms more favourable than those\navailable to the recipient in the market. Th e European Union argues that the FAA CLEEN Program\nin general, and the Boeing CLEEN Agreement in particular, results in the same distribution of\nintellectual property rights as the contracts and agreements funded by the NASA and DOD\naeronautics R&D program mes. The FAA provides funding for Boeing to perform R&D for the\nadvancement of Boeing 's own LCA development, and then allows Boeing to take ownership over\nthe fruits of the R&D.1700\n8.526. The European Union rejects the United States' view that the cost-sharing between FAA and\nBoeing that is a feature of the Boeing CLEEN Agreement must impact the benefit analysis. The\nEuropean Union submits that , under the benefit analysis in the original proceeding, the fact that\nBoeing contributed its own funds and resources under DOD assistance instruments did not change\nthe Appellate Body's characterization of those instruments as being akin to a species of joint\nventure in which a benefit was found to exist. Thus, it is clear that the Appellate Body found the\nexistence of a bene fit regardless of the presence of cost -sharing. In the same way as the DOD\nassistance instruments, the European Union argues that the Boeing CLEEN Agreement also seems\nto account for Boeing's cost -sharing by providing Boeing with additional rights to data developed\nwith government funding.1701\n8.527. The United States argues that t he European Union fails to identify the appropriate\nbenchmark with which to compare the terms of the Boeing CLEEN Agreement and has therefore\nfailed to make a prima facie case that the Boeing CLEEN Agreement confers a benefit under\nArticle 1.1(b) of the SCM Agreement.1702\n8.528. The United States argues that the Appellate Body 's assessment of the existence of a\nbenefit in the original proceeding applied only to contracts where Boeing 's contribution w as at\nmost equal to that of the U .S. Government. Any monetary contribution made by the recipient to a\njoint research project affects the net value obtained by the firm from the project. If the\ncontribution of the recipient is neglected there is a risk of overestimating the value obtained by the\nfirm from the project, and a finding of benefit could be made where a benefit d oes not exist.1703\nThe United States argues that the Appellate Body's findings on benefit in respect of the NASA\n\n1699 European Union's first written submission, para. 221.\n1700 European Union's first written submission, paras. 222-224; second written submission, paras. 346,\n347, and 350-353. The European Union contends that it relies on the same benchmarks, including R&D\ncontracts provided by the United States, and the comparison that the Appellate Body relied upon when\nanalysing the NASA aeronautics R&D contracts in the original dispute. (European Union's second written\nsubmission, para. 353).\n1701 European Union's second written submission, paras. 355-357.\n1702 United States' first written submission, paras. 486-488.\n1703 United States' second written submission, para. 439 (referring to Appellate Body Report, US – Large\nCivil Aircraft (2nd complaint) para. 663).\n\nprocurement contracts and D OD assistance instruments in the original proceeding do not apply to\nthe Boeing CLEEN Agreement because of the existence of a minimum cost -sharing requirement,\nthe fact that Boeing provides access to Boeing test aircraft , and the different way that intelle ctual\nproperty rights are distributed. 1704 According to the United States, t he Boeing CLEEN Agreement\ninvolves a contribution by Boeing that is greater than the FAA 's contribution, and is greater (on a\nproportional basis) than any of the contracts or agreements examined by the Appellate Body in the\noriginal proceeding. The United States considers that the European Union 's arguments do not\nindicate what a market -based actor would demand, nor do they compare that with the terms of\nthe Boeing CLEEN Agreement, bey ond making a \"superficial comparison to the IP allocation terms\nof NASA and DoD agreements\".1705\n8.529. Certain of the third parties ( Brazil, Korea, and Japan) make arguments as to the\ndetermination of the existence of benefit within the meaning of Article 1.1(b) of the SCM\nAgreement. These arguments are summarized in Section 8.1.2 above.\n8.2.4.4.2 Evaluation by the Panel\n8.530. In undertaking our evaluation, we first address the relevant standard that we should apply\nin determining whether the financial contributions under the Boeing CLEEN Agreement confer a\nbenefit.\n8.531. The European Union argues that we should adopt the same benefit analysis that the\nAppellate Body adopted in concluding that the NASA procurement contracts and DOD assistance\ninstruments at issue in the original proceeding conferred a benefit. The United States argues that\nthe appropriate standard for assessing whether a financial contribution confers a benefit depends\non the nature of the financial contribution , and that the assessment here mu st take into account\nthe degree of cost sharing involved in the Boeing CLEEN Agreement, the fact that Boeing\ncontributes use of Boeing test aircraft, and the degree to which intellectual property rights are\nshared.\n8.532. As we explain in Section 8.2.4.3.2 above, we have concluded that the Boeing CLEEN\nAgreement is properly characterized as a collaborative R&D arrangement on the basis of its\nrelevant characteristics. Accordingly, we have found that the payments provided to Boeing under\nthe Boeing CLEEN Agreement are financial contributions in the form of a direct transfer(s) of funds\nwithin the meaning of Article 1.1(a)(1)(i) of the SCM Agreement , and that any provision to Boeing\nof access to FAA employees under the Boeing CLEEN Agreement constitutes the provision of goods\nor services other than general infrastructure within the meaning of Article 1.1(a)(1)(iii) of the SCM\nAgreement.1706\n8.533. In the original proceeding, the Appellate Body characterized the NASA procurement\ncontracts and DOD assi stance instruments as collaborative R&D arrangements which involved\nfinancial contributions , and then determined whether these financial contributions conferred a\nbenefit by comparing the allocation of intellectual property rights under those contracts and\ninstruments with the allocations of intellectual property rights in collaborative R&D agreements ,\nwhich it treated as evidence of market practice. Given our conclusion that the Boeing CLEEN\nAgreement is a collaborative R&D arrangement, we consider it appr opriate to adopt the same\nstandard for determining whether the financial contribution provided under the Boeing CLEEN\nAgreement confers a benefit. We will therefore compare the allocation of intellectual property and\nrelated licence rights in respect of pa tents between FAA and Boeing under the Boeing CLEEN\nAgreement with the evidence before us concerning the allocation of such rights in collaborative\nR&D arrangements between market actors.\n8.534. The cost-sharing features of, and distribution of intellectual prope rty and related licence\nrights under, the Boeing CLEEN Agreement resemble those of the pre-2007 DOD assistance\ninstruments at issue in the original proceeding (prior to their modification by the DOD -Boeing\nPatent Licence Agreement), as well as those post-2006 assistance instruments that have not been\nmodified by the DOD -Boeing Patent Licence Agreement. 1707 As under those arrangements, Boeing\n\n1704 United States' first written submission, paras. 486-488; second written submission, para. 438.\n1705 United States' second written submission, para. 439.\n1706 See para. 8.522 above.\n1707 See Section 8.2.3.2.2 above.\n\nreceives payments and is provided access to U.S. Government employees. Boeing must also make\neither cash or non -cash (in -kind) contributions, including items such as equipment, facilities,\nlabour, and office space equal to 50% or more of the total cost of work specified in the\nAgreement.1708 As we explain in our evaluation of financial contribution 1709, pursuant to its\nparticipation in the Boeing CLEEN Agreement, Boeing may retain rights to own and use any\ninventions subject to gra nting the U.S. Government a nonexclusive, royalty -free license to patent\nfor inventions for government use.1710 Boeing may also restrict from disclosure designated \"limited\nrights data \" that involves trade secrets or other data that is \"commercial or financial and\nconfidential or privileged \" and \"pertain to items, components, or processes developed at private\nexpense, including minor modifications, or as otherwise identified as Limited Rights Data\".1711\n8.535. As we explain in Section 8.1.3 of this Report, based on our review of commercial R&D\narrangements, which the parties have submitted as evidence of relevant \"market benchmarks\"1712,\n\n8.536. The fundamental balance of intellectual property rights under the Boeing CLEEN\nAgreement remains one in which the U.S. Government lacks the right to obtain an exclusive\nlicence to practice Boeing-owned patents. Boeing's ability to commercially exploit its patents is not\ncontingent on any Government election not to exercise exclusive rights to licence those patents for\nitself. In this respect, the allocation of intellectual property rights under the Boeing CLEEN\nAgreement is more favourable to Boeing than the corresponding allocations to commissioned\nparties under the private collaborative R&D agreements before the Panel.\n8.537. In conclusion, we consider that the Boeing CLEEN Agreement confers a benefit based on\nthe same comparison to prevailing market practices for collaborative R&D arrangements that the\nAppellate Body relied upon in the original proceeding to find that the NASA procurement contracts\nand DOD assistance instruments conferred a benefit.\n8.538. The United States argues that the value of Boeing 's contribution under the Boeing CLEEN\nAgreement is greater than the corresponding value of Boeing contributions under the NASA\nprocurement contracts and DOD assistance inst ruments in the original proceeding, and that this\nhas an impact on whether the Boeing CLEEN Agreement should be found to confer a benefit.\n8.539. The Appellate Body considered a similar argument by the United States in the original\nproceeding; namely, that funds provided by Boeing to fund research projects under DOD\nassistance instruments must be taken int o account in comparing the terms of those instruments\nwith market benchmarks for purposes of determining whether a benefit has been conferred. While\nnoting that monetary contributions by a recipient to a joint research project affect the net value\nobtained by the firm from the project, and thus could distort the assessment of benefit, the\nAppellate Body nevertheless noted that the findings by the original p anel did not support the\nproposition that Boeing 's contribution to the projects meant that no benefit was conferred. The\nAppellate Body explained:\nAs part of its analysis of financial contribution, the Panel found that the scope of the\ngovernment licence over data rights varied when both Boeing and the USDOD\ncontributed funding to the project. More specifi cally, the Panel found that the\ngovernment received only \"limited rights \" to the data under the assistance\ninstruments (which were cost -sharing transactions), as opposed to the \"unlimited\nrights\" to the data that the government receives under USDOD procure ment contracts\n(where there was no cost -sharing). Thus, according to the Panel 's description,\n\n1708 Boeing CLEEN Agreement, (Exhibit EU-17), part I, section B.3.\n1709 See para. 8.515 above.\n1710 Boeing CLEEN Agreement, (Exhibit EU-17), section I.1 (incorporating clause 3.5-10); and FAA\nAcquisition Management System (AMS), Clause 3.5-10, \"Patent Rights – Ownership by Contractor\"\n(January 2009), (Exhibit EU-1063), section (d)(2).\n1711 Boeing CLEEN Agreement, (Exhibit EU-17), section I.3. Boeing may also designate \"Boeing\nproprietary information\", which includes data and technical information that is owned by Boeing and was not\nfirst produced during the performance of the Boeing CLEEN Agreement.\n1712 These private R&D agreements include Contracts A through F which were also submitted in the\noriginal proceeding and a number of other private, commercial collaborative R&D agreements. Our evaluation\nof the allocation of intellectual property rights and rights resulting therefrom (i.e. licence rights) under these\ncollaborative R&D arrangements is set out in a BCI Appendix (Appendix 1).\n\nBoeing's monetary contribution to the research project is not tied to the ownership\nrights over any inventions and data, which results from the operation of US la w.\nRather, Boeing's monetary contribution is consideration for the enhanced data rights\nthat it obtains under the assistance instruments, which grant more limited rights to\nthe government over the data. In the light of the Panel 's finding, it is therefore clear\nthat Boeing 's monetary contribution under the assistance instruments does not\nchange the bargain over the ownership of the inventions and data, it only changes the\nbargain as to the government's licence over the data rights.1713\n8.540. In the case of the Boein g CLEEN Agreement, we do not see that Boeing 's rights over any\ninventions resulting from the work performed thereunder are tied to Boeing 's monetary\ncontribution to the research project. Rather, as discussed by the Appellate Body with respect to\nthe DOD assistance instruments, Boeing's monetary contribution functions as consideration for the\nenhanced data rights that it obtains ; namely designated \"limited rights data\". We see no basis to\ndepart from the Appellate Body's assessment of this argument in the original proceeding in respect\nof the DOD assistance instruments.\n8.541. We therefore find that the financial contribution provided to Boeing through the\nBoeing CLEEN Agreement confer s a benefit within the meaning of Article 1.1(b) of the\nSCM Agreement.\n8.2.4.5 Whether the subsidy is specific\n8.2.4.5.1 Main arguments of the parties\n8.542. The European Union argues that the subsidy provided through the payments and access to\nfacilities, equipment, and employees provided to Boeing under the FAA CLEEN Program (pursuant\nto the Boeing CLEEN Agr eement) is specific within the meaning of Article 2.1(a) of the SCM\nAgreement. The European Union considers that the subsid y is explicitly limited to certain aviation -\nrelated industries because t he FAA CLEEN Program is expressly aimed at the development of\n\"technologies for civil subsonic jet airplanes \", and the FAA 's R&D activities, generally, are\nrestricted to \"civil aviation research and development \".1714 The European Union argues that the\nsubsidy is also specific within the meaning of Article 2.1(c) as the FAA has awarded contracts\nunder the FAA CLEEN Program to only five aviation companies. Accordingly, the subsidy\nprogramme is \"used by a limited number of industries \" which are also the predominant\nbeneficiaries of the subsidy.1715\n8.543. As with its specificity ar guments regarding the NASA aeronautics R&D measures, the\nEuropean Union argues that the assessment of specificity should not depend on the \"benefit\"\ndetermination, in the sense of the favourable distribution of intellectual property rights , but rather\nshould focus on the challenge to a subsidy involving funding and other support for research and\ndevelopment of near -term commerciali zable LCA -related technologies arising from the Boeing\nCLEEN Agreement.1716 The European Union regards the comparison of the allocations of intellectual\nproperty rights to market benchmark instruments as \"just a means to the end of determining the\nexistence of benefit from these financial contributions – it is not the 'benefit' or 'subsidy', in and of\nitself\".1717 Thus, the European Unio n submits that the findings of the panel and Appellate Body in\nthe original proceeding with respect to the European Union's separate challenge to the allocation of\npatent rights as a self -standing subsidy are not applicable to the question of whether the s ubsidy\nprovided to Boeing pursuant to the Boeing CLEEN Agreement is specific.1718\n\n1713 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 664. (fns omitted)\n1714 European Union's first written submission, paras. 225 and 226 (referring to CLEEN Solicitation,\n(Exhibit EU-20), p. 3; and Airport and Airway Trust Fund Authorizations, United States Code, Title 49,\nchapter 481, sections 48102 and 48103, (Exhibit EU-266), section 48102(a)); second written submission,\nparas. 359 and 361.\n1715 European Union's first written submission, para. 227; second written submission, para. 360.\n1716 European Union's second written submission, paras. 363, 366, and 368.\n1717 European Union's second written submission, para. 366. (emphasis omitted)\n1718 European Union's second written submission, paras. 364-365, and 367-369. See also\nEuropean Union's response to Panel question No. 28, paras. 165-168; and comments on United States'\nresponse to Panel question No. 28, para. 183. The European Union asserts that its claim before the original\n\n8.544. The United States argues that the Boeing CLEEN Agreement is not specific because it is not\nexplicitly limited to certain enterprises within the meaning of Article 2.1(a), or ot herwise de facto\nspecific within meaning of Article 2.1(c) of the SCM Agreement.\n8.545. The United States submits that the European Union 's allegation of the existence of a\nbenefit is limited to the fact that Boeing receives more favourable rights in patents tha n would be\nthe case if a commercial actor had funded the research. Thus, the United States argues that the\nspecificity analysis must focus on Boeing 's receipt of rights in patents more favourable than those\navailable to commissioned party under a commercia l transaction. The United States recalls that in\nthe original proceeding, the Appellate Body concluded that the a llocation of patent rights, if taken\nas a self -standing subsidy, would not be specific because it is available \"under any government\ncontract, by any agency, in any sector \". The Boeing CLEEN Agreement is also not specific for the\nsame reason. Thus, the United States submits that, e ven if the Boeing CLEEN Agreement involved\nan allocation of patent rights more favourable to Boeing as commissioned p arty than\ncorresponding allocations to commissioned parties under comparable commercial transactions\n(which, it contends, the European Union has not demonstrated), such a distribution would be\nconsistent with the distribution of patents rights generally av ailable under all government R&D\ncontracts.1719 The United States argues that the European Union 's specificity claim under\nArticle 2.1(c) of the SCM Agreement fails for the same reasons.1720\n8.2.4.5.2 Evaluation by the Panel\n8.546. The first question before us is whether the su bsidy provided to Boeing under the Boeing\nCLEEN Agreement is specific within the meaning of Article 2.1(a) of the SCM Agreement.\n8.547. We recall our analysis and findings in Sections 8.2.2.5.2 and 8.2.3.5.2 with regard to\nwhether subsidies provided to Boeing through post -2006 NASA procurement contracts and Space\nAct Agreements, and subsidies provided to Boeing through post-2006 DOD assistance instruments,\nare specific within the meaning of Article 2.1(a) of the SCM Agreement. The fundamental question\nthat arose in that regard was whether, for purposes of determining whether access to the subsidy\nis explicitly limited, the relevant subsidy should be understood to be the payments and the\nprovision of access to facilities, equipment, and employees on terms more favourable than\navailable in the market, as argued by the European Union ; or whether the relevant subsidy should\nbe understood to be the allocation of rights in patents on terms more favourable than ava ilable in\nthe market, as argued by the United States.1721\n8.548. In our view, the arguments of the parties with respect to whether the subsid y provided to\nBoeing through the Boeing CLEEN Agreement is specific within the meaning of Article 2.1(a) raise\nexactly the same question.\n8.549. We do not consider that, as argued by the United States, the fact that the focus of our\nanalysis of whether the Boeing CLEEN Agreement confers a benefit is the allocation of intellectual\nproperty rights, logically leads to the conclusion tha t the subsidy at issue should be defined as the\nallocation of intellectual property rights on terms more favourable than available in the market ,\nand that for purposes of determining whether access to the subsidy is limited , we must treat the\nBayh-Dole Act, its associated legislative instruments and implementing regulations as the relevant\nsubsidy scheme. Since a subsidy within the meaning of Article 1 is defined in terms of financial\ncontribution and benefit, it stands to reason that both the financial contribution and benefit must\nbe taken into consideration in an analysis of whether access to the subsidy is explicitly limited.\nTherefore, while we agree that the nature of the benefit found to exist is a key consideration in the\nspecificity analysis under A rticle 2.1(a), the question of whether access to the subsidy is explicitly\nlimited cannot always be answered by focusing solely on the existence of benefit.1722 In our view,\n\npanel related to the allocation of intellectual property rights was \"separate and distinct\" from its claims to the\nNASA and DOD aeronautics programmes. (European Union's second written submission, para. 364).\n1719 United States' first written submission, para. 489; second written submission, para. 440. See also\nUnited States' response to Panel question No. 28, paras. 124-126; and comments on European Union's\nresponse to Panel question No. 28, paras. 153-155.\n1720 United States' first written submission, para. 489.\n1721 Our analysis above in Sections 8.2.2.5.2 and 8.2.3.5.2 includes a summary of relevant findings\nregarding specificity made by the panel and the Appellate Body in the original proceeding.\n1722 See also Appellate Body Report, US – Anti-Dumping and Countervailing Duties (China), paras. 377\nand 378.\n\nthe United States' argument fails to properly consider the benefit in relation to the financial\ncontribution and the particular context in which that contribution occurs.\n8.550. We recall that in the case of the NASA aeronautics R&D measures, we consider it\nappropriate to assess whether the financial contributions provide a benefit on the basis of an\nexamination of the allocation of intellectual property rights because of our particular\ncharacterization of the nature of those measures. In contrast, a s illustrated by our analysis of\nbenefit in relation to DOD procurement contracts, where we characterize the financial contributions\ndifferently, we consider that a focus on the allocation of intellectual property rights as a basis to\ndetermine the existence of a benefit is not appropriate. Thus, in the context of our characterization\nof the DOD procurement contracts as purchases of R&D services, we find that the same allocation\nof patent rights that applies by virtue of the Bayh -Dole Act and related legislative instruments and\nimplementing regulations would not result in the measures in question being subsidies. 1723\n8.551. Because the role of the allocation of intellectual property rights in our analysis of whether a\nmeasure constitutes a subsidy depends upon the particular context, we consider that in\nascertaining whether \"access to the subsidy\" is subject to e xplicit limitations, we cannot treat the\nallocation of intellectual property rights on terms more favourable than available in the market as\nbeing the relevant subsidy in and of itself. Therefore , we disagree with the United States that the\nsubsidy provided through the Boeing CLEEN Agreement can be characterized as a \"patent rights\nsubsidy\", which is the same subsidy that the Appellate Body considered in its analysis of the\nEuropean Union's alternative claim regarding the allocation of intellectual property rights as a self-\nstanding subsidy. As a consequence, we also disagree that the Bayh -Dole Act, its associated\nlegislative instruments and implementing regulations constitute the appropriate legislative and\nregulatory framework that we must consider , for purposes of determining whether the legislation\npursuant to which the granting authority operates explicitly limits access to the subsidy to certain\nenterprises.1724\n8.552. We recall that in the case of the NASA aeronautics R&D subsidies at issue in the original\nproceeding, the basis for the panel's finding of an explicit limitation of access to the subsidy was\nthe existence of restrictions on the scope of NASA's R&D activities to aeronautics and space and\nthe particular objectives pursued by NASA with these activitie s. Thus, the original panel found that\nthe access to the subsidy was explicitly limited to certain enterprises because the very nature of\nthe research inherently limited access to the subsidy to \"certain enterprises that participate in\naeronautics-related R&D\".1725 In our view, access to the subsidy that we have found to exist in this\nproceeding in respect of the Boeing CLEEN Agreement is subject to a similar, explicit limitation. In\nparticular, we find that access to the subsid y is explicitly limited because the focus of the R&D\nconducted under the Boeing CLEEN Agreement is aerospace-related.\n8.553. Therefore, we find that the subsidy provided to Boeing through the Boeing CLEEN\nAgreement is specific within the meaning of Article 2.1(a) of the SCM Agreement. In light\nof this conclusion, we do not consider it ne cessary to address the European Union's alternative\nargument under Article 2.1(c).1726 Finally, we note that the European Union also argues that the\nsubsidy provided to Boeing through the Boeing CLEEN Agreement is specific pursuant to Article 2.3\nof the SCM Agreement. Article 2.3 provides that \"{a}ny subsidy falling under the provisions of\nArticle 3 shall be deemed to be specific\". We reject this argument because, in Section 10 of this\nReport, we find that the Europ ean Union has failed to establish that any subsidy at issue in this\nproceeding is prohibited by Articles 3.1 and 3.2 of the SCM Agreement.\n\n1723 See Section 8.2.3.4.2.3 above.\n1724 Because of the need to consider financial contribution and benefit together in determining whether\n\"access to the subsidy\" is explicitly limited, we consider that this is not a situation in which \"multiple authorities\nare implementing the same measure\". (United States' second written submission, para. 246).\n1725 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1048.\n1726 We note that the FAA entered into R&D agreements (in the form of other transaction agreements)\nonly with Boeing and four propulsion-focused companies (General Electric, Honeywell, Pratt & Whitney, and\nRolls-Royce North America) under the FAA CLEEN Program.\n\n8.2.4.6 Amount of the subsidy and amount of the financial contribution\n8.2.4.6.1 The amount of the subsidy provided to Boeing through t he FAA CLEEN\nAgreement\n8.554. In the previous Section, we f ind that the transactions pursuant to the post-2006 Boeing\nCLEEN Agreement constitute a specific subsidy within the meaning of Articles 1 and 2 of the SCM\nAgreement. In this Section, we address the partie s' arguments regarding the amount of the\nsubsidy provided to Boeing by the Boeing CLEEN Agreement as well as the amount of the financial\ncontribution. The amount of the subsidy, in our view, refers to the amount or magnitude of the\nbenefit conferred by the financial contribution; i.e. the quantification of the advantage conferred\non Boeing by the financial contribution, compared to what Boeing would have obtained in a market\ntransaction.\n8.555. The European Union argues that the value of the benefit from the Boein g CLEEN\nAgreement should be based on the value of the technology developed under the Boeing CLEEN\nAgreement, which can be valued as a \"multiple of the financial contribution \" and can \"last for\nmany years, given the long life of the technologies created \".1727 The United States does not\naddress the European Union's argument in the context of the Boeing CLEEN Agreement.\n8.556. We address this argument by the European Union in Section 8.2.2.6 when addressing the\nNASA aeronautics R&D measures at issue, where we find that the European Union's assessment of\nthe benefit is based on a conflation of the concept of benefit with the effects of a subsidy. We\ntherefore conclude that there is insufficient evidence on the record to enable us to estimate t he\namount of the subsidy in the sense of the difference between the terms regarding the allocation of\nintellectual property rights and related licence rights on which the financial contributions were\nprovided to Boeing under the NASA procurement contracts and cooperative agreements and the\nterms regarding the allocation of intellectual property rights and related licence rights under which\nthe financial contributions would have been provided in a market -based collaborative R&D\narrangement. In our view, t hat conclusion also applies to the European Union's argument as to\nhow to determine the amount of the subsidy provided through the Boeing CLEEN Agreement.\n8.557. In light of the foregoing, we are unable to accept the European Union 's argument\nregarding the amount of the benefit provided to Boeing through the Boeing CLEEN\nAgreement. We therefore find that there is insufficient evidence on the record as to the\namount of the subsidy provided to Boeing through the Boeing CLEEN Agreement.\n8.2.4.6.2 The amount of the financial contr ibution provided to Boeing through the\nBoeing CLEEN Agreement\n8.2.4.6.2.1 Main arguments of the parties\n8.558. The European Union argues that the amount of the financial contribution under the Boeing\nCLEEN Agreement is \"at least \" USD 27.99 million between 2010 and 2014, base d on the total\nvalue of the Boeing CLEEN Agreement. In particular, the European Union derives this amount from\nthe original schedule of annual f unding levels provided in the Boeing CLEEN Agreement, which\nindicates FAA funding for Boeing of USD 6,736,692 in 2010, USD 3,969,082 in 2011,\nUSD 8,103,935 in 2012, USD 6,494,751 in 2013, and USD 283,115 in 2014. These amounts are\nthen adjusted to account for the actual funding provided by the FAA to Boeing based on\nmodifications appended to the Boeing CLEEN Agreement.1728\n8.559. The United States argues that the European Union overstates any financial contribution\nprovided by the FAA CLEEN Program, as the Boeing CLEEN Agreement does not provide Boeing\nwith access to government facilities, equipment, and employees. The United States argues that\n\n1727 European Union's first written submission, para. 225. The European Union submits that Boeing\nprovides \"integrated management\" of the overall program, thus \"allowing Boeing to benefit from FAA funding\nof the other participants, all of whom are Boeing suppliers\". (European Union's first written submission,\npara. 202).\n1728 European Union's first written submission, para. 220 and fn 514. See Boeing CLEEN Agreement,\n(Exhibit EU-17), amendment/modification Nos. 0002, p. 1 (providing USD 6,310,150 in 2011), 0003, p. 2\n(providing an additional USD 201,298 in 2011), and 0004, p. 1 (providing USD 7,960,050 in 2012).\n\ncontractual language in the Boeing CLEEN Agreement referring to \"Facilities and Equipment\" does\nnot indicate that Boeing was provided facilities or equipment of any value by FAA. The\nUnited States therefore objects to including any spec ific amounts designated as \"Facilities and\nEquipment\". The United States also objects that any access to NASA test facilities provided to\nBoeing should be considered in relation to the Boeing CLEEN Agreement .1729 The United States\nalso argues that feedback provided to Boeing by FAA, NASA , and AFRL staff, and Boeing's\nparticipation in semi-annual government-led consortium meetings, does not demonstrate that the\nBoeing CLEEN Agreement involves a provision of goods and services to Boeing.1730 In addition, the\nUnited States notes that while the FAA CLEEN Program may contribute funding related to flight\ntesting CLEEN technology under the Boeing CLEEN Agreement, CLEEN funding may not be used for\nflight testing other technologies. Thus, there is no basis to assume that a ll work performed by\nBoeing in connection with its ecoDemonstrator programme is a result of FAA funding under the\nBoeing CLEEN Agreement.1731\n8.2.4.6.2.2 Evaluation by the Panel\n8.560. The European Union 's estimate of the amount of the financial contribution provided\nthrough th e Boeing CLEEN Agreement is based on actual figures listed in the Boeing CLEEN\nAgreement, adjusted to account for the actual funding provided by the FAA to Boeing based on\nmodifications appended to the Boeing CLEEN Agreement. The original schedule of annua l funding\nlevels, as modified, is as follows1732:\nTable 2: Annual funding levels under the Boeing CLEEN Agreement\nYear Annual funding level in USD (as modified)\n2010 6,736,692\n2011 6,511,448 (as per modifications 2 and 3)\n2012 7,960,050 (as per modification 4)\n2013 6,494,751\n2014 283,115\nTotal 27,986,056\n\n8.561. Portions of this total include certain amounts designated as \"Facilities and Equipment \"\nfunds as opposed to \"Research, Engineering, and Development (RED) \" funds.1733 Amounts\ndesignated as \"Facilities and Equipment \" total USD 6,301,498 over the 2011 -2012 period\n(including USD 1,811,448 in 20111734 and USD 4,490,050 in 20121735). The United States does not\ngenerally object to using adjusted annual funding amounts as a basis to estimate the total amount\nof the financial contribution. However, it argues that amounts designated as \"Facilities and\nEquipment\" should be excluded from the calculation.\n8.562. We conclude above in our evaluation of the whether a financial contribution exists that\namounts d esignated as \"Facilities and Equipment\" should be treated as further payments to\nBoeing. Accordingly, we include amounts designated as \"Facilities and Equipment\" as well as the\namounts designated as \"Research, Engineering, and Development (RED)\" in our est imate of the\ntotal amount of the financial contribution provided through the Boeing CLEEN Agreement.\n\n1729 United States' first written submission, para. 482; second written submission, para. 434 and fn 603.\n1730 United States' second written submission, paras. 432-436.\n1731 United States' comments on European Union's response to Panel question No. 11, para. 55.\n1732 See Boeing CLEEN Agreement, (Exhibit EU-17), amendment/modification Nos. 0002, p. 1 (providing\nUSD 6,310,150 in 2011), 0003, p. 2 (providing an additional USD 201,298 in 2011), and 0004, p. 1 (providing\nUSD 7,960,050 in 2012).\n1733 See e.g. Boeing CLEEN Agreement, (Exhibit EU-17), amendment/modification Nos. 0002, p. 1, and\n0003, p. 1.\n1734 See e.g. Boeing CLEEN Agreement, (Exhibit EU-17), amendment/modification Nos. 0002, p. 2, and\n0003, p. 2.\n1735 Boeing CLEEN Agreement, (Exhibit EU-17), amendment/modification No. 0004, p. 2.\n\n8.563. We note that the parties disagree as to whether Boeing is provided access to employees\nunder the Boeing CLEEN Agreement. Based on the United States ' own d escription of Boeing 's\ninteraction with U.S. Government staff pursuant to the Boeing CLEEN Agreement, we conclude that\nthe Boeing CLEEN Agreement provides Boeing with access to FAA employees.1736 The\nEuropean Union has not provided any estimate of the value of this access.\n8.564. In light of the foregoing, we accept the European Union 's estimate of the amount of the\nfinancial contribution to Boeing through the Boeing CLEEN Agreement as the best available\nevidence. We find that, to the extent that the amount of the fi nancial contribution is\nrelevant to the Panel 's assessment of whether the United States has withdrawn the\nsubsidy or taken appropriate steps to remove the adverse effects, within the meaning of\nArticle 7.8, the revised estimate of USD 27.99 million is a cr edible estimate of the\namount of the financial contribution provided to Boeing through the Boeing CLEEN\nAgreement between 2010 and 2014.\n8.2.4.7 Conclusion\n8.565. In light of our above findings regarding financial contribution, benefit, and specificity, we\nconclude that the European Union has established that transactions pursuant to the Boeing CLEEN\nAgreement involve a specific subsid y within the meaning of Articles 1 and 2 of the SCM\nAgreement. While we are unable to estimate the amount of the subsidy on the basis of th e\nevidence on the record, to the extent that it is relevant to the Panel's assessment of whether the\nUnited States has withdrawn the subsidy or taken appropriate steps to remove the adverse effects\nwithin the meaning of Article 7.8 of the SCM Agreement, we find the European Union's estimate of\nthe financial contribution at USD 27.99 million between 2010 and 2014 to be credible.\n8.2.5 Tax exemptions and exclusions under FSC/ETI legislation and successor\nlegislation\n8.2.5.1 Introduction\n8.566. In this Section of the Report, we d etermine whether the United States grants or maintains\nspecific subsidies to Boeing, in the form of tax exemptions and tax exclusions pursuant to the\nFSC/ETI measures and successor legislation, after the expiry of the implementation period , and\nhas thereby failed to withdraw the subsidy within the meaning of Article 7.8 of the SCM\nAgreement.\n8.567. In its request for the establishment of a panel in this compliance proceeding, the\nEuropean Union challenges the same FSC/ETI measures that were at issue in the origin al\nproceeding. The measures constitute the original provisions of the U.S. Internal Revenue Code\nwhich (prior to repeal) established special tax treatment for \"Foreign Sales Corporations \"\n(FSCs)1737: the FSC Repeal and Extraterritorial Income Exclusion Act of 2000 (the ETI Act)1738, the\nAmerican Jobs Creation Act of 2004 section 1011739, and the Tax Increase Prevention and\nReconciliation Act of 2005 (the TIPRA). 1740 The European Union alleges that, through these\nmeasures, the United States maintains tax exemptions and tax exclusions that constitute specific\nsubsidies within the meaning of Articles 1 and 2 of the SCM Agreement. 1741 Moreover, the\nEuropean Union alleges that these measures cause present adverse effects and are inconsistent\nwith Articles 3.1(a), 3.1(b) and 3.2 of the SCM Agreement and Article III:4 of the GATT.1742\n8.568. The original panel found that the tax exemptions and tax exclusions provided to Boeing\nunder the FSC/ETI legislation, including the transitional and grandfather provisions of the ETI Act\n\n1736 See para. 8.520 above.\n1737 Internal Revenue Code, United States Code, Title 26, sections 245, 921-927, and 951 (2000),\n(Exhibit EU-402), sections 921-927 and 951(d).\n1738 Repeal and Extraterritorial Income Exclusion Act of 2000, United States Code of Federal Regulations,\nPublic Law No. 106-519, (Exhibit EU-403).\n1739 American Jobs Creation Act of 2004, Public Law No. 108-357, section 101 (22 October 2004),\n(Exhibit EU-404).\n1740 Tax Increase Prevention and Reconciliation Act of 2005, Public Law No. 109-222 (17 May 2006),\n(Exhibit EU-405), section 513. See European Union's first written submission, para. 390.\n1741 European Union's request for the establishment of a panel, paras. 19 and 20.\n1742 European Union's request for the establishment of a panel, paras. 29-32.\n\nand the AJCA, c onstituted specific subsidies within the meaning of Articles 1 and 2 of the SCM\nAgreement.1743 The panel estimated that the amount of FSC/ETI subsidies provided to Boeing 's\nLCA division between 1989 and 2006 was USD 2.199 billion. 1744 The Appellate Body upheld (albeit\nwith different reasoning) the original panel 's finding that the measures caused serious prejudice ,\nwithin the meaning of Article 5(c) and 6.3(b) of the SCM Agreement, with respect to the 100 -200\nseat LCA product market.1745\n8.569. The United States notified t he DSB on 26 September 2012 that it has enacted legislation\nterminating the FSC/ETI benefits as of 2006, and that it confirms that Boeing did not \"use\" FSC or\nETI tax benefits after 2006. 1746 The European Union argues that certain grandfather ed provisions\nof the FSC/ETI legislation have not been repealed, and continue to grant Boeing tax benefits after\n2006.\n8.570. The measures at issue are set out in detail in the original panel report. 1747 By way of\nbackground, the original provision of the U.S. Internal Revenue Code granted to a \"Foreign Sales\nCorporation\"1748 a tax exemption on a portion of income generated by the sale or lease of \"export\nproperty\" – referred to as \"exempt foreign income \". The FSC measure s also allowed U.S. parent\ncompanies of FSCs to defer paying taxe s on certain \"foreign trade income\" that would normally be\nsubject to immediate taxation, and to avoid paying taxes on dividends received from their FSCs\nrelated to \"foreign trade income\".1749\n8.571. On 15 November 2000, in response to the findings made by the pane l and Appellate Body\nin US – FSC1750, the United States passed the ETI Act. 1751 The ETI Act repealed the provisions in\nthe U.S. Internal Revenue Code relating to taxation of FSCs (subject to section 5(c)(1), an\nindefinite grandfathering provision), but also intr oduced a further exclusion from income taxation\nfor certain qualifying foreign income. 1752 On 22 October 2004, in response to the panel and\nAppellate Body findings in US – FSC (Article 21.5 – EC)1753, the United States passed the AJCA.1754\nThe AJCA repealed those p rovisions in the ETI Act that granted tax exemptions on certain\nqualifying income.\n8.572. However, the AJCA contained two key grandfather provisions. First, the AJCA indefinitely\ngrandfathered the ETI scheme in respect of transactions made in the ordinary course of business,\noccurring pursuant to a binding contract between the relevant taxpayer and an unrelated person\nthat was in effect on 17 September 2003. 1755 Second, the AJCA did not repeal section 5(c)(1) of\n\n1743 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1429.\n1744 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1429.\n1745 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 1350(d)(iii).\n1746 United States' Compliance Communication, paras. 7 and 8.\n1747 Panel Report, US – Large Civil Aircraft (2nd complaint), paras. 7.1378-7.1385.\n1748 A \"Foreign Sales Corporation\" was a corporation created, organized and maintained in a qualified\nforeign country or U.S. possession outside the customs territory of the United States under the specific\nrequirements of Sections 921-927 of the U.S. Internal Revenue Code. (See Panel Report, US – Large Civil\n1749 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1379; and U.S. Internal Revenue\nCode, U.S. Code, Title 26, sections 245, 921-927, and 951 (2000), (Exhibit EU-402).\n1750 Panel Report, US – FSC, para. 8.1(a); and Appellate Body Report, US – FSC, paras. 177(a) and 178.\n1751 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1380; Repeal and Extraterritorial\nIncome Exclusion Act of 2000, United States Code of Federal Regulations, Public Law No. 106-519, (Exhibit\nEU-403).\n1752 As the original panel explained, \"the ETI Act allowed for the exclusion from taxation of certain\nincome of a U.S. 'taxpayer'. Such income – 'extraterritorial income' that was 'qualifying foreign trade income' –\ncould be earned with respect to goods only in transactions involving qualifying foreign trade property. The ETI\nAct defined 'extraterritorial income' as the gross income of a taxpayer attributable to 'foreign trading gross\nreceipts', i.e. gross receipts generated by certain qualifying transactions involving the sale or lease of\n'qualifying foreign trade property' not for use in the United States.\" (See Panel Report, US – Large Civil Aircraft\n(2nd complaint), para. 7.1382; see more generally paras. 7.1380-7.1383).\n1753 Panel Report, US – FSC (Article 21.5 – EC), paras. 9.1(a), 9.1(b), and 9.1(e); and Appellate Body\nReport, US – FSC (Article 21.5 – EC). paras. 256(b), 256(f), and 257.\n1754 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1384; and American Jobs Creation\nAct of 2004, Public Law No. 108-357, section 101 (22 October 2004), (Exhibit EU-404).\n1755 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1384.\n\nthe ETI Act which indefinitely grandfathered the origin al FSC measures in respect of certain\ntransactions entered into pursuant to binding contracts in effect on 30 September 2000.1756\n8.573. On 17 May 2006, in response to the panel and Appellate Body findings in US – FSC\n(Article 21.5 – EC II)1757, the United States pass ed the TIPRA, which purported to repeal the two\naforementioned grandfather provisions. Section 513(c) of the TIPRA provides that \"{t}he\namendments made by this section shall apply to taxable years beginning after the date of the\nenactment of this Act\".1758\n8.574. It was not disputed in the original proceeding that, up until 2006, the FSC/ETI measures\n(including transitional and grandfathered measures enacted in the successor legislation)\nconstituted specific subsidies.1759 The parties disagreed, however, as to whether the TIPRA in fact\nfully repealed the grandfathered provisions; that is, whether Boeing continued to receive tax\nbenefits with respect to certain foreign income after 2006. The European Communities argued, as\nthe European Union does now, that the prospectiv e application of the TIPRA meant that the\ngrandfathered provisions of the FSC/ETI legislation that remained in place following the passage of\nthe AJCA were still viable after 2006 with respect to income generated from certain eligible back -\ndated orders.1760 The United States argued that Boeing had ceased to receive FSC/ETI benefits as\nof 31 December 2006.1761\n8.575. Throughout this Section, the Panel refers to Boeing's possible receipt of \"FSC/ETI benefits\".\nBy way of explanation, this refers to the tax exemptions and exclusions that the European Union\nalleges continue to be available to Boeing, despite the purported repeal of the FSC/ETI and\nsuccessor act subsidies by the TIPRA. More specifically, it refers to tax exemptions and exclusions\non eligible foreign income gen erated after 2006 on those back -dated orders to which the two\ngrandfathered provisions of the FSC/ETI measures continue to apply.\n8.2.5.2 Main arguments of the parties\n8.576. The European Union argues that the same grandfathered provisions from the FSC/ETI\nsubsidies tha t were at issue in the original proceeding have continued, since 2006, to provide\nBoeing's LCA division with tax concessions.\n8.577. The European Union emphasi zes that the original panel found that, between 1989 and\n2006, Boeing received USD 2.199 billion in spe cific subsidies through the FSC/ETI legislation and\nsuccessor acts. 1762 It considers, however, that the original panel report cannot be relied on in\nsupport of the United States' argument that the FSC/ETI benefits terminated in 2006. The original\npanel found that it was \"not … necessary to reach a conclusion \" as to whether there was sufficient\nevidence before it to establish that the subsidies continued after 2006. 1763 In this proceeding,\nhowever, where the European Union claims that the United States has not ach ieved compliance\nbecause the FSC/ETI subsidies have not been withdrawn, the question of whether FSC/ETI benefits\nhave continued to accrue to Boeing after 2006 is highly relevant.1764\n8.578. As in the original proceeding, the European Union relies on a December 2006\nmemorandum from the Internal Revenue Service (2006 IRS memorandum), which states:\nThe TIPRA repeal date repeals the {FSC and ETI} binding contract rules for taxable\nyears that begin after May 17, 2006. Because the binding contract rules apply on a\ntransaction-by-transaction basis, we interpret the TIPRA repeal date as repealing the\nbinding contract rules prospectively, on a transaction -by-transaction basis, for\n\n1756 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1384.\n1757 Panel Report, US – FSC (Article 21.5 – EC II), para. 8.1; and Appellate Body Report, US – FSC\n1758 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1385; and Tax Increase Prevention\nand Reconciliation Act of 2005, Public Law No. 109-222 (17 May 2006), (Exhibit EU-405), section 513.\n1759 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1400.\n1760 Panel Report, US – Large Civil Aircraft (2nd complaint), paras. 7.1407-7.1411.\n1761 Panel Report, US – Large Civil Aircraft (2nd complaint), paras. 7.1412-7.1417.\n1762 European Union's first written submission, para. 390.\n1763 European Union's second written submission, para. 539 (citing Panel Report, US – Large Civil\nAircraft (2nd complaint), para. 7.1428).\n1764 European Union's second written submission, para. 539.\n\ntransactions entered into during a taxable year that begins after May 17, 2006. In\nother words, the binding contract rules {continue to} apply to certain transactions,\nbut only if such transactions are not entered into in a taxable year that begins after\nMay 17, 2006.1765\n8.579. The European Union argues that, based on this statement, the TIPRA continues to allow for\nBoeing to receive FSC/ETI benefits with respect to two types of foreign income recogni zed after\n31 December 20061766:\na. income from a sale or lease entered into before 1 January 2005;\nb. income from a sale or lease entered into before 1 January 2007, pursu ant to a binding\ncontract that was in place with an unrelated person on 17 September 2003 and at all\ntimes thereafter.\n8.580. The European Union submits that this means, for example, that if Boeing entered into a\nbinding contract with an unrelated customer before 18 September 2003 , wherein the customer\nhad an option to buy a certain number of aircraft, the buyer exerci sed the option before\n1 January 2007, and the final aircraft were not delivered until 2012 or later, Boeing remains\nentitled to tax concessions on income from the sale recogni zed in 2007 and beyond. 1767 The 2006\nIRS memorandum has not been superseded by any further guidance from the IRS. 1768 Its\ninterpretation of the TIPRA continues the flow of FSC/ETI benefits to Boeing which, as the original\npanel found with respect to the pre-2006 benefits, constitute a specific subsidy within the meaning\nof Articles 1 and 2 of the SCM Agreement. The European Union submits a report prepared by its\nexperts, International Trade Resources LLC (ITR), which identifies at least 69 orders that allegedly\nqualify for the first aspect of the continued grandfathering above; namely, orders that will\ngenerate new income recognized after 2012 from a sale or lease in the ordinary course of trade or\nbusiness entered into before 1 January 2005.1769\n8.581. The European Union argues that, in light of the evidence it has submitted, the statement s\nby Boeing 's James H. Zrust, Boeing 's Vice President of Tax , that Boeing has not received any\nFSC/ETI benefits as of 2006, and does not intend to receive any in the future, are\nunpersuasive.1770 First, the European Union emphasi zes that while the U.S. Government is in a\nunique position to definitively verify any statement s that Boeing makes about its corporate tax\nfilings, it does not do so. Rather, the United State s simply acts as a messenger for Boeing 's own\nview that FSC/ETI benefits were not received after 2006. 1771 The statements are also ambiguous\nand imprecise, and never define the term \"FSC benefits\".1772 Similarly, Boeing itself could, if it had\nwished to legally establish that it does not receive FSC/ETI benefits, provide a statement as such\nunder \"penalty of perjury\", but has not done so.\n\n1765 European Union's first written submission, para. 394 (citing \"Qualification for FSC benefits and ETI\nExclusions\", Office of Chief Counsel, Internal Revenue Service Memorandum No. AM 2007-001,\n22 December 2006 (2006 IRS memorandum), (Exhibit EU-406), p. 6). (underlining original, italics added by\nthe European Union)\n1766 European Union's first written submission, paras. 394 and 395 and fn 1030; and 2006 IRS\nmemorandum, (Exhibit EU-406), p. 6.\n1767 European Union's first written submission, para. 395.\n1768 European Union's first written submission, para. 399; comments on the United States' response to\nPanel question No. 34, para. 211 (citing United States' response to the Panel's request for information\npursuant to Article 13 of the DSU, dated 28 February 2013, response to question No. 46, para. 116).\n1769 European Union's first written submission, para. 396. International Trade Resources Report, Boeing\nFSC/ETI Tax Exemptions Post-2011, (13 December 2012) (ITR FSC/ETI Report), (Exhibit EU-24), at\nattachment 1. The European Union explains that it does not have the data necessary to determine the number\nof orders eligible for FSC/ETI benefits based on orders for revenue which will be recognized after\n31 December 2006 from a sale or lease in the ordinary course of trade or business entered into before\n1 January 2007 pursuant to a binding contract that was in place with an unrelated person on\n17 September 2003 and at all times thereafter.\n1770 European Union's comments on the United States' response to Panel question Nos. 33, para. 208,\nand 34, para. 210.\n1771 European Union's comments on the United States' response to Panel question No. 33, paras. 202\nand 207.\n1772 European Union's second written submission, para. 541; comments on the United States' response\n\n8.582. Further, the European Union notes that Mr Zrust's statements provide only that Boeing\n\"does not intend \" to receive FSC/ETI ben efits, not that Boeing \"will not \" receive the benefits.\nNothing prevents Boeing from changing its view that it will not claim FSC/ETI benefits on eligible\nincome. The subsidy therefore continues to exist after 2006, since government inaction is\ninsufficient to demonstrate the withdrawal of the subsidy.1773\n8.583. The European Union also argues that the United States' assertion that Boeing did not \"use\"\nthe tax benefits confirms that the benefit within the meaning of Article 1 .1(b) of the SCM\nAgreement in fact has been conferred on Boeing. If not, the opportunity to \"use\" the benefit would\nnever have arisen. 1774 The European Union considers that this is sufficient to demonstrate the\nexistence of the subsidy.1775 Whether a subsidy has been \"used\", according to the European Union,\ndoes not go to the question of whether the subsidy exists, but whether the subsidy has caused\nadverse effects, as provided for in Article 5 of the SCM Agreement. 1776 Since, however, the\nFSC/ETI subsidies are prohibited subsidies contingent on export, they are assumed to have caused\nadverse effects. The European Union argues that whether Boeing in fact \"used\" the subsidy is\ntherefore irrelevant.1777\n8.584. The United States argues that Boeing ceased to receive FSC/ETI tax benefits after\n2006.1778 It notes that the evid ence relied upon by the European Union to show otherwise\n(namely, the 2006 IRS memorandum) is the same evidence it relied upon in the original\nproceeding.1779 According to the United States, the original panel examined this evidence, and\ndeclined to find that Boeing would continue to receive FSC/ETI benefits after 2006. 1780 Rather, the\npanel found that the mere availability of the benefits did not indicate that Boeing had actually used\nthem.1781 Moreover, before the original panel, the European Communities itself su bmitted a\ndocument indicating that the amount of FSC/ETI subsidies after 2006 was zero.1782\n8.585. The United States submits the July 2009 statement by James H. Zrust, Boeing's Vice\nPresident of Tax (the Zrust statement), which it also submitted in the original proc eeding, stating\nthat Boeing did not receive any FSC /ETI benefits after 31 December 2006, that Boeing does not\ntreat income received after 2006 as eligible for FSC /ETI benefits, that Boeing does not intend to\nclaim FSC/ETI benefits in the future, and that Boeing's 2006 Annual Report states that 2006 will be\nthe final year for recogni zing any export tax benefits. 1783 The United States also submits an\nupdated statement of Mr Zrust, dated 3 December 2013 (the Updated Zrust statement) in which\nMr Zrust confirms tha t his statement of July 2009 remains accurate: Boeing did not receive any\nFSC/ETI benefits after 31 December 2006. 1784 In this statement, Mr Zrust adds that it is Boeing's\nview that any income recognized after 31 December 2006 is not eligible for FSC /ETI benefits and\nthat Boeing does not intend to claim any FSC /ETI benefits in the future. 1785 The United States\nadds, in response to a question from the Panel, that from Boeing's point of view, there were no\n\n1773 European Union's comments on the United States' response to Panel question No. 33, paras. 205\nand 207.\n1774 European Union's second written submission, para. 542.\n1775 European Union's second written submission, para. 542.\n1776 European Union's second written submission, para. 542.\n1777 European Union's second written submission, paras. 542 and 798.\n1778 United States' first written submission, para. 490; and Statement of J. H. Zrust, Vice President of\nTax of the Boeing Company, 20 July 2009, (Exhibit USA-232).\n1779 United States' first written submission, paras. 491 and 492 (citing Panel Report, US – Large Civil\nAircraft (2nd complaint), paras. 7.1421-7.1428).\n1780 United States' first written submission, paras. 491 and 492 (citing Panel Report, US – Large Civil\nAircraft (2nd complaint), para. 7.1428).\n1781 United States' second written submission, para. 451 (citing Panel Report, US – Large Civil Aircraft\n(2nd complaint), para. 7.1425).\n1782 United States' second written submission, para. 452 (citing Panel Report, US – Large Civil Aircraft\n(2nd complaint), para. 7.1426).\n1783 Statement of J. H. Zrust, Vice President of Tax of the Boeing Company, 20 July 2009, (Exhibit\nUSA-232).\n1784 Updated Statement of J. H. Zrust, Vice President of Tax of the Boeing Company, 3 December 2013,\n(Exhibit USA-382), para. 3.\n1785 Updated Statement of J. H. Zrust, Vice President of Tax of the Boeing Company, 3 December 2013,\n(Exhibit USA-382), para. 4.\n\nincome-recognition events (which would include the fulfilme nt of orders and the recognition of\noptions) after 31 December 2006 that were eligible for FSC/ETI benefits.1786\n8.586. The United States also states, in response to the Panel 's requests for information pursuant\nto Article 13 of the DSU, that it reviewed the annual reports that Boeing submitted to the U.S.\nSecurities and Exchange Commission (SEC). Those reports do not record Boeing as having\nrecognized FSC/ETI benefits after 2006.1787\n8.587. The United States does not consider that a statement \"signed under penalty of perjury\", as\nrequested by the European Union, is necessary to support its argument. 1788 Documents in WTO\nproceedings are not required to meet this standard in order to be persuasive.1789\n8.2.5.3 Evaluation by the Panel\n8.588. The issue before the Panel is whether, after the expiry of the implementation period, the\nUnited States grants or maintains subsidies to Boeing in the form of tax exemptions and tax\nexclusions pursuant to the FSC/ETI measures and successor legislation. In this regard, the issue in\ndispute between the parties is whether, as a factual matter, the United States has continued to\nprovide such subsidies to Boeing after 2006 . We consider that there are three distinct, but related\nquestions raised by the parties ' arguments on this issue. The first is whether the origina l panel\nalready made a determination as to whether Boeing continues to receive FSC/ETI benefits after\n2006. The second is whether it is sufficient for the European Union to establish that, after 2006,\nFSC/ETI benefits continued to be available, or whether it must establish that Boeing actually\nreceived FSC/ETI benefits. The third is an evidentiary issue as to whether, based on the evidence\nsubmitted by the parties, Boeing did in fact continue to receive FSC/ETI benefits.\n8.589. In the original proceeding, as now, the United States did not contest that , between 1989\nand 2006, the FSC/ETI measures constituted specific subsid ies, but argued that Boeing ceased to\nreceive the subsid ies as of 2006. 1790 The United States now argues that the original panel\nexamined this ques tion and, on the evidence before it (which is the same evidence before the\ncurrent Panel), declined to find that Boeing would continue to receive post-2006 FSC/ETI benefits.\n8.590. The original panel confirmed that between 1989 and 2006 , the FSC/ETI measures did\nconstitute specific subsid ies.1791 In addressing whether the subsid ies continued after 2006, the\npanel considered that this was a factual issue that went only to the question of the overall amount\nof the subsidy.1792 In the original proceeding, however, the European Communities' estimate of the\namount of the FSC/ETI subsidies did not include the alleged post -2006 benefits; the European\nCommunities calculated the amount only between 1989 and 2006. 1793 The panel therefore found it\nwas not necessary to reach a conclus ion as to whether Boeing did in fact continue to receive\nFSC/ETI benefits after 2006, since a finding either way would have no impact on the European\nCommunities' amount estimate.\n\n1786 United States' response to Panel question No. 34, para. 146; and Updated Statement of J. H. Zrust,\nVice President of Tax of the Boeing Company, 3 December 2013, (Exhibit USA-382).\n1787 United States' response to the Panel's request for information pursuant to Article 13 of the DSU,\ndated 28 February 2013, response to question No. 47, para. 117. The United States notes that Boeing's Chief\nExecutive Officer and Chief Financial Officer certified to the SEC that the reports did not contain an omission of\na material fact that would make the reports misleading. The United States emphasizes that \"severe civil or\ncriminal penalties may be imposed on any person who knowingly makes a false certification in an annual report\nto the SEC\". The European Union does not consider this persuasive since, compared to the revenues of\nUSD 81.7 billion that Boeing reported for 2012, omitting the USD 12 million FSC/ETI tax break that Boeing\nreceived that same year (as estimated by the European Union) would not be significant enough to constitute\nan \"omission of a material fact\". (See European Union's first written submission, para. 399 (citing Boeing,\nAnnual Form 10-K Report to the U.S. Securities and Exchange Commission for the Fiscal Year Ending\n31 December 2011, (Exhibit EU-488), p. 19)).\n1788 United States' second written submission, para. 453.\n1789 United States' second written submission, para. 453.\n1790 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1377.\n1791 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1400.\n1792 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1420.\n1793 Panel Report, US – Large Civil Aircraft (2nd complaint), paras. 7.1408 and 7.1427.\n\n8.591. While the original panel declined to find that Boeing would continue to rec eive post-2006\nFSC/ETI benefits, we do not consider that this amounts to a positive finding that Boeing would not\ncontinue to receive them. Rather, the panel made no definitive finding either way.\n8.592. In this proceeding, however, whether the FSC/ETI subsidies continue after 2006\ndetermines the European Union 's claim that the United States has not withdrawn the subsidy. 1794\nNow, the question of whether the FSC/ETI benefits continued after 2006, rather than going\nexclusively to the amount of the subsidies, goes to the continued existence of the subsid ies.\nFurther, again unlike the original proceeding, the European Union now does present an estimate of\nthe amount of post -2006 FSC/ETI benefits allegedly received by Boeing. We therefore agree with\nthe European Union that there is no existing determination by the original panel on this issue, and\nthat it is now necessary for this compliance Panel to determine whether the FSC/ETI subsidies\nhave continued after 2006.\n8.593. This in turn raises the second issue, which is what the European Union is required to\nestablish in order to demonstrate the existence of the subsidies after 2006. More precisely, the\nissue is whether the European Union is required to establish that Boeing in fact \"received\" or\n\"used\" the FSC/ETI benefits after 2006, or whether it is sufficient for the European Union to\nestablish that the FSC/ETI benefits were available to Boeing , or that Boeing was eligible to use the\nFSC/ETI benefit after 2006.\n8.594. In its second written submission, the European Union argues that on ce the opportunity to\n\"use\" a tax break has arisen, a benefit within the meaning of Article 1.1(b) has already arisen, and\nthis is sufficient to confirm the existence of a subsidy.1795 Just because a recipient does not elect to\n\"use\" that benefit does not, ac cording to the European Union, negate the existence of the\nsubsidy.1796 The European Union also emphasizes that, even if Boeing has not claimed tax benefits\nafter 2006, nothing in U.S. law prevents it from claiming those benefits in the future. The\nEuropean U nion seems to suggest that this alone means that the subsid ies continue, since\ngovernment inaction alone is insufficient to terminate them.\n8.595. We interpret this line of argumentation to imply that the European Union need not show\nthat Boeing in fact continues to receive FSC/ETI benefits. Rather, the fact that the FSC/ETI\nbenefits were available to Boeing and, if it wished, Boeing could claim the benefits in the future, is\nsufficient to demonstrate that the subsidy has not been withdrawn.\n8.596. We do not consider th at demonstrating that the FSC/ETI benefits were available to Boeing\nis equivalent to demonstrating that Boeing receives a subsidy within the meaning of\nArticle 1.1(a)(1)(ii) of the SCM Agreement. Rather, the European Union must establish that Boeing\nactually received FSC/ETI benefits after 2006 in order to demonstrate that the subsidies continue\nto exist.\n8.597. First, the European Union appears to argue that the opportunity to use a tax concession\nindicates that a benefit has been conferred under Article 1 .1(b) and therefore that eligibility for a\ntax concession of itself indicates that a subsidy exists. This argument frames the issue as one\nrelating to the conferral of a benefit under Article 1.1(b) of the SCM Agreement . We consider,\nhowever, that the factual question of whether a recipient has \"used\" or taken advantage of a\npossible tax concession raises instead the threshold issue of whether there has been a financial\ncontribution under Article 1 .1(a)(1) of the SCM Agreement. Specifically, the issue is whether, in\nthe absence of the eligible recipient actually \"using\" a tax break, there is still a foregoing of\nrevenue otherwise due within the meaning of Article 1.1(a)(1)(ii). Should the Panel find that,\nabsent Boeing having actually received post -2006 FSC/ETI be nefits, there is no finan cial\ncontribution, the European Union's benefit argument has no purchase.\n8.598. Second, the original panel did examine the question of whether a financial contribution\nexists when the parties disagree as to whether a subsidy has been \"used\", albeit in the context of\nthe Washington State tax measures. There, the panel found that, although a tax exemption was\n\n1794 European Union's request for the establishment of a panel, paras. 19 and 20; first written\nsubmission, para. 398.\n1795 European Union's second written submission, para. 542 and fn 887.\n1796 European Union's second written submission, para. 542 and fn 887.\n\navailable to Boeing, Boeing had not \"used\" the exemption. 1797 The panel noted that the\nEuropean Communities' position was that the meas ure constituted, not a financial contribution in\nthe abstract, but \"a financial contribution to a specific entity, namely to Boeing\".1798 In light of this,\nin circumstances where the tax exemption was never claimed by Boeing, and where Boeing had\ntaken steps to suggest that it would not claim the exemption, the panel found there was no\nfinancial contribution to Boeing in relation to the measure. 1799 The implication of this finding is\nthat, with respect to that measure, the existence of the financial contribution turned on whether a\ntax concession was \"used\", not on whether the tax concession was \"available\".\n8.599. In our view, the same reasoning is applicable with respect to the present measures. The\nEuropean Union 's claim is that the United States maintains tax exempt ions and tax exclusions\nunder FSC/ETI and successor legislation that benefit Boeing specifically. 1800 The European Union's\nevidence and arguments are directed at demonstrating that Boeing has received eligible foreign\nincome for which it continues to receive FSC/ETI tax benefits. Similarly, as the original panel found\nwith respect to the Washington tax measure, the European Union 's case under Article 3 is that\nthere are export-contingent subsidies to Boeing.1801\n8.600. We consider that the European Union must therefore demonstrate that Boeing used a tax\nconcession in order for a financial contribution under Article 1.1(a)(1)(ii) of the SCM Agreement to\nbe deemed to exist. If, however, Boeing does not continue to actually receive FSC/ETI benefits on\nthe eligible portions of its foreign income, it receives no financial contribution within the meaning\nof Article 1.1(a)(1)(ii) of the SCM Agreement, which provides that:\n1.1 For the purpose of this Agreement, a subsidy shall be deemed to exist if:\n(a) (1) there is a financial contribution by a government or any public body within the\nterritory of a Member (referred to in this Agreement as \"government\"), i.e. where:\n…\n(ii) government revenue that is otherwise due is foregone or not collected (e.g. fiscal\nincentives such as tax credits).\n8.601. If a tax concession is made available, but the recipient identified in the complaining party's\nclaim never uses or takes advantage of the concession, the recipient necessarily continues to pay\nthe government revenue that is otherwise due. There is no act of \"foregoing\" or \"failure to collect\"\nthat revenue on the part of the government. Nor is it possible for a potential foregoing of revenue\nthat is otherwise due to constitute a financial contribution. While Article 1.1(a)(1)(i) provides for a\nfinancial contribution to exist where there is a \"potential direct transfer of funds \", there is no\nequivalent in subparagraph (ii).1802\n8.602. This conclusion necessarily leads to the third question before the Panel, which is whether,\nweighing the evidence presented by t he European Union again st that presented by the\nUnited States, Boeing actually has received tax exemptions and exclusions on the income\ngenerated from certain back -dated orders pursuant to the two grandfathered FSC/ETI provisions\nafter 2006.\n8.603. The European Union submits the 2006 IRS memorandum as evidence that Boeing remains\neligible to receive FSC/ETI benefits through a prospective interpretation of the TIPRA repeal\n\n1797 See Panel Report, US – Large Civil Aircraft (2nd complaint), paras. 7.140-7.151. This finding was\nwith respect to the Washington State sales and use tax exemptions for construction services and equipment.\nAs the panel explained, \"after reviewing all of the evidence, we accept the United States' position that Boeing\nhas not claimed the sales and use tax exemption for construction services and equipment\". (See Panel Report,\nUS – Large Civil Aircraft (2nd complaint), para. 7.144).\n1798 Panel Report, US – Large Civil Aircraft (2nd complaint), paras. 7.150 and 7.151. (emphasis original)\n1799 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.151.\n1800 European Union's request for the establishment of a panel, paras. 19 and 20.\n1801 European Union's first written submission, paras. 743-746. See Panel Report, US – Large Civil\nAircraft (2nd complaint), para. 7.150.\n1802 Whether taxpayers actually use various tax concessions for which they are legally eligible will\ndepend on the particular situation of the taxpayer; including, among other things, the existence of other tax\nconcessions which they may also potentially use.\n\nprovision.1803 In response to the Panel's request for information pursuant to Article 13 of the DSU,\nthe United States confirm s that the U.S. Internal Revenue Service has not issued any guidance\nsuperseding the guidance in that memorandum.1804 The European Union considers that, so long as\nthe 2006 IRS memorandum has not been superseded or contradicted by any later regulations or\nguidelines, there is no basis on which to find that the United States has withdrawn the\nsubsidies.1805\n8.604. Further, the European Union submits the ITR FSC/ETI Report, which identifies a list of\norders that the European Union and ITR consider to qualify for continued FSC/ETI benefits.1806 The\nlist was generated by identifying Boeing aircraft that were ordered before 1 January 2005, but not\ndelivered until after 2011. 1807 The European Union then identifies certain aircraft, the sales of\nwhich would generate foreign income eligible for the FSC/ETI tax benefits.1808\n8.605. The European Union also makes arguments addressing the likelihood of Boeing continuing\nto receive FSC/ETI benefits after 2006. The European Union points out that Boeing 's management\nhas a fiduciary duty to its stockholders which compels it to take advantage of the tax concessions\nto which it is legally entitled, which include the FSC/ETI benefits. 1809 The European Union also\npoints out that, while the U.S. Government is in a \"unique position\" to verify Boeing's statements\nas to its corporate tax filings, it refuses to make a definitive verification, relying instead on\nBoeing's statements as to its own practices and future intentions. 1810 The European Union\nconsiders that the Panel should, having reviewed the evidence it has presented, and in light of the\nabove circumstances, draw an inference that Boeing takes advantage of the FSC/ETI tax benefits,\nand will continue to do so going forward.\n8.606. The question before us is not whether FSC/ETI benefits ar e available to Boeing after 2006,\nbut whether Boeing in fact received FSC/ETI benefits. We do not consider that the European Union\nestablishes that Boeing does receive those benefits. The 2006 IRS memorandum is directed\ntowards whether FSC/ETI benefits are available to Boeing after 2006. The ITR FSC/ETI Report\nsimilarly is directed towards demonstrating only that Boeing received income after 2006 that was\neligible for FSC/ETI benefits. Both fall short of showing that Boeing in fact receives tax concessions\nwhich constitute a foregoing by the U.S. Government of revenue that is otherwise due, within the\nmeaning of Article 1.1(a)(1)(ii). Neither the 2006 IRS memorandum nor the ITR FSC/ETI Report is\ndirected at this precise question.\n8.607. The European Union's argumen ts concerning the likelihood that Boeing continued to\nreceive FSC/ETI benefits after 2006, considered in conjunction with the European Union's 2006\nIRS memorandum and the ITR FSC/ETI Report, which go to the availability of the FSC/ETI benefit,\nare in our v iew insufficient to rebut the United States evidence, which does directly go to the\nquestion of whether Boeing continued to receive FSC/ETI benefits after 2006, and, in our opinion,\nconstitutes a prima facie case that Boeing does not receive FSC/ETI benefits after 2006.\n8.608. The United States ' evidence consists of statement s by James H. Zrust, Boeing 's Vice\nPresident of Tax , in July 2009 and December 2013, that Boeing did not receive any FSC benefits\nafter 31 December 2006 and that Boeing does not intend to cla im any FSC benefits in the future,\n\n1803 2006 IRS memorandum, (Exhibit EU-406), p. 6.\n1804 United States' response to the Panel's request for information pursuant to Article 13 of the DSU,\ndated 28 February 2013, response to question No. 46, para. 116.\n1805 European Union's second written submission, para. 534.\n1806 ITR FSC/ETI Report, (Exhibit EU-24). The list only includes orders that qualify for one aspect of the\ncontinued grandfather provisions. (See para. 8.580 above, and European Union's first written submission,\npara. 396).\n1807 The order and delivery information was obtained from Ascend Worldwide Limited, a \"respected\naggregator of public information on aircraft orders and deliveries\". The Ascend data was tested against, and\ncorresponded exactly with, aircraft data on actual deliveries that Boeing provides on its website. (See ITR\nFSC/ETI Report, (Exhibit EU-24), pp. 2 and 3).\n1808 The Boeing 777 and 787 are long-haul aircraft, which are used predominantly outside the United\nStates so, according to the European Union, qualify as \"export property\", the sale or lease of which generates\nforeign income eligible for the FSC/ETI tax exemptions and exclusions. (See ITR FSC/ETI Report, (Exhibit\nEU-24), attachment 1: Table of Pre-2005 Orders of Boeing LCA with Anticipated Delivery in 2012 and beyond,\npp. 2 and 3).\n1809 European Union's first written submission, para. 400; second written submission, para. 543.\n1810 European Union's comments on the United States' response to Panel question No. 33, para. 202.\n\nnoting that Boeing's 2006 Annual Report states that 2006 will be the final year for recognizing any\nexport tax benefits.1811\n8.609. The United States also states that it reviewed the annual reports that Boeing submitted to\nthe SEC and that those reports do not record Boeing as having recogni zed FSC/ETI tax benefits\nafter 2006.\n8.610. The United States has consistently maintained that the Zrust statement s and Boeing 's\nreports to the SEC are accurate1812, and it is unclear what further steps it could take to verify its\narguments.\n8.611. In the absence of evidence submitted by the European Union that goes directly to\nthe question before the Panel (whether FSC/ETI benefits were actually received by\nBoeing after 2006), and in light of the evidence prov ided by the United States that no\nsuch benefits were received, the Panel is not persuaded that the European Union has\nestablished that Boeing has continued to receive FSC/ETI subsidies in the post -2006\nperiod.\n8.2.5.4 Conclusion\n8.612. The Panel concludes that the Europ ean Union has not established that, after the expiry of\nthe implementation period, the United States grants or maintains subsidies to Boeing in the form\nof tax exemptions and tax exclusions pursuant to the FSC/ETI measures and successor legislation.\n8.2.6 Property and sales t ax abatements provided through IRBs issued by the City of\nWichita\n8.2.6.1 Introduction\n8.613. In this Section of the Report, we determine whether the United States grants or maintains\nspecific subsidies to Boeing after the expiry of the implementation perio d through property and\nsales tax abatements provided through IRBs issued on Boeing's behalf by the City of Wichita , and\nhas thereby failed to withdraw the subsidy within the meaning of Article 7.8 of the SCM\nAgreement.1813\n8.614. In the original proceeding, these m easures were subject to DSB recommendations and\nrulings as specific subsidies that caused adverse effects. 1814 In its Compliance Communication, the\nUnited States advise s that the \"City of Wichita is applying its Industrial Revenue Bond ( \"IRB\")\nprogram in a ma nner consistent with Article 5(c) of the SCM Agreement. It has not provided any\nIRBs to Boeing since 2007.\"1815 The last IRB issuance to Boeing by the City of Wichita was in 2007.\n\n1811 Statement of J. H. Zrust, Vice President of Tax of the Boeing Company, 20 July 2009, (Exhibit\nUSA-232); and Updated Statement of J. H. Zrust, Vice President of Tax of the Boeing Company,\n3 December 2013, (Exhibit USA-382).\n1812 United States' response to Panel question No. 33, paras. 144 and 145; response to the Panel's\nrequest for information pursuant to Article 13 of the DSU, dated 28 February 2013, response to question\nNo. 47, para. 117.\n1813 For an explanation of the operation of IRB programmes and the IRBs issued on behalf of Boeing by\nthe City of Wichita, see Section 7.5 above.\n1814 The original panel explained that IRBs are issued by cities and counties in Kansas, on behalf of\nprivate entities, in order to assist private entities in raising revenue to fund the purchase, construction or\nimprovement of various types of commercial and industrial property (referred to as \"Project Property\"). (Panel\nReport, US – Large Civil Aircraft (2nd complaint), para. 7.651). As the original panel explained: \"{i}n general,\nthe relevant city, which in the case of Boeing and Spirit is the City of Wichita, acts as the 'issuer' of the IRBs.\nThe IRBs are sold to the general public for proceeds that the private entity, on whose behalf the IRBs are\nissued, uses to acquire or enhance Project Property. During the term of the IRB, legal title to the Project\nProperty remains with the issuer (i.e. the City). The private entity leases the property, making rent payments\nto the holders of the IRBs that are sufficient to pay the principal and interest on the IRBs. At the end of the\nterm of the IRB, title to the Project Property transfers to the private entity involved.\" (See Panel Report, US –\nLarge Civil Aircraft (2nd complaint), para. 7.653 (fn omitted)).\n\n8.615. The European Union, in its panel request in this proceeding, challenges the tax abatements\nprovided to Boeing through these IRB issuances as one of the spe cific subsidies that the\nUnited States maintains and which cause adverse effects:\nThe State of Kansas and the City of Wichita maintain state and local property and\nsales tax abatements, pursuant to K.S.A. §§ 79 -201a, 79-3606(d), and 79-3640, that\npresently benefit Boeing in relation to the issuanc e of IRBs, pursuant to K.S.A.\n§ 12-1741, by the City of Wichita.1816\n8.616. The primary point of difference between the parties is whether the IRB p rogramme\ncontinues to be de facto specific within the meaning of Article 2.1(c) of the SCM Agreement. In\nparticular, the parties disagree as to the period of time over which the Panel should determine\nwhether the subsidy programme is specific. The European Union considers that the Panel should\ndetermine whether the measure is specific over the entire period of time that the IRB programme\nhas been available. The United States argues that, when assessed over a shorter, more recent\nperiod of time, the IRB prog ramme is no longer specific, and that the United States has therefore\ncomplied with Article 7.8 of the SCM Agreement because it no longer maintains a specific subsidy\nwithin the meaning of Articles 1 and 2.\n8.617. The original panel found that the property tax ab atements for up to ten years on Project\nProperty and sales tax exemptions on Project Property and services acquired with the proceeds of\nIRBs, constituted the foregoing of revenue otherwise due within the meaning of\nArticle 1.1(a)(1)(ii) of the SCM Agreeme nt.1817 The panel noted that Boeing had sold its Wichita\nfacilities to Spirit Aerosystems (Spirit), on 16 June 2005. 1818 However, for IRBs issued to Boeing\nprior to the sale of its Wichita facilities to Spirit, where the ten -year tax exemption period\ncontinued beyond 2005, Boeing continued directly to receive the tax benefits deriving from the\nIRBs because Boeing maintained its leasehold interest in the Project Property and subleased the\nProject Property to Spirit. 1819 The City of Wichita continued to issue IRBs to Boeing following the\nsale of the Wichita facilities to Spirit in 2005. 1820 In January 2012, Boeing announced that it would\nclose all of its Wichita operations by the end of 2013.1821\n8.618. The original panel also found that the tax abatements granted pursuant to the I RB\nprogramme were de facto specific within the meaning of Article 2.1(c) of the SCM Agreement. 1822\nSpecifically, the panel considered that evidence submitted by the European Communities showing\nthat Boeing and Spirit had received approximately 69 % of all IRBs granted by the City of Wichita\nbetween 1979 and 2005, while accounting for between 16 and 32 % of manufacturing employment\nin Wichita over that period, suggested that the IRB tax abatements granted to Boeing and Spirit\nwere disproportionately large and the refore specific to certain enterprises within the meaning of\nArticle 2.1(c) of the SCM Agreement.1823 The Appellate Body upheld the panel's finding, but on the\n\n1816 European Union's request for the establishment of a panel, para. 21.\n1817 We recall the original panel's acknowledgement that Kansas taxation legislation was amended such\nthat, as of 1 July 2006, Kansas no longer assessed property tax on commercial and industrial machinery and\nequipment, where such machinery and equipment was purchased after 30 June 2006. Such machinery and\nequipment had not been subject to sales tax since 2000. Notwithstanding the foregoing, the panel found that\nthe tax abatements in connection with the IRBs were still available in relation to a range of property: (a)\ncommercial and industrial machinery and equipment acquired before 30 June 2006; (b) property that was not\ncommercial or industrial machinery or equipment; (c) improvements, repairs or remodelling of commercial and\nindustrial machinery and equipment; (d) real property; and (e) a variety of machinery and equipment excluded\nfrom the sales tax exemption. Owing to this conclusion, the panel found that tax abatements granted in\nconnection with the purchase of the foregoing categories of property with the proceeds of the IRBs involved the\nforegoing of revenue otherwise due, and conferred a benefit on Boeing. (Panel Report, US – Large Civil Aircraft\n(2nd complaint), paras. 7.707-7.712). The categories of machinery and equipment excluded from the sales tax\nexemption are listed by the original panel at fn 2053 of its report.\n1818 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.649.\n1819 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.662. While the European\nCommunities had also challenged the IRBs issued directly to Spirit as providing a specific subsidy to Boeing,\nthe panel found that the European Communities had failed to demonstrate that the benefit of such subsidies\nwas passed-through to Boeing at the time of the sale of Boeing Wichita to Spirit. (See Panel Report, US – Large\nCivil Aircraft (2nd complaint), paras. 7.818 and 7.889).\n1820 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.663.\n1821 A.G. Sulzberger, \"Boeing Departure Shakes Wichita's Identity as Airplane Capital\", New York Times,\n18 January 2012, (Exhibit USA-338).\n1822 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.779.\n1823 Panel Report, US – Large Civil Aircraft (2nd complaint), paras. 7.769 and 7.770.\n\nbasis of different reasoning as to the relevance of the share of employment of Boeing and Spirit\nwithin the Wichita economy from the question of whether the grant of subsidies to those entities\nwas \"disproportionately\" large.1824\n8.2.6.2 Main arguments of the parties\n8.619. The European Union considers that the subsidy to Boeing continues to be specific within\nthe meani ng of Article 2.1(c) of the SCM Agreement. The European Union submits evidence\nshowing that , during the 1979 to 2012 period, the City of Wich ita issued a total of\nUSD 6.737 billion in tax -exempt IRBs, of which USD 3.576 billion (or 53% of the total amount)\nwas granted to Boeing, and approximately USD 3.963 billion (or approximately 59% of the total\namount) was granted to Boeing and Spirit combined.1825\n8.620. The European Union notes that in evaluating whether the subsidy at issue was specific\nwithin the meaning of A rticle 2.1(c), the original panel took account of the distribution of the\nsubsidy during the entire life of the IRB program me, and the Appellate Body performed its own\nreview of specificity in view of the allocation of tax benefits over the 25 year period between 1979\nand 2005.1826 As there has been no significant change in the structure of the Wichita economy and\nthe importance of the subsidized activities in that economy since 2007, there is nothing to justify a\nchange of focus in assessing specificity to a period shorter than the entire life of the Wichita IRB\nprogramme.1827\n8.621. The United States argues that it is applying the IRB programme in a manner consistent\nwith the SCM Agreement because the subsidy is no longer specifi c within the meaning of\nArticle 2.1(c) o f the SCM Agreement .1828 The United States considers that, because the IRB\nprogramme is no longer specific, it has withdrawn the subsidy within the meaning of Article 7.8 of\nthe SCM Agreement.1829\n8.622. The United States notes that, according to the European Union's own evidence, of the total\namount of IRBs issued since 2007, Boeing has received 0% (since no new IRBs have been issued\nto Boeing since that year) and Spirit has only received 12.6%. There is no basis to consider such\nan amount to be disproportionately large.1830\n8.623. The United States considers that, according to the original panel, where there has been a\nsignificant change in the structure of the economy, including the importance of the subsidi zed\nactivities in the economy, it may not be appropriate to assess spe cificity over the entire period of\ntime that the subsidy has been available. Instead, it would be more probative to assess specificity\nover a more limited period, corresponding to when such a change in the structure of the economy\noccurred.1831 The United Sta tes submits evidence that, due to changes in the structure of the\nWichita economy, the importance of aircraft manufacturing has reduced considerably. Because of\nthis, the Panel should assess specificity over a more recent period, rather than over the whole\nperiod that the subsidy has been available.\n\n1824 The Appellate Body examined the United States' arguments that the 69% figure was proportionate\nbecause of the lack of diversification in the Wichita economy, but concluded that the United States had not\nprovided sufficient reasons supported by evidence to undermine the assessment that the granting to Boeing\nand Spirit of 69% of the amounts of IRB subsidy represented \"an allocation at variance from what would have\nbeen expected from the allocation of IRBs in accordance with their conditions for eligibility\". (Appellate Body\nReport, US – Large Civil Aircraft (2nd complaint), paras. 888 and 889).\n1825 European Union's first written submission, para. 424 (referring to Sorted List of Wichita IRBs,\n1979-2012, (Exhibit EU-426)); second written submission, para. 554. The European Union's submissions\nconsistently refer to the period 1979-2012, however the evidence it submits in fact only contains data up until\n2011.\n1826 European Union's second written submission, paras. 558 and 559.\n1827 European Union's second written submission, para. 559.\n1829 As the United States explains in its second written submission, it \"does not assert that the measure\nhas been withdrawn simply because Boeing has not been granted IRBs since 2007. The measure has been\nwithdrawn because IRBs no longer constitute a specific subsidy.\" (See United States' second written\nsubmission, para. 484. See also United States' opening statement at the meeting with the Panel, para. 97).\n1830 United States' first written submission, para. 525.\n1831 United States' second written submission, paras. 485 and 486 (citing Panel Report, US – Large Civil\nAircraft (2nd complaint), para. 7.757).\n\n8.2.6.3 Evaluation by the Panel\n8.624. We note that the parties do not dispute that the property and sales tax abatements\nprovided to Boeing in connection with the City of Wichita IRBs constitute subsidies within the\nmeaning of Article 1 of the SCM Agreement. The European Union has submitted evidence setting\nout the yearly amounts of such tax abatements, which is not contested by the United States.1832\nAccording to this evidence, Boeing has received USD 7,348,500 in property and sales tax\nabatements between 2012 and 2014.1833\n8.625. The contentious issue between the parties is whether the subsidy provided to Boeing is\nspecific. The European Union, as in the original proceeding, does not attempt to argue that the\nsubsidy is de jure specific under Article 2.1(a) of the SCM Agreement. As the original panel found,\nit is clear that the IRB programme is not expressly limited to certain enterprises. 1834 Rather, the\nEuropean Union argues that the subsidy is de facto specific under Article 2.1(c), on t he basis that\ncertain enterprises, in this case Boeing and Spirit, have received a disproportionately large amount\nof the subsidy.1835\n8.626. Article 2.1(c) requires a panel to determine whether a subsidy which, although on the face\nof the measure appears to be widely available, is nonetheless allocated in a manner that belies the\napparent neutrality of the measure. 1836 Article 2.1(c) sets out a series of factors that indicate\nwhether \"there are reasons to believe that the subsidy may in fact be specific \". These includ e,\ninter alia, the granting of \"disproportionately large amounts\" of the subsidy to certain enterprises.\nArticle 2.1(c) also provides that, in applying the provision, account shall be taken of the extent of\ndiversification of the economic activities within the jurisdiction of the granting authority, as well as\nthe length of time during which the subsidy programme has been in operation.\n8.627. The key point of disagreement between the parties is the period of time over which the\nPanel should assess specificity. The European Union argues that the Panel should assess specificity\nover the entire period the subsidy has been available, during which Boeing received 53 %, and\nBoeing and Spirit together 59%, of the subsidy.1837 The United States argues that there has been a\nchange in the structure of Wichita 's economy, and the Panel should only assess specificity in the\nperiod since that change. Because there have not been any IRBs issued to Boeing since 2007,\nassessing specificity over a shorter, more recent period of time cau ses the percentage of the\nsubsidy received by Boeing and Spirit to fall considerably.1838\n8.628. Both parties' approaches to specificity involve a determination of whether Boeing and Spirit\nreceived a disproportionate percentage of the total amount of IRBs issued. W e recall, however,\nthat the IRBs themselves do not constitute the subsidy; the tax abatements granted on property\npurchased using the IRBs constitute the subsidy. Therefore, strictly speaking, assessing whether\nBoeing and Spirit have received a disprop ortionate amount of the subsidy should be based on the\namount of the tax abatements Boeing and Spirit have received, relative to the amount of tax\nabatements that all other IRB recipients have received.\n8.629. The original panel reconciled using the IRB amounts to d etermine specificity on the basis\nthat:\nTo the extent that other IRB recipients received tax abatements of the same\npercentage value under the terms of their IRB issuances as Boeing and Spirit, namely\n100 per cent tax abatements, the value of the IRBs issu ed is a good proxy for the\n\n1832 Mayor Brewer's Statement on Boeing Announcement, City of Wichita Web Document,\n4 January 2012 (Brewer Statement), (Exhibit EU-418).\n1833 Brewer Statement, (Exhibit EU-418).\n1834 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.743.\n1835 The Panel includes the amounts granted to Spirit in its assessment of specificity even though it has\nnot found that subsidies provided to Spirit \"passed through\" to Boeing. This is because a subsidy may be de\nfacto specific under Article 2.1(c) by virtue of being granted in disproportionate amounts to \"certain\nenterprises\". The Panel has taken Boeing and Spirit together to constitute \"certain enterprises\". The\nUnited States acknowledges that the amounts of the subsidy granted to Spirit are relevant to the Panel's\nspecificity finding. (See United States' first written submission, para. 525).\n1836 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 877.\n1837 European Union's first written submission, para. 424; second written submission, para. 554.\n1838 List of All City of Wichita IRBs, 1994-2012, provided by the City of Wichita, (Exhibit EU-420).\n\namount of the subsidy. This is because the value of the IRBs represents the value of\nthe property that may be purchased and consequently subject to the tax abatement.\nTo the extent that all tax abatements under the IRBs are of th e same percentage\nvalue, the value of the property purchased will be in proportion to the value of the tax\nabatement.1839\n8.630. In other words, where Boeing uses the amount of an IRB to purchase Project Property it\nthen receives a tax abatement, the value of which is based on the value of the property. There is\ntherefore a directly proportionate relationship between the value of the tax abatement and the\nvalue of the IRB such that the IRB figures presented by the European Union can be used as a\n\"proxy\" to calculate the percentage of the tax abatements (that is, the percentage of the subsidy)\nreceived by Boeing and Spirit, for the purposes of determining whether these enterprises have\nreceived a disproportionate amount of the subsidy.\n8.631. We consider that this reasoning is applicable in the current proceeding, and that it has\nnecessary implications for the time-period over which the Panel assesses specificity.\n8.632. Boeing has received IRB s every year from 1979 to 2007. Each year that Boeing received\nIRBs it purchased Project Property, in respect of which it received a tax abatement for the\nfollowing ten years. So, for Project Property purchased with IRB s granted in 2007, Boeing receives\nten, annual tax abatements, from 2008 until 2017. Up until 2008, therefore, Boeing receive d ten\nseparate tax abatements each year, pursuant to the ten preceding years that it had purchased\nProject Property with IRB funds. Because 2007 was the last year in which Boeing received IRB s,\nhowever, each subsequent year Boeing receives one less tax abatement. In 2017, Boeing is due to\nreceive a single tax abatement on Project Property purchased with IRB issuance in 2007.1840\n8.633. To recall, the value of each yearly tax abatement bears a proportionate relationship to the\namount of the IRB s used to purchase the P roject Property for which the tax abatement s are\nreceived. Therefore, the tax abatement that Boeing receives in 2017 bears a proportionate\nrelationship to the IRBs it received in 2007. The sum of the two tax abatements Boeing receives in\n2016 bears a proportionate relationship to the sum of the IRBs it received in 2007 and 2006, the\nthree it receives in 2015 to the IRBs received in 2005, 2006, and 2007, and so on.\n8.634. The original panel justified using the actual IRB figures as a proxy for the amount of the\ntax abatements when assessing the percentage of the subsidy received by Boeing and Spirit for\nthe purposes of a specificity analysis , on the basis that the two sets of figures bore a directly\nproportionate relationship to each other. In the original proceedi ng, the European Communities\nchallenged the entirety of the subsidy received by Boeing since the inception of the IRB\nprogramme in 1979, so it was consistent with the scope of that challenge for the panel to use the\nentirety of the IRBs granted to Boeing b etween 1979 and 2005 as an approximation for the value\nof the subsidy in its specificity analysis. In this proceeding, however, the relevant financial\ncontribution is that which was granted after the end of the implementation period. In other words,\nwe are concerned only with those tax abatements granted to Boeing from 2013 onwards.\n8.635. Therefore, it is not consistent with the above reasoning to assess specificity using the IRB\nfigures from the entire period that the IRB program me has been in existence, becaus e these\nfigures do not bear a proportionate relationship to the amount of the tax abatements provided to\nBoeing after the end of the implementation period. Rather, the amount of the tax abatements\nBoeing receives after 2012 was determined by the value of t he IRBs that were granted from 2002\nonwards. We therefore will assess whether the subsidy is de facto specific by determining what\npercentage of the total amount of IRBs provided from 2002 onwards was granted to Boeing and\nSpirit.\n8.636. Based on the evidence su bmitted by the European Union, from 2002 onwards , Boeing and\nSpirit received 32 % of the total amount of IRBs issued. 1841 We note that this is considerably\n\n1839 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.756.\n1840 This pattern of tax abatements is set out in table form in the Brewer Statement, (Exhibit EU-418).\n1841 The figure of 32% was obtained by comparing the total amount of IRBs issued from 2002 onwards\nto Boeing and Spirit (USD 681 million) with the total amount of IRBs issued from 2002 onwards\n(USD 2.15 billion). The figures of USD 681 million and USD 2.15 billion were obtained by adding the amounts\n\nreduced from the original proceeding, where the panel found that Boeing and Spirit had received\n69% of the total amount.\n8.637. The IRB programme remains open to any enterprises that seek to purchase, construct, or\nimprove various types of commercial or industrial property. 1842 The availability of the IRB\nprogramme is therefore somewhat restricted to entities with th e capacity and inclination to make\nsuch investments. With this in mind, we do not consider that Boeing and Spirit 's receipt of 32% of\nthe total amount of IRBs issued indicates a distribution of the subsidy that is at odds with what\none would expect were th e IRB program me to be administered in accordance with the SCM\nAgreement.1843\n8.638. In light of the foregoing considerations, we find that, after the expiry of the\nimplementation period the subsidies provided to Boeing in the form of property and sales tax\nabatements related to IRBs issued by the City of Wichita have not been specific within the\nmeaning of Article 2.1(c) of the SCM Agreement.\n8.639. A measure which satisfies the definition of a subsidy but is not specific is not inconsistent\nwith the provisions of Part III of the SCM Agreement. As discussed in Section 6 of this Report, we\nconsider that \"withdrawal\" for the purposes of Article 7.8 should be interpreted in accordance with\nwhether a Member State has brought a measure into conformity with the SCM Agreement. By\nreducing considerably the proportion of the subsidy programme received by Boeing after the end\nof the implementation period, the United States has brought the measure into conformity with the\nSCM Agreement because, as a non -specific-subsidy, the measure is no longer subject to the\nprovisions of Part III of the SCM Agreement.1844\n8.2.6.4 Conclusion\n8.640. In light of our above findings with respect to IRBs issued by the City of Wichita, we\nconclude that the European Union has not established that, after the expiry of the impl ementation\nperiod, the property and sales tax abatements provided through these IRBs are subsidies that are\nspecific within the meaning of Article 2 of the SCM Agreement . We therefore conclude that these\nsubsidies therefore are no longer subject to the provisions of Part III of the SCM Agreement.\n8.2.7 Washington state and local measures\n8.2.7.1 Whether the Washington state and local measures constitute specific subsidies\nwithin the meaning of Articles 1 and 2 of the SCM Agreement\n8.2.7.1.1 Introduction\n8.641. In this Section of the Repo rt, we evaluate whether the Washington state and local\nmeasures that are within the scope of this proceeding1845 (hereafter the Washington tax measures)\nconstitute specific subsidies within the meaning of Articles 1 and 2 of the SCM Agreement , and\nwhether by granting or maintaining any such subsidies, the United States has failed to withdraw\nthe subsidies within the meaning of Article 7.8 of the SCM Agreement. Specifically, we address the\nfollowing:\na. Washington State B&O tax rate reduction for the aerospace industry;\n\nappearing in the column \"AMT ISSUED\" for the years 2002 to 2012. (See List of all City of Wichita IRBs,\n1994-2012, provided by the City of Wichita, (Exhibit EU-420)).\n1842 Panel Report, US – Large Civil Aircraft (2nd complaint), paras. 7.651-7.656.\n1843 We note in this regard that the European Union bears the burden of demonstrating that the subsidy\nis specific, within the meaning of Article 2.1(c).\n1844 We note that the European Union also argues that the subsidies provided to Boeing through the tax\nabatements associated with the City of Wichita IRBs are specific pursuant to Article 2.3 of the SCM Agreement.\nWe recall that we have found in Section 7.6.2 of this Report that the European Union's claims under\nArticles 3.1 and 3.2 of the SCM Agreement are not within the scope of this proceeding with respect to the tax\nabatements related to the City of Wichita IRBs. We therefore reject the European Union's argument that these\nsubsidies are specific pursuant to Article 2.3 of the SCM Agreement.\n1845 See Section 7.2.1 above for our rulings regarding the Washington state and local measures that are\nwithin the scope of this proceeding.\n\nb. Washington State B&O tax credit s for preproduction/aerospace product development, as\namended by section 7 of SSB 6828;\nc. Washington State B&O tax credit for property taxes, as amended by HB 2466 to include\nleasehold excise taxes;\nd. Washington State sale s and use tax exemptions for computer hardware, software, and\nperipherals; and\ne. City of Everett B&O tax rate reduction.\n8.642. The four Washington State tax measures above were first enacted in Washington State\nunder HB 2294 in 2003.1846 The City of Everett B&O tax r ate reduction is a local measure that was\nenacted in 2004 under Ordinance 2759. 1847 All five measures were at issue in the original\nproceeding, and were found to constitute specific subsidies within the meaning of Article 1 and 2 of\nthe SCM Agreement. 1848 Of the se subsidies, however, only the Washington State B&O tax rate\nreduction was affirmatively found to cause ser ious prejudice at the end of the original\nproceeding.1849 For the remaining subsidies, the Appellate Body overturned the panel's finding that\nthe subsi dies did not cause serious prejudice , but then was unable, or was not requested, to\ncomplete the analysis.1850\n8.643. The European Union claims that the United States has failed to withdraw the subsidy within\nthe meaning of Article 7.8 of the SCM Agreement because, through the Washington state and local\nmeasures, the United States maintains specific subsidies within the meaning of Articles 1 and 2 of\nthe SCM Agreement. 1851 In its Compliance Communication, the United States asserts that the\nState of Washington is applyi ng B&O tax rates for aerospace manufacturing and retailing\nconsistently with Article 5(c) of the SCM Agreement.1852\n8.2.7.1.2 Main arguments of the parties\n8.644. The European Union argues that the Washington State B&O tax rate reduction , B&O tax\ncredits for preproduction/aerospace product development, B&O tax credits for property taxes and\nleasehold excise taxes, sales and use tax exemptions for computer hardware, software, and\nperipherals, and the City of Everett B&O tax rate reduction , continue to provide specific subsidie s\nto Boeing within the meaning of Articles 1.1 and 2.1(a) of the SCM Agreement, consistent with the\nfindings in the original proceeding and thus have not been withdrawn.1853\n8.645. As to whether the Washington State B&O tax credit for leasehold excise taxes involve s a\nfinancial contribution to Boeing, the European Union argues that this measure is an \"expansion\" of,\nand operates in precisely the same manner as, the B&O tax credit for property taxes, which the\noriginal panel found was a specific subsidy. 1854 In response to the United States ' argument that\nBoeing has never claimed the B&O tax credit in respect of leasehold excise taxes , the\nEuropean Union argues that it has met its burden by : (a) identifying property being leased by\nBoeing that is subject to the Washingto n State leasehold excise tax es; and ( b) identifying the\n\n1846 Panel Report, US – Large Civil Aircraft (2nd complaint), paras. 7.41-7.43.\n1847 Panel Report, US – Large Civil Aircraft (2nd complaint), paras. 7.306-7.308.\n1848 Panel Report, US – Large Civil Aircraft (2nd complaint), paras. 7.302 and 7.354. These findings were\nnot disturbed on appeal. The B&O tax credit for property taxes was before the original panel prior to the\namendment under HB 2466 to extend the availability of the credit to leasehold excise taxes.\n1849 Panel Report, US – Large Civil Aircraft (2nd complaint), paras. 7.1801-7.1824 (with respect to the\nWashington State B&O tax rate reduction and the City of Everett B&O tax rate reduction); and 7.1825-7.1828\n(with respect to the preproduction tax credit, the property tax credit and the sales and use tax exemption).\n1850 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), paras. 1245-1273 (with respect to\nthe Washington State B&O tax rate reduction and the City of Everett B&O tax rate reduction); and 1331-1346\n(with respect to the preproduction tax credit, the property tax credit and the sales and use tax exemption). For\na more detailed explanation of the Appellate Body's findings with respect to the Washington tax measures, see\nparas. 7.46-7.51 above.\n1851 European Union's request for the establishment of a panel, para. 17.\n1853 European Union's first written submission, paras. 430-474.\n1854 European Union's first written submission, paras. 475-491.\n\nvalue to Boeing of the B&O tax credit for leasehold excise taxes.1855 Further, the European Union\nsubmits a Washington State document indicating the value of the se tax credits.1856 The\nEuropean Union consid ers that the b urden has shifted to the United States to demonstrate that\nBoeing is not receiving this subsidy.\n8.646. The United States does not dispute that the Washington State B&O tax rate reduction, B&O\ntax credits for preproduction/aerospace product develop ment, B&O tax credits for property taxes,\nsales and use tax exemptions for computer hardware, software, and peripherals , and the City of\nEverett B&O tax rate reduction continue to provide specifi c subsidies. Rather, the United States\nargues that they are b eing applied consistently with Article 5(c) of the SCM Agreement because\nthe subsidies are too small to cause adverse effects. 1857 The United States also argues that the\nWashington State B&O tax credit for leasehold excise taxes does not constitute a financia l\ncontribution within the meaning of 1.1(a)(1)(ii) of the SCM Agreement as Boeing does not claim\nthe B&O tax credit for leasehold excise taxes. 1858 According to the United States, the\nEuropean Union cannot fulfil its burden of proof by establishing that Boein g is eligible to claim the\ncredit. The European Union must show that Boeing claimed the credit, which it did not.1859\n8.2.7.1.3 Evaluation by the Panel\n8.647. In Section 7.2 of this Report, we explain that the Washington State B&O tax credit for\nproperty taxes, as modified by HB 2466 to additionally be available for leasehold excise taxes, is in\nour view a single measure, the availability of which has simply been modified by HB 2466. 1860 This\nbeing so, we do not consider it necessary for the European Union to demonstrate that the B&O tax\ncredit for leasehold excise taxes exists as a self-standing financial contribution, distinct from and\nadditional to the financial contribution that the original panel found existed in respect of the\noriginal Washington State B&O tax credit for property taxes prior to its amendment by HB 246 6.\nThis being so, the United States' argument that Boeing has never claimed the B&O tax credit with\nrespect to leasehold excise taxes does not go to the \"existence\" of the B&O tax credit for leasehold\nexcise taxes as a financial contribution, distinct from the B&O tax credit for property taxes. Rather,\nthe issue of whether Boeing has claimed the B&O tax credit in respect of leasehold excise taxes\nconcerns the overall amount of revenue otherwise due which has been foregone in relation to the\nB&O tax credit, available for both property taxes and leasehold excise taxes.\n8.648. Each of the Washington state and local measures that this Panel has found to be within the\nscope of this proceeding has previously been found by the original panel to constitute a specific\nsubsidy within the meaning of Articles 1 and 2 of the SCM Agreement; namely:\na. Washington State B&O tax rate reduction for the aerospace industry;\nb. Washington State B&O tax credits for pre production/aerospace product development, as\namended by section 7 of SSB 6828;\n\n1855 European Union's second written submission, para. 582 (citing European Union's first written\nsubmission, paras. 485-487); and Snohomish County Council Lease Approval, Dreamlifter Land and Building\nLease (25 July 2012), (Exhibit EU-447), exhibit C.\n1856 European Union's second written submission, para. 582; Washington State Department of Revenue,\n2012 Tax Exemption Study: A Study of Tax Exemptions, Exclusions, Deductions, Deferrals, Differential Rates\nand Credits for Major Washington State and Local Taxes, (January 2012), (Exhibit EU-435); and Washington\nState Subsidies to Boeing's LCA division, (Exhibit EU-38). The European Union notes that the United States did\nnot respond to the Panel's request for \"information and documents demonstrating whether Boeing leases\nbuildings or land meeting the criteria for this tax credit\", nor did it assert that Boeing did not lease any\nbuildings or land meeting the criteria for this tax credit. (See European Union's second written submission,\npara. 583 (citing United States' response to the Panel's request for information pursuant to Article 13 of the\nDSU, dated 28 February 2013, response to question No. 53, para. 123; and United States' communication in\nresponse to the Panel's request for information pursuant to Article 13 of the DSU, dated 22 March 2013\n(Exhibit USA-176) (responding to question No. 53))).\n1857 United States first written submission, paras. 494-509; and second written submission,\nparas. 465-474.\n1858 United States' first written submission, para. 510 (citing United States' communication in response\nto the Panel's request for information pursuant to Article 13 of the DSU, 22 March 2013, (Exhibit USA-176),\np. 2).\n1859 United States' second written submission, para. 477.\n1860 See para. 7.10 above.\n\nc. Washington State B&O tax credit for property taxes, as amended by HB 2466 to include\nleasehold excise taxes;\nd. Washington State sales and use tax exemptions for computer hardware, software, and\nperipherals; and\ne. City of Everett B&O tax rate reduction.\n8.649. We see no basis for revisiting the origina l panel's conclusions that the Washington state\nand local measures identified in paragraph 8.641 above are specific subsidies.1861\n8.2.7.2 Amount of the subsidy\n8.650. The parties disagree in several respects as to the amounts of the various Washington state\nand local subsidies. Each party provides estimates of the alleged amounts in question from 2007 to\n2011-2012, as well as projec tions of the amounts of subsidies from 2012 -2013 through 2023 or\n2024, whenever the tax subsidy was originally set to expire.1862\n8.2.7.2.1 Main arguments of the parties\n8.651. The European Union presents separate estimates for the amount s provided, or forecast to\nbe provided, by each of the five Washington tax subsidies, between 2007 and 2024. It relies on a\nnumber of different sources to support its estimates, depending not only on the particular subsidy,\nbut also on the time-period over which it is estimating the amount.\n8.652. For the Washington State B&O tax rate reduction , the European Union estimates the\namounts as being approximately USD 350.1 million between 2007 and 2011, USD 94.4 million in\n2012 and a further USD 2.53 billion between 2013 to 20241863 (or USD 210.8 million annually).1864\nThis amounts to an estimated tax reduction of USD 2.62 billion from 2012 to 2024 . For the figures\nfrom 2007 to 2011, the European Union relies on the same evidence that the original panel used\nto calculate the amount of th is subsidy, which is a s preadsheet provided by the Washington State\nDepartment of Revenue dated from 2005 and a Washington St ate presentation from\nSeptember 2003.1865 For the estimates for the annual amounts for 2012 until 2024, however, the\nEuropean Union relies on a report prepared by International Trade Resources (ITR Report).1866\n\n1861 We note that the European Union also argues that these Washington state and local measures are\nspecific pursuant to Article 2.3 of the SCM Agreement. We recall that we have found in Section 7 of the Report\nthat the European Union's claims under Articles 3.1 and 3.2 are not within the scope of this proceeding with\nrespect to these Washington state and local measures. We therefore do not further address the\nEuropean Union's argument that these subsidies are specific pursuant to Article 2.3 of the SCM Agreement.\n1862 The City of Everett B&O tax rate reduction is available until 2023. All the remaining Washington\nstate and local subsidies were originally available until 2024. We note that on 11 November 2013, the\nWashington State Legislature passed SSB 5952, which extends the tax measures in HB 2294 from 1 July 2024\nuntil 1 July 2040, contingent upon Boeing siting the production of the 777X in Washington State. In our\npreliminary ruling of 18 September 2014, we declined to include this extension within the scope of this\nproceeding. (See Reasons for Declining the European Union's Request for Leave to File an Additional\nSubmission Regarding SSB 5952 at Section 7.7). Our findings on amount therefore cover only the period over\nwhich the Washington state and local subsidies were originally planned to be available, and only address the\nWashington state and local subsidies granted with respect to aircraft for which Boeing currently receives\nrevenue; i.e. that are currently being delivered. The 777X is yet to enter fully into production, and first\ndeliveries of the 777X are not scheduled to begin until 2020. (See Ascend data base, Deliveries made, data\nrequest as of 22 September 2015, (Exhibit EU-1660)).\n1863 European Union's first written submission, para. 430.\n1864 Washington State Subsidies to Boeing's LCA Division, (Exhibit EU-38).\n1865 European Union's first written submission, paras. 430 and 439 and fn 1094; Panel Report, US –\nLarge Civil Aircraft (2nd complaint), paras. 7.216-7.220 and 7.252-7.258; \"Washington State and the Boeing\nCompany: Working Together for the Boeing 7E7 Dreamliner\", Continuing Support and Collaborative Actions,\nPresentation at Greenville, SC, September 2003 (Washington State presentation), (Exhibit EU-427);\nWashington State Department of Revenue Final HB 2294 Fiscal Note – 20-Year Spreadsheet, Commercial\nAirplane/Component Industry Tax Incentives (Washington State spreadsheet), (Exhibit EU-428); and\nWashington State Subsidies to Boeing's LCA Division, (Exhibit EU-38).\n1866 European Union's first written submission, para. 440; International Trade Resources Report,\nEstimated Value of Washington State's B&O Tax Rate Reduction for Boeing's Civil Aircraft Division\n\n8.653. With respect to the Washington State B&O tax credits for both preproduction/aerospace\nproduct development and property taxes, the European Union originally submitted its own amount\nestimates.1867 These estimates were also based on both the evidence used by the original panel,\nand a 2012 study by Washington State Department of Rev enue which purports to estimate the\ntaxpayer savings that would accrue from eliminating certain tax exemptions (the 2012 Study).1868\nThe European Union subsequently adopted the United States ' estimates of the amounts of these\nsubsidies, noting that the United States ' estimates were in fact higher than its own .1869 The\nEuropean Union also uses the 2012 Study as evidence for its estimate of the amount, between\n2012 and 201 5, of the portion of the Washington State B&O tax credits in respect of leasehold\nexcise taxes (which only became available in 2012).1870 From 2016 until 2024, the European Union\nnotes that Boeing leases the Dreamlifter Operations Center in Washington State. It estimates what\nBoeing is eligible to receive from the subsidy by calculating Boeing's yearly rent for those facilities,\nand then calculating what Boeing should receive based on the rate reduction provi ded by the B&O\ntax credit.1871\n8.654. For the Washington State sales and use tax exemption s, the European Union relies on the\nsame evidence used by the panel for the amount findings in the original proceeding, but for the\nperiods 2007 to 2011 and 2016 to 2024. 1872 For the intervening years ; i.e. 2012-2015 inclusive,\nthe European Union relies on the 2012 Study.1873 The European Union justifies this departure from\nthe estimates on which the original panel relied for the 2012 -2015 period on the basis that the\n2012 Study shows that the other materia l available to the European Union significantly\nundervalues the benefit to Boeing from these tax exemptions. The European Union accordingly\nestimates on the basis of the 2012 Study (based on the assumption that Boeing receives 80% of\nthe total value of these tax exemptions to the aerospace industry) that the amount of this subsidy\nto Boeing was USD 9.83 million, 11.52 million, 13.02 million and 13.69 million in 2012, 2013,\n2014, and 2015, respectively.1874\n8.655. Finally, with respect to the City of Everett B&O tax rate reduction, the European Union also\nuses the evidence relied on by the original panel for its estimate of the amount of the subsidy from\n2007 to 2011. 1875 For the period from 2012 to 2023, the European Union bases its estimate on\nfigures received from the City of Everett representing the total amount of tax revenue received\n(and forecast to be received) by the City of Everett from Boeing. 1876 The European Union works\nbackwards from this figure to calculate the value of this tax rate reduction to Boeing. 1877 The\n\n(2012-2024), (1 March 2013) (ITR Report), (Exhibit EU-25); and Washington State Subsidies to Boeing's LCA\nDivision, (Exhibit EU-38).\n1867 European Union's first written submission, para. 453 and fns 1139-1144.\n1868 Panel Report, US – Large Civil Aircraft (2nd complaint), paras. 7.217, 7.257 and fn 1416;\nWashington State presentation, (Exhibit EU-427); Washington State spreadsheet, (Exhibit EU-428);\nWashington State Department of Revenue, 2012 Tax Exemption Study: A Study of Tax Exemptions, Exclusions,\nDeductions, Deferrals, Differential Rates and Credits for Major Washington State and Local Taxes,\n(January 2012), (Exhibit EU-435); and Washington State Subsidies to Boeing's LCA Division, (Exhibit EU-38).\n1869 European Union's second written submission, paras. 575-577.\n1870 European Union's first written submission, para. 487; Washington State Department of Revenue,\n2012 Tax Exemption Study: A Study of Tax Exemptions, Exclusions, Deductions, Deferrals, Differential Rates\nand Credits for Major Washington State and Local Taxes, (January 2012), (Exhibit EU-435).\n1871 European Union's first written submission, para. 485; Snohomish County Council Lease Approval,\nDreamlifter Land and Building Lease (25 July 2012), (Exhibit EU-447), exhibit C.\n1872 European Union's first written submission, paras. 496 and 497; Panel Report, US – Large Civil\nAircraft (2nd complaint), para. 7.258; Washington State presentation, (Exhibit EU-427); Washington State\nSubsidies to Boeing's LCA Division, (Exhibit EU-38); and Washington State Department of Revenue, 2012 Tax\nExemption Study: A Study of Tax Exemptions, Exclusions, Deductions, Deferrals, Differential Rates and Credits\nfor Major Washington State and Local Taxes (January 2012), (Exhibit EU-435).\n1873 European Union's first written submission, para. 497; and Washington State Department of\nRevenue, 2012 Tax Exemption Study: A Study of Tax Exemptions, Exclusions, Deductions, Deferrals,\nDifferential Rates and Credits for Major Washington State and Local Taxes, (January 2012), (Exhibit EU-435).\n1874 European Union's first written submission, para. 497.\n1875 European Union's first written submission, paras. 512 and 513 (referring to Panel Report, US –\nLarge Civil Aircraft (2nd complaint), para. 7.353; and State and Local Subsidies to Boeing LCA Division (Original\nExhibit EC-27), (Exhibit EU-451), \"City of Everett Local B&O Tax Rate Reduction\" row and fn 14 (explaining\nmethodology)).\n1876 European Union's first written submission, paras. 514-516; Forecast of Boeing's Gross Revenue and\nTaxation in the City of Everett, and accompanying note from City of Everett August 2012 FOIA Response,\n(Exhibit EU-450).\n1877 City of Everett's B&O Tax Rate Reduction Estimates for 2012-2023, (Exhibit EU-452).\n\nEuropean Union notes that the United States only provides figures for the total amount of tax\nrevenue to be paid by Boeing, and does not actually present a calculation, based on these figures,\nof the amount of the subsidy to Boeing. 1878 The European Union also considers that the\nUnited States' estimates cannot be authenticated and should not be relied upon.1879\n8.656. The United States bases its estimates of the amount of the Washington State B&O tax rate\nreduction, B&O tax credits for preproduction/aerospace product de velopment, B&O tax credits for\nproperty taxes and leasehold excise taxes, and sales and use tax exemptions for computer\nhardware, software, and peripherals on figures contained in Exhibit USA-264 (BCI), which it states\nare the calculations and estimates of the Washington State Department of Revenue of the value to\nBoeing of these subsidies.1880 The United States explains that the Washington State Department of\nRevenue's calculations indicate the value of each tax measure for the years 2006 to 2012 based on\nactual amounts, and forecast the value for years 2013 through 2024. 1881 The United States argues\nthat Boeing does not claim the B&O tax credit for leasehold excise taxes, and that it is insufficient\nfor the European Union to establish that Boeing is eligible to claim the tax credit; it must show that\nBoeing actually received it.1882\n8.657. With respect to the evidence provided by the European Union in support of its estimates ,\nthe United States considers that the evidence used by the original panel ( on which the\nEuropean Union partly relies to estimate the amounts of the Washington State subsidies other than\nthe B&O tax credit for leasehold excise taxes) is now outdated and should not be relied upon.1883\nThe United States also considers that the ITR Report, which estimates the total amount of the B&O\ntax rate reduction from 2012 to 2024, then divides that total evenly over each year of that period,\nover-allocates revenue to the earlier years of that period.1884\n8.658. For the City of Everett B&O tax rate reduction , the United States submits evidence only as\nto Boeing 's actual and forecast tax revenue to the City of Everett. 1885 It does not submit a n\nestimate of the resulting amount of the City of Everett B&O tax rate reduction.\n8.2.7.2.2 Evaluation by the Panel\n8.2.7.2.2.1 The Washington State B&O tax rate reduction\n8.659. The parties' estimates of the annual amounts of this subsidy (both historic from 2007 to\n2012 and projected from 2013 to 2024) diverge significantly. The United States ' estimate of the\namount of this subsidy between 2007 -2012 (approximately USD [***]) is based on actual\namounts reported by the Washington State D epartment of Revenue .1886 The United States\nsubmitted the Washington State D epartment of Revenue information originally in response to\ncertain requests of the Panel for information pursuant to Arti cle 13 of the DSU. 1887 The\nEuropean Union bases its estimate for the 2007 -2011 period on the same evidence used by the\n\n1878 European Union's second written submission, para. 593.\n1879 European Union's second written submission, para. 592.\n1880 United States' first written submission, para. 496; second written submission, paras. 457 and 458.\nWashington State Tax Information 2006-2024, Boeing Only (formerly Exhibit US-13-656), (Exhibit USA-264)\n(BCI).\n1881 United States' second written submission, para. 457. This information was originally provided by the\nUnited States in response to the Panel's request for information pursuant to Article 13 of the DSU, dated\n28 February 2013, response to questions 48, 49, 51, 52, and 54. (See United States' communication in\nresponse to the Panel's request for information pursuant to Article 13 of the DSU, dated 22 March 2013,\n(Exhibit USA-176); and Washington State Tax Information 2006-2024, Boeing Only (formerly Exhibit\nUS-13-656), (Exhibit USA-264) (BCI)).\n1882 United States' second written submission, para. 477.\n1883 United States' first written submission, para. 496.\n1884 United States' second written submission, para. 463.\n1885 United States' first written submission, para. 507; second written submission, para. 473; and City of\nEverett B&O Tax Revenue, Boeing (formerly Exhibit US-13-327), (Exhibit USA-175) (BCI).\n1886 The Washington State Department of Revenue exhibit states that the figures for 2006 through 2012\nare \"actual amounts based on activity reported on the combined excise tax return\". (Washington State Tax\nInformation 2006-2024, Boeing Only (formerly Exhibit US-13-656), (Exhibit USA-264) (BCI), note 1).\n1887 See United States' communication in response to the Panel's request for information pursuant to\nArticle 13 of the DSU, 22 March 2013, (Exhibit USA-176) (providing additional information with respect to\nquestions 48, 49, 51, 52, and 54 of the Panel's Article 13 request); and Washington State Tax Information\n2006-2024, Boeing Only (formerly Exhibit US-13-656), (Exhibit USA-264) (BCI).\n\noriginal panel to estimate the amounts of this subsidy for 2004 -2006; namely, a Washington State\npresentation from September 2003 1888 and a spr eadsheet prepared by the Washington State\nDepartment of Revenue at the time that HB 2294 was being finalized, showing the projected value\nof the B&O tax rate reduction to the commercial airplane/component industry as a whole (of which\nBoeing's share is 65%).1889 The European Union argues that the United States ' 2006-2012 figures\nappear to indicate [***] revenue for Boeing Commercial Airplanes than is reported in Boeing 's\nannual financial statements. 1890 The United States says that estimates based on actual tax da ta\nare inherently more reliable than calculations that rely on estimates of that same data.\n8.660. We consider the United States ' estimates of the amount of the Washington State B&O tax\nrate reduction to Boeing for the 2007 -2012 period, based as they are on the actual receipts of the\nrevenue authority from the taxpayer, to be the best evidence of the amount of the subsidy to\nBoeing for the 2007 -2012 period. This information was provided by the United States in response\nto a request for information by the Panel un der Article 13 of the DSU. The United States has\nconfirmed, in response to concerns raised by the European Union regarding the authenticity of\nExhibit USA -264 (BCI), that the figures in question were provided to the United States by the\nWashington State Department of Revenue.1891 We have no reason to suspect that this information\nwas not provided in good faith.\n8.661. As to the estimates of the annual amount of the Washington State B&O tax rate reduction\nfor the years 2013 through 2024, the United States relies on th e Washington State Department of\nRevenue projections contained in the same Exhibit USA-264 (BCI), while the European Union relies\non estimates prepared by ITR for 2012 -2024. The Washington State D epartment of Revenue\n2013-2024 forecasts are described in Ex hibit USA -264 (BCI) as being [***].1892 The European\nUnion notes that the United States has not provided or otherwise made available a copy of this\nforecast, and submits that the European Union 's estimate, prepared by ITR, is based on projected\nLCA deliveries in Boeing 's own Current Market Outlook , and therefore is likely to be a more\naccurate estimate of Boeing 's future deliveries (and thus revenues). 1893 The United States argues\nthat the Washington State Department of Revenue's forecasts are more reliable than ITR's as the\nWashington State D epartment of Revenue is well positioned to provide a reliable estimate of the\nState of Washington 's own tax revenue, and the estimate is based on the most recent revenue\nforecast for the state, combined with the most up -to-date information about the industry as a\nwhole, and Boeing in particular. 1894 The United States offers that the [***].1895 According to the\nUnited States, the Washington State D epartment of Revenue 's projections are based on a more\nsophisticated analysis than the simplistic and flawed assumptions underlying the European Union 's\nestimates.1896\n8.662. As already mentioned, the European Union 's estimates of the annual amount of the\nWashington State B&O tax rate reduction from 2012 -2024 are based on the ITR Report. ITR's\nestimates are derived by estimating Boeing's total LCA revenue s in Washington State from 2012\nuntil 2024 (the year until which the subsidy is available) based on an assumption in Boeing's 2012\nCurrent Market Outlook that global demand for LCA in 2021 -2031 will be 31,980 aircraft with a\nmarket value of USD 4,390 billion . ITR assumes that Boeing will supply half of this demand, and\nsubtracts Boeing Commercial Airplanes ' 2012 reported revenues (USD 49.1 billion) from half of\nUSD 4,390 billion (USD 2,1 95 billion) to a rrive at Boeing 's estim ated total LCA revenue for\n2013-2031 (USD 2,145.9 billion) . In order to arrive at an estimat ed total LCA revenue for the\n12 years 2013-2024 from the 19 -year 2013-2031 estimate, it multiplies USD 2,145.9 billion by\n12/19. It makes adj ustments to reflect that Boeing 's commercial airplane revenues also include\nrevenues attributable to 787s produced in South Carolina (which are not revenues subject to\nWashington State B&O tax ). After arriving at a total revenue figure for 2013 -2024 that d oes not\ninclude South Carolina revenues, ITR multiplies this number (USD 1,306.6 billion) by the B&O tax\n\n1888 Washington State presentation, (Exhibit EU-427).\n1889 Washington State spreadsheet, (Exhibit EU-428). See also Panel Report, US – Large Civil Aircraft\n(2nd complaint), para. 7.254.\n1890 European Union's second written submission, para. 571.\n1891 United States' second written submission, para. 458.\n1892 Washington State Tax Information 2006-2024, Boeing Only (formerly Exhibit US-13-656), (Exhibit\nUSA-264) (BCI), note 3.\n1893 European Union's second written submission, para. 572.\n1894 United States' second written submission, para. 460.\n1895 United States' second written submission, para. 460 and fn 652.\n1896 United States' second written submission, para. 460, fn 652.\n\nrate reduction of 0.1936%, to arrive at an estimated tax reduction of USD 2,529.7 million for the\nperiod 2013-2024.1897 When divided equally over the years 2013-2024, this amounts to a subsidy\nto Boeing of USD 210.81 million per year for every year from 2013 -2024.1898 The European Union\nconsiders that this evidence is the best available evidence as to the amount of the B&O tax rate\nreduction, because the United States' figures cannot be relied on.1899\n8.663. The United States takes issue with the European Union's suggestion that the ITR estimates\nare based on Boeing 's own commercial projections. It also questions the credibility of the ITR\nestimates because of an absence of continuity between the pre -2012 and post -2012 estimates,\nnoting that the 2012 estimate is USD 94.4 million, which then jumps to more than twice that at\nUSD 210.8 million in 2013 and every year thereafter until 2024. The United States alleges that the\n\"fundamental problem\" with the ITR methodology is that it is based on an estimate of Boeing 's\ntotal revenue for 2012-2031 that assumes the world market for aircraft will double in 20 years. 1900\nIt then allocates that total revenue evenly over each year of that 20-year period, ignoring that\nBoeing's revenue would be expected to increase gradually each year. This leads to an\nover-allocation of revenue to Boeing in the early years of the 20 -year period that in reality would\nnot be realized until over a decade late r in the latter years of the 20 -year period, thereby inflating\nthe amount of the B&O tax rate reduction over the early years.1901\n8.664. The accuracy of estimates of the post-2012 amount of the Washington State B&O tax rate\nreduction to Boeing depends to a large ex tent on the accuracy of the estimates of Boeing 's\nexpected revenues from future deliveries of LCA manufactured in the State of Washington. The\nUnited States refers to [***] as the basis for the Washington State D epartment of Revenue 's\nprojections of the va lue of the Washington State B&O tax rate reduction to Boeing in the\npost-2012 period. The ITR Report, by contrast, bases its estimates on Boeing 's 2012 Current\nMarket Outlook and in particular, Boeing's prediction that global demand for LCA in 2012 -2031 will\nbe 31,980 aircraft with a market value of USD 4,390 billion, of which Boeing could expect to\nsupply approximately 50%.1902 The United States does not provide any further detail regarding the\nGlobal Insight forecast and in the absence of any further informa tion, we cannot evaluate the\nassumptions underlying [***] against the 2012 Current Market Outlook LCA demand and revenue\nforecasts. However, the United States does not specifically criticize the demand and revenue\nforecasts in the 2012 Current Market Outlook. Rather, it criticizes what ITR does with the notional\nrevenues represented by Boeing's assumed share of those LCA sales between 2013-2031, which is\nto apportion the amount equally over every year to arrive at a uniform annual value of the B&O\ntax rate reduction for the years 2013 to 2024, without accounting for the fact that in reality,\nBoeing's revenues (and the corresponding value to Boeing of the B&O tax rate reduction) would be\nexpected to increase gradually over the period.\n8.665. We consider this latter criticism is valid because the effect of ITR's apportionment\nmethodology is to enlarge Boeing's estimated LCA revenues for the period immediately after 2012,\nwhich is the period relevant to the Panel 's estimate of the amount of the Washington State B&O\ntax rate reduction.1903 It is this methodological flaw that explains why the ITR estimate for 2012 is\nUSD 94.4 million , based on Boeing commercial airplanes ' actual reported revenues of\nUSD 49.1 billion, and a B&O tax rate reduction of 0.1936%, while for 2013, the estimated amount\nis dramatically higher at USD 210.8 million, based on an apportionment of Boeing 's assumed LCA\nrevenues from 2013-2031.\n\n1897 ITR Report, (Exhibit EU-25), paras. 5-15.\n1898 Washington State Subsidies to Boeing's LCA Division, (Exhibit EU-38).\n1899 Specifically, the European Union notes that the United States' estimates are provided on \"a single\npiece of paper\", with no signs of authenticity. (See European Union's second written submission, para. 569).\nHowever, in its second written submission, the United States confirms that the figures were provided by the\nWashington State Department of Revenue and explains that they are not provided on Department of Revenue\nletterhead because the Washington State Department of Revenue does not print internal documents on its own\nletterhead. (See United States' second written submission, para. 458 and fn 647).\n1900 United States' second written submission, para. 463.\n1901 United States' second written submission, para. 463.\n1902 ITR Report, (Exhibit EU-25), paras. 5 and 6.\n1903 By way of comparison, the estimates on which the original panel relied contemplated that the\nprojected amount of these subsidies in 2023 would be almost double the amount of the subsidies in 2012. See\nWashington State spreadsheet, (Exhibit EU-428).\n\n8.666. For purposes of evaluating the credibility of both the United States ' and the\nEuropean Union's estimates, we have made our own calculations of the estimated amount of the\nB&O tax rate reduction to Boeing for 2013 and 2014, based on the Boeing commercial airplanes\nsegment's reported LCA revenues for those years, and adjusting for revenues associated with 787\nproduction in South Carolina in the same manner as in the ITR Report. We present those estimates\nbelow, along with the corresponding United States and European Union estimates, as well as the\nWashington State D epartment of Revenue estimates from the 2005 worksheet t hat formed the\nbasis for the original panel's amount estimates for 2004-2006.\nTable 3: Estimates of amount of Washington State B&O Tax Rate Reduction 2012-2015\n\nUnited States\n(Washington\nState Department\nof Revenue)1904\nEuropean Union\n(ITR)1905\nWashington State\nDepartment of\nRevenue 2005\nworksheet1906\nPanel1907\n2012 [***] 94.4 92.6 94.4\n2013 [***] 210.8 98.8 97.2\n2014 [***] 210.8 105.2 108.1\n2015 [***] 210.8 111.9\nNo reported Boeing\ncommercial\nairplanes revenue\nfigure for 2015\nAll figures above in USD (million)\n8.667. Although the Panel's calculations are very approximate, they are generally [***] than the\nUnited States' estimates, and lower than the European Union 's. They are interestingly quite close\nto the projections based on the Washington S tate Department of Revenue 2005 spreadsheet an d\nSeptember 2003 Presentation which formed the basis for the original panel 's estimates of the\namount of these subsidies for 2004 -2006, even though those estimates were based on Boeing\ndelivering the 787 beginn ing in 2008 rather than late 2011, as occurred in reality. We elsewhere\nexplain the methodological flaw in the European Union 's estimates that renders them, in our view,\nnot credible as estimates of the amount of the B&O tax rate reduction received by Boeing in the\nyears from 2012 -2015. We f ind it more difficult to understand why the United States ' estimates\nalso vary from our calculations. The United States has not provided any explanation of how the\nWashington State Department of Revenue projections for 2013 and subsequently were arrived at,\nother than to suggest that the 2013 -2024 forecasts are \"based on\" [***].1908 Given that B&O tax\nis levied on revenues, it is reasonable to expect that the higher Boeing 's reported revenues from\nsales of airplanes, the gre ater the reduction in B&O tax.1909 It appears to us from the table above\n\n1904 Washington State Tax Information 2006-2024, Boeing Only (formerly Exhibit US-13-656), (Exhibit\nUSA-264) (BCI). The 2012 figure is based on actual reported revenue data for the relevant fiscal year (i.e.\n1 July-30 June) while the other numbers are based on projected revenues.\n1905 ITR Report, (Exhibit EU-25); and Washington State Subsidies to Boeing's LCA Division, (Exhibit\nEU-38).\n1906 Washington State spreadsheet, (Exhibit EU-428), based on the assumption from the\nSeptember 2003 Presentation that 65% of the totals reported in the spreadsheet will accrue to Boeing. (See\nPanel Report, US – Large Civil Aircraft (2nd complaint), para. 7.254; and Washington State presentation,\n(Exhibit EU-427)).\n1907 The Panel has taken the reported revenues for Boeing's commercial airplanes segment for 2012,\n2013 and 2014 (USD 49.1 billion, 53 billion, and 60 billion, respectively), as reported in Subsidies to Boeing's\nLCA Division (2013-2014 Update), (Exhibit EU-1451), annex A: Boeing's Annual Report on Form 10-K for the\nfiscal year ended 31 December, 2014, p. 20. To adjust for 787 revenues from Boeing's South Carolina\noperations in the same manner as ITR, it has subtracted from these revenue figures USD 347.4 million for\n2012, USD 2.78 billion for 2013 and USD 4.17 billion for 2014. (see ITR Report, (Exhibit EU-25), paras. 12 and\n13). It then multiplies the remaining Washington LCA revenue numbers by the value of the B&O tax rate\n(0.1936%).\n1908 United States' second written submission, fn 652.\n1909 Both the 2005 estimates and the new estimates provided by the Washington State Department of\nRevenue for the years 2012 compared to 2013-2015 are generally consistent in terms of the pattern of\n\nthat there is a correlation between the United States' estimates for 2014 and 2015 and the Panel's\nestimates for 2013 and 2014. In particular, the United States' estimates appear to lag those of the\nPanel. This may re flect the fact that the Washington State D epartment of Revenue figures appear\nto be based on the fiscal year in Washington State, while the revenue figures on which the Panel\nbased its estimates are as reported by Boeing in i ts annual reports, which uses a 31 December\nyear-end.\n8.668. Although the European Union 's estimates are problematic, we are also uncertain how the\nWashington State Department of Revenue estimates, based as they appear to be on a fiscal year\nending on 30 June, t ranslate to the calendar year. Boeing 's reported revenues from LCA have\nincreased since 2012 and our concern is that the United States ' figures may not actually represent\nthe value of the B&O tax rate reduction for the 2013 -2015 calendar years because they appear to\ncover a different annual reporting period.\n8.669. The Panel does not have before it Boeing 's revenue figures for the year end ing 31\nDecember 2015. We therefore cannot estimate the amount of the B&O tax rate reduction received\nby Boeing for 2015 in the same way that we have estimated the 2013 and 2014 amounts. We are\nconfident, however, that the amount of the Washington State B&O tax rate reduction for 2015\nwould be higher than the United States ' fiscal year 2015 estimate. We consider that the 2015\nfigure is more likely closer to , but also higher than, the estimate that the Washington State\nDepartment of Revenue provides for fiscal year 2016, owing to the discrepancies arising from\ndifferent reporting periods described above, and based on other evidence before the Panel that\nwould seem to indicate that Boeing 's commercial airplanes revenues for 2015 would be higher\nthan for 2014 owing to record deliveries in that year. 1910 We have decided that it is reasonable to\nestimate the 2015 figure to be USD 120 million.\n8.670. Accordingly, the Panel estimates that the amount of the Washington State B&O\ntax rate reduction for 2013, 2014 and 2015 is approximately USD 97 million, 108 million\nand 120 million, respectively, for a total of USD 325 million over those three years.\n8.2.7.2.2.2 The amount s of the Washington State B&O tax credits for\npreproduction/aerospace product development and for property taxes and the\nWashington State sales and use tax exemptions for computer hardware, software, and\nperipherals\n8.671. The European Union accepts th e United States ' estimates of the amounts of the\nWashington State B&O tax credits for preproduction/aerospace product development and for\nproperty taxes.1911 It does so despite its complaints generally that the information contained in\nExhibit USA-264 (BCI) i s not adequately authenticated and does not explain how the projections\nwere derived, and by whom. 1912 It notes, however, that the United States ' estimates of the\namounts of the B&O tax credits for preproduction/aerospace product development and for property\ntaxes are in fact significantly higher than the European Union 's estimates based on the original\npanel's methodology.1913 It then advances other reasons why the European Union could accept the\nUnited States ' estimates, if the Panel were prepared to accept the m despite their lack of\n\"authentication\".1914 We consider that the United States has adequately addressed the origin of the\nWashington State D epartment of Revenue estimates. Given that there is no other disagreement\nbetween the parties regarding the amounts, we accept the United States ' estimates of the\namounts of these subsidies.1915\n\ngradually increasing annual values of the B&O tax rate reductions to Boeing, with the 2003 annual projections\nbeing somewhat higher than the more recent annual projections.\n1910 Earnings Call Transcript of D.A. Muilenburg on Boeing (BA) Q3 2015 Results, 21 October 2015,\n(Exhibit EU-1706), p. 4/20.\n1911 European Union's second written submission, paras. 575-577 and 579.\n1912 European Union's second written submission, para. 569.\n1913 European Union's second written submission, paras. 576 and 579.\n1914 European Union's second written submission, paras. 576 and 579. In the case of the B&O tax credits\nfor preproduction/aerospace product development, the European Union explains that the United States' figures\ndo [***]. In the case of the B&O tax credits for property taxes, it is because the European Union is prepared\nto give greater weight to the United States' [***].\n1915 Accordingly, the value of the B&O tax credits for preproduction/aerospace product development for\n2007-2012 is USD [***], and for the 2013-2015 period, the amount is USD [***]. The value of the B&O tax\n\n8.672. With respect to the sales and use tax exemption s, however, the European Union rejects\nthe United States ' estimates, which in this case are [***] the corresponding European Union\nestimates. The European Union relies instead on the evidence used by the original panel for the\nperiods 2007-2011 and 2016-2024. For the period 2012-2015, the European Union relies on the\n2012 Study. The European Union argues that the United States ' estimates do not comport with\npublicly available information, such as information derived from the 2012 Study. 1916 The United\nStates argues that in truth the European Union 's objection to these estimates appears to be that\nthey are lower than the European Union's estimates.1917\n8.673. The 2012 Study is a 250 page document that purports to list 640 different exemptions\nfound principally in Titles 82 and 84 of the Revised Code of Washington. It says that in some\ncases, similar statutes are considered together as a single estimate, e.g. retail sales and use tax\nexemptions for the same product or activity. 1918 The 2012 Study contains a half -page listing of\ntaxpayer savings for state and local sales and use tax exemptions for air plane computer\nexpenditures for the years FY 2012-FY 2015. The European Union adds the state and local savings\nestimates together and multiplies that sum by 80% , which was estimated to be Boeing 's share of\nthis tax measure in the September 2003 Presentation. 1919 The European Union does not explain\nhow the figures in the 2012 Study were calculated, or why these figures are more reliable than the\nUnited States' estimates provided by the Washington State D epartment of Revenue, and whether\nit is still appropriate to assume that Boeing benefits from approximately 80% of this tax exemption\nto the aerospace industry. The 2012 Study contains a caution in the introduction that the revenue\nimpacts presented in the study reflect estimated savings to taxpayers and do not necessarily\nindicate the potential revenue which might accru e to governmental jurisdictions in the absence of\nthe exemptions.1920 Given the more generalized nature of the information provided in the 2012\nStudy, we are not persuaded that it is a more reliable estimate of the amount of the sales and use\ntax exemptions t han the Washington State D epartment of Revenue information provided by the\nUnited States. We therefore accept the United States ' estimates of the amount of the\nsales and use tax exemptions.1921\n8.674. With respect to the portion of the B&O tax credits in respect of leasehold excise taxes, the\nUnited States argues that, although the European Union has presented evidence that Boeing is\neligible to receive the subsidy, Boeing does not actually claim, or receive, credits for the leasehold\nexcise tax es.1922 The European Unio n argues that it has met its burden by identifying property\nleased by Boeing that is subject to leasehold excise tax and identifying the value of the leasehold\nexcise tax credit accruing from the lease. 1923 In particular, it notes that the 2012 Study indicate s\nthe value of the B&O tax credits for property and leasehold excise taxes on aeroplane facilities.1924\nThe 2012 Study, however, provides a single figure of USD 4 million per year from 2012 to 2015 for\nboth property and leasehold excise tax credits, which the European Union halves to generate an\nestimate of the amount of the leasehold excise tax credit.1925 We do not consider that this\nconstitutes evidence that Boeing actually received the leasehold excise tax credit; the full USD 4\nmillion per year could have be en attributable to tax credit s in respect of property taxes alone.\n\ncredits for property taxes for 2007-2012 is USD [***], and for the 2013-2015, the amount is USD [***].\n(See Washington State Tax Information 2006-2024, Boeing Only (formerly Exhibit US-13-656) (BCI), (Exhibit\nUSA-264 (BCI)).\n1916 European Union's second written submission, para. 588.\n1917 United States' second written submission, para. 471.\n1918 Washington State Department of Revenue, 2012 Tax Exemption Study: A Study of Tax Exemptions,\nExclusions, Deductions, Deferrals, Differential Rates and Credits for Major Washington State and Local Taxes,\n(January 2012), (Exhibit EU-435), p. 1.\n1919 European Union's first written submission, paras. 496 and 497.\n1920 Washington State Department of Revenue, 2012 Tax Exemption Study: A Study of Tax Exemptions,\nExclusions, Deductions, Deferrals, Differential Rates and Credits for Major Washington State and Local Taxes,\n(January 2012), (Exhibit EU-435), p. 1.\n1921 Accordingly, the amount of the sales and use tax exemptions for 2007-2012 is USD [***], and for\nthe 2013-2015 period, the amount is USD [***]. (See Washington State Tax Information 2006-2024, Boeing\nOnly (formerly Exhibit US-13-656), (Exhibit USA-264) (BCI)).\n1923 European Union's first written submission, paras. 485-487.\n1924 European Union's first written submission, para. 487; and Washington State Department of\nRevenue, 2012 Tax Exemption Study: A Study of Tax Exemptions, Exclusions, Deductions, Deferrals,\nDifferential Rates and Credits for Major Washington State and Local Taxes, (January 2012), (Exhibit EU-435),\np. 118.\n1925 See European Union's first written submission, para. 487.\n\nMoreover, the United States' estimate of the B&O tax credit for property taxes for 2012 and 2015,\nwhich the European Union accepts, exceeds the 2012 Study's reported estimate for the tax cr edit\napplied to both the property tax es and leasehold excise tax es. The European Union 's remaining\nevidence only demonstrates Boeing's eligibility for the B&O tax credit in respect of leasehold excise\ntaxes, not Boeing's actual receipt of the subsidy.1926\n8.2.7.2.2.3 The amount of the City of Everett B&O tax rate reduction\n8.675. The European Union calculates the amount of the City of Everett B&O tax r ate reduction\nbetween 2007 and 2011 based on evidence relied upon by the original panel, and between 2012\nand 2023, based on revenue forecasts received from the City of Everett. 1927 The United States\nprovides evidence of the actual tax revenues received by the City of Everett between 2007 and\n2012, and forecasts of tax revenue s between 2013 and 2023 [***].1928 The United States does\nnot, however, submit its own estimates of the City of Everett B&O tax rate reduction. The\nEuropean Union submits that the United States ' figures lack signs of authenticity, and should be\nrejected because they fail to value the precise tax benefit, and otherwis e do not correspond to the\ninformation the European Union received directly from the City of Everett. 1929 The United States\nnotes that certain of the European Union 's figures for total reported revenue are greater than\nthose submitted by the United States, an d considers that, as a result, the European Union\novervalues the amount of the tax rate reduction.1930\n8.676. Given that the United States submits actual receipts of the revenue from the taxpayer\nduring the 2007-2012 period, we consider it appropriate to base our a ssessment of the amount of\nthe City of Everett B&O tax rate reduction on these figures as the best evidence of the amount of\nthe subsidy to Boeing .1931 This information was provided by the United States in response to a\nrequest for information by the Panel pursuant to Article 13 of the DSU. Based on the information\nconcerning actual revenue provided in Exhibit USA -175, the Panel calculates that the amount of\nthe City of Everett B&O tax rate reduction between 2007 and 2012 is approximately [***].1932 For\nthe 2013-2015 period, the United States has submitted forecasted tax revenue accruing to the\nCity of Everett purportedly based on [***], but has not otherwise explained its methodology for\ndetermining the projected revenue figures . Absent any explanation from the U nited States,\nconsistent with our approach in respect of the other Washington tax measures1933, we consider it\nappropriate to base the calculation of the amount of the subsidy on projections from the relevant\ntax authority, in this case, figures from the City of Everett. Based on projected gross revenues and\nthe B&O tax basis provided by the City of Everett, the amount of the City of Everett B&O tax r ate\nreduction totals approximately USD 16.41 million, 17.47 million and 20.22 million in 2013, 2014 ,\nand 2015, respectively, as confirmed by the European Union's own calculations.1934\n\n1926 See Snohomish County Council Lease Approval, Dreamlifter Land and Building Lease (25 July 2012),\n(Exhibit EU-447), exhibit C.\n1927 State and Local Subsidies to Boeing's LCA Division (Original Exhibit EC-27), (Exhibit EU-451);\nForecast of Boeing's Gross Revenue and Taxation in the City of Everett, and accompanying note from City of\nEverett August 2012 FOIA Response, (Exhibit EU-450); and City of Everett's B&O Tax Rate Reduction\nEstimates for 2012-2023, (Exhibit EU-452).\n1928 City of Everett B&O Tax Revenue, Boeing (formerly Exhibit US-13-327), (Exhibit USA-175) (BCI).\n1929 See European Union's first written submission, para. 514; European Union's second written\nsubmission, paras. 591-593; State and Local Subsidies to Boeing LCA Division (Original Exhibit EC-27), (Exhibit\nEU-451); Forecast of Boeing's Gross Revenue and Taxation in the City of Everett, and accompanying note from\nCity of Everett August 2012 FOIA Response, (Exhibit EU-450); and City of Everett's B&O Tax Rate Reduction\nEstimates for 2012-2023, (Exhibit EU-452).\n1930 United States' first written submission, para. 508; and City of Everett B&O Tax Revenue, Boeing\n(formerly Exhibit US-13-327), (Exhibit USA-175) (BCI).\n1931 City of Everett B&O Tax Revenue, Boeing (formerly Exhibit US-13-327), (Exhibit USA-175) (BCI).\n1932 See City of Everett B&O Tax Revenue, Boeing (formerly Exhibit US-13-327), (Exhibit USA-175)\n(BCI). Knowing that taxes on revenue of up to USD 7 billion are assessed on the basis of a rate of 0.1%\nbetween 2007-2012 and therefore amount to USD 7 million, the Panel calculates the value of the City of\nEverett B&O tax rate reduction by determining Boeing's gross revenues per annum in the City of Everett, the\ntax on the portion of gross revenues taxed at the regular rate of 0.1%, the tax on the portion of gross\nrevenues taxed at the special rate of 0.025%, and thereafter determining Boeing's resulting tax savings.\n1933 See Sections 8.2.7.2.2.1 and 8.2.7.2.2.2.\n1934 See Forecast of Boeing's Gross Revenue and Taxation in the City of Everett, and accompanying note\nfrom City of Everett August 2012 FOIA Response, (Exhibit EU-450); and City of Everett's B&O Tax Rate\nReduction Estimates for 2012-2023, (Exhibit EU-452).\n\n8.677. We therefore find that the amount of the City of Everett B&O tax rate reduction\nwas approximately USD 54.1 million during the 2013-2015 period.1935\n8.2.7.3 Conclusion\n8.678. In light of our findings above with respect to the Washington state and local subsidies, we\nconclude that the European Union has established that the following measures involve specific\nsubsidies within the meaning of Articles 1 and 2 of the SCM Agreement:\na. Washington State B&O tax rate reduction for the aerospace industry, in the amount of\nUSD 325 million between 2013 and 2015;\nb. Washington State B&O tax credits for preproduction/aerospace product development, as\namended by section 7 of SSB 6828, in the amount of [***] between 2013 and 2015;\nc. Washington State B&O tax credit for property taxes, as amended by HB 2466 to include\nleasehold excise taxes, in the amount of [***] between 2013 and 2015;\nd. Washington State sales and use tax exemptions for computer hardware, software, and\nperipherals, in the amount of [***] between 2013 and 2015; and\ne. City of Everett B&O tax rate reduction, in the amount of USD 54.1 million between 2013\nand 2015.\n8.2.8 The South Carolina measures\n8.2.8.1 Introduction\n8.679. In this Section of the Report, we evaluate whether the state and loca l measures provided\nby the State of South Carolina in connection with the production and assembly of the 787 in North\nCharleston1936 are specific subsidies to Boeing, and whether, by granting or maintaining any such\nsubsidies, the United States has failed to withdraw the subsidy within the meaning of Article 7.8 of\nthe SCM Agreement.\n8.680. The South Carolina measures properly before us concern different aspects of Boeing 's\noperations in North Charleston and are alleged to involve two incentive packages provided at\ndifferent times1937:\na. Project Gemini: A 2009 incentive package concerning Boeing 's second 787 final\nassembly and delivery facility in North Charleston, South Carolina (the first 787 final\nassembly and delivery facility located outside the State of Washington).\nb. Project Emerald: A 2006 package concerning the 787 fuselage fabrication and\nintegration operations originally operated by Vought Aircraft Industries, Inc. (Vought)\nand a joint venture between Vought and Alenia Aeronautica (Global Aeronautica). These\noperations were acquired by Boeing in 2009.\n8.2.8.2 The measures at issue\n8.681. The European Union claims that the State of South Carolina and its political subdivisions\nmaintain various subsidies for Boeing, related to the production of LCA and LCA components at\n\n1935 See City of Everett's B&O Tax Rate Reduction Estimates for 2012-2023, (Exhibit EU-452).\n1936 See Section 7.5.1 above for our rulings that these measures are within the scope of this compliance\nproceeding as \"undeclared\" measures taken to comply on account of their sufficiently close nexus with the\nmeasures the subject of the DSB recommendations and rulings in the original proceeding.\n1937 We recall that the European Union, in its second written submission, also challenged a third package\nof South Carolina measures, the \"Phase II measures\", which were announced in 2013 and thus, came into\nexistence only after the European Union's first written submission. In Section 7.5.2 above, we rule that the\nPhase II measures are outside the Panel's terms of reference.\n\nfacilities in North Charleston, South Carolina, through two packages of investment incentives: (a)\nProject Gemini measures; and (b) Project Emerald measures.1938\n8.682. The Project Gemini measures are the package of financial incentives offered by the State\nof South Carolina in 2009, allegedly in order to induce Boeing to locate its second 787 final\nassembly and delivery facility adjacent to the Vought -Global Aeronautica 787 fuselage fabrication\nand integration complex at Charleston International Airport. The European Union 's panel request\ndescribes the following eight measures that it challenges as part of the Project Gemini package1939:\na. Provision of a long-term lease of government-owned land at preferential rates, pursuant\nto a Ground Lease Agreement between the Charleston Cou nty Aviation Authority and\nSouth Carolina Public Railways, as amended, and a Ground Sublease between S outh\nCarolina Public Railways and Boeing, as amended.\nb. Provision of facilities and infrastructure at the Charleston International Airport site, as\nprovided for in the Project Gemini Agreement between Boeing and the State of South\nCarolina, dated 1 January 2010, funded through state general obligation bonds issued\npursuant to Title 11, chapter 41 of the South Carolina Code, as amended by section 5 of\nH3130, Act No. 124, 2009 S.C. Acts 1092 (H3130), and S.C. Code section 55-11-520, at\nno cost to Boeing.\nc. Property tax reductions under a fee-in-lieu-of taxes Agreement between Charleston\nCounty and Boeing dated 1 December 2009, as authorized by Title 12, chapter 44 of the\nSouth Carolina Code, including the provision of special source credits as provided for in\nsuch agreement, and authorized by S.C. Code section 4-1-175.1940\nd. Property tax exemptions for Boeing 's Large Cargo Freighters (LCFs) pursuant to South\nCarolina Code section 12-37-220(B)(33), as amended by section 1 of H3482, Act No. 45,\n2009 S.C. Acts 763.\ne. Reductions of state corporate income taxes through an income allocation and\napportionment agreement, entered into pursuant to S.C. Code section 12-6-2320(b), as\namended by section 1 of H3130.\nf. Provision of corporate income tax credits, as provided for in South Carolina Code\nsection 12-6-3360(E)(1), by virtue of designating the Boeing site in North Charleston as\npart of a business/industrial park jointly established and developed by Charleston County\nand Colleton County, South Carolina.\ng. Exemption from state sales and use taxes for aircraft fuel, computer equipment, and\nconstruction materials, established by sections 2, 3 , and 4 of H3130, respectively, and\ncodified at S.C. Code section 12-36-2120(9)(e) and (f), (65)(b), and (67).\nh. Establishment of workforce recruitment, training and development program mes for\nBoeing.\n8.683. The Project Emerald measures comprise the package of financial incentives offered by\nthe State of South Carolina to Vought in 2006 in connection with the 787 fuselage fabrication and\nintegration complex at a site at Charleston International Airport. The European Union 's panel\nrequest identifies the following four measures as part of the Project Emerald package1941:\na. Provision of a long -term lease of government -owned land at below -market rates,\npursuant to a Ground Lease Agreement between C harleston County Aviation Authority\n\n1938 European Union's request for the establishment of a panel, para. 23.\n1939 European Union's request for the establishment of a panel, para. 24.\n1940 The European Union has subsequently advised that the above-referenced fee-in-lieu-of taxes\nagreement was a draft, which had been provided by Charleston County. The final agreement (the Boeing\nFILOT Agreement) is dated 1 December 2010. It is this final agreement to which the European Union refers in\nits arguments. (European Union's first written submission, fn 1309).\n1941 European Union's request for the establishment of a panel, para. 25.\n\nand South Carolina Public Railways, as amended, and a Ground Sublease between S outh\nCarolina Public Railways and Boeing, as amended.\nb. Provision of facilities and infrastructure at the Charleston International Airport site, as\nprovided for in the Project Emerald Confidential Site Development Agreement, funded\nthrough state general obligatio n bonds issued pursuant to Title 11, chapter 41 of the\nS.C. Code, at no cost to Boeing.\nc. Property tax reductions under a fee-in-lieu-of taxes agreement between Charleston\nCounty and Vought, Global Aeronautica, and Boeing, dated 19 December 2006, and\nassigned to Boeing on or about 10 February 2010, as authorized by Title 12, chapter 44\nof the S.C. Code, and provided for in the Project Emerald Confidential Site Development\nAgreement, including the provision of infrastructure credits as provided for in such\nagreement, and authorized by S.C. Code section 12-44-70.\nd. Provision of corporate income tax credits, as provided for in S.C. Code\nsection 12-6-3360(E)(1), by virtue of designating the Project Emerald site at Charleston\nInternational Airport as part of a busin ess/industrial park jointly established and\ndeveloped by Charleston County and Colleton County, South Carolina.\n8.2.8.3 Relevant factual background regarding the Project Gemini and Project Emerald\nincentive packages\n8.2.8.3.1 Project Gemini incentive package\n8.684. The Project Ge mini measures challenged by the European Union consist of the eight\nmeasures related to Boeing 's South Carolina 787 final assembly and delivery facility (the Project\nGemini facilities and infrastructure) listed in Section 8.2.8.2 above.1942 The obligations of the South\nCarolina state and local authorities and Boeing as regards Project Gemini, including the challenged\nProject Gemini measures listed above, are implemented through three main instruments which we\ndescribe briefly below.\n8.685. The first is H3130, an Act of the South Carolina General Assembly that was signed into law\non 30 October 2009. H3130 amends several S outh Carolina laws in order to provide for the\nfollowing:\na. Authorization to issue additional general obligation economic development bonds1943 in\nan aggregate principal amount that does not exceed USD 170 million. 1944 The section of\nH3130 authorizing the additional issuance sets forth legislative findings that the\nconstruction of infrastructure as defined under the relevant legisl ation enhances the\nrecruitment of businesses to the State of South Carolina, facilitates the operation and\ngrowth of businesses in the State, and thereby provides significant and substantial direct\nand indirect benefits to the State and its residents, incl uding employment and other\nopportunities; that such benefits outweigh the costs of such infrastructure; that for such\nreasons it is in the best interest of the State to authorize the issuance of economic\ndevelopment bonds subject to the terms and condition s of the relevant legislation ; and\nthat such economic development bonds, issued for such purpose, serve a public purpose\nin fostering economic development and increasing employment in the State. The General\n\n1942 The first 787 final assembly and delivery facility was established in the State of Washington in 2004.\n1943 S.C. Code section 11-41-40 provides that economic development bonds can be used to fund\n\"financing for infrastructure\", which includes the following: land acquisition, site preparation, road and highway\nimprovements, water service, wastewater treatment, employee training, environmental mitigation, training and\nresearch facilities, and building associated with an air hub facility or located on government land. In order for\neconomic development bonds to be issued, the South Carolina Department of Commerce must first notify the\nJoint Bond Review Committee and the State Budget and Control Board that the related infrastructure project\nmeets certain requirements, including a minimum investment and contribution to employment. After approval\nby the Joint Bond Review Committee, the State Budget and Control Board adopts a resolution issuing the\nbonds. Economic development bonds are backed by the full faith, credit, and taxing power of the State of\nSouth Carolina. The monetary value of economic development bonds that the State may issue depends on the\nprovision under which the State issues the bonds.\n1944 South Carolina Act No. 124, S.C. Code, Acts 1092, H3130 (30 October 2009), (Exhibit EU-466),\nsection 5.\n\nAssembly makes a further finding that the primary beneficiaries of the issuance of such\neconomic development bonds and the construction of such infrastructure are the State of\nSouth Carolina and its residents.1945\nb. South Carolina 's entering into an agreement establishing the allocation and\napportionment of t he taxpayer's income, provided certain conditions are met, including\nthat the taxpayer is planning a new facility in the State, or expanding an existing facility,\nthe new facility or expansion is certified by the Advisory Coordinating Council for\nEconomic Development in South Carolina as having a significant beneficial economic\neffect on the region for which it is planned and that it s benefits to the public exceed its\ncosts to the public , and the taxpayer requests, prior to 31 October 2015, that South\nCarolina enter into such an income allocation and apportionment agreement.1946 The\nmaximum duration of such agreements may be increased from five years to ten years\nwhere a number of other conditions are met, one of which is that the taxpayer is\nplanning a new fac ility in the State and invests at least USD 750 million in real or\npersonal property or both in a single county in the State and creates at least 3,800\nfull-time new jobs within the county.1947\nc. Exemptions from sales and use tax es for aircraft fuel, computer equipment, and\nconstruction materials. 1948 More specifically, section 2 of H3130 creates an exemption\nfor, respectively, the sales of fuel for the generation of motive power for test flights of\naircraft by the manufacturer of the aircraft, and the transportat ion of an aircraft prior to\nits completion from one facility of the manufacturer of the aircraft to another facility of\nthe manufacturer of the aircraft. Section 3 of H3130 creates an exemption for sales of\ncomputer equipment used in connection with a manu facturing facility. Finally, section 4\nof H3130 creates an exemption for sales of construction materials used in the\nconstruction of a new or expanded single manufacturing facility. In each case, eligibility\nfor the exemptions is expressly restricted to taxpayers investing at least USD 750 million\nin real or personal property in a single manufacturing facility over a seven -year period\nand creating 3,800 full-time new jobs at the manufacturing facility over that period.1949\n8.686. The second principal Project Gemini -related instrument is the Project Gemini Agreement ,\ndated 1 January 2010, between Boeing and the South Carolina Department of Commerce (on\nbehalf of the State of South Carolina). 1950 The Project Gemini Agreement records generally the\nstate-level commitments ma de by South Carolina to Boeing, and the commitments made by\nBoeing to South Carolina, in connection with Boeing 's establishment of the second 787 final\nassembly and delivery line.\n8.687. In return for Boeing meeting certain minimum employment and investment requ irements,\nSouth Carolina agrees to seek approval for: (a) the issuance of economic development bonds in\nthe amount of USD 220 million to offset the costs of certain infrastructure associated with Project\nGemini; and (b) the issuance of air hub bonds 1951 in the amount of USD 50 million to offset the\n\n1945 South Carolina Act No. 124, S.C. Code, Acts 1092, H3130 (30 October 2009), (Exhibit EU-466),\nsection 5.A.\n1946 South Carolina Act No. 124, S.C. Code, Acts 1092, H3130 (30 October 2009), (Exhibit EU-466),\nsection 1.\n1947 South Carolina Act No. 124, S.C. Code, Acts 1092, H3130 (30 October 2009), (Exhibit EU-466),\nsection 1. The taxpayer has seven years from the date on which it requests South Carolina to enter into an\nincome allocation and apportionment agreement to make the required investment and create the required\nnumber of jobs.\n1948 South Carolina Act No. 124, S.C. Code, Acts 1092, H3130 (30 October 2009), (Exhibit EU-466),\nsections 2-4.\n1949 South Carolina Act No. 124, S.C. Code, Acts 1092, H3130 (30 October 2009), (Exhibit EU-466),\nsection 2 (amending S.C. Code, section 12-36-2120(9)(e) and (f), section 12-36-2120(65)(b), and section 12-\n-36-2120(67)). In addition, the taxpayer is required to notify the South Carolina Department of Revenue, prior\nto 15 October 2015, of its intention to use any of the exemptions. (South Carolina Act No. 124, S.C. Code,\nActs 1092, H3130 (30 October 2009), (Exhibit EU-466), sections 2(B), 3(B), and 4(B)).\n1950 Project Gemini Agreement between The Boeing company and South Carolina Department of\nCommerce, on behalf of the State of South Carolina (1 January 2010), (Project Gemini Agreement), (Exhibit\nEU-467).\n1951 S.C. Code, section 55-11-520 provides that air hub bonds can be used to acquire land, construct,\nenlarge, improve, extend, renovate, and equip suitable air carrier hub terminal facilities, and purchase\nequipment, ground support equipment, machinery, special tools, maintenance, boarding facilities, and any real\n\ncosts associated with air carrier hub terminal facilities which Boeing agrees to operate in support of\nProject Gemini. 1952 In addition, South Carolina agrees to recommend that Project Gemini be\ncertified in such a way as to make it eligible for negotiated apportionment of state corporate\nincome taxes as set forth in S.C. Code section 12-6-2320.1953\n8.688. Boeing, for its part agrees to make new investment s in re al and personal property of\nUSD 750 million (the Minimum Investment Requirement) and to employ 6,000 employees in the\nState (Minimum Job Requirement) within a specified period. 1954 Should Boeing fail to comply with\nthe foregoing investment and employment commitments, it will be required to reimburse the State\nin accordance with a formula and procedure set forth in an annex to the Project Gemini Agreement\n(the Performance Provision).1955\n8.689. The preamble to the Project Gemini Agreement expressly refers to the findings of\nlegislative fact made by the South Carolina General Assembly as part of H3130.1956\n8.690. Finally, the Fee Agreement , dated 1 December 2010, between Charleston County and\nBoeing (the Boeing FILOT Agreement) provides for certain property tax and corporate income tax\nconcessions to Boeing. Section 5.4 of the Boeing F ILOT Agreement states that its intent in part is\nto afford Boeing the benefits of payment of a fee -in-lieu-of property taxes as well as\nreimbursement of a portion of those payments in respect of Boeing 's investment in Special Source\nImprovements in consideration of Boe ing's decision to locate Project Gemini within the County.\nUnder the Boeing F ILOT Agreement, Boeing is authorized to pay a negotiated fee -in-lieu-of\nproperty taxes in respect of Project Gemini, including large cargo freighters owned, operated or\nleased by Boeing and used primarily for the transport of items to and from the Project Gemini site.\nBoeing is also authorized to claim reimbursement of an agreed portion of such payments in lieu of\nproperty taxes in return for its investment in certain infrastructur e and facilities serving the\neconomic development of the County (Special Source Improvements).1957\n8.691. Project Gemini is designated as part of a \"multi-county park\" pursuant to the Multi-County\nAct in order to provide additional jobs tax credits afforded by the laws of South Carolina for\nprojects located within multi-county industrial or business parks for all jobs created by Boeing.1958\n\nor personal property for operation of air carrier hub terminal facilities. In order for air hub bonds to be issued,\nthere must first be a binding contract with an air carrier or the principal user of the facility committing the\nentity to use the facility for the lesser of five years or the time needed to retire the indebtedness. The\nExecutive Director of the Aeronautics Commission then must certify, among other information, the amount to\nbe authorized, a description of the infrastructure for which the bonds are to be issued, and that the facility is\nan air carrier hub terminal facility. After approval by the Joint Bond Review Committee, the State Budget and\nControl Board then adopts a resolution issuing the bonds. Air hub bonds are backed by the full faith, credit,\nand taxing power of the South Carolina. The amount of air hub bonds that the state may issue is limited to\nUSD 50 million outstanding at any time.\n1952 Project Gemini Agreement, (Exhibit EU-467), section II. The parties agree to the description of the\neligible items of infrastructure for which the economic development bonds may be allocated and the eligible\ncosts associated with air carrier hub facilities to be offset by the air hub bonds in exhibit B.\n1953 Project Gemini Agreement, (Exhibit EU-467), section III.\n1954 Project Gemini Agreement, (Exhibit EU-467), section IV.A. The period for performance of the\nMinimum Investment Requirement and Minimum Job Requirement is the earlier of 31 December 2016 or the\ndate that Boeing certifies that the two targets have been met.\n1955 The Performance Provision is expressed to supersede the \"Emerald Additional Rent Provisions\"\nattached as exhibit B to the Amended and Restated Ground Sublease between South Carolina Public Railways,\nand Boeing Commercial Airplanes Charleston South Carolina, Inc., and attached as exhibit E to the Project\nEmerald Confidential Site Development and Incentive Agreement between the South Carolina Department of\nCommerce and certain additional parties, and Boeing Commercial Airplanes Charleston South Carolina, Inc., as\nsuccessor in interest to Vought. See para. 8.711 below.\n1956 Project Gemini Agreement, (Exhibit EU-467), recitals 3 and 4.\n1957 Fee Agreement by and between Charleston County, South Carolina and the Boeing Company\n(1 December 2010) (Boeing FILOT Agreement), (Exhibit EU-470), sections 1.3, 5.1, and 5.2.\n1958 Boeing FILOT Agreement, (Exhibit EU-470), section 5.3. South Carolina Income Tax Act, S.C. Code,\nTitle 12, chapter 6, (Exhibit EU-509), section 3360 (C)(1), provides for a state corporate income tax credit for\ncertain qualifying businesses that create a specified number of jobs at the time a new facility or expansion is\ninitially staffed. In addition, under paragraph (E)(1) of § 12-6-3360, taxpayers that are located in a \"Multi-\nCounty Industrial Park\" and qualify for the tax credit under (C)(1) are allowed an additional USD 1,000 credit\nfor each new full-time job created for five years beginning in the taxable year following the creation of the job.\n\n8.692. As explained further in Section 8.2.8.5.1 below, the Project Gemini facilities and\ninfrastructure are located on the same Project Site as the 787 fuselage fabrication and integration\noperations, which had originally been operated by Vought and Global Aeronautica, and were\nacquired by Boeing in 2009 (the Project Emerald facilities and infrastructure). In this respect, the\nlegal instruments embodying the Ground Sublease of the Project Site on which both the Project\nGemini and Project Emerald facilities and infrastructure are located are common to both Project\nGemini and Project Emerald.\n8.2.8.3.2 Project Emerald incentive package\n8.693. The Project Emerald measures consist of the four measures identified in Section 8.2.8.2\nabove that were provided to Vought in 2006 in connection with its 787 fuselage fabrication and\nintegration complex at a site at Charleston International Airport. As will be explained further\nbelow, Boeing acquired Vought's South Carolina operations in July 2009.\n8.694. The obligations of the South Carolina state and local authorities as regards Project Emerald\nwere initially set forth in a 2004 Confidential Initial Site Development and Incentive Agreement\nbetween certain South Carolina public agencies and Vought on behalf of itself and two other\nentities that comprise Project Emerald. 1959 Under this Initial Site Development and Incentive\nAgreement, the relevant South Carolina public agencies set forth their commitments to provide\nfunds and incentives as an inducement for Vought to locate Project Emerald at the Project Site,\nand to induce Vought to commence work on the Project Site pending f inal negotiation of a Site\nDevelopment and Incentive Agreement.1960 Such funds and incentives included the issuance of tax\nexempt and/or taxable bonds, the proceeds of which may be allocated to \"infrastructure\" as\ndefined in section 11-41-30 of the South Carolina Code, or to \"air carrier hub facilities\", as defined\nin section 55-11-500 of the South Carolina Code, a fee-in-lieu-of taxes agreement setting forth a\nparticular property tax treatment as well as special source credits to reduce property taxes or\nfee-in-lieu-of property taxes for Project Emerald, and the incorporation of the Project Site into a\nmulti-county industrial park to enable Project Emerald to receive additional job tax credits. 1961\nUnder the Initial Site Development and Incentive Agreement, the C harleston County Airport\nDistrict also agreed to enter into a ground lease of the Project Site with South Carolina Public\nRailways, which in turn would enter into a Ground Sublease of the Project Site with Vought.1962\n8.695. Subsequently, in 2006, the same parties entered into the Project Emerald Confidential Site\nDevelopment and Incentive Agreement (the Project Emerald Agreement) to finalize the incentives\nand commitments of the South Carolina public agencies and of Project Emerald to induce Vought\nto initiate and/or continue work on the Project Site. 1963 Accordingly, Project Emerald was required\nto hire 745 employees and invest USD 450 million, in return for which South Carolina undertook to\nauthorize the issuance of economic development bonds, and to make available to Project Emerald\nUSD 123 million from the bond proceeds. 1964 The commitments regarding the fee -in-lieu-of taxes\nagreement and special source credits in respect of property taxes or fee -in-lieu-of property taxes\nfor Project Emerald, and the incorporation of th e Project Site into a multi -county industrial park,\nremained the same as those previously made as part of the 2004 Initial Site Development and\nIncentive Agreement. 1965 The commitment regarding the grant of a ground lease of the Project\nSite by the Charleston Airport District to South Carolina Public Railways, and of a Ground Sublease\nof the Project Site by South Carolina Public Railways to Vought, also remained consistent with that\nundertaken in the 2004 Initial Site Development and Incentive Agreement, except that Vought was\nfurther authorized to enter into building pad leases with the Project Emerald entities or other\n\n1959 Initial Project Emerald Site Development and Incentive Agreement, (Exhibit EU-560).\n1960 Initial Project Emerald Site Development and Incentive Agreement, (Exhibit EU-560), recitals 9 and\n10, part VII, sections 7.1 and 7.2.\n1961 See Initial Project Emerald Site Development and Incentive Agreement, (Exhibit EU-560), parts II\n(regarding the tax exempt and/or taxable bonds), and IV (regarding the FILOT, special source credits and\nadditional job tax credits through designation of Project Emerald as part of a multi-county industrial park).\n1962 Initial Project Emerald Site Development and Incentive Agreement, (Exhibit EU-560), part V, section\n5.3.\n1963 Final Project Emerald Incentive Agreement, (Exhibit EU-550), recital 10. The version of this\ninstrument provided to the Panel as Exhibit EU-550 is dated as of a blank date in 2006 and is executed only by\nSouth Carolina Department of Commerce and South Carolina Public Railways.\n1964 Final Project Emerald Incentive Agreement, (Exhibit EU-550), section 2.3.\n1965 See Final Project Emerald Incentive Agreement, (Exhibit EU-550), sections 4.1, 4.2, and 4.3.\n\ndesignated parties and to sublease parts of the Project Site not immediately used by Project\nEmerald.1966\n8.696. Accordingly, on 25 August 2006, C harleston County Aviation Authority, which is the owner\nand operator of Charleston International Airport, granted a ground lease of the Project Site to\nSouth Carolina Public Railways on the understanding that South Carolina Public Railways would\nimmediately sublet the Project Site to Vought in order for Vought to construct and operate the 787\nfuselage fabrication and integration complex. 1967 The initial term o f the Ground Lease was until\n31 December 2021 with provision for extensions for four additional five -year terms.1968 The annual\nrent was USD 1.00. 1969 The Project Site was delivered in \"as is \" condition, with South Carolina\nPublic Railways being responsible for the cost of any improvements made to or at the Project Site\nland.1970 Also on 25 August 2006, Vought and South Carolina Public Railways entered into a\nGround Sublease (the Vought Sublease) under which Vought subleased from South Carolina Public\nRailways the Project Site (referred to in the Vought Sublease as the \"Premises\").1971 The initial\nterm of the Vought Sublease was also until 31 December 2021 with provision for extensions for\nfour additional five -year terms. 1972 The annual rent was USD 1.00 with provision for Vought to\nmake \"Additional Rent\" payments under circumstances generally involving failure to meet required\ninvestment and employment thresholds set forth in the Vought Sublease. 1973 The Vought Sublease\ncontemplated that Vought was subletting the Project Site for the purpose of constructing facilities\nrelated to the manufacture of products for the aeronautics indus try, defined therein as\n\"Improvements\".1974 The \"Improvements\" in question refer to the construction by Vought of its\n787 fuselage fabrication and integration complex.1975\n8.2.8.4 The Panel's order of analysis\n8.697. The European Union has organized its submissions by first presenting arguments as to why\neach of the Project Gemini measures involves a subsidy to Boeing that is specific, followed by\narguments as to why each of the Project Emerald measures involves a subsidy to Boeing that is\nspecific. The United States responds i n its submissions by addressing the Project Emerald\nmeasures first (including the sublease of the Project Site), followed by the Project Gemini\nmeasures. We have decided to adopt a different order of analysis from that of either party.\n8.698. We note that certain of the challenged measures involve the following:\na. Project Site on which both the Project Gemini facilities and infrastructure and Project\nEmerald facilities and infrastructure are located;\nb. construction, and certain funding for the construction, of both the Project Gemini and\nProject Emerald facilities and infrastructure;\nc. agreements as to how property taxes would be assessed in relation to both the Project\nGemini and Project Emerald facilities and infrastructure; and\n\n1966 Final Project Emerald Incentive Agreement, (Exhibit EU-550), section 5.3.\n1967 Ground Lease Agreement by and between Charleston County Aviation Authority and South Carolina\nPublic Railways (25 August 2006) (Ground Lease Agreement), (Exhibit EU-473), recitals and section 12.01.\n1968 Ground Lease Agreement, (Exhibit EU-473), sections 3 and 4.\n1969 Ground Lease Agreement, (Exhibit EU-473), section 7.01.\n1970 Ground Lease Agreement, (Exhibit EU-473), sections 6.01 and 6.02.\n1971 Ground Sublease between Vought Aircraft Industries, Inc. and South Carolina Public Railways\n(25 August 2006) (Vought Sublease Agreement), (Exhibit EU-474).\n1972 Vought Sublease Agreement, (Exhibit EU-474), sections 3 and 4.\n1973 Vought Sublease Agreement, (Exhibit EU-474), section 6.\n1974 Vought Sublease Agreement, (Exhibit EU-474), section 7.\n1975 The Project Emerald Confidential Site Development and Incentive Agreement, between Vought\nAircraft Industries, Inc., on behalf of itself and the two entities that comprise Project Emerald (collectively\nProject Emerald), and the South Carolina Department of Commerce, the South Carolina Public Railways,\nCharleston County and the Charleston County Airport District (collectively, the Public Agencies), dated 2006\n(see fn 1963 above) (Final Project Emerald Incentive Agreement, (Exhibit EU-550)) more specifically explains\nthat Project Emerald contemplated the establishment of industrial facilities for the purpose of manufacturing,\nassembling, integrating and testing composite components and related shipping facilities for the 787 (the\nProject) and that the Public Agencies wish to have Project Emerald establish the Project on the property the\nsubject of the Vought Sublease.\n\nd. corporate income tax credits in res pect of both the Project Gemini and Project Emerald\nfacilities and infrastructure through their respective designation as part of the same\nmulti-county industrial park.\n8.699. In these circumstances, and given the similarity in the legal arguments made by the\nparties with respect to both the Project Gemini and Project Emerald measures in each of the above\ncategories (a) through (d), we will address these particular Project Gemini and Project Emerald\nmeasures together. Accordingly, in Section 8.2.8.5, we first consider whether the sublease of the\nProject Site involves a specific subsidy to Boeing. 1976 In Section 8.2.8.6, we consider whether\nspecific subsidies exist by virtue of South Carolina 's alleged provisio n of Gemini facilities and\ninfrastructure and Emerald facilities and infrastructure to Boeing. In Section 8.2.8.6.5, we evaluate\nwhether the property tax reductions provided under fee -in-lieu-of taxes agreements concluded in\nconnection with both Project Gemini and Project Emerald involve specific subsidies to Boeing. In\nSection 8.2.8.8, we address whether corporate income tax credits in connection with the\ndesignation of both the Project Gemini facil ities and infrastructure and the Project Emerald\nfacilities and infrastructure as part of the same multi -county industrial park, involve specific\nsubsidies to Boeing.\n8.700. We then address the remaining Project Gemini measures challenged by the\nEuropean Union for which there is no challenged Project Emerald counterpart: (a) state corporate\nincome tax reductions allegedly provided through an income allocation and apportionment\nagreement with Boeing ( Section 8.2.8.9); (b) state property tax exemption for Boeing 's large\ncargo freighters ( Section 8.2.8.10); (c) state sales and use tax exemptions for aircraft fuel,\ncomputer equipment, and construction materials established by H3130 (Section 8.2.8.11); and (d)\nworkforce recruitment, training and development program mes allegedly established for Boeing\n(Section 8.2.8.12).\n8.2.8.5 Whether the sublease of the Project Site is a specific subsidy to Boeing\n8.2.8.5.1 Introduction\n8.701. In paragraph 24 of its panel request, the European Union identifies the following measure\nas a subsidy related to Project Gemini presently benefiting Boeing:\nProvision of a long -term lease of government -owned land at preferential rates,\npursuant to a ground lease agreement between the Charleston County Aviation\nAuthority and South Carolina Public Railways, as amended, and a ground sublease\nagreement between South Carolina Public Railways and Boeing, as amended, thereby\nproviding a financial contribution with in the meaning of Article 1.1(a)(1)(ii)-(iii) of the\nSCM Agreement.1977\n8.702. In paragraph 25 of its panel request, the European Union identifies the following measure\nas a subsidy related to Project Emerald presently benefiting Boeing:\nProvision of a long -term l ease of government -owned land at below-market rates,\npursuant to a ground lease agreement between the Charleston County Aviation\nAuthority and South Carolina Public Railways, as amended, and a ground sublease\nagreement between South Carolina Public Railway s and Boeing, as amended, thereby\nproviding a financial contribution within the meaning of Article 1.1(a)(1)(ii)-(iii) of the\nSCM Agreement.1978\n8.703. The government-owned land referred to in paragraphs 24 and 25 of the European Union's\npanel request is the same 240 acre portion of land at Charleston International Airport, (the Project\nSite). The Project Site is currently subleased to Boeing by South Carolina Public Railways pursuant\n\n1976 The Project Gemini facilities and infrastructure and Project Emerald facilities and infrastructure are\nboth located on the same Project Site, a 240 acre portion of land at Charleston International Airport. As we\nexplain further in Section 8.2.8.5.1 below, the rights to occupy the Project Site in relation to both the Project\nGemini facilities and infrastructure and the Project Emerald facilities and infrastructure are granted under the\nsame sublease instrument.\n1977 European Union's request for the establishment of a panel, para. 24, first dot point.\n1978 European Union's request for the establishment of a panel, para. 25, first dot point.\n\nto a ground sublease which we describe in greater detail in the remainder of this Section of the\nReport. South Carolina Public Railways in turn holds the ground lease of the Project Site pursuant\nto a Ground Lease Agreement with C harleston County Aviation Authority . As explained in\nparagraphs 8.694-8.696 above, the Ground Lease and Ground Sublease were initially entered into\nin 2006 in order to provide Vought a sublease of the Project Site for purposes of constructing the\nProject Emerald facilities and infrastructure thereon and operating the 787 fuselage fabrication and\nintegration operations that Boeing subsequently acquired from Vought and Global Aeronautica in\n2008 and 2009.\n8.704. The European Union argues that the sublease of the Project Site to Boeing involves a\nfinancial contribution to Boeing in the form of a provision of goods or services other than general\ninfrastructure within the meaning of Article 1.1(a)(1)(iii) of the SCM Agreement, which\nfurthermore confers a benefit and is specific. The United States does not dispute that there is a\nfinancial contribution, but argues that any financial contribution was made to Vought rather than\nBoeing and that the European Union has failed to demonstrate that any benefit arising from that\nfinancial contribution passed through to Boeing whe n it purchased Vought 's South Carolina\noperations in an arm's-length transaction for fair market value in July 2009.\n8.705. The facts surrounding Boeing 's acquisition of Project Emerald facilities and infrastructure\nfrom Vought and its assumption of the Ground Sublease originally held by Vought as sublessee are\nimportant to the Panel 's evaluation of the parties ' arguments as to whether the sublease of the\nProject Site involves a subsidy to Boeing. We set forth below in greater detail the precise sequence\nof events leading to Boeing, in 2009, being the sublessee of the Project Site (then consisting of the\nProject Emerald facilities and infrastructure ), and to South Carolina offering the Project Gemini\npackage of incentives in connection with Boeing's subsequent decision to locate the Project Gemini\nfacilities and infrastructure on the same Project Site.\n8.706. Owing to production delays and manufacturing difficulties with the 787 programme, Boeing\nannounced on 7 July 2009 that it would purchase Vought 's 787 business in So uth Carolina.1979\nBoeing had previously, in June 2008, purchased Vought 's 50% interest in the Global Aeronautica\njoint venture. 1980 On 30 July 2009, Boeing acquired the business, assets and operations of\nVought's 787 business in North Charleston ; namely, the Vought facility that produces the 787 aft\nfuselage sections, including fabrication, assembly and systems installation. 1981 Boeing reported\nthat, in connection with the Vought acquisition, it paid cash consideration of USD 590 million and\nreleased Vought from its obligation to pay USD 416 million previously advanced by Boeing.1982\n8.707. Also in connection with Vought 's sale of its 787 business in South Carolina, on\n30 July 2009, Vought assigned its interest in the Vought Sublease to Boeing. 1983 Thus, as of\n30 July 2009, Boein g became sublessee of the Project Site, as successor -in-interest to Vought.\nAlso on 30 July 2009, Vought transferred to Boeing its interest in all buildings, structures and\nother improvements owned by Vought related to, located on or used in connection wit h the\noperation of the facilities on the Project Site.1984\n8.708. Shortly after Boeing 's acquisition of Vought 's South Carolina operations, Boeing began to\nconsider whether it would locate its second 787 final assembly and delivery line outside\n\n1979 J. Weber, \"Boeing Buys a Vought Aircraft Plant\", Bloomberg Newsweek, 7 July 2009, (Exhibit\nUSA-195).\n1980 Boeing, Backgrounder, Boeing South Carolina, (August 2011), (Exhibit EU-463). In December 2009,\nBoeing purchased Alenia's portion of the Global Aeronautica joint venture, dissolving the joint venture and\ncreating Boeing South Carolina. (Boeing, Backgrounder, Boeing South Carolina, (August 2011), (Exhibit EU-\n463)).\n1981 Boeing, 2009 Annual Report, (Exhibit USA-265), p. 26.\n1982 Boeing, 2009 Annual Report, (Exhibit USA-265), p. 66.\n1983 Assignment and Assumption of Vought Sublease between Vought Aircraft Industries, Inc. and\nBoeing Commercial Airplanes South Carolina, Inc. (30 July 2009) (Assignment of Vought Sublease), (Exhibits\nEU-475/USA-449 (exhibited twice)).\n1984 Assignment and Bill of Sale from Vought Aircraft Industries, Inc. to Boeing Commercial Airplanes\nCharleston South Carolina, Inc. (30 July 2009), (Exhibit EU-552). According to the United States, this\ninstrument is the execution copy of the \"Facilities Bill of Sale, Assignment and Assumption Agreement\" referred\nto in section 9.1(e)(ix) of the Asset Purchase Agreement by and between Vought Aircraft Industries, Inc. and\nBCACSC, Inc., dated 6 July 2009, (the Vought Asset Purchase Agreement), (Exhibit USA-325). See United\nStates' response to Panel question No. 117, para. 243; and response to Panel question No. 120, para. 248.\n\nWashington State. 1985 According to press reports, Boeing executives met with South Carolina\ngovernment officials in mid -August 2009 to discuss the possibility of Boeing locating its second\n787 final assembly and delivery line in South Carolina. 1986 In response to South Carolina 's\nperceived \"competitive disadvantage\" to other States that Boeing was considering, South Carolina\nlegislators proposed an incentive package that included USD 170 million in government bonds,\nelimination of Boeing's state corporate income taxes and sales tax e xemptions for computers, fuel\nfor test flights and construction materials and equipment.1987 On the weekend of 24 October 2009,\nBoeing requested South Carolina to add a further USD 37 million in government bonds to the\noffer.1988 On 26 October 2009, Boeing 's Board of Directors met to decide on the location of the\nsecond 787 assembly facility. 1989 On 28 October 2009, Boeing announced that it had decided to\nlocate the second 787 assembly line (i.e. the Project Gemini facilities and infrastructure) at the\nsame site as its recently acquired North Charleston 787 fuselage fabrication and integration\ncomplex (i.e. the Project Emerald facilities and infrastructure).\n8.709. Also on 28 October 2009, the South Carolina General Assembly passed H3130 (described\nin section 8.2.8.3.1) which amended several S outh Carolina laws in order to: (a) authorize the\nissuance of additional general economic development bonds up to USD 170 million aggregate\nprincipal amount; (b) authorize an agreement to apportion the income of taxpayers either planning\na new facility in the State, or expanding an existing facility, conditional on the taxpayer investing\nat least USD 750 million in a single county and creating at least 3,800 full -time new jobs in the\ncounty; and (c) exempt f rom sales and use tax aircraft fuel, computer equipment , and\nconstruction materials where the taxpayer invests at least USD 750 million in a single county and\ncreates at least 3,800 full -time new jobs in the county. H3130 wa s signed into law on\n30 October 2009.1990\n8.710. Boeing broke ground on its new 787 final assembly and delivery line in\nNovember 2009.1991 On 19 November 2009, C harleston County Aviation Authority and South\nCarolina Public Railways amended the Ground Lease for the Project Site, inter alia, to acknowledge\nthe changes in the structure of the subleases over the Project Site as a result of Vought 's\nassignment of the Vought Sublease to Boeing on 30 July 2009.1992 Also on 19 November 2009,\nBoeing and South Carolina Public Railways entered into an \"amended and restated\" sublease of the\nProject Site.1993 Under the Amended and Restated Sublease: (a) the parties acknowledge that the\nVought Sublease was assigned to Boeing on 30 July 2009 ; (b) South Carolina Public Railways as\nsublessor expressly consents to that assig nment; and (c) the parties agree that the Amended and\nRestated Sublease \"amends, restates in its entirety, and takes the place of \" the Vought\nSublease.1994 The operative terms of the Amended and Restated Sublease as regards term, annual\nrent (including liabil ity for, and the calculation of, Additional Rent) and representations of\nsublessor and sublessee for all practical purposes remain the same as those of the Vought\nSublease. The principal relevant difference between the two instruments is that section 7 of the\nAmended and Restated Sublease, unlike its counterpart in the Vought Sublease, provides that the\n\n1985 Press reports indicate that Boeing executives had been frustrated about interruptions to 787\nproduction due to strikes by Boeing workers in Washington State in 2008 and remained dissatisfied over\nnegotiations with the labour union representing Boeing machinists in Washington State. (Andy Shain, \"S.C.\ntravelled a long road to land Boeing\", Charlotte Observer, 1 November 2009, (Exhibit EU-9)).\n1986 Andy Shain, \"S.C. travelled a long road to land Boeing\", Charlotte Observer, 1 November 2009,\n(Exhibit EU-9).\n1987 Andy Shain, \"S.C. travelled a long road to land Boeing\", Charlotte Observer, 1 November 2009,\n(Exhibit EU-9).\n1988 Andy Shain, \"S.C. travelled a long road to land Boeing\", Charlotte Observer, 1 November 2009,\n(Exhibit EU-9).\n1989 Andy Shain, \"S.C. travelled a long road to land Boeing\", Charlotte Observer, 1 November 2009,\n(Exhibit EU-9).\n1990 South Carolina Act No. 124, S.C. Code, Acts 1092, H3130 (30 October 2009), (Exhibit EU-466)\n1991 Boeing, Backgrounder, Boeing South Carolina, (August 2011), (Exhibit EU-463).\n1992 First Amendment to Ground Lease Agreement by and between Charleston County Aviation Authority\nand South Carolina Public Railways (19 November 2009), (Exhibit EU-476), recitals 3 and 4.\n1993 Amended and Restated Ground Sublease by and between Boeing Commercial Airplanes Charleston\nSouth Carolina, Inc. and South Carolina Public Railways (19 November 2009) (Amended and Restated\nSublease), (Exhibit EU-471).\n1994 Section 1 of the Amended and Restated Sublease relevantly provides: \"{t}his Sublease amends,\nrestates in its entirety, and takes the place of the Vought Sublease, such that the Sublessor shall hereafter\nsublease the Premises to Sublessee in accordance with the terms and conditions set forth herein.\" (Amended\nand Restated Sublease, (Exhibit EU-471), clause 1).\n\nsublessee (Boeing) is subleasing the Premises for the purpose of, not just constructing thereon\nfacilities supporting the manufacture of products for the ae ronautics industry, but also using\npreviously constructed facilities.\n8.711. Subsequently, on 1 January 2010, Boeing and the South Carolina Department of\nCommerce entered into the Project Gemini Agreement. 1995 Under the Project Gemini Agreement,\nthe South Carolina D epartment of Commerce agreed to request the South Carolina Joint Bond\nReview Committee to approve, and the State Budget and Control Board to issue, economic\ndevelopment bonds in the amount of USD 220 million to offset the costs of infrastructure\nassociated with Project Gemini and air hub bonds in the amount of USD 50 million to offset the\ncosts associated with air carrier hub terminal facilities.1996 For its part, Boeing agreed to make new\ninvestments in real and personal property of USD 750 million in the Sta te of South Carolina and to\nemploy 6,000 employees in the State of South Carolina by 31 December 2016 or earlier. 1997 The\nparties further agreed to amend the Project Emerald Additional Rent provisions contained in the\nAmended and Restated Sublease and replace those provisions with a Performance Provision set\nforth as an exhibit to the Project Gemini Agreement, in light of the significant employment and\ninvestment already made by Boeing and other entities at the Project Site and given that the\nPerformance Provision includes existing employment along with anticipated new employment and\ninvestment associated with Project Gemini.1998\n8.2.8.5.2 Main arguments of the parties\n8.712. The European Union argues that the \"lease of the project site to Boeing \" is a financial\ncontribution.1999 By allowing Boeing exclusive use of government -owned land at Charleston\nInternational Airport for its 787 manufacturing facilities in exchange for a nominal fee, South\nCarolina provides goods other than general infrastructure within the meaning of\nArticle 1.1(a)(1)(iii) of the SCM Agreement.2000\n8.713. The European Union acknowledges that the sublease of the Project Site covers both\nBoeing's 787 final assembly and delivery facility (the Project Gemini facilities and infrastructure) as\nwell as the 787 fuselage fabricati on and integration complex which Boeing took over from Vought\nand Global Aeronautica in 2009 (the Project Emerald facilities and infrastructure ).2001 The\nEuropean Union clarifies that \"while the lease also subsidises Boeing 's Project Emerald facilities\nand infrastructure, the European Union chooses not to treat this as a separate subsidy \" from the\nsubsidy it describes in connection with Project Gemini.2002\n8.714. The European Union argues that the \"Project Site lease\" is the \"instrument through which\nSouth Carolina provides Boeing with use of the project site \".2003 The European Union considers the\nfinancial contribution to have been first provided \"directly\" to Boeing on 30 July 2009, the date on\n\n1995 Project Gemini Agreement, (Exhibit EU-467).\n1996 Project Gemini Agreement, (Exhibit EU-467), part II.A and B Boeing agrees also to operate the air\ncarrier hub facilities financed with the issuance of the air hub bonds to support Project Gemini.\n1997 Project Gemini Agreement, (Exhibit EU-467), part IV.A.\n1998 Project Gemini Agreement, (Exhibit EU-467), part IV.B. The Project Gemini Agreement provides\nthat, promptly following execution of the Project Gemini Agreement, the parties will cause the relevant parties\nto amend the Amended and Restated Sublease so that the provisions regarding the Performance Provision\nsupersede the Emerald Additional Rent provisions as well as in certain other respects. No such amendment has\nbeen submitted into evidence by either of the parties.\n1999 European Union's first written submission, para. 557. In its panel request, the European Union\nidentifies the measure at issue as the \"long-term lease of government-owned land … pursuant to a ground\nlease agreement between the Charleston County Aviation Authority and South Carolina Public Railways, as\namended, and a ground sublease between South Carolina Public Railways and Boeing, as amended.\"\n(European Union's request for the establishment of a panel, paras. 24 and 25). Although the European Union\nrefers in its submissions to the measure at issue as the \"Project Site Lease\", as we explain in Section 8.2.8.5.1\nabove, the instrument to which Vought and Boeing were parties is in fact a ground sublease, and not a lease.\nThus, to the extent that the European Union in its submissions refers variously to the \"lease of the project\nsite\", or the \"Project Site Lease\", we understand it to be referring to the instrument pursuant to which South\nCarolina Public Railways, as lessee of the Project Site from Charleston County Aviation Authority subleases the\nProject Site to Vought (and Boeing).\n2000 European Union's first written submission, para. 557.\n2001 European Union's first written submission, para. 696 and fn 1552.\n2002 European Union's first written submission, para. 696.\n2003 European Union's response to Panel question No. 107, para. 170.\n\nwhich Boeing assumed Vought 's rights as sublessee under the Vought Sublease. 2004 While the\nEuropean Union considers that a financial contribution existed with respect to the sublease of the\nProject Site before 30 July 2009 (presumably to Vought and not to Boeing), it does not claim that\nthere was a benefit or subsidy to Boeing prior to that date.2005\n8.715. The European Union argues that the sublease of the Project Site to Boeing confers a\nbenefit on Boeing's LCA division because it is provided on non -market terms.2006 The provision of\nthe sublease is made for less than adequate remuneration in re lation to prevailing market\nconditions. Boeing pays USD 1 per year to sublease the Project Site, while a market participant\nwould pay significantly more. The European Union acknowledges that one method of valuing the\nsublease of the Project Site would be t o consider comparable lease transactions. However, as\nneither party has provided the information that would be required to determine the benefit on this\nbasis, the sublease of the Project Site itself provides the best information available as to the value\nof the sublease of the Project Site. 2007 In this regard, the European Union notes that the \"base\nlease value\" of USD 4.7 million per annum from the first full year of the sublease (1 January 2010)\nthrough the end of the final five -year extension at the end of 2041 totals USD 150.03 million. The\nEuropean Union argues that the \"base lease value\", being the amount the sublessee was liable to\npay under the Vought Sublease if the sublessee failed to meet the investment and employment\nthresholds, was likely negotiat ed between South Carolina and Vought to represent less than the\nactual fair market value of the sublease.2008 The amount of USD 150.03 million (less the USD 31 in\nrent payments due from Boeing) also likely underestimates the benefit to Boeing because it was\nnegotiated prior to Boeing 's purchase of the Project Emerald facilities and infrastructure and its\ndecision to establish the Project Gemini facilities and infrastructure. Once account is taken of the\nparticular value to Boeing of having its second 787 final assembly and delivery line located\nadjacent to the 787 fuselage fabrication and integration complex, and connected to an airport\nrunway of sufficient length from which to operate 787s and 747 LCFs, the benefit conferred on\nBoeing would include an additional market premium.2009\n8.716. The European Union rejects the United States ' arguments that the Project Site had [***]\nvalue to Boeing because [***]. The Project Site's value is a function of supply and demand in the\nmarket. Moreover, if the Project Site really [***] as the United States contends, it is\ninconceivable that Boeing or any other sublessee would have agreed to the sublease. 2010 The\nEuropean Union also rejects the United States ' suggestion that the site improvements effected by\nBoeing that will revert to South Carolina at the conclusion of the sublease entail \"adequate\nremuneration\" on a number of grounds, including the absence of evidence provided by the United\nStates comparing the value of Boeing 's improvements to prevailing market lease rates, the fact\nthat a significant portion of the site improvements were paid for by South Carolina rather than\nBoeing, the improvements will have limited or no value at the time of reversion, and in any case, a\nstandard commercial ground lease would have required Boeing to pa y more than nominal rent for\nthe term of the lease.2011\n8.717. The European Union argues that the sublease of the Project Site is specific , within the\nmeaning of Article 2.1(a) of the SCM Agreement , as a subsidy that is explicitly limited to certain\nenterprises.2012 The European Union bases this argument on a number of factors. First, it notes\nthat South Carolina Public Railways entered into the sublease with Boeing (or at different times,\n\n2004 European Union's response to Panel question No. 107, fn 303. It likewise regards the starting point\nfor the \"benefit\" (and hence, the \"subsidy\" to Boeing) to be 30 July 2009.\n2005 European Union's response to Panel question No. 107, para. 169. In response to the United States'\nargument that none of the Project Emerald measures provided to Vought (including the sublease of the Project\nSite) confer a benefit on Boeing because the European Union has failed to demonstrate that any benefits\npassed through to Boeing, the European Union argues that the question of how such benefits conferred\noriginally on Vought or Global Aeronautica passed through to Boeing is \"irrelevant\" because the\nEuropean Union does not claim that Boeing received any benefits prior to completing the acquisition of\nVought's South Carolina operations, or that any benefits conferred originally on Vought or Global Aeronautica\npassed through to Boeing. (European Union's second written submission, para. 722). See also\nEuropean Union's response to Panel question No. 39, paras. 219 and 220 and fn 247.\n2006 European Union's first written submission, para. 560.\n2007 European Union's second written submission, para. 616.\n2008 European Union's first written submission, paras. 558 and 559.\n2009 European Union's first written submission, paras. 561 and 562.\n2010 European Union's second written submission, paras. 619 and 620.\n2011 European Union's second written submission, paras. 621-627.\n2012 European Union's first written submission, para. 563.\n\nBoeing and Vought) alone and that Charleston County Aviation Authority similarly consented to the\nsublease of the Project Site solely to Boeing (or at different times, to Boeing and Vought). 2013\nSecond, the sublease is an element of both the Project Gemini and Project Emerald incentive\npackages, intended to benefit Boeing and its supplier s.2014 Third, both the Ground Lease and\nVought Sublease provide that their purposes concern the construction and use of manufacturing\nfacilities for the aviation or aeronautics industries. 2015 The European Union additionally argues that\nthe sublease of the Project Site is de facto specific within the meaning of Article 2.1(c) because the\nsubsidy is used by a limited number of entities and Boeing is the predominant user of the subsidy\nprogramme. Boeing and its suppliers have been the sole beneficiaries of the subl ease of the\nProject Site, and the United States has identified only one other multi -acre property that the State\nof South Carolina has leased or subleased to a private company for USD 1,000 per year or less\nsince around the year 2000.2016 Thus, even if there were a larger subsidy programme, beyond the\nsublease of the Project Site (which the European Union says the United States has failed to\ndemonstrate), such a programme would in any case only have been used by a limited number of\ncertain enterprises.2017\n8.718. The United States denies that the Project Site sublease provides a financial contribution to\nBoeing.2018 It argues that South Carolina provided the land use rights to the Project Site to Vought,\nthrough the Project Emerald Agreement and the Vought Sublease. Vought \"autonomously\nassigned\" those rights to Boeing in an arm's-length, fair market value purchase of Vought 's South\nCarolina operations in July 2009. Accordingly, Boeing obtained the right to use the Project Site,\nand the improvements on it, from Vought, not South Carolina. There was no financial contribution\nby a government to Boeing under the SCM Agreement. 2019 The United States adds that, as the\nEuropean Union does not attempt to argue or provide evidence to demonstrate that any benefit\nconferred by a financia l contribution made by South Carolina to Vought passed through from\nVought to Boeing, the European Union has failed to demonstrate that any relevant financial\ncontribution by a government occurred with respect to the Project Site sublease.2020\n8.719. The United Stat es considers that the European Union, in acknowledging that there was a\nfinancial contribution with respect to the sublease of the Project Site prior to 30 July 2009, and\nthen asserting that the \"starting point \" of the financial contribution \"to Boeing dir ectly\" was\n30 July 2009, incorrectly suggests that there was more than one financial contribution with respect\nto the Project Site land. 2021 The European Union thus \"seems to conceive of the sublease as a\nrecurring subsidy, wherein each ye ar, South Carolina ( through the Charleston County Aviation\nAuthority) provides the sublessee with land for less than adequate remuneration \".2022 The United\nStates argues that such a conception is entirely at odds with the design, operation and principal\ncharacteristics of the sublease at issue. For the United States, the sublease for the Project Site is a\n\"unified asset \" provided at the time of execution of the Vought Sublease (in 2006) when the\nparties became contractually obligated by its terms.2023\n8.720. The United States argues that there is nothing about Boeing 's purchase of Vought's South\nCarolina assets, including its assumption of Vought 's subleasehold interest in the Project Site, that\nsupports finding a \"second financial contribution\" in 2009, or any additional financial contrib utions\nafter the initial one in 2006. Given that the only financial contribution in connection with the right\n\n2013 European Union's first written submission, para. 563. The European Union asserts that both the\noriginal decision to sublease the Project Site to Vought and the approval of Boeing's assumption of the Vought\nSublease necessarily took the form of resolutions passed by the Charleston County Aviation Authority.\nTherefore, Charleston County Aviation Authority and South Carolina Public Railways explicitly limited access to\nthe subsidy to certain enterprises. (European Union's second written submission, para. 630).\n2014 European Union's first written submission, para. 563.\n2015 European Union's first written submission, para. 564.\n2016 European Union's first written submission, para. 565. The European Union also argues that the\nsublease of the Project Site is specific because it falls under the provisions of Article 3 of the SCM Agreement\nand is therefore \"deemed\" to be specific pursuant to Article 2.3 of the SCM Agreement. (European Union's first\nwritten submission, para. 566).\n2017 European Union's second written submission, paras. 631 and 632.\n2019 United States' second written submission, paras. 487 and 501.\n2020 United States' second written submission, fn 703 (referring to European Union's second written\nsubmission, para. 722) and para. 503.\n2021 United States' comments on the European Union's response to Panel question No. 107, para. 172.\n2022 United States' comments on the European Union's response to Panel question No. 107, para. 173.\n2023 United States' comments on the European Union's response to Panel question No. 107, para. 174.\n\nto use the Project Site occurred when South Carolina executed the Vought Sublease in 2006, the\nEuropean Union must demonstrate that any benefit co nferred by that 2006 financial contribution\n\"passed through\" to Boeing.2024\n8.721. The United States argues that, even assuming arguendo that the sublease of the Project\nSite constituted a financial contribution to Boeing, it did not confer a benefit because it had a\n[***] to Boeing if examined in isolation. 2025 Boeing [***].2026 Boeing's actual remuneration to\nSouth Carolina of USD 1 per year is therefore more than adequate. 2027 The United States argues\nthat, contrary to the European Union 's assertion that it is inconceivabl e that a commercial actor\nlike Boeing would have agreed to a ground sublease of land that had a [***], it is quite\nconceivable that a party would take a loss on one aspect of an arrangement if overall, the\narrangement was advantageous to it. It gives the e xample of private parties agreeing to lease or\npurchase so-called brownfield (i.e. environmental clean -up) sites due to government enticements\nto develop land and/or defray environmental costs and liabilities. 2028 The United States regards as\n\"fanciful\" (and unsupported by the United States ' expert appraisals) the European Union 's\nvaluation of the Project Site at USD 150.03 million. 2029 According to the United States, the\nEuropean Union's valuation of the Project Site would make it the most expensive piece of the land\nin North Charleston.2030\n8.722. The United States rejects the European Union 's arguments that the sublease of the Project\nSite is specific within the meaning of Article 2.1(a) of the SCM Agreement. The United States\nconsiders that the European Union confuses t he identification of an alleged subsidy recipient, with\na limitation on access to that recipient, or the class of enterprises to which it belongs. 2031 The fact\nthat Boeing was the sole sublessee of the Project Site, or that the Charleston County Aviation\nAuthority consented to the sublease, does not mean that the Charleston County Aviation Authority\nexplicitly limited access to the subsidy to certain enterprises, nor does it demonstrate that the\nCharleston County Aviation Authority or any other South Carolina entity restricted access to the\nsublease of the Project Site, or to other similar measures, from parties other than Boeing. The\nUnited States also rejects the European Union 's argument that the sublease of the Project Site is\nde facto specific within the m eaning of Article 2.1(c). The United States argues that the sublease\nof the Project Site is part of a broader programme to provide site leases to industrial lessees in\nexchange for nominal lease payments, and asserts that political subdivisions of South Ca rolina,\nincluding Charleston County (through the Charleston County Aviation Authority ) routinely provide\nnominal leases of publicly-owned property.2032\n8.2.8.5.3 Evaluation by the Panel\n8.2.8.5.3.1 Whether the sublease of the Project Site involves a financial contribution to\nBoeing within the meaning of Article 1.1(a)(1)(iii) of the SCM Agreement\n8.723. The first issue before us is whether the sublease of the Project Site, on which Boeing 's 787\nmanufacturing facilities are located (both the Project Gemini facilities and infrastructure and the\nProject Emerald facilities and infrastructure), involves a financial contribution by South Carolina to\nBoeing within the meaning of Article 1.1(a)(1)(iii) of the SCM Agreement.\n8.724. The European Union and United States agree that there was a financial cont ribution in the\nform of a provision of goods or services other than general infrastructure from the time that South\nCarolina entered into the Vought Sublease with Vought on 25 August 2006. 2033 However, the\nEuropean Union considers that a \"financial contribution is provided throughout the period that the\n\n2024 United States' comments on the European Union's response to Panel question No. 107, para. 182.\n2025 United States' first written submission, paras. 554-557; second written submission, para. 504.\n2026 United States' second written submission, para. 504. The United States further argues that the\n[***] of the Project Site \"should offset any putative benefit conferred to Boeing by the provision of facilities\nand infrastructure\". (United States' second written submission, para. 507 and fn 752).\n2027 United States' second written submission, para. 507.\n2028 United States' second written submission, para. 505.\n2030 United States' second written submission, para. 506.\n2031 United States' second written submission, para. 508.\n2032 United States' second written submission, para. 509.\n2033 European Union's response to Panel question No. 172, para. 575.\n\ngovernment continues to provide such goods or services \".2034 As Boeing is \"presently leasing the\nproject site directly from a South Carolina government agency \" this is conclusive evidence of a\nfinancial contribution to Boeing.2035\n8.725. The United States argues that the relevant financial contribution by South Carolina was to\ngrant Vought a ground sublease of the Project Site when it executed the Vought Su blease on\n25 August 2006. Boeing obtained its interest as sublessee under the Vought Sublease directly from\nVought on 30 July 2009, as part of what the United States asserts was an arm's-length transaction\nfor fair market value between Vought and Boeing. In these circumstances, the European Union\nbears the burden of demonst rating (and has failed to demonstrate) that the benefit conferred by\nany such financial contribution provided to Vought has \"passed through\" to Boeing.\n8.726. In response, the European Union says that the United States has misunderstood its claims,\nthat its actual claims involve the provision of goods directly to Boeing by South Carolina, and that\nsuch a financial contribution has been conferred on Boeing directly by South Carolina since\n2009.2036 The European Union maintains that it does not allege that the benefit from any financial\ncontribution provided directly to Vought \"passed through\" to Boeing.2037 Thus, the European Union\nargues that a subsidy to Boeing exists, not as a result of the pass -through to Boeing of a benefit\nconferred by a financial contribution prov ided to Vought, but as a result of a benefit from a\nfinancial contribution provided directly to Boeing.\n8.727. The Panel asked the European Union to identify the temporal starting point for the alleged\nfinancial contribution to Boeing, and to indicate whether th e alleged financial contribution is the\nVought Sublease, the Amended and Restated Sublease or other instruments or events. The\nEuropean Union responded as follows:\na. A financial contribution existed with respect to the sublease of the Project Site well\nbefore 30 July 2009 (the date on which Boeing assumed the sublease from Vought).\nHowever, it \"does not claim that there was a 'benefit' or 'subsidy' to Boeing prior to that\ndate\".2038\nb. The sublease of the Project Site is the instrument through which South Carolina provides\nBoeing with use of the Project Site, and consequently, the starting point for the benefit\nand hence subsidy to Boeing is 30 July 2009, the date on which Boeing assumed the\nsublease of the Project Site from Vought. In a footnote to this part of its response the\nEuropean Union then stated: \"{a}ccordingly, the Europe an Union also considers\n30 July {2009} the starting point of the financial contribution to Boeing directly\".2039\n8.728. In the part of the European Union's response recounted in (a) and the first se ntence of (b)\nabove, the European Union acknowledges that South Carolina provided a financial contribution to\nVought when it executed the Vought Sublease in 2006.\n8.729. However, the European Union then states, in footnote 303 of its response to Panel\nquestion No. 107, that \"accordingly\" it \"also\" considers the starting point of the direct financial\ncontribution to Boeing to be 30 July 2009. The European Union adds, in a final paragraph of its\nresponse to Panel question No. 107, that if the Panel considers the ex ecution of the Amended and\nRestated Sublease to be \"relevant\" to its determination of financial contribution or benefit, it could\n\"alternatively\" consider the date of that instrument (i.e. 19 November 2009) as the starting point\nof the \"subsidy\".2040 Notably, the European Union does not argue that it considers the Amended\nand Restated Sublease to be relevant to the financial contribution determination, nor does it offer\nany legal explanation as to why the Panel could potentially consider the Amended and Restat ed\nSublease to be so relevant.\n\n2034 European Union's response to Panel question No. 172, para. 575.\n2035 European Union's response to Panel question No. 172, para. 577. (emphasis original)\n2036 European Union's response to Panel question No. 39, paras. 218 and 219.\n2037 See e.g. European Union's response to Panel question No. 39, para. 220.\n2038 European Union's response to Panel question No. 107, para. 169.\n2039 European Union's response to Panel question No. 107, para. 170 and fn 303. The European Union\nappears to have inadvertently written 1999 when it meant 2009. (emphasis original)\n2040 European Union's response to Panel question No. 107, para. 171.\n\n8.730. We recall that paragraphs 24 and 25 of the European Union 's panel request describe the\nalleged subsidy as the provision of a \"long-term lease\" pursuant to a Ground Lease Agreement\nbetween the Charleston County Aviation Author ity and South Carolina Public Railways and \"a\nground sublease agreement between South Carolina Public Railways and Boeing, as amended \". It\nwould appear from the language used in the European Union 's panel request, and also in its first\nwritten submission, that it means to identify the Amended and Restated Sublease, dated 19\nNovember 2009, which on its face would appear to be the \"ground sublease between South\nCarolina Public Railways and Boeing, as amended\".2041 Yet the European Union's response to Panel\nquestion No. 107, that the temporal starting point of the \"direct\" financial contribution to Boeing is\n30 July 2009 suggests, to the contrary, that the European Union is in fact referring to the Vought\nSublease as of the date on which Boeing became the assignee of Vought 's subleasehold rights\nthereunder (i.e. 30 July 2009) as the relevant direct financial contribution to Boeing.\n8.731. The correct identification of the legal instrument that the European Union alleges is the\ndirect financial contribution to Boeing is of key importance to the Panel 's analysis. This is because\nthe European Union challenges the legal instrument of the sublease itself as the financial\ncontribution that is said to constitute a provision of \"goods … other than general infrastructure \"\nwithin the meaning of Article 1.1(a)(1)(iii). 2042 When we compare our understanding of the legal\ninstrument that is the measure described in the European Union 's panel request and first written\nsubmission in particular (the Amended and Restated Sublease executed on 19 November 2009),\nwith the legal instrument that logically must be the challenge d measure based on the\nEuropean Union's response to Panel question No. 107 (the Vought Sublease, as of the date on\nwhich Boeing became Vought's assignee), we are left in no smal l measure of doubt as to whether\nthe European Union has been sufficiently clear or consistent as to which legal instrument or event\nis the direct financial contribution to Boeing.2043\n8.732. As we explain below, we have concluded in any case that neither the assump tion by\nBoeing of Vought 's interests under the Vought Sublease on 30 July 2009, nor the Amended and\nRestated Sublease entered into by S outh Carolina Public Railways and Boeing on\n19 November 2009, can be considered to constitute a direct financial contribution to Boeing.\n8.2.8.5.3.2 Whether Boeing 's assumption of Vought 's interests under the Vought\nSublease on 30 July 2009 is a direct financial contribution to Boeing\n8.733. As previously noted, the European Union and United States agree that there was a\nfinancial contribution to Vought, in the form of a provision of goods or services other than general\ninfrastructure, at the time that South Carolina entered into the Vo ught Sublease with Vought on\n25 August 2006.\n\n2041 Additionally, after explaining that Boeing assumed the sublease of the Project Site from Vought on\n30 July 2009, the European Union argues that, on 19 November 2009, \"Boeing and SCPR (with the consent of\nthe Charleston County Aviation Authority) entered into the Amended and Restated Ground Sublease …\nproviding Boeing with that direct sublease.\" (European Union's first written submission, para. 553). The\nreferences to the terms of the \"Ground Sublease\" in paragraphs 554 and 555 which the European Union then\nargues (in paragraphs 556 and 557) is a specific subsidy to Boeing, are to Exhibit EU-471 which is the\nAmended and Restated Sublease between South Carolina Public Railways and Boeing, dated 19 November\n2009, not the Vought Sublease.\n2042 This much is clear not only from paragraphs 24 and 25 of the European Union's panel request, but\nalso from its submissions: \"{a}s demonstrated below, the provision of this lease constitutes a specific\nsubsidy\". (European Union's first written submission, para. 556). \"{t}he lease of the project site to Boeing\nprovides a financial contribution by a government under the SCM Agreement\". (European Union's first written\nsubmission, para. 557). \"{t}he European Union explained in its First Written Submission that South Carolina's\nlease of land at Charleston International Airport to Boeing (i.e., the 'project site lease') … provides to Boeing a\nfinancial contribution within the meaning of Article 1.1(a)(1)(iii) of the SCM Agreement\". (European Union's\nsecond written submission, para. 614). \"{t}he United States … misunderstands what is the subject of {the\nEuropean Union's valuation of the financial contribution}. Contrary to the US' characterization, the\nEuropean Union here valued the project site lease, not the project site itself.\" (European Union's second written\nsubmission, para. 615 (emphasis original)).\n2043 To the extent that the European Union intends to challenge a direct financial contribution allegedly\nprovided to Boeing by South Carolina as of 30 July 2009, when Boeing became the assignee of Vought's\ninterests under the Vought Sublease, there is a real issue in our view, whether the Vought Sublease has been\nsufficiently clearly identified in the European Union's panel request.\n\n8.734. To be clear, a government 's undertaking legal obligations embod ied in a legal instrument\nsuch as a ground sublease is not of itself a provision of \"goods\". The characterization of a legal\ninstrument such as a government ground sublease as a \"provision\" of \"goods\" for purposes of\nArticle 1.1(a)(1)(iii) is based on the notion that the legal instrument creates a government\nobligation to provide the recipient with certain rights in respect of a \"good\". In the present case,\nthe Vought Sublease provided the sublessee, Vought, with the rights of exclusive use and\npossession o f the Project Site for an agreed period of time. There is accordingly a reasonably\nproximate relationship between the action of the government in granting legal rights in the legal\ninstrument (i.e. Vought Sublease) and the use and enjoyment of the \"good\" (i.e. the Project\nSite).2044\n8.735. The United States considers that, while a ground sublease involves a government\nobligation to provide rights to land for the duration of the ground sublease, the financial\ncontribution is the government's legal commitment to provide the land for a period into the future,\nwhich occurs when the commitment becomes legally effective. The United States thus regards the\nquestion of whether the Vought Sublease involves a subsidy to Boeing to concern the question of\nthe transmission of subsidy benefits between unrelated parties.\n8.736. We recall that the disputes in US – Lead and Bismuth II and US – Countervailing Measures\non Certain EC Products addressed the question of whether the benefit conferred from past,\nnon-recurring subsidies continued t o exist and had been fully transferred to the recipient\nfirms' new owners in spite of the fact that the new owners had paid fair market value for the\nrecipient firms. The United States ' arguments are similarly based on an analytical framework in\nwhich the financial contribution (South Carolina 's obligation to provide a Ground Sublease of the\nProject Site) was made directly to Vought in 2006 when it entered into the Vought Sublease, while\nany benefit conferred by that financial contribution (annual rental pa yments allegedly at below-fair\nmarket value) would necessarily be enjoyed by the recipient over the period of the ground\nsublease. Under this framework, when Boeing became the assignee of Vought's interests under the\nVought Sublease in July 2009, the relev ant question is whether the benefit conferred by the\nallegedly below -market value rental payments, from the period of time from which Boeing had\nassumed Vought 's rights and obligations, can be said to have \"passed through \" to Boeing, or\nwhether it was \"extinguished\" at that point because Boeing effectively paid for it when it acquired\nthe Project Emerald facilities and infrastructure from Vought in an arm 's-length, fair market value\ntransaction. For the United States, there is no question that the relevant financial contribution\noccurred only once in 2006 when the South Carolina authorities granted the Vought Sublease to\nVought. The relevant issue is whether the benefit conferred by that f inancial contribution from\nJuly 2009 onwards is being enjoyed by Boeing.\n8.737. The European Union 's analytical approach, on the other hand, obviates the need to\ndetermine whether the benefit conferred by a financial contribution to Party A in Year N has\n\"passed through \" to an assignee of that financial contribution so that it is s ubsequently being\nenjoyed by Party B in Year N + 1, by characterizing the assignment of the financial contribution by\nParty A to Party B as itself giving rise to a new, distinct and direct financial contribution by a\ngovernment to the assignee. For the European Union, because Boeing enjoyed the right to use the\nProject Site as Vought 's assignee under the Vought Sublease as of 30 July 2009, South Carolina\ncan be considered from that date to have made a new financial contribution of \"goods … other than\ngeneral infrastructure\" directly to Boeing under the Vought Sublease.\n8.738. The parties' positions involve the question of how to characterize a financial contribution\nthat involves a government-provided legal right which is to be enjoyed over a period of time (e.g.\nto occupy land, to obtain a particular tax treatment). More specifically, the question is whether the\ngovernment-provided legal right should be characterized for purposes of Article 1.1(a)(1) of the\nSCM Agreement as a single financial contribution that occ urs at the time the government\nundertakes the legal commitment, notwithstanding that the benefit conferred by that one -time\nfinancial contribution may be analysed as being enjoyed over the period of the government 's\nactual performance of that obligation , o r as a continuing or recurring series of financial\ncontributions commensurate with the government's performance of the obligation over time.\n\n2044 Appellate Body Report, US – Softwood Lumber IV, para. 71. See also Appellate Body Report, US –\nCarbon Steel (India), para. 4.69.\n\n8.739. The United States regards the Vought Sublease over the Project Site as a \"unified asset\"\nprovided by South Carolina at the time of the execution of the Vought Sublease on\n30 July 2006.2045 The existence and magnitude of any subsidy arising from the Vought Sublease\nwould be measured by reference to the market rates at the time the Vought Sublease was\nexecuted and its terms (e.g. period and annual rental) were set. Whether the agreed annual rental\nwas below the market rate is an ex ante analysis that would be assessed at the time the South\nCarolina authorities and Vought executed the Vought Sublease, even if the benefit were to be\nconsidered to be enjoyed over the period of the sublease. 2046 When Boeing purchased Vought 's\nSouth Carolina interests and assets – including Vought's interests under the Vought Sublease – for\nover USD 1 billion in a July 2009 transaction with Vought, S outh Carolina \"provided\" nothing. It\nwas already contractually obligated to honour the annual rental and term of the Vought\nSublease.2047 The only question is whether the European Union can demonstrate that any benefit\nconferred on Vought can be considered to have \"passed through \" to Boeing as assignee of\nVought's interests under the Vought Sublease in 2009, which the European Union has failed to do.\n8.740. The European Union regards the Ground Sublease of the Project Site as \"ongoing\", rather\nthan a \"completed single act in 2006\".2048 According to the European Union, there are a number of\nfactors that support such a characterization, including: (a) the \"nature of the land rights\" provided\nunder a ground sublease, being \"possession and use, rather than ownership \"; (b) the conditioning\nof those rights on certain performance obligations by the sublessee and the broader relationship of\nother aspects of the Project Gemini incentive package to Boeing 's location of its facility on public\nland; (c) South Carolina 's \"ongoing supervisory relationship to Boeing as landlord \"; and (d) the\nlimited term of the sublease and the eventual \"reversion\" of the Project Site to South Carolina. 2049\nMoreover, the \"goods or services \" provided to Boeing are \"qualitatively different \" from those\npreviously provided to Vought, because the parts of the Project Site other than those already in\nuse by the Project Emerald companies were only made useable for the Project Gemini facilities and\ninfrastructure through approximately USD 50 million spent by South C arolina on land\nremediation.2050 In addition, \"Boeing's lease \" is materially different from the Vought Sublease\nbecause the former eliminated the performance requirements that potentially could have triggered\nadditional payment obligations on the part of Vought.2051\n8.741. We do not consider it appropriate to characterize the financial contribution that arises from\nthe Ground Sublease of the Project Site, involving as it does a government provision of land for\nthe term of the sublease, as a financial contribution that i s ongoing, or continues, for the duration\nof the Ground Sublease.2052 Like the United States, we see the financial contribution as a one -time\nfinancial contribution made by South Carolina at the time the government undert akes the legal\nobligation under the su blease, notwithstand ing that its performance of the obligation will\nnecessarily occur over time. When the South Carolina authorities entered into the Vought Sublease\nwith Vought in 2006, they became legally obligated to provide Vought or Vought 's assignees with\nexclusive use and possession of the Project Site for the period of the Ground Sublease. This did\nnot change when Boeing became assignee of Vought's rights under the Vought Sublease.\n8.742. We are not persuaded by the European Union 's arguments that the \"nature\" of the rights\ngranted to the sublessee, or the rights and obligations of South Carolina as sublessor, under the\nGround Sublease of the Project Site, warrant a characterization of the relevant financial\ncontribution as one that is \"ongoing\". We note th at ground leases (or land leases, as they are\nsometimes called) are a particular form of property interest that typically involve the long-term\nlease of land only. 2053 A ground lease tenant will usually construct its own buildings on the land\n\n2045 United States' comments on the European Union's response to Panel question No. 107, para. 174.\n2046 United States' comments on the European Union's response to Panel question No. 107, para. 180.\n2047 United States' comments on the European Union's response to Panel question No. 107, para. 181.\n2048 European Union's response to Panel question No. 172, para. 578.\n2049 European Union's response to Panel question No. 172, para. 578.\n2050 European Union's response to Panel question No. 172, para. 579.\n2051 European Union's response to Panel question No. 172, para. 580.\n2052 This is very different from the question of whether it is appropriate to analyse any benefit conferred\nby such a financial contribution as being amortized over the period of the ground sublease, or over some other\nappropriate period.\n2053 Black's Law Dictionary describes a \"ground lease\" as follows:\nA long term (usu. 99 -year) lease of land only. Such a lease typically involves\ncommercial property, and any im provements built by the lessee usu. revert to the\nlessor.\n\nand own those bu ildings for the duration of the ground lease term, after which the buildings will\nbecome the property of the lessor when the control of the land reverts to the lessor. The long-term\nnature of the lease means that the lessee will control the land for a suff icient length of time to\nmake him or her willing to invest in site and building improvements.2054 Ground leases are in many\nrespects regarded as an alternative to outright fee purchases, and may enable a lessee to obtain\nlong-term control and use of land that would not otherwise be available, or avoid the up -front\ncapital cost of purchasing land.2055\n8.743. These characteristics of ground leases (which apply equally to the Ground Sublease of the\nProject Site) suggest that they are comparable in many respects to outright purchases of land.\nUnder a ground lease, the lessee obtains exclusive use and control of the land for a long (but\nnecessarily finite) duration, rather than indefinitely, as in the case of an outright purchase. Like an\noutright purchase, however, the lesso r grants the lessee the right to exclusive use and control of\nthe land for the term of the ground lease once, on execution of the Ground Sublease. This is the\ncase even though the period of time over which the ground lessee will necessarily enjoy the\nexclusive use and control of the land is confined to the term of the ground lease (rather than\nindefinitely, as in the case of an outright purchase).\n8.744. The European Union argues that \"subsidies involving leases of land are considered to\ninvolve recurring benefit s\" in U.S. law and practice in countervailing duty investigations. 2056 We\nfind it instructive that the authorities the European Union refers to in fact address the\ncharacterization of the benefit rather than the financial contribution as being recurring in na ture.\nWe note in this regard that it is important not to confuse the concepts of an ongoing financial\ncontribution and a recurring benefit. We emphasize that in concluding that the financial\ncontribution made by the South Carolina authorities in granting V ought a Ground Sublease of the\nProject Site in 2006 was made once on 25 August 2006 rather than continually or on a recurring\nbasis for the duration of the Ground Sublease, we do not suggest that the benefit or indeed the\nsubsidy in question existed only o nce in 2006. We mean only to say that the financial contribution\nprovided directly to Vought under the Vought Sublease in 2006 was not \"continuous\" and did not\nbecome a financial contribution provided directly to Boeing on 30 July 2009 without any action o n\nthe part of the South Carolina authorities at that time.\n8.745. We are therefore unable to identify any basis on which to conclude that South Carolina can\nbe said to have granted a new direct financial contribution to Boeing on 30 July 2009 when Boeing,\nin a p rivate transaction with Vought, assumed Vought 's rights as sublessee under the Vought\nSublease. The legal instrument through which Boeing, as of 30 July 2009, enjoyed the exclusive\npossession and use of the Project Site remained the Vought Sublease , and So uth Carolina 's\nobligations with respect to that legal instrument, and thus the financial contribution , were\ncrystallized on 25 August 2006.\n8.746. The European Union has argued that under \"Boeing's lease\", South Carolina eliminated the\nperformance requirements that previously would have triggered additional payment obligations on\nthe part of Vought, and thus that Boeing was \"provided the land on materially different (and more\nfavourable) terms than was Vought \".2057 However, the replacement of the \"Additional Rent \"\nprovisions contained in identical terms in both the Vought Sublease and the Amended and\nRestated Sublease with a \"Performance Provision\" occurred only as a result of the Project Gemini\nFee Agreement, which was entered into on 1 January 2010. The European Uni on has nowhere\nargued that the Project Gemini Agreement, by amending certain aspects of the Amended and\nRestated Sublease, so materially altered South Carolina 's obligation with respect to the Ground\n\n(Black's Law Dictionary, 10th edn, B. A. Garner (ed.) (Thomson Reuters, 2004), p. 1025)\n2054 C. Carneghi, \"Determining Ground-Lease Rental Rates\", The Appraisal Journal, April 2004, (Exhibit\nEU-1108), p. 257.\n2055 C. Carneghi, \"Determining Ground-Lease Rental Rates\", The Appraisal Journal, April 2004, (Exhibit\nEU-1108), p. 257.\n2056 European Union's response to Panel question No. 172, para. 586, and authorities cited at fn 1112\nthereto.\n2057 European Union's response to Panel question No. 172, para. 580 (emphasis original); comments on\nthe United States' response to Panel question No. 121, para. 349.\n\nSublease of the Project Site as to warrant the conclusio n that there was a new, direct financial\ncontribution to Boeing as of 1 January 2010, nor do we think such a conclusion is warranted.2058\n8.747. Although not specifically argued by the European Union, we have additionally considered\nthe possibility that, if the lega l validity of Vought 's assignment to Boeing of its subleasehold\ninterest in the Project Site were conditional upon first obtaining the consent of S outh Carolina\nPublic Railways as sublessor, or C harleston County Aviation Authority as less or, there could\narguably be sufficient government action in July 2009 to warrant treating such consent to the\nVought assignment as \"reasonably proximate\" to Boeing's use and enjoyment of the Project Site,\nand thus a \"provision\" of the property in question, for purposes of A rticle 1.1(a)(1)(iii). However,\nwhile some lease instruments may expressly prohibit assignments of leases without the prior\nconsent of the lessor, the terms of the Vought Sublease do not appear to do so, meaning that the\nlegal effectiveness of Vought 's assignment of its interests under the Vought Sublease to Boeing\nwas not conditional upon any prior consent from S outh Carolina Public Railways as the\nsublessor.2059\n8.748. We similarly do not find any provision of the underlying Ground Lease to S outh Carolina\nPublic R ailways that could potentially operate to prevent the legal effectiveness of Vought 's\nassignment of its interest under the Vought Sublease to Boeing without the prior consent of S outh\nCarolina Public Railways or Charleston County Aviation Authority . We note that Charleston County\nAviation Authority (the lessor of the Project Site under the Ground Lease) did execute a consent to\nthe Amended and Restated Sublease on 19 November 2009. 2060 This consent is almost identical to\nthe consent that Charleston County Aviation Authority previously gave to the Vought Sublease.2061\nHowever, it is not apparent that this consent was legally necessary, as section 12.01 of the Ground\nLease appears to enable S outh Carolina Public Railways to assign or sublease its interest in the\nGround Lease to any party without the consent of Charleston County Aviation Authority.2062\n8.749. We note that, when the Ground Lease was amended on 19 November 2009, the following\nsentence was added to section 12.01:\nThrough assignment of the Vought Sublease, {C harleston County Aviation Authority }\nspecifically authorizes the sublease by {S outh Carolina Public Railways } of its rights\nhereunder to Boeing under the {Amended and Restated} Sublease and further\nauthorizes the lease by Boeing of certain Improvements within the Leased Premises to\nentities engaged in manufacturing.2063\n8.750. Once again, it is not clear that C harleston County Aviation Authority 's authorization of\nVought's assignment of its interest under the Vought Sublease to Boeing was legally necessary. It\nappears th at this amendment to section 12.01 of the Ground Lease was added through an\nabundance of caution to provide clarity that C harleston County Aviation Authority was aware of\nBoeing's assumption of the Vought Sublease and its plans to construct further facilit ies on the\nProject Site.\n\n2058 We are similarly not persuaded that the question of whether a lease or sublease of land should be\nanalysed as a one-time or \"ongoing\" financial contribution is assisted by attempted analogies to the very\ndifferent context of breaches of international obligations having a \"continuing character\" or involving\n\"composite acts\" in Articles 14 and 15 of the ILC's Articles on State Responsibility. (See European Union's\nresponse to Panel question No. 172, fn 1091).\n2059 Section 16 of the Vought Sublease permits Vought to assign or sublet additional portions of the\nProject Site to third parties involved in the manufacture of aeronautical composites products for projects which\nfoster strategic development opportunities with appropriate investment and job creation without the prior\nconsent of South Carolina Public Railways. After 31 December 2013, the mutual consent of the parties is\nrequired for any assignment or sublease of any \"unused portion\" of the Project Site. However, section 16 does\nnot on its terms prevent Vought from assigning its leasehold interest in the whole of the Project Site without\nSouth Carolina Public Railway's prior consent.\n2060 The consent appears as an attachment to the version of the Amended and Restated Sublease\nsubmitted as Exhibit EU-471.\n2061 The consent appears as an attachment to the version of the Vought Sublease submitted as Exhibit\nEU-474.\n2062 Ground Lease Agreement, (Exhibit EU-473).\n2063 See First Amendment to Ground Lease Agreement by and between Charleston County Aviation\nAuthority and South Carolina Public Railways (19 November 2009), (Exhibit EU-476), section 11.\n\n8.751. We therefore consider that there is insufficient support for the proposition that there was a\ndirect financial contribution to Boeing when Vought assigned its rights under the Vought Sublease\nto Boeing on 30 July 2009, even leaving aside the terms of reference difficulties to which we have\npreviously referred.2064\n8.2.8.5.3.3 Whether S outh Carolina Public Railway's entering into the Amended and\nRestated Sublease with Boeing on 19 November 2009 is a new direct financial\ncontribution to Boeing\n8.752. As we have previously explained, the terms of the European Union 's panel request and\narguments in its submissions, compared to its responses to the Panel 's questions and comments\non the United States responses, have left the Panel somewhat uncertain as to which legal\ninstrument the European Union challenges as the \"long-term lease of government-owned land\", or\nthe \"sublease of the project site\".\n8.753. The European Union does not appear to have explicitly argued that S outh Carolina Public\nRailway's entering into the A mended and Restated Sublease with Boeing on 19 November 2009\nterminated the Vought Sublease, thereby putting to an end that financial contribution, and\nbringing into existence a new direct financial contribution to Boeing. 2065 We nevertheless consider\nwhether the facts in question may support such a conclusion. In our view, if the Amended and\nRestated Sublease could be considered to involve a new legal commitment on the part of South\nCarolina to provide a Ground Sublease of the Project Site directly to Boeing, there would be a basis\nfor concluding that South Carolina made a direct financial contri bution to Boeing on\n19 November 2009.\n8.754. The United States argues that in executing the Amended and Restated Sublease with\nBoeing on 19 November 2009, S outh Carolina Pub lic Railways did not enter into a new legal\nrelationship with Boeing. Rather, the Amended and Restated Sublease simply \"formalized\" Boeing's\nrole as successor -in-interest to Vought under the Vought Sublease. 2066 For the United States,\nBoeing's interest as sublessee of the Project Site derives from the assignment by Vought of its\ninterests under the Vought Sublease on 30 July 2009.2067\n8.755. We recall that on 28 October 2009, some three months after acquiring Vought 's South\nCarolina operations (i.e. the Project Emerald facilities and infrastructure), and taking over Vought's\ninterest as sublessee under the Vought Sublease, Boeing decided to locate its second 787 final\nassembly and delivery facility (i.e. the Project Gemini facilities and infrastructure) on the same\nProject Site, allegedly as a result of the tax and other incentives offered by South Carolina. 2068 As\ndetailed in paragraph 8.710 above, on 19 November 2009, C harleston County Aviation Authority\nand South Carolina Public Railways amended the underlying Ground Lease for the Project Site to\nacknowledge that the Vought Sublease had been assigned to Boeing on 30 July 2009, as well as to\nupdate certain factual information. 2069 At the same time, S outh Carolina Public Railways and\nBoeing execute d the Amended and Restated Sublease which was expressed as amending,\nrestating, and entirely taking the place of the Vought Sublease.2070\n\n2064 See fn 2043 above.\n2065 We note that the European Union does not argue that the Amended and Restated Sublease involved\na new legal commitment by South Carolina to provide a Ground Sublease of the Project Site directly to Boeing.\nRather, the European Union argues that Boeing's interests as sublessee of the Project Site arose on 30 July\n2009 when it was assigned Vought's interests under the Vought Sublease. For example, the European Union\nexplains in its first written submission that Boeing's purchases of Vought and Global Aeronautica additionally\nled to it \"taking over the $1 per year lease to the Project Emerald site at Charleston International Airport\",\nwhich lease \"also covers the location of Boeing's 787 Final Assembly and Delivery Facility\". (European Union's\nfirst written submission, paras. 696, 552, and 553, and fn 1554).\n2066 United States' second written submission, para. 492 and fn 722; response to Panel question\nNo. 101(b), para. 195; and response to Panel question No. 101(d), para. 199.\n2067 Thus, the United States argues, to the extent the sublease of the Project Site involves a financial\ncontribution by South Carolina in the form of a provision of land other than general infrastructure: (a) it was\nmade to Vought (and not Boeing) on execution of the Vought Sublease on 25 August 2006; and (b) there was\nno financial contribution made by South Carolina to Boeing.\n2068 These incentives are the Project Gemini measures, set out in para. 8.682 above.\n2069 First Amendment to Ground Lease Agreement by and between Charleston County Aviation Authority\nand South Carolina Public Railways (19 November 2009), (Exhibit EU-476), recitals 3 and 4.\n2070 Amended and Restated Sublease, (Exhibit EU-471), section 1.\n\n8.756. Our examination of the Vought Sublease and the Amended and Restated Sublease\nindicates that the Amended and Restated Sub lease is an instrument embodying the same Ground\nSublease of the Project Site that was originally provided to Vought under the Vought Sublease\n(and of which Boeing became the assignee from Vought from 30 July 2009). 2071 The Project Site\nthe subject of the Amended and Restated Sublease is the same Project Site covered by the Vought\nSublease, and is defined in the same way in both instruments. The Amended and Restated\nSublease simply restates the terms of the sublease of the Project Site as originally provided i n the\nVought Sublease, replacing Vought for Boeing as the sublessee.2072 Significantly, there is nothing\nto indicate that the subleasehold interests granted to Vought under the Vought Sublease (and then\nassigned to Boeing) were ever terminated on or prior to 18 November 2009 such that S outh\nCarolina Public Railways can be said to have granted Boeing a new subleasehold interest in the\nProject Site when it executed the Amended and Restate d Sublease on 19 November 2009. We do\nnot see any basis for finding that So uth Carolina Public Railways provided a direct financial\ncontribution to Boeing on 19 November 2009 when it executed the Amended and Restated\nSublease with Boeing. We therefore conclude that the Amended and Restated Sublease is not\nrelevant to our determin ation of the financial contribution with respect to the sublease of the\nProject Site.2073\n8.757. In sum, our review of the relevant instruments suggests that Vought was legally entitled to\nassign to Boeing its right to sublease the Project Site from S outh Carolina P ublic Railways on\n30 July 2009, without first obtaining the consent of, or otherwise requiring any action on the part\nof, South Carolina. Consequently, by entering into the Assignment and Assumption of Vought\nSublease with Boeing on 30 July 2009, Vought as signed its subleasehold interests in the Project\nSite to Boeing, and Boeing thereby became the sublessee under the Vought Sublease. The\nsubsequent execution by South Carolina Public Railways and Boeing of the Amended and Restated\nSublease did not legally a lter this position, nor did any of the consents to the Vought assignment\nexecuted by South Carolina Public Railways or Charleston County Aviation Authority.\n8.758. As a result of the foregoing analysis, we conclude that the only relevant action that South\nCarolina took in granting a Ground Sublease of the Project Site was when S outh Carolina Public\nRailways entered into the Vought Sublease with Vought on 25 August 2006. 2074 Thus, the relevant\nfinancial contribution is a financial contribution made directly to Vought in 2006.\n8.759. As we have explained, we do not agree with the European Union 's characterization of the\nfinancial contribution as \"ongoing\", and we do not consider that it has demonstrated the existence\nof a direct financial contribution to Boeing. We wish to emp hasize that in reaching this conclusion,\nwe do not rule out the possibility that some or all of the benefit conferred by the financial\ncontribution provided to Vought in 2006 could have \"passed through\" to Boeing when it became\nthe assignee Vought's interest in the Vought Sublease on 30 July 2009, and thereby obtained the\nright to use and control of the Project Site from that point onwards.\n\n2071 This also appears to be the understanding of South Carolina, as in the second recital of the Ground\nLease, when referring to the assignment of the Vought Sublease to Boeing on 30 July 2009, Charleston County\nAviation Authority and South Carolina Public Railways state that pursuant to the Assignment and Assumption of\nthe Vought Sublease dated 30 July 2009, the Vought Sublease thereby became the \"Boeing\" Sublease. (First\nAmendment to Ground Lease Agreement by and between Charleston County Aviation Authority and South\nCarolina Public Railways (19 November 2009), (Exhibit EU-476)).\n2072 As we note in para. 8.710, the operative terms of the Amended and Restated Sublease as regards\nterm, annual rent and representations of the sublessor and sublessee for all practical purposes remain the\nsame as those of the Vought Sublease. While the European Union argues that the \"additional rent\" provision in\nthe Vought Sublease was eliminated by the Project Gemini Agreement, we note that the Project Gemini\nAgreement was executed by the State of South Carolina and Boeing on 1 January, 2010, which is subsequent\nto the date on which the Amended and Restated Sublease was executed. The Amended and Restated Sublease\nas originally executed contained the same \"additional rent\" provision as the Vought Sublease. (See\nEuropean Union's response to Panel question No. 39, para. 225).\n2073 See also para. 8.746.\n2074 Indeed, the European Union's own approach to the calculation of the \"benefit\" conferred by the\nfinancial contribution reflects the notion that the financial contribution was made in August 2006 rather than in\n2009. The European Union bases its estimate of the \"benefit\" on the annual value of the sublease of the Project\nSite from the first full year of the sublease to Boeing (i.e. from January 2010) through the end of the final five\nyear extension on 31 December 2041. However, its estimate of the annual value is the \"base lease value\" of\nthe Project Site established in the Vought Sublease and negotiated with Vought in 2006. (See\nEuropean Union's first written submission, paras. 558 and 561).\n\n8.760. While it is well accepted that a financial contribution provided to one entity can be\ndemonstrated to have conferred a benefit on (and thus constitute a subsidy to) another entity, the\nEuropean Union bears the onus of demonstrating that the benefit conferred by the financial\ncontribution to Vought passed through to Boeing as of 30 July 2009 or subsequently, particularly\nin light of the United States ' arguments that Boeing 's acquisition of Vought 's South Carolina\noperations, including the assignment of the sublease of the Project Site, was an arm's-length\ntransaction for fair market value. 2075 The European Union has not attem pted to do so, because its\ncharacterization of the relevant financial contribution renders such a demonstration irrelevant.\nHowever, we f ind its characterization of the relevant financial contribution, whether commencing\non 30 July 2009 or 19 November 2009, to be in error. This being so, the European Union has failed\nto establish the existence of any benefit conferred on Boeing by whichever of the legal instruments\nthe European Union challenges as the Ground Sublease of the Project Site.\n8.2.8.5.4 Conclusion\n8.761. In light of our findings above with respect to the sublease of the Project Site, we conclude\nthat the European Union has failed to establish that the measure involves a subsidy to Boeing\nwithin the meaning of Article 1 of the SCM Agreement.\n8.2.8.6 Whether specific subsid ies exist by virtue of South Carolina 's provision of\nGemini and Emerald facilities and infrastructure to Boeing\n8.2.8.6.1 Introduction\n8.762. In paragraph 24 of its panel request, the European Union identifies the following measure\nas a subsidy related to Project Gemini directly benefiting Boeing:\nProvision of facilities and infrastructure at the Charleston International Airport site, as\nprovided for in the Project Gemini Agreement between Boeing and the State of South\nCarolina, dated 1 January 2010, funded through state ge neral obligation bonds issued\npursuant to Title 11, Chapter 41 of the S.C. Code, as amended by Section 5 of H3130,\nAct No. 124, 2009 S.C. Acts 1092 (H3130), and S.C. Code § 55-11-520, at no cost to\nBoeing.\n8.763. In paragraph 25 of its panel request, the European Union identifies the following measure\nas a subsidy related to Project Emerald directly benefiting Boeing:\nProvision of facilities and infrastructure at the Charleston International Airport site, as\nprovided for in the Project Emerald Confidential Site De velopment Agreement, funded\nthrough state general obligation bonds issued pursuant to Title 11, Chapter 41 of the\nS.C. Code, at no cost to Boeing.\n8.764. The European Union 's arguments concern, on the one hand, facilities and infrastructure\nrelating to Boeing 's 787 final assembly and delivery facility (Gemini facilities and infrastructure)\nand, on the other, facilities and infrastructure relating to Boeing 's 787 fuselage fabrication and\nintegration complex (Emerald facilities and infrastructure). 2076 The United State s argues that the\nEuropean Union has failed to demonstrate that the alleged financial contribution confers a benefit\n(with regard to the Gemini facilities and infrastructure) and that a financial contribution to Boeing\nexists (with regard to the Emerald fa cilities and infrastructure), and that the alleged financial\ncontributions are specific within the meaning of Article 2 of the SCM Agreement.\n8.765. With regard to the Project Gemini facilities and infrastructure , as explained in\nSection 8.2.8.3.1, under the Project Gemini Agreement, dated 1 January 2010, which provides for\nvarious incentives in relation to Project Gemini, South Carolina co mmitted to issue a total of\nUSD 220 million in state economic development bonds to offset the co sts of infrastructure\nassociated with Project Gemini and to issue USD 50 million in air hub bonds to offset the costs\nassociated with air carrier hub terminal facilities. 2077 Boeing agreed that \"the commitments made\n\n2075 United States' first written submission, para. 548.\n2076 European Union's first written submission, paras. 697 and 567.\n2077 Project Gemini Agreement, (Exhibit EU-467), Articles II(A) and II(B), p. 3.\n\nby Commerce of general obligation bond fund ing set forth in this Section II were made based on\nthe expectation that Boeing will attain the Minimum Job requirement and the Minimum Investment\nrequirement as defined in Section IV herein, or, if those requirements are not met during the\napplicable time -period, will be obligated to reimburse the State in accordance with the\nPerformance Provision attached hereto as Exhibit A.\"2078\n8.766. The Project Gemini Agreement provides a set of procedures to ensure the proper\napplication of the bond proceeds, whereby Boeing enters into contracts to construct infrastructure\nand facilities, pays the invoices and subsequently submits the invoices to South Carolina for\nreimbursement. On 13 January 2010, the South Carolina State Budget and Control Board adopted\nthree resolutions, providing for the issuance and sale of economic development bonds and air hub\nbonds, as contemplated by the Project Gemini Agreement. 2079 The resolutions provided that the\neconomic development bond proceeds were to be used as follows: USD 10 million for \"{r}oad\nimprovements necessary to provide Project Gemini full use of the project site \"; USD 53.9 million\nfor \"{s}ite preparation, including clearing, grading, and filling the site, and construction of any\nrequired infrastructure\"; USD 156.1 million for \"{c}onstruction of the new assembly facility which\nis functionally related to and is part of the air carrier hub terminal facility \".2080 The air hub bond\nproceeds, in the amount of USD 50 million, were to be used for \"{c}onstruction of the new\nassembly facility which is functionally related to and is part of the air carrier hub terminal\nfacility\".2081\n8.767. Beginning in November 2009, Boeing contracted and paid for the construction of facilities\nand infrastructure pertaining to Project Gemini on the Project Site. The construct ion costs were\nreimbursed, at least partially, in the amount of USD 270 million, by South Carolina through bond\nproceeds. [***].2082\n8.768. With respect to the Project Emerald facilities and infrastructure , as explained in\nSection 8.2.8.3.2, Project Emerald was the subject of an agreement concluded in 2004 and 2006\nbetween the relevant South Carolina authorities and Vought, on its own behalf and on behalf of\nthe Project Emerald entities, which contemplated a number of incentives, includi ng the issuance of\nstate bonds to fund certain facilities and infrastructure. 2083 Specifically, South Carolina committed\nto providing economic development bond proceeds to the maximum amount of USD 120 million to\nVought while Vought inter alia committed itself to utilising these proceeds towards the construction\nof infrastructure, as broadly defined in section 11 -41-30 of the South Carolina Code, within broad\ncategories of expenditure as laid out in the Project Emerald Agreement. 2084 The South Carolina\nState Budget and Control Board approved the issuance of the economic development bonds for\n\n2078 Project Gemini Agreement, (Exhibit EU-467), p. 3. (emphasis original)\n2079 South Carolina State Budget and Control Board, A Resolution to Provide for the Issuance and Sale of\nNot Exceeding in the Aggregate Fifty Million Dollars (USD 50,000,000) Principal Amount General Obligation\nState Economic Development Bonds of the State of South Carolina, to Prescribe the Purposes for Which the\nProceeds Shall Be Expended, to Provide for the Payment Thereof, and Other Matters Relating Thereto\n(13 January 2010), exhibit 3 (Gemini economic development bond resolution), (Exhibit EU-481); South\nCarolina State Budget and Control Board, A Resolution to Provide for the Issuance and Sale of Not Exceeding in\nthe Aggregate One Hundred Seventy Million Dollars (USD 170,000,000) Principal Amount General Obligation\nState Economic Development Bonds of the State of South Carolina, to Prescribe the Purposes for Which the\nProceeds Shall Be Expended, to Provide for the Payment Thereof, and Other Matters Relating Thereto\n(13 January 2010) (Gemini additional economic development bond resolution), (Exhibit EU-482); and South\nCarolina State Budget and Control Board, A Resolution to Provide for the Issuance and Sale of Not Exceeding in\nthe Aggregate Fifty Million Dollars (USD 50,000,000) Principal Amount General Obligation State Air Carrier Hub\nTerminal Facilities Bonds of the State of South Carolina, to Prescribe the Purposes for Which the Proceeds Shall\nBe Expended, to Provide for the Payment Thereof, and Other Matters Relating Thereto (13 January 2010),\nexhibit 2 (Gemini air hub bond resolution), (Exhibit EU-483).\n2080 Gemini economic development bond resolution, (Exhibit EU-481), pdf p. 44; Gemini additional\neconomic development bond resolution, (Exhibit EU-482), pdf p. 44.\n2081 Gemini air hub bond resolution, (Exhibit EU-483), pdf p. 45.\n2082 Project Gemini Reimbursement Documents (formerly Exhibit US-13-287), (Exhibit EU-1269) (BCI).\n2083 Initial Project Emerald Site Development and Incentive Agreement, (Exhibit EU-560); and Final\nProject Emerald Incentive Agreement, (Exhibit EU-550).\n2084 Final Project Emerald Incentive Agreement, (Exhibit EU-550), sections 2.1 and 2.3. While the Initial\nProject Emerald Agreement originally contemplated the issuance of both economic development bonds and air\nhub bonds, it appears that Project Emerald was only eligible for economic development bonds, and only that\ntype of bond was issued. Compare section 2.1 of the Initial Project Emerald Site Development and Incentive\nAgreement, (Exhibit EU-560) and section 2.1 of the Final Project Emerald Incentive Agreement, (Exhibit\nEU-550).\n\nthis purpose in a resolution adopted on 14 December 2004. This resolution provided that the bond\nproceeds were to be utilized as follows: USD 7.5 million for \"site prep \"; USD 5 Million for\n\"wetlands\", USD 2 million for \"airport improvements \"; USD 2 million for \"road improvements \";\nUSD 2 million for a \"training/multi-use center\"; and USD 97 million for \"manufacturing facilities\".\nThe remaining USD 4 million was allocated to the costs of issuing the bonds. This resolution also\nprovided a tentative timetable for expenditure of the bond proceeds in support of Project Emerald\nfrom November 2004 to April 2006.2085\n8.769. Vought was granted the right to sublease the Project Site in the Initial Project Emerald\nAgreement concluded on 29 November 2004, an arrangement subsequently formalised through\nthe Ground Lease and the Vought Ground Sublease, both dated 25 August 2006. 2086 The Vought\nGround Sublease provides in Article 7 that \"{s}ublessee is subleasing the Premises for the purpose\nof constructing thereon facilities related to the manufacture of products for the aeronautics\nindustry (the 'Improvements')\". Prior to the beginning of production in 2006, Vought contracted\nand paid for the construction o f facilities and infrastructure on the Project Site. Vought 's\nconstruction costs were then partially reimbursed by the South Carolina Department of Commerce\nthrough economic development bond proceeds.2087\n8.770. On 6 July 2009, Vought and Boeing entered into the Vo ught Asset Purchase Agreement,\npursuant to which Vought sold its title and interest in the assets that it owned, leased, licensed,\nused or held for use in connection with the design, manufacture, and assembly of the aft fuselage\nsections of the 787. On 30 July 2009, Vought assigned to Boeing its rights to the Project Site\nunder the Assignment and Assumption of Vought Sublease 2088, and to the Emerald facilities and\ninfrastructure constructed thereon, under two apparently [***] instruments.2089\n8.771. On 19 November 2009 , Boeing entered into the Amended and Restated Ground Sublease\nwith South Carolina Public Railways2090, Article 7 of which provides that \"{s}ublessee is subleasing\nthe Premises for the purpose of (a) constructing thereon or (b) using previously constructed\nthereon facilities related to or supporting the manufacture of products for the aeronautics industry\n(the 'Improvements')\".\n8.2.8.6.2 Main arguments of the parties\n8.772. Regarding the Gemini facilities and infrastructure , the European Union argues that South\nCarolina constructed custom-built facilities and infrastructure for Boeing and is presently providing\nBoeing with the exclusive use of these facilities and infrastructure for the entirety of their useful\nlife. Such a provision of goods and services other than general infrastructure constitutes a financial\ncontribution within the meaning of Article 1.1(a)(1)(iii) of the SCM Agreement. 2091 The\nEuropean Union asserts, in this regard, that the State of South Carolina maintains title to the\nfacilities and infrastructure construc ted with the bond proceeds and that Boeing only has a\nleasehold interest in these facilities and infrastructure. 2092 The European Union argues, in the\nalternative, that South Carolina has provided Boeing with funding for the construction of its 787\n\n2085 South Carolina State Budget and Control Board, Resolution providing for the issuance and sale of\nnot exceeding in the aggregate one hundred sixty million (USD 160,000,000) principal amount general\nobligation state economic development bonds of the State of South Carolina, to prescribe the purposes for\nwhich the proceeds shall be expended, to provide for the payment thereof, and other matters relating thereto\n(14 December 2004), (Exhibit EU-551).\n2086 Ground Lease Agreement, (Exhibit EU-473). Exhibit E of the Ground Lease contains the Vought\nGround Sublease.\n2087 South Carolina Office of the State Treasurer, Debt Management System, Project Emerald\nReimbursement Documents, 6 January 2005 (formerly Exhibit US-13-288), (Exhibit USA-247) (BCI).\n2088 Assignment of Vought Sublease, (Exhibits EU-475/USA-449 (exhibited twice)).\n2089 Bill of Sale, Assignment and Assumption Agreement (30 July 2009), (Exhibit USA-515) (BCI); and\nAssignment and Bill of Sale from Vought Aircraft Industries, Inc. to Boeing Commercial Airplanes Charleston\nSouth Carolina, Inc. (30 July 2009), (Exhibit EU-552). Also see United States' response to Panel question\nNo. 120, para. 249.\n2090 Amended and Restated Sublease, (Exhibit EU-471).\n2091 European Union's first written submission, para. 573. We note that while Article 1.1(a)(1)(iii) of the\nSCM Agreement refers to \"goods or services other than general infrastructure\" (emphasis added), the\nEuropean Union mainly refers in its submissions to \"goods and services\".\n2092 European Union's first written submission, paras. 574-576.\n\nfinal assembly facility through the transfer of bond proceeds to Boeing, which constitutes a direct\ntransfer of funds in the sense of Article 1.1(a)(1)(i) of the SCM Agreement.2093\n8.773. The European Union considers that its explanation of why under the Vought Ground\nSublease Vought only has a leasehold interest in the Emerald facilities and infrastructure also\napplies to Boeing's interest in the Gemini facilities and infrastructure. Thus, Boeing has a leasehold\ninterest, or the functional equivalent thereof, in the Premises , including all improvements\nconstructed thereupon at whatever point.2094\n8.774. In response to a Panel question, the European Union explains that, if the Panel were to\nreach the factual conclusion that Boeing constructed the Gemini facilities and infrastructure an d\nthat South Carolina partially reimbursed Boeing 's costs of constructing these facilities and\ninfrastructure, the measures should nevertheless be characterized as a provision of goods and\nservices other than general infrastructure within the meaning of Ar ticle 1.1(a)(1)(iii) of the SCM\nAgreement.2095 In this respect, the European Union notes that the Appellate Body has indicated\nthat a panel 's characterization of a measure should identify the measure 's most significant\nfeatures.2096 Thus, although as a formal ma tter funds were being transferred directly from South\nCarolina to Boeing, the essence of the transaction is one of South Carolina providing goods and\nservices to Boeing. The transfer of funds from South Carolina to Boeing is merely a means to the\nend of enabling South Carolina to provide goods and services to Boeing. Indeed, even before the\nfunds were raised through the sale of economic development bonds and air hub bonds it had\nalready been determined that those funds must be expended on goods and services to be provided\nto Boeing, including for the construction and assembly of a new assembly facility. Boeing pays for\nthe construction of the facility and infrastructure, and is then promptly reimbursed by the\ngovernment for this expenditure. Moreover, the Un ited States has acknowledged that \"the State\n{of South Carolina} (or a political subdivision of the State) retains an ownership or reversionary\ninterest in such property \".2097 According to the European Union, it should make no difference to\nthe fundamental na ture of the transaction, for purposes of the analysis under Article 1.1(a)(1)\nwhether Boeing paid for the goods and services and was reimbursed, or whether the government\ninitially paid for the goods and services to be provided to Boeing. 2098 The European Uni on also\ncontends that the United States ' argument on how to determine whether a benefit exists implies\nthat the United States agrees that the measure should be characterized as a provision of goods\nand services within the meaning of Article 1.1(a)(1)(iii) of the SCM Agreement.2099\n8.775. The European Union further argues that the provision of the Gemini facilities and\ninfrastructure confers a benefit within the meaning of Article 1.1(b).2100 The provision of facilities is\nmade for less than adequate remuneration in rela tion to prevailing market conditions, as Boeing\nprovides nothing in exchange. This is so regardless of whether the financial contribution is\nconsidered as a provision of goods and services other than gener al infrastructure under\nArticle 1.1(a)(1)(iii), or as a direct transfer of funds under Article 1.1(a)(1)(i). Indeed, paying\nnothing constitutes less than adequate remuneration since Boeing would have two options to\nobtain access to the custom -made Gemini facilities and infrastructure in the market: either raise\nfunds in the market to construct the facilities and infrastructure itself, or find another market\nparticipant to construct and then lease the facilities and infrastructure. Each option carries with it a\nfinancing cost.2101\n\n2093 European Union's first written submission, para. 577.\n2094 European Union's response to Panel question No. 101(c), paras. 129 and 130.\n2095 European Union's response to Panel question No. 106.\n2096 European Union's response to Panel question No. 106, para. 163.\n2097 United States' response to the Panel's request for information pursuant to Article 13 of the DSU,\ndated 28 February 2013, response to question No. 64, para. 144.\n2098 European Union's response to Panel question No. 106, para. 164. See also European Union's\ncomments on United States' response to Panel question Nos. 101, para. 305; and 116, paras. 340-342.\n2099 European Union's response to Panel question No. 106, para. 165; comments on United States'\nresponse to Panel question No. 101, para. 306.\n2100 European Union's first written submission, paras. 578-582; second written submission,\nparas. 635-638.\n2101 European Union's response to Panel question No. 105, paras. 155 and 156; first written submission,\n\n8.776. With respect to specificity, the European Union argues that the provision of the Gemini\nfacilities and infrastructure is specific within the meaning of Articles 2.1(a) and 2.1(c).2102 First, the\ntransfer of bond proceeds is specific to Boeing within the meaning of Article 2.1(a) since So uth\nCarolina committed to providing the Gemini facilities in the Project Gemini Agreement, the\nresolutions authorising the issuance of bonds explicitly restricted the use of the bond proceeds to\nthe construction of the facilities for Boeing 's use, and the legislative provision pursuant to which\nthe bonds were issued was enacted under H3130, the Boeing incentive legislation. 2103\nFurthermore, access to the subsidy is limited to the aviation and aerospace industry, since air hub\nbond proceeds may only be issued for air carrier hub terminal facilities, and economic development\nbond proceeds may only be used for buildings when used in connection with air hub carrier\nterminal facilities or located on government -owned land.2104 Second, the provision of the Gemini\nfacilities and infrastructure is specific within the meaning of Article 2.1(c) since this type of subsidy\nhas only been used by a limited number of enterprises, and Boeing and its suppliers have been its\npredominant users.2105\n8.777. Regarding the Emerald facilities and infrastructure, the European Union argues that South\nCarolina constructed custom-built facilities and infrastructure for Project Emerald and is presently\nproviding Boeing with the exclusive use of these facilities and infrastructure for the remainder of\ntheir useful life. Such a provision of goods and services other than general infrastructure\nconstitutes a financial contribution within the meaning of Article 1.1(a)(1)(iii) of the SCM\nAgreement.2106 The European Union asserts, in this regard, that the State of South Ca rolina\nmaintains title to the Emerald facilities and infrastructure constructed with the bond proceeds and\nthat Boeing only has a leasehold interest in these facilities and infrastructure.2107\n8.778. The European Union rejects the argument of the United Sta tes that South Carolina does\nnot provide any Emerald facilities and infrastructure to Boeing since Boeing purchased the right to\nuse the facilities and infrastructure from Vought and Global Aeronautica at arm's-length and for\nfair market value. The European Union contests the assertion that this purchase was made for fair\nmarket value and argues that the United States fails to explain how Boeing 's transactions with\nVought could change the fact that South Carolina is currently providing the facilities and\ninfrastructure to Boeing at below-market rates.2108\n8.779. In response to a Panel question, the European Union argues that Vought never actually\nowned, and therefore could not sell, the bond -funded Emerald facilities and infrastructure to\nBoeing, as they were owned a t all times by South Carolina (or an agency thereof). 2109 First, the\nEuropean Union contends that as a matter of the property law s of U .S. states: ( a) the term\n\"Premises\" as used in the Vought Ground Sublease refers to buildings and land together; and ( b)\nownership of buildings and other permanent improvements constructed upon leased premises\npasses to the lessor.2110 Second, the European Union argues that South Carolina built the Emerald\nfacilities and infrastructure. 2111 South Carolina law requires that bond issua nces be used to fund\nbuildings located only on land owned by a state agency, or at an air carrier hub terminal facility,\nfor a public purpose. 2112 As such, improvements constructed with the proceeds of state bonds\nbecome part of the leased premises, pursuant to the underlying rules of U .S. state property\n\n2102 European Union's first written submission, paras. 583-586; second written submission,\nparas. 639-642.\n2103 European Union's first written submission, paras. 583 and 584.\n2104 European Union's first written submission, para. 584; second written submission, para. 639.\n2105 European Union's first written submission, para. 585; second written submission, para. 639.\n2106 European Union's first written submission, para. 701.\n2107 European Union's first written submission, para. 702. As support for its view that Boeing only has a\nleasehold interest in the Emerald facilities and infrastructure, the European Union invokes Article 6.06(A) of the\nGround Lease, as incorporated into the Boeing Ground Sublease, governing the ownership of improvements to\nthe Project Site that are real property (Category I improvements). (European Union's first written submission,\npara. 702).\n2108 European Union's second written submission, para. 727. The European Union further states that, to\nthe extent that the United States argues that the expected future value of the subsidies passed through to\nVought and Global Aeronautica at the time of the sale to Boeing, a similar argument was rejected by the panel\nin the original proceedings. (European Union's second written submission, paras. 727 and 728 (referring to\nPanel Report, US – Large Civil Aircraft (2nd complaint), para. 7.881)).\n2109 European Union's response to Panel question No. 101, para. 134.\n2110 European Union's response to Panel question No. 101(a), paras. 121, 122, and 125.\n2111 European Union's response to Panel question No. 101(a), para. 121.\n2112 European Union's response to Panel question No. 101(a), paras. 122 and 123.\n\nlaw.2113 In this respect, the European Union contends that section 6.06(A) of the Ground Lease\ndoes not affect the respective property interests of S outh Carolina Public Railways and Vought in\nCategory I Improvem ents. In particular, given that S outh Carolina Public Railways is part of the\nSouth Carolina Department of Commerce, section 6.06(A) does not provide a basis for transferring\nownership of the improvements built by the South Carolina Department of Commerce to\nVought.2114 Finally, the European Union argues that section 4.9 of the Vought Asset Purchase\nAgreement does not clarify the nature of Vought 's rights in the Emerald facilities and\ninfrastructure.2115\n8.780. The European Union considers that the fact that the Emerald facilities and infrastructure\nare owned by South Carolina, and that the facilities and infrastructure became part of the Premises\nsubject to the Ground Sublease, confirms that South Carolina, through C harleston County Aviation\nAuthority and S outh Carolina Public Railways as lessors, is \"providing\" such facilities and\ninfrastructure directly to Boeing as lessee.2116\n8.781. Nonetheless, the European Union posits, with regard to each of the financial contributions\nassociated with the provision of land and the provision of the Emerald and Gemini facilities and\ninfrastructure, that South Carolina or a state agency is providing Boeing with the right to possess\nand use tangible assets that would (or do) belong to the state. In this regard, it is irrelevant\nwhether Boeing is considered to have legal title to, or simply a leasehold interest in, such assets as\nboth arrangements would constitute \"provision\" of goods and services.2117\n8.782. The European Union further argues that the provision of the Emerald facilities and\ninfrastructure confers a benefit to Boeing within the meaning of Article 1.1(b), since it is made for\nless than adequate remuneration in relation to prevailing market conditions. 2118 Finally, the\nEuropean Union contends that the provision of the facilities and infrastructure is specific within the\nmeaning of Articles 2.1(a) and 2.1(c). Indeed, the resolutions authorising the issuance of the\nbonds indicate that access to the subsidy is de jure limited to the Project Emerald companies, or at\na minimum the aeronautics industry. The subsidy is also de facto specific since it has only been\nused by a limited number of enterprises, and Boeing and its suppliers have been the predominant\nusers.2119\n8.783. Regarding the Gemini facilities and infrastructure , the United States argues that the\nEuropean Union 's assertion regarding the existence of a financial contribution in the form of a\nprovision of goods rests on factual misunderstandings. 2120 First, the United States argues that\nBoeing, not South Carolina, constructed the facilities and infrastructu re, and that South Carolina 's\nonly role was to reimburse a portion of Boeing 's costs.2121 In this respect, the United States points\nto the reimbursement forms and supporting documentation for Boeing 's expenditures in\nconstructing the facilities and infrastructure.2122 Second, the United States contends that , contrary\nto the European Union 's assertion, Boeing, not South Carolina , maintains title to the facilities and\ninfrastructure constructed with the bond proceeds. Boeing obtained this title at the latest upon\nBoeing's construction of the facilities and infrastructure, and pursuant to the Ground Lease, such\n\n2113 European Union's response to Panel question No. 101(a), para. 125.\n2114 European Union's response to Panel question No. 101(a), para. 124. The European Union argues\nthat while it is possible that Vought retained ownership of improvements constructed solely by Vought, subject\nto the reversionary interest of the South Carolina Civil Aviation authority upon expiry of the lease, such\nterm-limited ownership does not appear to differ from a transferable leasehold interest for the same term.\n(European Union's response to Panel question No. 101(a), para. 126).\n2115 European Union's response to Panel question No. 101(a), para. 128.\n2116 European Union's response to Panel question No. 101(d), para. 134.\n2117 European Union's response to Panel question No. 101, para. 132.\n2118 European Union's first written submission, para. 705.\n2119 European Union's first written submission, paras. 706-708.\n2120 United States' second written submission, para. 512. The United States indicates with respect to the\nalleged financial contribution in the form of a provision of bond-funded facilities and infrastructure to Boeing in\nthe context of Project Gemini that it \"simply addresses the EU case as it has argued it, and has demonstrated\nwhy the EU's case is flawed. The United States has not taken a position on the correct characterization of this\nseries of transactions outside the context of the EU's claims and arguments\". (United States' comments on\nEuropean Union's response to Panel question No. 101, fn 257). See also United States' comments on\nEuropean Union's response to Panel question No. 101(d), fn 229.\n2121 United States' response to Panel question Nos. 101, para. 203, 116, paras. 240-242; and comments\non European Union's response to Panel question No. 106, para. 169.\n2122 United States' response to Panel question No. 116, para. 240.\n\nproperty remains Boeing 's until the expiration or termination of the Ground Lease. 2123 With\nreference to a statement by the European Union that \"in any circumstance involving a provision of\ngoods, the goods will have been constructed or acquired before they are provided \", the\nUnited States argues that the European Union 's own standard implies that South Carolina could\nnot have provided the Emerald or Gemini facili ties and infrastructure to Boeing because it never\nconstructed or acquired those facilities or infrastructure. Since the Gemini facilities and\ninfrastructure were never owned by South Carolina , they could not have been provided by South\nCarolina to Boeing. The United States considers that the Europ ean Union 's assertion that \"it is\nirrelevant whether Boeing is considered to have legal title or simply a leasehold interest in such\nassets, as both arrangements would constitute 'provision'\" is belied by the Euro pean Union 's\narguments, which are based on South Carolina 's purported ownership of the facilities and\ninfrastructure.2124\n8.784. The United States considers that in contending that it makes no difference whether Boeing\npaid for the goods and services and was reimbur sed, or whether the government initially paid for\nthe goods and services to be provided to Boeing , the European Union ignores the fact that only a\nportion of the costs were reimbursed.2125\n8.785. With respect to the Emerald facilities and infrastructure , the United States argues that\nthere is no financial contribution by a government since Boeing 's right to use the facilities and\ninfrastructure stems from Vought, not South Carolina. More specifically, Boeing obtained\nownership of the Emerald facilities and infrastru cture through the Vought Asset Purchase\nAgreement and related legal instruments. 2126 The United States argues that its position that\nVought owned the Emerald facilities and infrastructure, prior to selling them to Boeing is supported\nby section 6.06(A) of the Ground Lease. This provision indicates that when improvements are\nconstructed by the sublessee of Operator (e.g. Vought or Boeing), such improvements remain the\nproperty of sublessee until expiration or termination of the Ground Lease. It is not until the\nexpiration or termination of the Ground Lease that such improvements become the property of the\nCharleston County Aviation Authority (the Lessor). Thus, while South Carolina (through C harleston\nCounty Aviation Authority ) does not have and has never had ti tle to the improvements, it does\nmaintain a future interest in the improvements. 2127 The United States also considers that Vought's\nownership of the Emerald facilities and infrastructure is corroborated by the Vought Asset Purchase\nAgreement. Indeed, section 4.9(c)(i) states that Vought \"owns the Facilities free and clear of any\nEncumbrances except for Permitted Encumbrances and Outstanding Encumbrances\".2128\n8.786. Furthermore, the United States argues that the European Union is wrong to state that the\nEmerald facilities and infrastructure were built by South Carolina. The facilities and infrastructure\nwere in fact built by Vought. Only after paying for the construction of the facilities and\ninfrastructure did Vought apply for partial reimbursement from the South Caroli na Department of\nCommerce. The South Carolina Department of Commerce had no control over the construction\nprocess itself, nor did it select which of the expenditures it would reimburse. There is no basis for\nconcluding that, by the South Carolina Departmen t of Commerce partially reimbursing Vought 's\nconstruction costs, S outh Carolina Public Railways gained title to the Emerald facilities and\ninfrastructure.2129 In any event, the European Union is wrong to presume that ownership of the\nEmerald facilities and in frastructure is determined by who built them. Instead, section 6.06(A) of\nthe Ground Lease provides a clear statement as to \"Title to Improvements and Alterations\".2130\n8.787. Finally, the United States rejects the European Union 's argument that it ultimately does\nnot matter whether Vought had a leasehold interest in the facilities and infrastructure or a\ntime-limited ownership. Where South Carolina never had more than a future interest in the\n\n2123 United States' response to Panel question No. 101, paras. 199 and 202.\n2124 United States' comments on European Union's response to Panel question No. 101, paras. 149 and\n150.\n2125 United States' comments on European Union's response to Panel question No. 106, para. 169.\n2126 See e.g. United States' response to Panel question Nos. 101(b), para. 194, and 101(d), para. 199.\n2127 United States' response to Panel question No. 101, para. 190.\n2128 United States' response to Panel question No. 101(a), para. 191.\n2129 United States' comments on the European Union's response to Panel question No. 101(a),\npara. 140.\n2130 United States' comments on the European Union's response to Panel question No. 101(a),\nparas. 138 and 139.\n\nEmerald facilities and infrastructure, South Carolina could not have \"provided\" those facilities and\ninfrastructure within the meaning of Article 1.1(a)(1).2131\n8.788. The United States argues that the provision of the Gemini facilities and infrastructure\nconfers no benefit within the meaning of Article 1.1(b). 2132 First, the European Union 's benefit\narguments are based on the factually inaccurate premise that Boeing received the bond funds for\nthe Gemini facilities and infrastructure for free. Boeing has in fact compensated South Carolina\nthrough its investment in un improved real property at the Project Site, which will revert to South\nCarolina at the end of the Amended Ground Lease. 2133 Second, the European Union has failed to\nprovide an adequate benchmark for determining benefit since the relevant question for the\nEuropean Union 's arguments is how much more Boeing would pay to rent the facilities and\ninfrastructure in question if South Carolina were a market actor. 2134 Furthermore, the\nUnited States is aware of no logic or principle endorsed by the Appellate Body supporting the\nEuropean Union 's po sition that, even if the financial contribution is properly characteri zed as a\ndirect transfer of funds, the benefit has the same value as the value of the goods and services that\nmust, by law, be purchased with the funds transferred by the government.2135\n8.789. With respect to specificity, the United States argues that the provision of the bond -funded\nGemini facilities and infrastructure is not specific within the meaning of Article 2.2136 The specificity\nanalysis should be carried out at the level of the South Carol ina legislative system for issuing state\nbonds.2137 First, the provision of bond -funded facilities and infrastructure is not specific within the\nmeaning of Article 2.1(a), since there is no provision in this legislative system limiting access for\nfunds raised through economic development bonds, air hub bonds, and industrial revenue bonds to\ncertain enterprises.2138 Moreover, none of the individual pieces of legislation pursuant to which the\nbonds are issued limit access to certain enterprises. 2139 The mere fact that the Project Gemini\nAgreement and the South Carolina State Budget and Control Board resolutions authorising the\nissuance of bonds mention Boeing by name is not sufficient to sati sfy the requirements of\nArticle 2.1(a), since the specificity analysis must be carried out at a different level.2140 Second, the\nprovision of bond -funded facilities and infrastructure is not specifi c within the meaning of\nArticle 2.1(c), since the South Carolina bond scheme has funded facilities and infrastructure that\nare used by a variety of companies, only two of which are in the aerospace industry.2141\n8.2.8.6.3 Evaluation by the Panel\n8.2.8.6.3.1 Whether there is a financial contribution\n8.790. The issue before the Panel is whether South Carolina authorities provide the Gemini and\nEmerald facilities and infrastr ucture2142 to Boeing, such that a financial contribution exists within\nthe meaning of Article 1.1(a)(1)(iii) of the SCM Agreement ( \"a government provides goods or\nservices other than general infrastructure, or purchases goods \"). In addition, with regard to th e\nGemini facilities and infrastructure, the European Union argues in the alternative that a financial\ncontribution exists in the form of a direct transfer of funds in the sense of Article 1.1(a)(1)(i) of\nthe SCM Agreement (\"a government practice involves a direct transfer of funds (e.g. grants, loans,\nand equity infusion), potential direct transfers of funds or liabilities (e.g. loan guarantees) \"). The\n\n2131 United States' comments on the European Union's response to Panel question No. 101(a),\npara. 145.\n2132 United States' first written submission, paras. 583 and 584; second written submission, para. 519.\n2133 United States' first written submission, para. 488; response to Panel question Nos. 105, para. 224,\n128, para. 265, and 129, paras. 266 and 267; and comments on European Union's response to Panel question\nNos. 105, paras. 162-168, and 106, para. 169.\n2134 United States' first written submission, paras. 583 and 584; second written submission, para. 519.\n2135 United States' comments on European Union's response to Panel question Nos. 105, paras. 162 and\n164-168, and 106, para. 170. Also see United States' response to Panel question No. 105, para. 228.\n2136 United States' first written submission, paras. 619-632; second written submission, paras. 523-532.\n2137 United States' first written submission, para. 624.\n2138 United States' first written submission, paras. 625-628; second written submission, paras. 524-528.\n2139 United States' first written submission, para. 626.\n2140 United States' first written submission, para. 627.\n2141 United States' first written submission, paras. 629-632; second written submission, paras. 529-532.\n2142 As noted above, \"Gemini facilities and infrastructure\" refers to Boeing's 787 final assembly and\ndelivery facility and \"Emerald facilities and infrastructure\" refers to Boeing's 787 fuselage fabrication and\nintegration complex.\n\nEuropean Union makes no such alternat ive argument under Article 1.1(a)(1)(i) with respect to the\nEmerald facilities and infrastructure.2143\n8.791. The principal argument of the European Union to support its view that South Carolina\n\"provides\" the Gemini and Emerald facilities and infrastructure to Boeing 2144 is that South Carolina\n\"constructed\", and \"is presently providing Boeing with exclusive use of \", the Gemini and Emerald\nfacilities.2145 The European Union argues, in this respect, that South Carolina owns, and that\nBoeing has a leasehold interest in, the Gemini and Emerald facilities and infrastructure.2146.\n8.792. We consider that the evidence before us does not suppor t this argument of the\nEuropean Union regarding the construction of, and ownership interest in, the Gemini and Emerald\nfacilities and infrastructure: (a) we see no factual basis for the contention that South Carolina\n\"constructed\" the Gemini and Emerald facilities; and (b) it follows from the Ground Lease (and, in\nthe case of the Emerald facilities and infrastructure, from the Vought Asset Purchase Agreement)\nthat Boeing actually owns, and does not sublease, the Gemini or Emerald facilities and\ninfrastructure.\n8.793. First, as noted above, in January 2010, and pursuant to commitments made in the Project\nGemini Agreement, South Carolina issued bonds to defray a portion of the costs incurred by\nBoeing in connection with the con struction of certain Project Gemini facilities and infrastructure.\nThe Project Gemini Agreement provides a set of procedures to ensure the proper application of the\nbond proceeds, whereby Boeing enters into contracts to construct infrastructure and facilities, pays\nthe invoices and subsequently submits the invoices to South Carolina for reimbursement. 2147 In\naccordance with these procedures, [***]. We see nothing in the record to suggest that South\nCarolina's role with respect to the construction of these faci lities and infrastructure went beyond\nthe provision of funding to offset a portion of the costs incurred by Boeing.2148\n\n2143 European Union's first written submission, para. 701.\n2144 The European Union's argument concerns the alleged provision of the Gemini and Emerald facilities\nand infrastructure to Boeing. The European Union does not request the Panel to make a finding that prior to\nBoeing's assumption of the Vought Ground Sublease in July 2009 a financial contribution existed in relation to\nVought by virtue of South Carolina's provision of the Emerald facilities and infrastructure to Vought. The aim of\nthe European Union's discussion of Vought's legal interest in the Emerald facilities is to bolster its arguments\nthat Boeing only has a leasehold interest in these facilities. The European Union asserts that since Vought only\nheld a leasehold interest in the Emerald facilities, Boeing could not have acquired ownership of the facilities\nwhen it acquired Vought's assets. See e.g. European Union's comments on United States' response to panel\nquestion No. 101(a), para. 293 (\"{g}iven that United States' central premise with respect to ownership of the\nproject Emerald facilities is incorrect, it follows that all of its claims which depend on that premise are, in turn,\nincorrect. Accordingly, because Vought did not own the Project Emerald facilities, it could not have sold them\nto Boeing; rather it must have simply assigned its leasehold interest. Nor does Boeing now hold title to the\nProject Emerald facilities, as it could not have acquired from Vought greater rights to the property than Vought\nhad, itself. It additionally follows that, if Vought held only a leasehold interest in the Project Emerald facilities,\ntitle to the facilities must be held by the lessor (CCAA) or sub-lessor (SCPR/SCDOR)\").\n2145 European Union's first written submission, paras. 701 and 573.\n2146 While the argumentation presented by the European Union as to why South Carolina should be\nconsidered to \"provide\" the Gemini and Emerald facilities and infrastructure is mainly based on the assertion\nthat Boeing has access to these facilities and infrastructure pursuant to a sublease arrangement with the South\nCarolina authorities, the European Union has also suggested, at a later stage of this proceeding, that even in\nthe absence of such a sublease arrangement South Carolina should be considered to \"provide\" the Emerald and\nGemini facilities and infrastructure to Boeing. (See para. 8.805 below).\n2147 See para. 8.766 above.\n2148 With respect to the reimbursement through state bonds being characterized as partial in nature, we\nnote that the European Union contests the extent of the land remediation reimbursed by South Carolina, and\nargues that South Carolina paid for \"all or nearly all\" of the remediation necessary to make the Project Site\nusable. (European Union's comments on United States' response to Panel question No. 123, para. 352;\nSupplemental Expert Report of D. E. Fields, MAI, CRE, FRICS, 24 November 2014, (Exhibit EU-1349) (BCI),\np. 4; also see comments on United States' response to Panel question Nos. 125-127, paras. 357-360, and 128,\npara. 362). Nonetheless, the European Union does not appear to contest the characterization of the\nreimbursement for the building of facilities as partial. (See European Union's response to Panel question\nNo. 106, para. 167; also see European Union's comments on United States' response to Panel question\nNo. 123, para. 352: \"despite its best efforts, Boeing has yet to find a state that would directly pay for all of its\ncapital expenditures\" (fn omitted, emphasis original)). The United States explains that Boeing spent a total of\n[***] in real property investment at the Project Site. As this entire figure was eligible for reimbursement from\nstate bonds, Boeing, at its discretion, selected USD 270 million worth of expenses for which to seek\nreimbursement. (United States' response to Panel question No. 123, paras. 254-256; also see Boeing\n\n8.794. Similarly, the evidence before us shows that, prior to the beginning of production in 2006,\nVought contracted and paid for the constructio n of the Emerald facilities and infrastructure. The\nconstruction costs were then partially reimbursed by the South Carolina Department of Commerce\nthrough economic development bond proceeds. 2149 Indeed, in the Project Emerald Agreement,\nSouth Carolina committ ed itself to providing economic development bond proceeds to the\nmaximum amount of USD 120 million to Vought, while Vought inter alia committed itself to\nutilising these proceeds towards the construction of \"infrastructure\", as broadly defined in section\n11-41-30 of the South Carolina Code , within broad categories of expenditure as laid out in the\nProject Emerald Agreement.2150 As such, it seems to us that South Carolina merely provided bond\nfunds to Vought, which were to be used for the construction of broadl y-defined categories of\nfacilities and infrastructure.\n8.795. In light of the above, we do not consider that the European Union has demonstrated that\nSouth Carolina constructed or built the Gemini or Emerald facilities and infrastructure. Instead, we\nfind that S outh Carolina provided bond proceeds to Boeing, in the context of Project Gemini, and\nsimilarly to Vought, in the context of Project Emerald, which were to be used for the construction\nof broadly-defined categories of facilities and infrastructure.2151\n8.796. Second, the Ground Lease, as incorporated into the Vought Ground Sublease and the\nAmended and Restated Ground Sublease, contains a provision that specifically addresses the issue\nof ownership of the facilities and infrastructure constructed on the Project Site. This provision\nindicates that Vought and subsequently Boeing obtained ownership over such facilities and\ninfrastructure. Section 6.06 of the Ground Lease, entitled \"Title to Improvements and Alterations\",\nprovides ownership rules for \"Improvements\" built on the Project Site. \"Improvements\" are\ndefined as:\n{A}ny and all improvements, additions or alterations made to the Leased Premises by\nthe Operator and its contractors, agents, employees, and sublessees, including, but\nnot limited to buildings, bridges, overpasses, retaining walls, ditches, culverts, lighting\nsupports, earth fills, earth excavations, clearing, grubbing, grading, roads, utilities,\npaving, ground cover, fences, signs, railway spurs and tracks, and landscaping,\nconstructed, installed or placed on, under or above the Leased Premises.2152\nImprovements are divided into two categories. \"Category I Improvements \" are defined in the\nGround Lease as \"Improvements encompassing building locations, heights, elevations, materials\nused in the exterior const ruction, landscaping and any other exteriors \".2153 Facilities and\ninfrastructure thus appear to be covered by the scope of Category I Improvements.\n8.797. Section 6.06(A) provides with respect to Category I Improvements that:\nAll Category I Improvements made with the Leased Premises during the Term shall\nremain the property of Operator, or any assignee or sublessee of Operator, as\n\nInvestment in South Carolina (2010-3Q2012), (Exhibit USA-324) (BCI), and explanations of this Exhibit in\nUnited States' response to Panel question Nos. 124, para. 261, and 128, para. 265). Boeing received\ncompensation through state bonds of [***] under the category [***], and [***] under the category [***].\n(SC Department of Commerce, Summary of Reimbursements to Boeing, (Exhibit USA-519) (BCI)). The amount\nof Boeing's unreimbursed real property investment at the Project Site, that is a total of [***], is split between\n[***] under the category [***], [***] under the category [***], and [***] under the category [***].\nThe United States explains that [***] includes expenditures to [***]. [***] refers to [***]. (Comparison of\nBoeing Investment in South Carolina (2010-3Q2012), (Exhibit USA-324) (BCI), and SC Department of\nCommerce, Summary of Reimbursements to Boeing, (Exhibit USA-519) (BCI); also see explanations in United\nStates' response to Panel question Nos. 124, paras. 259-261 and fn 327, and 128, para. 265). In light of this\nevidence, we consider it appropriate to characterize the reimbursement of Boeing's real property investment at\nthe Project Site, including land remediation as well as the building of facilities, as partial in nature.\n2149 Final Project Emerald Incentive Agreement, (Exhibit EU-550), sections 2.1 and 2.3.\n2150 See para. 8.768 above.\n2151 The European Union does not request the Panel to find that the payments made to Vought under\nthese procedures constitute a financial contribution to Vought.\n2152 Ground Lease Agreement, (Exhibit EU-473), section 1.01(K).\n2153 Ground Lease Agreement, (Exhibit EU-473), section 1.01(F).\n\napplicable, until expiration or termination of this Agreement, at which time all\nCategory I Improvements shall automatically become the property of Authority.2154\n\"Operator\" is defined in the Ground Lease as meaning \"South Carolina Public Railways, its\nsuccessors, sublessees and assign{ee}s\".2155\n8.798. It therefore appears to us that the clause \"Operator, or any assignee or sublessee of\nOperator, as applicable\" indicates that if there is an assignee or sublessee of South Carolina Public\nRailways, Category I Improvements shall remain the property of that assignee or sublessee. Thus,\nduring the Vought Ground Sublease, any Category I Improvements built b y Vought remained the\nproperty of Vought as sublessee of the Operator. Similarly, during the term of the Amended\nBoeing Ground Sublease, any Category I Improvements built by Boeing remain the property of\nBoeing as sublessee of the Operator. It is only afte r the expiration or termination of the Ground\nLease that these improvements become the property of the Authority.2156\n8.799. We consider that the European Union 's argument that \"Premises\" generally encompass\nland as well as the buildings on it is irrelevant, since the term \"Premises\" is specifically defined in\nthe Ground Lease for the purposes of that agreement. Indeed, \"Premises\", as used in the Ground\nLease, is defined as \"that portion of the Airport more particularly described in Exhibit A attached\nhereto\"2157, whereby Exhibit A appears to represent the 240 -acre parcel of land that constitutes\nthe Project Site.2158 Thus, it is clear that the definition of \"Premises\" is limited to land and does not\ninclude facilities and infrastructure constructed thereon.\n8.800. It follows th at the subleasehold interest in the Project Site provided for in the Vought\nGround Sublease and the Amended and Restated Ground Sublease is confined to a particular tract\nof land and does not encompass any facilities and infrastructure. 2159 We consider moot t he\nEuropean Union 's argument that the ownership of the Emerald facilities and infrastructure is\ngoverned by general rules of U.S. state property law and South Carolina law on the expenditure of\nbonds. Instead, there is a specific provision of the Ground Le ase that was precisely intended to\ngovern the ownership of Category I Improvements built on the Premises during the term of the\nlease and potential subleases, and this provision indicates that the improvements built by Vought\nremain the property of Vought for the duration of the Ground Lease.\n8.801. Our conclusion regarding the ownership of the Gemini and Emerald facilities and\ninfrastructure is based on an analysis of the text of the Ground Lease, as incorporated into the\nVought Ground Sublease and the Amended a nd Restated Ground Sublease. While the\nUnited States also relies on the Vought Asset Purchase Agreement as evidence that Vought owned\nthe Emerald facilities, we agree with the European Union that the Vought Asset Purchase\nAgreement is not clear as to the n ature of Vought 's right to the Emerald facilities and\ninfrastructure.2160 Thus, we do not consider that the Vought Asset Purchase Agreement either\n\n2154 Ground Lease Agreement, (Exhibit EU-473), section 6.06(A).\n2155 Ground Lease Agreement, (Exhibit EU-473), section 1.01(M).\n2156 \"Authority\" means \"the Charleston County Aviation Authority, the governing body of the Airport\nDistrict, which is granted the responsibilities of exercising and performing the corporate powers and duties of\nthe Airport District, and when used herein refers to both.\" (Ground Lease Agreement, (Exhibit EU-473),\nsection 1.01(E)).\n2157 Ground Lease Agreement, (Exhibit EU-473), section 1.01(L).\n2158 Ground Lease Agreement, (Exhibit EU-473), annex A.\n2159 The text of the Vought Ground Sublease and the Amended and Restated Ground Sublease also\nindicates that the scope of the subleasehold interest is limited to land. Article 7 of the Vought Ground Sublease\nstates that \"{s}ublessee is subleasing the Premises for the purpose of constructing thereon facilities related to\nthe manufacture of products for the aeronautics industry\". (Ground Lease Agreement, (Exhibit EU-473), pdf\np. 63). Article 7 of the Amended and Restated Ground Sublease states that \"{s}ublessee is subleasing the\nPremises for the purpose of (a) constructing thereon or (b) using previously constructed thereon facilities\nrelated to or supporting the manufacture of products for the aeronautics industry\". (Amended and Restated\nSublease, (Exhibit EU-471), pdf p. 4). In both cases, if the scope of the subleasehold included facilities, the\nagreements would not state that the Premises were being subleased for the purpose of constructing facilities\nthereon or using facilities already constructed thereon. Also see para. 8.769 above.\n2160 The provisions of section 2 indicate that Vought sold, assigned, transferred, conveyed and delivered\nassets either owned, leased, licensed, used or held for use by Vought, including the North Charleston Facility.\nSuch a statement is inconclusive as to the nature of Vought's rights to these facilities. Indeed, the North\nCharleston Facility could have been either owned, leased, licensed or held for use by Vought. Section 4.9 in\nturn indicates that Vought owns facilities, except to the extent leased pursuant to [***]. The United States\n\nconfirms or refutes our conclusion reached on the basis of the Ground Lease. At the same time,\nhowever, the Voug ht Asset Purchase Agreement and related instruments 2161 are relevant as\nevidence that Vought transferred its ownership rights in the Emerald facilities and infrastructure to\nBoeing. Therefore, the assertion of the European Union that Boeing acquired its inter est in the\nEmerald facilities and infrastructure through the Assignment and Assumption of the Ground\nSublease is erroneous.2162\n8.802. In light of the above, we consider the factual premise of the European Union 's main\nargument under Article 1.1(a)(1)(iii), namely that South Carolina owns, and Boeing only has a\nleasehold interest in, the Gemini and Emerald facilities and infrastructure , to be erroneous. Rather\nwe find that: (a) Vought owned the facilities and infrastructure constructed on the Project Site\nduring the term of the Vought Sublease as a consequence of the operation of specific provisions in\nthe Ground Lease defining ownership rights in such facilities and infrastructure; therefore, there is\nno merit to the European Union 's argument that Vought could not h ave transferred ownership of\nthe Emerald facilities and facilities to Boeing; (b) Boeing acquired the Emerald facilities and\ninfrastructure as part of its purchase of Vought 's assets in July 2009; and (c) Boeing owns the\nfacilities and infrastructure const ructed on the Project Site in the context of Project Gemini as a\nconsequence of the operation of specific provisions in the Ground Lease defining ownership rights\nin such facilities and infrastructure.2163\n8.803. Article 1.1(a)(1)(iii) of the SCM Agreement stipulat es that a financial contribution exists\nwhere a government provides goods or services other than general infrastructure. In US –\nSoftwood Lumber IV, the Appellate Body considered whether the grant of an \"intangible right to\nharvest\" equated to a provision of goods within the meaning of Article 1.1(a)(1)(iii) of the SCM\nAgreement. The Appellate Body noted definitions of the term \"provide\" as \"supply or furnish for\nuse; make available \" and \"to put at the disposal of \".2164 The Appellate Body reasoned that there\nmust be a \"reasonably proximate relationship \" between the governmental action of providing the\ngood or service and the use or enjoyment of the good or service by the recipient. 2165 It stated that\n\"a government must have some control over the availability of a specific thing being 'made\navailable'\".2166\n8.804. In our view, since Boeing does not sublease but actually owns the Gemini and Emerald\nfacilities and infrastructure, and it is clear that its ownership interest was not conveyed to Boeing\nby South Carolina, there is no basis to conclude that a financial contribution to Boeing exists in the\nform of a provision of goods or services other than general infrastructure. South Carolina did not,\nand does not \"have some control over the availability of \" the facilities and inf rastructure that are\nactually owned by Boeing and where Boeing acquired its ownership not from South Carolina but by\noperation of the relevant provisions of the Ground Lease (in the case of the Gemini facilities and\ninfrastructure) or from Vought (in the case of the Emerald facilities and infrastructure).\n\nhas provided no further explanation of its assertion that the majority of facilities and infrastructure built on the\nProject Site during the term of Vought's sublease was not subject to a lease by a Material Contract. (See\nUnited States' comments on European Union's response to Panel question No. 101(a), para. 143 and fn 219).\n2161 See Assignment and Bill of Sale from Vought Aircraft Industries, Inc. to Boeing Commercial\nAirplanes Charleston South Carolina, Inc. (30 July 2009), (Exhibit EU-552); Exhibit J of the Vought-Boeing\nAsset Purchase Agreement, (Exhibit USA-450) (BCI); and Bill of Sale, Assignment and Assumption Agreement\n(30 July 2009), (Exhibit USA-515) (BCI). Also see United States' response to Panel question Nos. 101(a),\nparas. 192 and 193, 101(b), para. 194 and fn 263, and 120, paras. 247-249.\n2162 European Union's response to Panel question No. 101(b), para. 129 (\"{t}he European Union is not\naware of any mechanism by which Boeing obtained its interest in the Premises and the various improvements\nalready located thereupon, other than the assignment and assumption of the Ground Sublease (including\nCCAA's consent thereto), and the subsequent Amended and Restated Ground Sublease\"); European Union's\ncomments on United States' response to Panel question No. 101(b), para. 298 (\"{a}s the United States has\nfailed to show otherwise, the European Union continues to consider that the Assignment and Assumption of\nVought Sublease was the legal mechanism by which Boeing initially obtained its interest in the Premises and\nthe improvements located thereupon, subject to the consent of the CCAA\" (fn omitted)).\n2163 In any event, with regard to the Emerald facilities and infrastructure, even if the European Union\nwere correct that Boeing only has a leasehold interest in these facilities and infrastructure, we would not\nnecessarily find that there is a financial contribution provided by South Carolina to Boeing. This is because\nBoeing obtained its interest in the Emerald facilities and infrastructure as part of its purchase of Vought's\nassets. See Section 8.2.8.5.3 above.\n2164 Appellate Body Report, US – Softwood Lumber IV, para. 69.\n2165 Appellate Body Report, US – Softwood Lumber IV, para. 71.\n2166 Appellate Body Report, US – Softwood Lumber IV, para. 71. (emphasis original)\n\n8.805. We note that, in its responses to Panel questions, the European Union makes several\narguments suggesting that South Carolina should be considered to \"provide\" (within the meaning\nof Article 1.1(a)(1)(iii) of the SCM Agreement), facilities and infrastructure to Boei ng regardless of\nwhether Boeing owns or subleases the facilities and infrastructure. Aside from the fact that these\narguments would seem to be inconsistent with the main line of reasoning advance d by the\nEuropean Union on this matter in its two written submissions, we consider that these arguments\nare factually erroneous and legally unfounded as they stretch the meaning of the notion of a\n\"provision\" of goods or services other than general infrast ructure beyond what we consider to be\nthe proper interpretation of that notion as reflected in Article 1.1(a)(1)(iii) of the SCM Agreement.\n8.806. Thus, one argument made by the European Union in response to a Panel question is that a\nprovision of goods or servi ces other than general infrastructure occurs, regardless of whether\nBoeing has a legal title or a leasehold interest in facilities and infrastructure, because \"South\nCarolina (or a state agency) is providing Boeing with the right to possess and use tangibl e assets\nthat otherwise would (or do) belong to the state\".2167 As discussed above, Boeing owns the Gemini\nand Emerald facilities and infrastructure at issue. The European Union does not explain the precise\nlegal meaning of this alleged \"right to possess and use\", how the evidence before the Panel shows\nthat South Carolina conveyed such a \"right to possess and use \" to Boeing, and on what factual\nbasis it asserts that these facilities and infrastructure \"would (or do) belong to the state\".\n8.807. The European Union also argues, in respect of the Gemini facilities and infrastructure, that\nSouth Carolina provides goods and services to Boeing by providing funding specifically for the\npurpose of reimbursing costs incurred by Boeing in the construction of the Project Gemini facilities\nand infrastructure; although as a formal matter funds were being transferred directly from South\nCarolina to Boeing, the essence of the transaction is one of South Carolina providing goods and\nservices to Boeing. 2168 Related to this, the European Union contends that insofar as Boeing 's\nownership of the Gemini facilities and infrastructure is limited in time and subject to South\nCarolina's reversionary interest, this should be considered to be the \"functional equivalent\" of a\nleasehold arrangement.2169\n8.808. It is not in dispute that South Carolina made payments to Boeing to cover a portion of the\ncosts incurred by Boeing for the construction of the Gemini facilities and infrastructure. In our\nview, the most natural characterization of these payments is \"a direct transfer of funds\" within the\nmeaning of Article 1.1(a)(1)(i) of the SCM Agreement. We disagree with the European Union 's\nargument that \"the fundamental nature \" of the transaction is a provision of goods because the\npayments were made for the specifi c purpose of funding the construction of certain facilities and\ninfrastructure. There is nothing in the text of Article 1 to suggest that when it is clear that the\nnature of the measure is a direct transfer of funds, the purpose for which the funds are gra nted\nshould be given a decisive weight in the characterization of that measure.\n8.809. The logic underlying the European Union 's argument is that where a particular type of\nfinancial contribution is made for the purpose of supporting a firm's financing of the construction or\npurchase of a good, such a financial contribution must be treated as a provision of that good in the\nsense of Article 1.1(a)(1)(iii) because of its \"fundamental nature\". Thus, if a government lends\nmoney, makes a payment or grants a tax credi t to a firm for purposes of reimbursing the firm 's\nacquisition costs, each of these measures would be a financial contribution in the form of a\nprovision of a good or service other than general infrastructure. We consider that this logic is\ninconsistent with Article 1.1(a)(1), which clearly contemplates a characterization of a measure as a\nfinancial contribution on the basis of the manner in which that measure transfers value to a\nrecipient.2170 Therefore, even where they are somehow related to the purchase of goods or\n\n2167 European Union's response to Panel question No. 101(d), para. 132.\n2168 European Union's response to Panel question No. 106, para. 164.\n2169 See e.g. European Union's response to Panel question No. 101(c), para. 130; and comments on\nUnited States' response to Panel question No. 101, para. 305.\n2170 It is also inconsistent with the approach taken to the same issue by other panels and the Appellate\nBody. For example, in EC and certain member States – Large Civil Aircraft, the panel addressed whether\ncertain infrastructure-related grants to Airbus (i.e. grants towards the costs of constructing the A380 assembly\nline in Hamburg, a grant for the expansion of Airbus' Nordenham facility, a grant for Airbus facilities in\nBroughton, Wales and grants for the expansion and modernization of Airbus and EADS plants in Puerto de\nSanta Maria, Illescas, Puerto Real, Sevilla and La Rinconada, Spain) were specific subsidies to Airbus. These\ninfrastructure-related grants were analysed as financial contributions to Airbus in the form of direct transfers of\n\nservices by a recipient, grants, loans, and tax measures are distinctive types of financial\ncontributions. The term \"provide goods or services other than general infrastructure \" cannot be\ninterpreted so broadly as to include measures that fall naturally within the scope of the other types\nof financial contribution identified in Article 1.1(a)(1).\n8.810. We consider that for a government to \"provide\", i.e. \"to supply or furnish for use \" or \"to\nmake available \" facilities and infrastructure, these facilitie s and infrastructure must have been\ncreated. Indeed, the Appellate Body has observed that while the circumstances of the creation of\ninfrastructure may be relevant to a proper characteri zation of what is provided, the creation of\ninfrastructure is a precondition, and thus necessary, for the provision of that infrastructure. 2171 We\ndo not consider that a private entity can be \"provided\" with created facilities and infrastructure by\na government within the meaning of Article 1.1(a)(1)(iii) where that private ent ity is itself\nresponsible for the construction of those facilities and infrastructure.\n8.811. The notion that the financing provided by South Carolina is somehow tantamount to the\nactual provision of those facilities and infrastructure is also contradicted by th e fact that South\nCarolina only covered a part of Boeing 's expenditures for the construction of these facilities and\ninfrastructure. Moreover, the European Union 's position is based on the factual premise that the\nbond proceeds were pre -destined to be spen t on the construction of specific facilities and\ninfrastructure. The extent to which proceeds were thus pre -destined is debatable. It in fact seems\nthat the purpose of the bond proceeds was so broadly defined and Boeing had such a margin of\ndiscretion in s electing which of its expenses to have reimbursed 2172 that the European Union is\nunable to precisely identify the Gemini facilities and infrastructure that were allegedly provided to\nBoeing beyond the evidence that is contained in the bond withdrawal requests . Similarly, in the\ncontext of specificity, the European Union 's arguments mostly relate to the issuance of the bonds\nthemselves.2173 Indeed, the bond funds for Project Gemini were intended for use under\nbroadly-defined categories of facilities and infrastruc ture. The European Union itself acknowledges\nthat Boeing had complete and total control over how the proceeds were expended within the\nagreed-upon categories.2174\n8.812. Finally, we find that South Carolina's reversionary, future ownership in the Gemini facilities\nand infrastructure does not give it any control at present over the availability of the facilities and\ninfrastructure and therefore does not constitute a basis for finding that South Carolina \"provides\"\nthe facilities and infrastructure to Boeing.\n8.813. In light of the foregoing considerations, we: (a) reject the European Union 's\nargument that a financial contribution exists within the meaning of Article 1.1(a)(1)(iii)\nof the SCM Agreement because South Carolina provides Gemini and Emerald facilities\nand infrastr ucture to Boeing 2175; (b) find that the payments made by South Carolina\npursuant to commitments made in the Project Gemini Agreement to compensate Boeing\nfor a portion of the costs in constructing the Gemini facilities and infrastructure are\ndirect transfers of fund s within the meaning of Article 1.1(a)(1)(i) of the SCM\nAgreement; and (c) find that there is no financial contribution to Boeing with respect to\nthe Emerald facilities and infrastructure.2176\n8.2.8.6.3.2 Whether there is a benefit\n8.814. The issue before the Panel is whether the direct transfers of funds made by South Carolina\nto compensate Boeing for a portion of the costs in constructing the Gemini facilities and\n\nfunds without objection by the European Communities as to the correct form of financial contribution. (See\nPanel Report, EC and certain member States – Large Civil Aircraft, paras. 7.1010 and 7.1205-7.1218).\n2171 Appellate Body Report, EC and certain member States – Large Civil Aircraft, paras. 964-966.\n2172 See United States' response to Panel question No. 123, para. 256.\n2173 European Union's response to Panel question No. 110, paras. 176 and 177.\n2174 European Union's first written submission, para. 570.\n2175 The parties disagree on whether the European Union has identified the facilities and infrastructure\nwith sufficient precision and on whether, as argued by the European Union, these facilities and infrastructure\nare \"tailor-made\". In light of our conclusion that the European Union has not established that South Carolina\nactually provide facilities and infrastructure to Boeing, we do not see the need to address these issues.\n2176 While payments were made in connection with the construction of the Emerald facilities and\ninfrastructure, these payments were made to Vought. The European Union does not argue in this proceeding\nthat any financial contributions to Vought have given rise to subsidies to Boeing.\n\ninfrastructure, which the Panel has found to be financial contributions within the m eaning of\nArticle 1.1(a)(1)(i), confer a benefit within the meaning of Article 1.1(b). The disagreement\nbetween the parties mainly focuses on the identification of the correct benchmark for determining\nbenefit, as well as the question of whether Boeing provided remuneration to South Carolina in\nexchange for the direct transfers of funds that would offset any benefit conferred.\n8.815. At the outset, we recall that the European Union considers the proper characteri zation of\nthe financial contribution associated with the Gemini facilitie s to be the provision of goods or\nservices within the meaning of Article 1.1(a)(1)(iii).2177 As such, the European Union's submissions\nfocus to a great extent on determining the benefit conferred by South Carolina's provision of a\nlease of the Gemini facilities. Consequently, while taking no position on the proper characterization\nof the alleged financial contribution, the United States mainly responds to the European Union 's\narguments made in the context of the financial contribution characteri zed as a provision of goods.\nHowever, as explained above, we are of the view that the relevant financial contribution is properly\ncharacterized as direct transfers of funds. 2178 The Panel requested the parties to explain their\nposition on benefit if the financial contributi on were properly characteri zed as a direct transfer of\nfunds, and the following sets out the parties ' positions relating to such a characteri zation of the\nfinancial contribution.\n8.816. The European Union 's position is that a benefit was conferred to Boeing sinc e it received\nbond funds for the Gemini facilities in the amount of USD 270 million for free, while in the market\nit would have had to pay for them. 2179 Indeed, irrespective of how the financial contribution is\ncharacterized, paying nothing constitutes less t han adequate remuneration since Boeing would\nhave two options to obtain access to the custom -made Gemini facilities in the market, each\ncarrying with it a financing cost. First, Boeing could have raised funds in the market sufficient to\nconstruct the custo m-made facilities itself, with a corresponding cost of funds for the investment\n(either as actual expenditure or as opportunity cost, in case Boeing had the funds available).\nSecond, and alternatively, Boeing could have found another market participant to make the\ninvestment in the construction of the custom -made facilities, and leased these from the investor.\nIn that case, the investor would agree to the construction and lease of custom -made facilities for\nBoeing only if the lease would result in the inves tor expecting an appropriate return on its\ninvestment.2180\n8.817. The United States ' position is that the European Union has failed to provide an adequate\nbenchmark, since the United States is aware of no logic or principle endorsed by the Appellate\nBody that supports the European Union's position that, even if the financial contribution is properly\ncharacterized as a direct transfer of funds, the benefit has the same value as the value of the\ngoods and services that must, by law, be purchased with the funds transfe rred by the\ngovernment.2181 Furthermore, the European Union 's reliance on a benchmark comprising of the\ncost of constructing the facilities plus a finance charge is precisely the methodology found to be\ninconsistent with Articles 1.1(b) and 14 by the Appellat e Body in EC and certain member States –\nLarge Civil Aircraft.2182\n8.818. For the reasons detailed below, we find that the direct transfers of funds made by South\nCarolina to compensate Boeing for a portion of the costs in constructing the Gemini facilities confer\na benefit within the meaning of Article 1.1(b). It is well established in previous panel and Appellate\nBody reports that a financial contribution confers a benefit and thus constitutes a subsidy within\nthe meaning of Article 1.1 where the financial contrib ution is provided to the recipient on terms\nthat are more favourable than the terms available to the recipient on the market. 2183 In other\nwords, the \"market benchmark\" for determining the existence of a subsidy is the terms on which\nthat financial contribution would have been available to the recipient on the market.\n\n2177 European Union's response to Panel question No. 106, para. 162.\n2178 See para. 8.808 above.\n2179 European Union's response to Panel question No. 105, para. 153.\n2180 European Union's response to Panel question No. 105, paras. 155 and 156.\n2181 United States' comments on European Union's response to Panel question Nos. 105, paras. 162 and\n164-168, and 106, para. 170.\n2182 United States' comments on European Union's response to Panel question No. 105, paras. 164-166;\nresponse to Panel question No. 105, para. 228.\n2183 See e.g. Appellate Body Reports, Canada – Aircraft, paras. 154 and 157; Japan – DRAMs (Korea),\npara. 225; and EC and certain member States – Large Civil Aircraft, para. 705.\n\n8.819. The European Union considers an appropriate benchmark in the present instance to be\neither what Boeing would have had to pay in financing costs had it built the Gemini facilities itself,\nor what Boeing would have had to pay in rent to an investor expecting an appropriate return on\ninvestment.2184 Indeed, the European Union argues that regardless of which characterization of the\nfinancial contribution is most appropriate, since the bond funds were us ed to construct facilities\nand infrastructure, the benefit of such a financial contribution is to be determined with respect to\nthose facilities and infrastructure. We agree with the United States to the extent that the\nEuropean Union has failed to explain how the benefit determination is the same whether the\nfinancial contribution is properly characterized as a direct transfer of funds, or a provision of goods\nor services.2185 The European Union 's approach to determining benefit confounds the distinction\nbetween the two different types of financial contribution embodied in Articles 1.1(a)(1)(i) and\n1.1(a)(1)(iii), and the different methodologies involved in determining benefit for different types of\nfinancial contributions. We note the Appellate Body's observation that:\n{T}he characterization of a transaction under Article 1.1(a) of the SCM Agreement\nmay have implications for the manner in which the assessment of whether a benefit is\nconferred is to be conducted. For instance, the context provided by Article 1 4 of the\nSCM Agreement presents different methods for calculating the amount of a subsidy in\nterms of benefit to the recipient depending on the type of financial contribution at\nissue.2186\n8.820. We have previously explained that the financial contribution at issue consists of funds\nprovided to Boeing to offset some of Boeing 's costs of constructing the Gemini facilities, and that\nthis financial contribution is properly characterized as a direct transfer of funds within the meaning\nof Article 1.1(a)(1)(i) of the SCM Agreement. Whether that financial contribution confers a benefit\nis necessarily determined by comparing the terms on which Boeing received that financial\ncontribution (i.e. the funds), compared to the terms on which that financial contribution would\nhave been provided to it on the market. In our view, like the infrastructure-related grants analysed\nby the panel in EC and certain member States – Large Civil Aircraft , the financial contribution\nclearly confers a benefit.2187\n8.821. A further issue raised by the parties' benefit arguments is what, if anything, Boeing can be\nconsidered to have given as remuneration to offset any benefit conferred by the financial\ncontribution. The European Union claims that Boeing received the funds for the Gemini facilities for\nfree. Any residual value from Boeing's unreimbursed investment in real property at the Project Site\nthat may revert to South Carolina at the end of the Amended Ground Lease in 2041 is nominal and\nfails to provide adequate remuneration, thus meaning that the direct transfers of funds confer a\nbenefit.2188 The United States argues that the European Union 's benefit arguments are based on\nthe factually inaccurate premise that Boeing received the bond funds for the Gemini facilities and\ninfrastructure for free. In fact, Bo eing has compensated South Carolina through its investment in\nunreimbursed real property at the Project Site in the amount of [***], the residual value of which\nwill revert to South Carolina at the end of the Amended Ground Lease, thus obviating any\nbenefit.2189\n8.822. We consider both parties' positions to be flawed, since an assessment of benefit should be\ncarried out on an ex ante basis, and there is no evidence before us that any remuneration for the\ndirect transfers of funds was foreseen in the agreement betwee n South Carolina and Boeing that\ncould be considered to offset any benefit conferred. Both parties' arguments on benefit appear to\nstray from the text and interpretation of Article 1.1(b). The Appellate Body has indicated that the\nbenefit determination is an ex ante analysis, carried out at the time the financial contribution is\n\n2184 European Union's response to Panel question No. 105, para. 156.\n2185 See United States' comment on European Union's response to Panel question No. 106, para. 170.\n2186 Appellate Body Reports, Canada – Renewable Energy / Canada – Feed-In Tariff Program,\npara. 5.130.\n2187 See Panel Report, EC and certain member States – Large Civil Aircraft, paras. 7.1010 and\n7.1205-7.1218. See also Panel Report, US – Upland Cotton, para. 7.1116.\n2188 European Union's response to Panel question Nos. 106, para. 167, and 111, paras. 182-195. Also\nsee Expert Report of D. E. Fields, MAI, CRE, FRICS, 2 December 2013, (Exhibit EU-1267) (BCI); and\nSupplemental Expert Report of D. E. Fields, MAI, CRE, FRICS, 24 November 2014, (Exhibit EU-1349) (BCI).\n2189 United States' response to Panel question Nos. 105, para. 224, and 128, para. 265; comments on\nEuropean Union's response to Panel question Nos. 105, paras. 162-168, and 106, para. 169. Also see\nUnited States' response to Panel question No. 129, paras. 266 and 267.\n\nmade. To determine whether a benefit has been conferred, a comparison is made between the\nterms and conditions of the financial contribution when it is granted with the terms and co nditions\nthat would have been offered on the market at that time. 2190 In making such an ex ante analysis,\nwe see that the United States has failed to show that the Project Gemini Agreement between\nSouth Carolina and Boeing foresaw that Boeing would invest [***] in real property at the Project\nSite, the residual value of which would re vert to South Carolina, via the Charleston County\nAviation Authority , in 2041 at the latest. While it may be that some residual value of Boeing 's\ninvestment of [***] in real prope rty at the Project Site will revert to South Carolina 2191, the\nUnited States has failed to show that this residual value was foreseen in the agreement between\nSouth Carolina and Boeing, and should therefore be reflected in the ex ante analysis of benefit\nconsistent with Article 1.1(b), nor do we see any evidence on the record to this effect. 2192 As such,\nwe do not consider that Boeing can be considered to have compensated South Carolina for the\ndirect transfers of funds, and instead find that these transfers are correctly described as a grant to\nBoeing.\n8.823. In light of the above, we find that the direct transfers of funds made by South\nCarolina to compensate Boeing for a portion of the costs in constructing the Gemini\nfacilities confer a benefit within the meaning of Article 1.1(b).\n8.2.8.6.3.3 Whether the subsidy is specific within the meaning of Article 2.1 of the SCM\nAgreement\n8.824. The first question raised by the parties ' arguments is whether the subsidy provided\nthrough the direct transfers of funds made by South Carolina to comp ensate Boeing for a portion\nof the costs in constructing the Gemini facilities is specific within the meaning of Article 2.1(a) of\nthe SCM Agreement, i.e. whether \"the granting authority, or the legislation pursuant to which the\ngranting authority operates, explicitly limits access to the subsidy to certain enterprises\".\n8.825. It is clear from the text of Article 2.1(a) that the \"the express limitation can be found\neither in the legislation by which the granting authority operates, or in other statements or mean s\nby which the granting authority expresses its will \".2193 The European Union does not argue that\nsuch an explicit limitation exists as a result of \"other statements or means by which the granting\nauthority expresses its will\". The question before us in this case is whether access to the subsidy is\nsubject to an explicit limitation by virtue of \"the legislation pursuant to which the granting\nauthority operates\".\n8.826. As to the meaning of \"explicitly limits\" in Article 2.1(a), the Appellate Body has explained\nthat \"a subsidy is specific under Article 2.1(a) if the limitation on access to the subsidy to certain\nenterprises is express, unambiguous, or clear from the content of the relevant instrument, and not\nmerely 'implied' or 'suggested\"'.2194 Whether \"access to the subsidy\" is explicitly limited must focus\non whether the granting authority, or the legislation pursuant to which the granting authority\noperates, limits the eligibility to receive the subsidy to certain enterprises. 2195 With regard to the\nterm \"certain enterprises\", the Appellate Body has observed that \"the relevant enterprises must be\n\n2190 Appellate Body Report, EC and certain member States – Large Civil Aircraft, para. 706.\n2191 The parties disagree on the calculation of such residual value. (Parties' response and comments on\nPanel question Nos. 123-130).\n2192 The fact that Boeing's investment of [***] in real property at the Project Site contributed to its\noverall investment requirement of USD 750 million, set out in the Project Gemini Agreement (as confirmed by\nthe United States in response to a question from the Panel – United States' response to Panel question No.\n129, paras. 266 and 267), is in our view insufficient to consider any residual value from Boeing's investment of\n[***] as remuneration in our benefit determination. Indeed, the general requirement to invest USD 750\nmillion as part of the Project Gemini package of incentives says nothing about an obligation to invest precisely\n[***] in real property at the Project Site.\n2193 Panel Report, US – Large Civil Aircraft (2nd complaint) para. 7.190.\n2194 Appellate Body Report, US – Anti-Dumping and Countervailing Duties (China), para. 372. See also\nPanel Report, US – Large Civil Aircraft (2nd complaint), paras. 7.190 and 7.192.\n2195 See, in particular, Appellate Body Reports, US – Anti-Dumping and Countervailing Duties (China),\npara. 368 (\"Article 2.1(a) thus focuses not on whether a subsidy has been granted to certain enterprises, but\non whether access to that subsidy has been explicitly limited. This suggests that the focus of the inquiry is on\nwhether certain enterprises are eligible for the subsidy, not on whether they in fact receive it\"); and US –\nLarge Civil Aircraft (2nd complaint), para. 753 (\"{t}his inquiry focuses not only on whether the subsidy was\nprovided to the particular recipients identified in the complaint, but focuses also on all enterprises or industries\neligible to receive that same subsidy\").\n\n'known and particularized', but not necessarily 'explicitly identified', and that they may have 'some\nmutual or common relation or purpose', or 'degree of similarity'\".2196\n8.827. Since \"eligibility is key to a consideration of de jure specificity under subparagraphs (a)\nand (b) of Article 2.1 of the SCM Agreement \"2197, we consider that the term \"legislation pursuant\nto which the granting authority operates \" in Article 2.1(a) must be understoo d to mean the\nlegislation that defines the criteria of eligibility for a subsidy.2198 South Carolina provided the direct\ntransfers of funds to Boeing to compensate for a portion of the costs in constructing the Gemini\nfacilities pursuant to provisions of South Carolina Code sections 11-41-40 and South Carolina Code\nsection 55-11-520 relating to the issuance of economic development bonds and air hub bonds,\nrespectively. Accordingly, these provisions constitute \"the legislation pursuant to which the\ngranting authority operates\" for purposes of the analysis under Article 2.1(a).2199\n8.828. In this regard, we see no merit in the argument of the European Union that the individual\nresolutions adopted by South Carolina authorizing the issuance of the economic development\nbonds and air hub bonds establish an explicit limitation on access to the subsidy within the\nmeaning of Article 2.1(a). The bond resolutions that the European Union relies on are clearly\ninstances of application of a broader legislative framework in place for th e issuance of economic\ndevelopment bonds and air hub bonds. The fact that, as alleged by the European Union, \"the\nresolutions authorising issuance of the bonds explicitly restricted the use of the proceeds to the\nconstruction of specified facilities and in frastructure for Boeing 's use \"2200 simply reflects the\napplication of the relevant statutory provisions to this individual case and does not demonstrate an\n\"explicit limitation\" of access to the subsidy to certain enterprises.2201\n8.829. At the same time, however, we are also not persuaded that the inquiry into whether the\nmeasure is specific within the meaning of Article 2.1(a) should be conducted at the level of what\nthe United States refers to as South Carolina 's \"system for issuing state bonds to provide facilities\nand infrastructure\".2202 In our view, the United States has not defined that \"system\" with sufficient\nprecision. In its first written submission, the United States asserts that the relevant legislative\nframework encompasses not only economic development bond s and air hub bonds but also\nindustrial revenue bonds, since the common purpose of all of these bonds is to enable South\nCarolina to fund facilities and infrastructure for economic development projects to promote job\ncreation and/or retention in South Carolina.2203 In its second written submission, the United States\nalso refers to \"state highway bonds for road construction \" and \"state institution bonds to fund\nconstruction of facilities for state four-year colleges and universities\".2204 It is thus unclear whether\nthe \"system for issuing state bonds to provide facilities and infrastructure\" should be understood to\ncomprise only the three types bonds discussed in the United States ' first written submission i.e.\neconomic development bonds, industrial revenue bonds and air hub bonds or whether the two type\nof bonds mentioned in the second written submission of the United States also form part of that\nsystem.\n\n2196 Appellate Body Report, US – Carbon Steel (India), para. 4.365. The Appellate Body has also stated\nthat \"{a}ny determination of whether a number of enterprises or industries constitute 'certain enterprises' can\nonly be made on a case-by-case basis\". (Appellate Body Report, US – Anti-Dumping and Countervailing Duties\n(China), para. 373 (quoting Panel Report, US – Upland Cotton, para. 7.1142)). See also Appellate Body Report,\nUS – Washing Machines, paras. 5.220.5.221 (explaining that the notion of \"certain enterprises\" in Article 2.2 of\nthe SCM Agreement does not depend on the legal personality of the subsidy recipients).\n2197 Appellate Body Report, US – Carbon Steel (India), para. 4.384.\n2198 This interpretation is also supported by a reading of Article 2.1(a) in the context of Article 2.1(b).\nSee Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 750.\n2199 The Appellate Body Report in the original proceeding emphasizes the need for an inquiry concerning\nspecificity under Article 2.1(a) properly to take into account the broader legislative framework pursuant to\nwhich the subsidy has been provided. (Appellate Body Report, US – Large Civil Aircraft (2nd complaint),\nparas. 750, 753, and 841). Also see Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.565.\n2200 European Union's first written submission, para. 583.\n2201 We also consider that the fact that \"the provision of these bond-funded facilities and infrastructure\nwas among the commitments South Carolina made to Boeing as part of the Project Gemini Agreement\" is an\ninsufficient basis to find that access to the subsidy is explicitly limited to certain enterprises. (European Union's\nfirst written submission, para. 583).\n2202 United States' first written submission, paras. 625-632.\n2203 United States' first written submission, para. 619.\n2204 United States' second written submission, para. 526.\n\n8.830. In light of these considerations, and since the subsidy at issue here concerns proceeds\nfrom the issuance of e conomic development bond s and air hub bond s for Project Gemini, we\nconsider that whether the subsidy is specific within the meaning of Article 2.1(a) should be\ndetermined on the basis of the text of the relevant legislative provisions relating to the issua nce of\neconomic development bonds and air hub bonds.\n8.831. In this context, the European Union argues that access to the subsidy is limited to the\naviation and aerospace industry, since air hub bond proceeds may only be issued for air carrier\nhub terminal facili ties, and economic development bond proceeds may not be used for buildings\nexcept when used in connection with air carrier hub terminal facilities or located on\ngovernment-owned land.2205 The United States counters that the provision of bond-funded facilities\nand infrastructure is not specific within the meaning of Article 2.1(a), since the system of\nlegislation for issuing state bonds to provide facilities is not explicitly limited to certain\nenterprises.2206 There is no provision in South Carolina law limiting access for funds raised through\neconomic development bonds and air hub bonds to certain enterprises. Moreover, none of the\nindividual pieces of legislation pursuant to which the bonds are issued limit access to certain\nenterprises.2207\n8.832. As noted above 2208, section 11-41-40 of the South Carolina Code provides that economic\ndevelopment bonds can be used to fund financing for infrastructure. In this context, \"economic\ndevelopment project\" is defined as \"a project in this State as defined in Section 12 -44-30(16) in\nwhich a total of at l east four hundred million dollars is invested in the project by the sponsor and\nat least four hundred new jobs are created at the project by the sponsor \".2209 With respect to\neconomic development bonds, the European Union makes two argumen ts in support of its position\nthat the relevant statutory provisions explicitly limit access to the subsidy to \"certain enterprises:\nthat is, Boeing, or, at a minimum, the aviation and aerospace industry\".2210\n8.833. First, the European Union argues that an amendme nt made in 2009 to increase the total\namount of general obligation bonds 2211 \"was enacted for Boeing as part of H3130 \".2212 While we\nagree that this amendment was made in relation to commitments made by South Carolina\nvis-à-vis Boeing in the context of Project Gemini, we see nothing in the text of this amendment2213\nto suggest that this additional amount of economic development bonds may only be used in\nrespect of economic development projects involving certain enterprises.\n8.834. Second, the European Union asserts that \"economic development bond proceeds may not\nbe used for buildings (as they were in this case), except in the context of projects associated with\nan air hub carrier terminal facility or located on government -owned land\".2214 The European Union\ndoes not explain how this warrants the conclusion that \"the statutory provisions pursuant to which\nthe economic development bonds … were issued contain explicit limitations to certain\nenterprises\".2215 Moreover, the European Union only considers the eligibility criteria for e conomic\ndevelopment bond proceeds used for buildings. This is unwarranted, inter alia because the\neconomic development bond proceeds transferred to Boeing were used [***2216].2217\n8.835. In sum, we consider that, with respect to the issuance of economic development bo nds to\nfinance infrastructure, the European Union has not offered sufficient reasoning to establish that the\n\n2205 European Union's first written submission, para. 584; second written submission, para. 639.\n2206 United States' first written submission, paras. 625-628; second written submission, paras. 524-528.\n2207 United States' first written submission, para. 626; also see second written submission, paras. 526\nand 527.\n2208 See fn 1943 above.\n2209 State General Obligation Economic development Bond Act, S.C. Code, Title 11, chapter 41, (Exhibit\nEU-477), section 11-41-30.\n2210 European Union's first written submission, para. 584.\n2211 See para. 8.685 above.\n2212 European Union's first written submission, para. 584.\n2213 State General Obligation Economic development Bond Act, S.C. Code, Title 11, chapter 41, (Exhibit\nEU-477), section 11-41-50(B).\n2214 European Union's first written submission, para. 584. (emphasis original)\n2215 European Union's second written submission, para. 639.\n2216 See para. 8.767 above.\n2217 European Union's first written submission, para. 584.\n\nmeasure at issue is explicitly limited to certain enterprises within the meaning of Article 2.1(a).\nHaving made such a finding, we consider it unnecessary to pronounce on Article 2.1(b).2218\n8.836. With respect to air hub bonds, section 55-11-520 of the South Carolina Code provides that\nthis type of bond can be used to acquire land, construct, enlarge, improve, extend, renovate, and\nequip suitable air carrier hub terminal facilities, and purchase equipment, ground support\nequipment, machinery, special tools, maintenance, boarding facilities, and any real or personal\nproperty for operation of air carrier hub terminal facilities. 2219 The parties disagree as to wheth er\nthe fact that proceeds from air hub bonds may be issued only for \"air carrier hub terminal\nfacilities\", defined as airport terminal facilities from which certain categories of air carriers operate\nmakes the measure specific within the meaning of Article 2.1(a). Since we find that the air hub\nbonds are specific within the meaning of Article 2.1(c), we do not consider it nece ssary to address\nthat question.\n8.837. A second issue raised by the parties ' arguments is whether the direct transfers of funds\nmade by South Carolina to compensate Boeing for a portion of the costs in constructing the Gemini\nfacilities are specific within the meaning of Article 2.1(c). The European Union argues that the\ntransfer of bond proceeds is specific within the meaning of Article 2.1(c ) on the grounds that this\ntype of subsidy has only been used by a limited number of enterprises, and Boeing and its\nsuppliers have been the predominant users. 2220 The United States counters that the provision of\nbond-funded facilities and infrastructure i s not de facto specific, since the South Carolina bond\nscheme has funded facilities and infrastructure that are used by a variety of companies, only two\nof which are in the aerospace industry.2221\n8.838. The evidence before the Panel indicates that since the adoption o f South Carolina\nlegislation authorising the issuance of economic development bonds in 2002, South Carolina has\nissued economic development bonds for BMW (in 2003 in the amount of up to\nUSD 105 million)2222, the Project Emerald companies (in 2004 in the amoun t of up to\nUSD 160 million)2223, and Boeing. In addition, economic development bonds were issued for\ncertain public entities in 2005, namely the City of Greenville, the City of Myrtle Beach, and the\nTrident Technical College, in the amount of up to USD 7 mill ion each.2224 Since the adoption of\nlegislation authorising the issuance of air hub bonds in 1989 2225, air hub bonds have only been\nissued to Boeing, a fact which the United States does not contest.2226\n8.839. We are of the view that the European Union has failed to esta blish that the transfer of\nfunds to Boeing through economic development bond proceeds is specific within the meaning of\nArticle 2.1(c) because it is used by a limited number of certain enterprises, or is predominantly\nused by Boeing and its suppliers. The European Union provides no reasoning as to why, in light of\nthe level of diversification in the South Carolina economy and the duration of the economic\ndevelopment bond scheme, the grant of economic development bond proceeds to BMW, the\nProject Emerald companies and Boeing amounts to use by a limited number of enterprises.\n\n2218 See Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 876 (\"{h}aving found\nthat the IRB subsidies are not specific within the meaning of Article 2.1(a), analysis by the Panel under\nArticle 2.1(b) was not necessary\").\n2219 See fn 1951 above.\n2220 European Union's first written submission, para. 585; second written submission, para. 639.\n2221 United States' first written submission, para. 631; see also second written submission,\nparas. 529-532.\n2222 United States' response to the Panel's request for information pursuant to Article 13 of the DSU,\ndated 28 February 2013, response to question No. 67, para. 150. Also see South Carolina State Budget and\nControl Board, Freedom of Information Act Response Letter, 23 July 2012, (Exhibit EU-490), p. 1, and South\nCarolina State Budget and Control Board, Freedom of Information Act Response Supplemental Letter,\n31 July 2012, (Exhibit EU-491).\n2223 See para. 8.768 above. Also see South Carolina State Budget and Control Board, Freedom of\nInformation Act Response Letter, 23 July 2012, (Exhibit EU-490), p. 1.\n2224 South Carolina State Budget and Control Board, Freedom of Information Act Response Letter,\n23 July 2012, (Exhibit EU-490), p. 1.\n2225 United States' response to the Panel's request for information pursuant to Article 13 of the DSU,\ndated 28 February 2013, response to question No. 67, para. 150.\n2226 United States' response to the Panel's request for information pursuant to Article 13 of the DSU,\ndated 28 February 2013, response to question No. 67, para. 150.\n\n8.840. With respect to predominant use, the Panel noted in the original proceeding that\npredominant use \"requires consideration of whether the subsidy programme in issue is mainly or\nmost frequently used by 'certain enterprises'\", taking into account the extent of diversification of\neconomic activities within the jurisdiction of the granting authority, as well as the length of time\nduring which the subsidy programme has been in operation. 2227 The European Union argues that\nBoeing and its suppliers have been the predominant users of th e subsidy, benefitting from\nUSD 390 million out of a total of USD 495 million in economic development bonds and air hub\nbonds, or 79% of the bonds by value. 2228 We do not consider this information to show that the\neconomic development bond scheme has mainly or most frequently been used by certain\nenterprises. While this information could be relevant to an argument that a disproportionately\nlarge amount of subsidy has been g ranted to certain enterprises, this is not an argument that the\nEuropean Union makes. 2229 To find otherwise would be to confound predominant use by certain\nenterprises (the second of the \"other factors \" listed in Article 2.1(c)), and the granting of\ndisproportionately large amounts of subsidy to certain enterprises (the third of the \"other factors\"\nlisted in Article 2.1(c)).2230 The European Union makes no other arguments why, in light of the\ndiversification of the South Carolina economy and the duration of the e conomic development bond\nscheme, economic development bond proceeds have been mainly or most frequently used by\ncertain enterprises.\n8.841. Further to the above, with respect to economic development bond proceeds provided to\npublic entities, the European Union st ates that \"{b}ecause specificity is assessed with respect to\nenterprises and industries, the European Union does not include economic development bonds\nissued for public entities, such as cities or public colleges \".2231 Notwithstanding this, precisely the\nfact that economic development bonds can be and have been issued to public entities, namely two\ncities and a public college, in addition to private entities, suggests that the scheme is not limited to\n\"certain enterprises\" within the meaning of Article 2.1(c).\n8.842. However, we do consider that the European Union has established that the grant of air hub\nbond proceeds to Boeing is specific within the meaning of Article 2.1(c) , in the sense that the use\nof the subsidy programme is limited to certain enterprises. In t his regard, we note that i t is\nundisputed that air hub bonds have only been issued to Boeing during the almost three -decade\nlong existence o f the scheme. The fact that air hub bonds have only been issued for Boeing is\nunsurprising since the evidence before the Panel suggests that only Boeing meets the\nrequirements to benefit from air hub bond proceeds, namely to be the operator of an \"air carrier\nhub terminal facility\" as defined in the South Carolina Code. While the Project Emerald Agreement\noriginally contemplated the issuance of both economic devel opment bonds and air hub bonds, it\nappears that Project Emerald was only eligible for economic development bonds, and only that\ntype of bond was issued. 2232 The definition of \"air carrier hub terminal facility\" was amended in\n\n2227 Panel Report, US – Large Civil Aircraft (2nd complaint), paras. 7.746 and 7.747.\n2228 European Union's first written submission, para. 585 and fn 1377.\n2229 The European Union does not argue that a disproportionate amount of subsidy has been granted to\ncertain enterprises, nor does it address the question of whether there is a \"disparity between the expected\ndistribution of that subsidy, as determined by the conditions of eligibility, and its actual distribution\", necessary\nfor the demonstration of disproportionality of grants. See Appellate Body Report, US – Large Civil Aircraft (2nd\n2230 We note that in the original proceeding, the Panel conducted an analysis of the City of Wichita\nindustrial revenue bonds under several of the factors listed in Article 2.1(c), but based its finding of specificity\non the granting of disproportionately large amounts of subsidy to certain enterprises. (See Panel Report, US –\nLarge Civil Aircraft (2nd complaint), paras. 7.743-7.779). Also see Appellate Body Report, US – Large Civil\nAircraft (2nd complaint), paras. 879 and 886-889, upholding for different reasons the Panel's finding of\nspecificity.\n2231 European Union's second written submission, fn 1064. Also see first written submission, fn 1377;\nand United States' second written submission, paras. 529 and 530.\n2232 Compare section 2.1 of the Initial Project Emerald Site Development and Incentive Agreement,\n(Exhibit EU-560), and section 2.1 of the Final Project Emerald Incentive Agreement, (Exhibit EU-550).\nNonetheless, in the Project Emerald Agreement the \"parties acknowledge that {South Carolina Department of\nCommerce} will request a modification to existing legislation to facilitate Project Emerald's qualification for the\nissuance of Air Hub Bonds\". Initial Project Emerald Site Development and Incentive Agreement, (Exhibit\nEU-560), section 2.4. A Bond Counsel Opinion in the Project Emerald Agreement also noted the following:\n\"{w}e have been informed that the Project Emerald Consortium will not independently satisfy the requirement\nthat the Project account for at least 'twenty common carrier departing flights a week on an annual basis for the\npurposes of transporting cargo and air freight'\", within the meaning of section 55-11-500(1) of the South\nCarolina Code. (Initial Project Emerald Site Development and Incentive Agreement), (Exhibit EU-560),\nexhibit D.\n\n2005 to encompass section 55 -11-500(a)(3)2233 in addition to section 55 -11-500(a)(1), and air\nhub bonds were issued for the first time to Boeing, which fulfil led the requirements of\nsection 55-11-500(a)(3).2234\n8.843. As such, we find that the European Unio n has established that subsidy provided\nby South Carolina through air hub bond proceeds to compensate Boeing for a portion of\nthe costs in constructing the Gemini facilities and infrastructure is specific within the\nmeaning of Article 2.1(c). However, the European Union has failed to establish that the\nsubsidy provided by South Carolina through economic development bond proceeds is\nspecific within the meaning of Article 2.1.\n8.844. Finally, we note that the European Union also argues that the subsidies provided to Boeing\nthrough air hub bond proceeds and economic development bond proceeds are specific pursuant to\nArticle 2.3 of the SCM Agreement. Article 2.3 provides that \"{a}ny subsidy falling under the\nprovisions of Article 3 shall be deemed to be specific\". We r eject t his argument because in\nSection 10 of this Report we find that the European Union has failed to establish that any subsidy\nat issue in this proceeding is prohibited by Articles 3.1 and 3.2 of the SCM Agreement.\n8.2.8.6.4 The amount of the subsidy\n8.845. The European Union argues that, where the financial contribution in question is South\nCarolina's provision of funding for the construction of Boeing 's 787 facilities and infrastructure\nthrough the transfer of bond proceeds to Boeing, such that the subsidy is character ized as a direct\ntransfer of funds, the amount of the financial contribution is the total value of the funds (i.e. the\nproceeds of both the economic development bonds and the air hub bonds) , which it alleges is\nUSD 270 million between 2010 and 2011. 2235 However, the European Union considers that the\nvalue of the benefit is USD 400.64 million between 2011 and 2035, or USD 67.53 million between\n2013 and 2015.2236 The European Union 's estimate of the amount of the subsidy (i.e.\nUSD 400.64 million between 2011 and 20352237, or USD 67.53 million between 2013 and 20152238)\nis based on its estimate of the value of the facilities and infrastructure that the European Union\nalleges were provided to Boeing 2239, plus the imputed financing costs for Boeing to either raise\nfunds in the market to construct the facilities and infrastructure itself, or find another market\nparticipant to construct and then lease the facilities and infrastructure .2240 The European Union\nargues that, a s Boeing paid nothing for the facilities and infrastructure, t he entire amount\nrepresents the benefit conferred to Boeing.2241\n8.846. The United States does not provide a n estimate of the amount of the subsidy, arguing\ninstead that the financial contribution conferred no benefit to Boeing on account of adequate\nremuneration provided to South Carolina through real property investment at the Project Site, and\n\n2233 H3234, signed into law on 5 April 2005. S.C. Code, section 55-11-500(a)(3) provides: \"{a}n 'air\ncarrier hub terminal facility' is an airport terminal facility from which an air carrier … operates either: … (3)\nirrespective of the number of flights, two or more specially equipped planes that are : (i) used for the\ntransportation of specialized cargo; and (ii) subject to ad valorem property taxation or a fee in lieu of taxes in\nthis State\".\n2234 Gemini air hub bond resolution, (Exhibit EU-483), p. 48, section 1.\n2235 European Union's first written submission, para. 577.\n2236 European Union's first written submission, para. 582; second written submission, paras. 636-638;\nresponse to Panel question Nos. 105, paras. 150-161, and 106, paras. 162-168; comments on United States'\nresponse to Panel question No. 105, paras. 319-329; and South Carolina's Subsidies to Boeing's LCA Division,\n(Exhibit EU-39), p. 1.\n2237 European Union's first written submission, para. 581.\n2238 South Carolina Subsidies to Boeing's LCA Division, (Exhibit EU-39), p. 1.\n2239 The European Union estimates the value of the facilities and infrastructure at USD 270 million from\n2011 to 2035.\n2240 European Union's response to Panel question Nos. 106, para. 166, and 105, paras. 155 and 156.\nHowever, the European Union rejects as a mischaracterization the United States' assertion that its valuation\naddresses the cost to Boeing to raise an amount of money equal to what South Carolina raised through state\nbonds. (European Union's second written submission, para. 636).\n2241 European Union's first written submission, para. 581.\n\nbecause the European Union has failed to provide an appropriate benchmark to determine and\nestimate any benefit conferred.2242\n8.847. The European Union's estimate of the amount of the subsidy, based on what it would cost\nBoeing to raise funds to construct the facilities, or find another market participant to construct and\nlease the facilities, suffers from a fundamental factual and legal flaw regarding the nature of the\nsubsidy. In Section 8.2.8.6.3.1, we reject as factually unsupported the European Union's argument\nthat South Carolina provides the Gemini facilities and infrastructure to Boeing. We also reject as a\nlegal matter the European Union 's argume nt that, in relation to the Gemini facilities and\ninfrastructure, there was a financial contribution to Boeing in the form of a provision of goods or\nservices other than general infrastructure , since we consider that Article 1.1(a)(1) contemplates a\ncharacterization of a measure as a financial contribution on the basis of the manner in which that\nmeasure transfers value to a recipient. Rather, we find that the payments made by South Carolina\npursuant to commitments in the Project Gemini Agreement to compens ate Boeing for a portion of\nthe costs in constructing the Gemini facilities and infrastructure are direct transfers of funds within\nthe meaning of Article 1.1(a)(1)(i) of the SCM Agreement.\n8.848. In Section 8.2.8.6.3.2, we find that these financial contributions, which are direct transfers\nof funds (and essentially infrastructure -related grants), confer a benefit. In so doing, we explain\nthat our benefit determination is not affected by any alleged remuneration or \"compensation\"\nprovided by Boeing in relation to the grants.\n8.849. Moreover, in Section 8.2.8.6.3.3, we find that only the direct transfers of funds made by\nSouth Carolina through air hub bonds are specific. The total amoun t of these bond proceeds is\nUSD 50 million. This being so, and bearing in mind that there is no requirement in a dispute under\nPart III of the SCM Agreement for panels to quantify precisely the amount of a subsidy benefiting\na product at issue in every case 2243, it suffices for present purposes to consider the amount\nof the subsidy to be equal to the amount of the air h ub bond proceeds, namely\nUSD 50 million.2244\n8.2.8.6.5 Conclusion\n8.850. In light of our findings above with respect to the Gemini and Emerald facilities and\ninfrastructure, we conclude that:\na. The European Union has failed to establish that financial contributions exist within the\nmeaning of Article 1.1(a)(1)(iii) of the SCM Agreement because South Carolina provides\nGemini and Emerald facilities and infrastructure to Boeing, and thus has also not\nestablished that specific subsidies exist within the meaning of Articles 1 and 2 of the\nSCM Agreement in this regard.\nb. The European Union has established that the payments made by South Carolina\npursuant to commitments in the Project Gemini Agreement to compensate Boeing for a\nportion of the costs incurred by Boeing in respect of the construction of the Gemini\nfacilities and infrastructure through air hub bond proceeds involve a specific subsidy\nwithin the meaning of Articles 1 and 2 of the SCM Agr eement, in the amount of\nUSD 50 million.\n8.2.8.7 Whether property tax reductions through the Boeing and Project Emerald FILOT\nAgreements are specific subsidies to Boeing\n8.2.8.7.1 Introduction\n8.851. In paragraph 24 of its panel request, the European Union identifies as one of the Project\nGemini-related subsidies presently benefiting Boeing:\n\n2242 United States' first written submission, paras. 583 and 584; second written submission, paras. 518\nand 519; response to Panel question No. 105, paras. 218-229; and comments on European Union's response\nto Panel question Nos. 105, paras. 162-168, and 106, paras. 169-171.\n2243 Appellate Body Report, US – Upland Cotton, paras. 462-467; and Panel Report, Mexico – Olive Oil,\npara. 7.152.\n2244 Gemini Air Hub Bond Resolution, (Exhibit EU-483).\n\nProperty tax reductions under a fee -in-lieu-of taxes agreement between Charleston\nCounty and Boeing, dated 1 December 2009, as authorized by Title 12, Chapter 44 of\nthe S.C. code, including the provi sion of special source credits as provided for in such\nagreement, and authorized by S.C. Code § 4-1-175.\n8.852. In paragraph 25 of its panel request, the European Union identifies as one of the Project\nEmerald-related subsidies presently benefiting Boeing:\nProperty tax reductions under a fee -in-lieu-of taxes agreement between Charleston\nCounty and Vought Aircraft industries, Global Ae ronautica, and Boeing, dated\n19 December 2006, and assigned to Boeing on or about 10 February 2010, as\nauthorized by Title 12, Chapt er 44 of the S.C. Code, and provided for in the Project\nEmerald Confidential Site Development Agreement, including the provision of\ninfrastructure credits as provided for in such agreement, and authorized by S.C. Code\n§ 12-44-70.\n8.853. The European Union argues that the above -referenced FILOT agreements in respect of\nProject Gemini and Project Emerald, through which Boeing pays negotiated fees in place of the ad\nvalorem property taxes that it would otherwise owe in respect of the 787 final assembly and\ndelivery f acility, and the 787 fuselage fabrication and integration complex, respectively, are\nspecific subsidies to Boeing.\n8.854. Real property, personal property used in business, and certain other personal property\n(e.g. aeroplanes) are subject to property taxes in So uth Carolina. Such property taxes are\ncalculated by multiplying the periodically appraised fair market value of property by an assessment\nratio set forth in the South Carolina Constitution according to the type of property. The resulting\nassessed value is then multiplied by a millage rate, i.e. a varying tax rate applied by each local\ntaxing jurisdiction (e.g. county)2245, to obtain the amount of tax due.2246\n8.855. Assessment ratios are established in the South Carolina Constitution and differ according\nto property classification. All manufacturing property, whether real or personal, is assessed at the\nratio of 10.5% 2247, a higher rate than in neighbouring states. 2248 The South Carolina legislature\nhas, through legislation enacted between 1988 and 1997, granted counties the authority to\nexempt certain projects from property taxes in exchange for entering into agreements that provide\nfor the annual payment of fees with respect to property which would otherwise be subject to\nproperty taxes.2249 These agreements are known as FILOT agreements. In general terms, FILOT\nagreements꞉ (a) freeze the value of real property; and (b) provide for a reduced assessment ratio.\nThey may also set a fixed millage rate. 2250 FILOT agreements may be supplemented by Special\nSource Revenue Credits (revenue credits), which rebate a portion of the fee due under the\n\n2245 A \"mill\" is a unit of monetary value equal to one thousandth of a dollar, or USD 0.001.\n2246 See South Carolina Department of Revenue, South Carolina Tax Incentives for Economic\nDevelopment 20, 2013 edn, (South Carolina Department of Revenue, 2012) (South Carolina Tax\nIncentives), (Exhibit EU-494), pp. 141 and 142.\n2247 County Equalization and Reassessment, S.C. Code, Title 12, chapter 43, (Exhibit EU-525),\nsection 12-43-220(a)(1). By way of context, most commercial personal property is also assessed at 10.5%,\nwhereas commercial real property is assessed at 6%. (See South Carolina Tax Incentives, (Exhibit EU-494),\npp. 142-148).\n2248 See Alliance for South Carolina's Future, The Economic Impact of Boeing in South Carolina,\n(May 2010), (Exhibit EU-489), p. 3; and Lincoln Institute of Land Policy, 50-State Property Comparison Study,\n(April 2012), (Exhibit USA-331), p. 20.\n2249 The legislation in question is the \"Big Fee\" FILOT statute, enacted in 1988, followed by the \"Little\nFee\" and \"Simplified Fee\" statutes. See Industrial Development Projects, S.C. Code, Title 4, chapter 29,\n(Exhibit USA-243), section 4-29-67; Fee in Lieu of Property Taxes, S.C. Code, Title 4, chapter 12, (Exhibit\nUSA-330), section 4-12-30; and Fee in Lieu of Tax Simplification Act, S.C. Code, Title 12, chapter 44, (Exhibit\nEU-539), section 12-44-44. The legislative findings for the \"Simplified Fee\" statute, the full title of which is the\n\"Fee in Lieu of Tax Simplification Act\", enacted in 1997, explain that the legislation simplifies the method for\nobtaining the fee in lieu of tax benefits and makes this incentive more attractive by eliminating the\nrequirement in the existing FILOT legislation for the issuance of industrial revenue bonds or the transfer of title\nto property to a county. See the Fee in Lieu of Tax Simplification Act, S.C. Code, Title 12, chapter 44, (Exhibit\nEU-539), section 12-44-20.\n2250 Fee in Lieu of Tax Simplification Act, S.C. Code, Title 12, chapter 44, (Exhibit EU-539), section 12-\n44-50(A)(1).\n\nagreement and thereby further reduce the assessment ratio. Counties evaluate projects, negotiate\nterms, approve agreements, and collect fee payments.2251\n8.856. South Carolina law authorizing FILOT agreements provides for three main types of FILOT\nagreements which differ, inter alia, with respect to the minimum required investments and the title\nto project property. 2252 Notwithstanding these differences, all three types of agreements provide\nfor a reduced assess ment ratio of 6%. Furthermore, the South Carolina law regarding FILOT\nagreements also contains special provisions for very large investments, known as \"Super Fee \"\nagreements or \"Enhanced Investment Fee\" agreements, depending on the particular FILOT statute\nunder which the FILOT agreement is authorized. Under both super fee agreements and enhanced\ninvestment fee agreements, a company investing USD 150 million and creating 125 new jobs, or\ninvesting USD 400 million regardless of job creation, is subject to a reduced assessment ratio of\n4%.2253 Where a party to a FILOT agreement fails to meet the requirements to qualify for the\nlower assessment ratios, the higher constitutional assessment ratio will be applied retroactively to\nthe property covered by the agreement.2254\n8.857. On 1 December 2010, Charleston County entered into an Enhanced Investment Fee\nAgreement with Boeing (the Boeing F ILOT Agreement).2255 The property covered by the Boeing\nFILOT Agreement consists of Boeing 's 787 final assembly and delivery facility (i.e. the Project\nGemini property), as well as Boeing 's South Carolina Interior Responsibility Center. 2256 The tax\ntreatment applicable to this project property for a minimum of thirty years 2257 is based on꞉ (a) an\nassessment ratio of 4 %; (b) a fixed millage rate of 269. 8; and (c) a fair market value estimate\ndetermined by the South Carolina Department of Revenue according to state legislation. 2258 In\naddition, the Boeing F ILOT Agreement grants a rebate equal to half of each of Boeing 's first 15\nannual payments in the form o f revenue credits. 2259 The Boeing F ILOT Agreement contains a\nprovision regarding the allocation of property between the Project Emerald F ILOT Agreement and\nthe Boeing F ILOT Agreement.2260 The Boeing F ILOT Agreement also provides that the Project\nEmerald F ILOT Agreement \"shall remain in full force and effect, and shall be controlling, with\nrespect to the Vought Project\".2261\n8.858. On 19 December 2006, Charleston County entered into an Enhanced Investment Fee\nAgreement with Vought, G lobal Aeronautica and Boeing (the Project Emerald F ILOT\nAgreement).2262 The property covered by the Project Emerald F ILOT Agreement consists of\nproperty used for the purpose of manufacturing and assembling aircraft components, including\nportions of the fuselage for the Boeing 787 aircraft (i.e. the Project Emerald property).2263 The tax\n\n2251 With respect to Big Fee agreements, see e.g. South Carolina Tax Incentives, (Exhibit EU-494),\npp. 184 and 185. See also United States' second written submission, para. 534.\n2252 By way of example, Little Fee and Simplified Fee agreements generally require a minimum\ninvestment of USD 2.5 million, whereas Big Fee agreements generally require a minimum investment of\nUSD 45 million. Furthermore, under Little Fee and Big Fee agreements, title to the project property must be\nheld by the county, whereas under Simplified Fee agreements, title is usually held by the project sponsor. (See\nSouth Carolina Tax Incentives, (Exhibit EU-494), p. 204, and generally pp. 175-205).\n2253 South Carolina Tax Incentives, (Exhibit EU-494), p. 204, and generally pp. 175-205.\n2254 Fee in Lieu of Tax Simplification Act, S.C. Code, Title 12, chapter 44, (Exhibit USA-245), section 12-\n44-140(B).\n2255 Boeing FILOT Agreement, (Exhibit EU-470), recital 1 of which refers to the Simplified Fee statute,\nS.C. Code, Title 12 chapter 44. See also European Union's first written submission, fn 1309.\n2256 See United States' response to the Panel's request for information pursuant to Article 13 of the DSU,\ndated 28 February 2013, response to question No. 78, para. 170; and South Carolina Department of Revenue,\nBoeing PT-300S Forms, 2012, (Exhibit US-13-318) (BCI). See also Boeing FILOT Agreement, (Exhibit EU-470),\nsection 1.3, p. 6 (definitions of \"Project\" and \"Site\"), and exhibit A.\n2257 Boeing FILOT Agreement, (Exhibit EU-470), section 5.6.\n2258 Boeing FILOT Agreement, (Exhibit EU-470), section 5.1(a).\n2259 Boeing FILOT Agreement, (Exhibit EU-470), section 5.2(a).\n2260 Boeing FILOT Agreement, (Exhibit EU-470), p. 10.\n2261 Boeing FILOT Agreement, (Exhibit EU-470), section 11.11.\n2262 Fee Agreement between Charleston County, Vought Aircraft Industries, Inc., Global Aeronautica,\nLLC, and the Boeing Company (19 December 2006) (Project Emerald FILOT Agreement), (Exhibit EU-556),\nrecital 1 (referring to Simplified Fee statute, S.C. Code, Title 12, chapter 44).\n2263 See Project Emerald FILOT Agreement, (Exhibit EU-556), recital 4, p. 1 (definition of the \"Site\"),\nsection 1.01, p. 5 (definition of the \"Project\"), and section 2.2(b). See also United States' response to Panel\nquestion No. 143, para. 294; and State of South Carolina, Department of Revenue, Emerald Property Return\nPT-300, schedule S-1 (2013), (Exhibit USA-529) (BCI).\n\ntreatment applicable to this project property for a minimum of thirty years 2264 is based on꞉ (a) the\nvalue of the real property established during the first year of the agreement; (b) an assessment\nratio of 4%; and (c) a fi xed millage rate of 273. 2265 In addition, the Project Emerald F ILOT\nAgreement grants a rebate equal to 25% of the fees paid for ten years in the form of revenue\ncredits.2266 In 2010, following approval by Charleston County on 11 August 2009 2267, Vought\nassigned its rights under the Project Emerald FILOT Agreement to Boeing.2268\n8.2.8.7.2 Main arguments of the parties\n8.859. The European Union argues that the reductions of Boeing 's property tax liability for\nproperty including the 787 final assembly and delivery facility, through the Bo eing F ILOT\nAgreement, and for the 787 fuselage fabrication and integration complex through the Project\nEmerald FILOT Agreement, constitute specific subsidies within the meaning of Articles 1 and 2.\n8.860. The European Union argues that both the Boeing F ILOT Agreement and the Project\nEmerald F ILOT Agreement involve the foregoing of revenue otherwise due and thus a financial\ncontribution within the meaning of Article 1.1(a)(1)(ii), or alternatively a direct transfer of funds\nwithin the meaning of Article 1.1(a)(1)(i). The European Union is of the view that its position finds\nsupport in the three -step analysis set out by the Appellate Body in the original proceeding for\ndetermining the existence of revenue foregone, and structures its arguments according to that\nanalysis. The European Union identifies the benchmark tax treatment of comparable taxable\nactivity of comparable taxpayers as the standard property tax treatment of other manufacturers in\nCharleston County. The European Union considers a benchmark based on other manufacturers to\nbe appropriate, since property tax is contingent on the nature of the property, and manufacturing\nproperty is treated as a comprehensive category.2269 Furthermore, the European Union considers a\nbenchmark based on other manufacturers in Charleston County is appropriate, since Charleston\nCounty is the granting authority, and property taxes in South Carolina are imposed by local\ngovernments, not the state government. The property tax treatment of such taxpayers (i.e. other\nmanufacturers in Ch arleston County) is based on꞉ (a) the valuation by appraisal of a\nmanufacturer's real property every five years or upon a triggering event; (b) the assessment ratio\nof 10.5%; and (c) fluctuating millage rates. 2270 Based on a comparison with other manufacturer s,\nthe Boeing F ILOT Agreement and the Project Emerald F ILOT Agreement involve the foregoing of\nrevenue otherwise due because, in the absence of the agreements, the manufacturing property\ncovered by the agreements would be subject to higher taxation under t he general rule governing\nthe taxation of manufacturing property.2271 In the alternative, the European Union argues that the\nrevenue credits, involving the transfer of funds by check or wire to Boeing as reimbursements for\nexpenditures on Special Source Improvements, constitute a direct transfer of funds.2272\n8.861. The European Union contends that both the Boeing F ILOT Agreement and the Project\nEmerald F ILOT Agreement confer benefits to Boeing within the meaning of Article 1.1(b). The\nforegoing of taxes that would otherwise be due \"clearly confers a benefit\".2273\n8.862. The European Union argues that the Boeing F ILOT Agreement and the Project Emerald\nFILOT Agreement are specific within the meaning of Articles 2.1(a) and 2.1(c). With respect to de\n\n2264 Project Emerald FILOT Agreement, (Exhibit EU-556), section 1.01, p. 5 (definition of \"Termination\nDate\").\n2265 Project Emerald FILOT Agreement, (Exhibit EU-556), section 4.1.\n2266 Project Emerald FILOT Agreement, (Exhibit EU-556), section 4.2.\n2267 Assignment and Assumption of Fee Agreement between Vought Aircraft Industries, Inc. and Boeing\nCommercial Airplanes Charleston South Carolina, Inc. (10 February 2010), (Exhibit EU-557), second recital,\nreferring to a Charleston County resolution adopted on 11 August 2009.\n2268 Assignment and Assumption of Fee Agreement between Vought Aircraft Industries, Inc. and Boeing\nCommercial Airplanes Charleston South Carolina, Inc. (10 February 2010), (Exhibit EU-557).\n2269 European Union's first written submission, para. 682.\n2270 European Union's first written submission, para. 682.\n2271 European Union's first written submission, paras. 683 and 726.\n2272 Nevertheless, the European Union has indicated that, if the Panel finds the Boeing FILOT Agreement\nas a whole to provide a financial contribution through the foregoing of government revenue otherwise due, the\nPanel need not consider the European Union's alternative argument that the rebate provisions can also be\ncharacterized as a direct transfer of funds. (European Union's second written submission, para. 715; first\nwritten submission, para. 684).\n2273 European Union's first written submission, paras. 687 and 730 (both citing Panel Report, US – FSC,\npara. 7.103).\n\njure specificity within the mean ing of Article 2.1(a), the legislation pursuant to which Charleston\nCounty authorised and approved the Boeing F ILOT Agreement and the Project Emerald F ILOT\nAgreement explicitly limit the availability of these arrangements to Boeing and the Project Emerald\ncompanies, respectively. 2274 With respect to de facto specificity within the meaning of\nArticle 2.1(c), the Boeing FILOT Agreement and the Project Emerald FILOT Agreement are used by\na limited number of enterprises, are predominantly used by certain enterpris es, and grant\ndisproportionately large amounts of the subsidy to certain enterprises. In addition, the manner in\nwhich discretion has been exercised in granting the subsidy further indicates specificity.2275\n8.863. The United States rejects the European Union 's argument that the FILOT agreements at\nissue provide financial contributions through the foregoing of revenue otherwise due within the\nmeaning of Article 1.1(a)(1)(ii). The United States additionally argues that the European Union has\nfailed to demonstrate tha t the Project Emerald F ILOT Agreement provides a subsidy to Boeing,\ngiven that Project Emerald was an investment package for Vought and Global Aeronautica and the\nEuropean Union has failed to demonstrate that any alleged benefits conferred to Vought and/or\nGlobal Aeronautica passed through to Boeing.2276\n8.864. The United States argues that FILOT agreements are the rule rather than the exception for\nthe property taxation of similarly situated industrial taxpayers in South Carolina. 2277 The\nUnited States considers that the FILOT agreements at issue in this dispute are an example of a\nsituation in which a notional general tax rate (the rate of 10.5% mandated by the South Carolina\nConstitution) does not constitute the appropriate benchmark.2278 \"Similarly situated\" taxpayers are\nlarge industrial taxpayers in South Carolina 2279 (i.e. companies eligible for FILOT agreements\nbecause they invest over USD 150 million and create 125 jobs, or invest USD 400 million in\nprojects in South Carolina).2280 Indeed, industrial taxpayers throughout the State of South Carolina\nreceive the same tax treatment as Boeing if they meet the statutory investment and employment\nthresholds2281 and are generally assessed pursuant to an assessment ratio of less than 4% through\nFILOT agreements coupled with revenue credits. When compared to this benchmark, the\napplicable assessment ratio under the FILOT agreements at issue is not out of the norm.2282\n8.865. The United States also rejects the argument that the FILOT agreements provide financial\ncontributions through a direct t ransfer of funds within the meaning of Article 1.1(a)(1)(i) of the\nSCM Agreement. The FILOT agreements and revenue credits do not entail payments or any other\nfunds flowing from South Carolina to Boeing, and instead merely provide for the adjustment of tax\npayments to reflect the correct tax rate. 2283 Indeed, the amount to be rebated does not belong to\nSouth Carolina in the first place. 2284 Furthermore, the European Union fails to specify the amount\nof the supposed revenue credits, or to identify the alleged check or wire payments.2285\n8.866. The United States argues that FILOT agreements, such as the Boeing F ILOT Agreement\nand the Project Emerald F ILOT Agreement, are not specific. Rather, they are a general feature of\nSouth Carolina industrial property tax law and widely available throughout South Carolina due to\nthe relatively high property tax rate fixed by the South Carolina Constitution. 2286 The \"legislation\npursuant to which the granting authority operates \", namely the Simplified Fee statute, including\nthe statutory prov ision for Enhanced Investment Fees, South Carolina Code section 12-44-30(7)\n\n2274 European Union's first written submission, para. 731 (referring to Charleston County Council,\nMinutes of 21 December 2004 Meeting where an Inducement Resolution is approved, (Exhibit EU-561));\nCharleston County, Ordinance 1476 (19 December 2006), (Exhibit EU-562), para. 688 (referring to Charleston\nCounty Council, Minutes of 17 November 2009 Meeting where an Inducement Resolution is approved, (Exhibit\nEU-540); and Charleston County Council, Minutes of 12 January 2010 Meeting where a County Ordinance is\napproved, (Exhibit EU-541)).\n2275 European Union's first written submission, paras. 689-691 and 732; second written submission,\npara. 717; and response to Panel question No. 112, paras. 197-201.\n2276 United States' first written submission, paras. 546-553.\n2277 United States' first written submission, para. 582; response to Panel question No. 104, para. 215.\n2278 United States' first written submission, para. 565.\n2279 United States' second written submission, paras. 537 and 538.\n2280 United States' first written submission, para. 566.\n2281 United States' second written submission, para. 542.\n2282 United States' first written submission, para. 566.\n2283 United States' first written submission, para. 567.\n2284 United States' second written submission, para. 544.\n2285 United States' second written submission, para. 544.\n2286 United States' first written submission, para. 633.\n\nand chapter 44, Title 12, does not explicitly limit access to FILOT agreements to certain\nenterprises within the meaning of Article 2.1(a). Furthermore, South Carolina 's FILOT programme\nis non-specific under Article 2.1(b) since it establishes \"objective criteria or conditions \" that are\n\"clearly spelled out in law, regulation or other official document{s}\" that govern eligibility to FILOT\nagreements within the meaning of footnote 2 to the SCM Agreement. Finally, the European Union\nhas failed to establish that the challenged agreements are de facto specific within the meaning of\nArticle 2.1(c).2287\n8.2.8.7.3 Evaluation by the Panel\n8.2.8.7.3.1 Whether there is a financial contribution\n8.867. The first question before the Panel is whether the tax treatment of property covered by the\nBoeing F ILOT Agreement and the Project Emerald F ILOT Agreement involves a financial\ncontribution in the form of the foregoing of revenue otherwise due, within the meaning of\nArticle 1.1(a)(1)(ii) of the SCM Agreement. The European Union 's basic position is that, in the\nabsence of the challenged FILOT agreements, the property in question would be subject to the\nstandard treatment of manufacturing property pursuant to the Constitution of the State of South\nCarolina, which is significantly higher. The United States ' basic position is that the FILOT\nagreements do not involve the foregoing of revenue otherwise due because they provide for tax\ntreatment that is identical to the treatment of manuf acturing property in projects with similar\ninvestment and employment levels.\n8.868. Both parties structure their arguments according to the three-step analysis set out by the\nAppellate Body in the original proceeding for determining the existence of revenue fore gone.2288 In\nour view, it is essential to consider the broader legal rationale underlying this analysis before\nstudying its specific stages.\n8.869. The Appellate Body has observed that the foregoing of revenue otherwise due within the\nmeaning of Article 1.1(a)(1)(ii) implies that less revenue has been raised by the government than\nwould have been raised in a different situation, and crucially that \"the word 'foregone' suggests\nthat the government has given up an entitlement to raise revenue that it could 'otherwise' have\nraised\".2289 However, this cannot be an entitlement in the abstract, because governments could, in\ntheory, tax all revenues. There must therefore be some defined, normative benchmark against\nwhich a comparison can be made between the revenue actually ra ised and the revenue that would\nhave been raised \"otherwise\".2290 The Appellate Body has also emphasized that this comparison\nmust be made under the domestic taxation rules established by the Member in question. 2291\nBecause domestic taxation rules can be varied and complex, identifying the appropriate\nbenchmark for comparison under Article 1.1(a)(1)(ii) may be difficult.2292 The Appellate Body has\nobserved, in this regard, that panels must ensure that in identifying the appropriate benchmark for\ncomparison, \"they identify and examine fiscal situations which it is legitimate to compare \"2293 and\nthat the examination under Article 1.1(a)(1)(ii) \"involve{s} a comparison of the fiscal treatment of\nthe relevant income for taxpayers in comparable situations \".2294 In this connecti on, the Appellate\nBody has expressed reservations regarding the application of a \"but for \" test as a basis for\n\n2287 United States' first written submission, paras. 634 and 635; second written submission,\nparas. 547-554. See also United States' response to Panel question Nos. 132, paras. 271-273, 133,\nparas. 274-282, 138, paras. 2 and 3, 140, para. 170, and 142, paras. 14 and 15; and comments on\nEuropean Union's response to Panel question Nos. 104, para. 158, and 112, paras. 200 and 201.\n2288 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), paras. 812-814 (reproduced below\nat para. 8.874). European Union's first written submission, paras. 594 and 681-683; and United States' first\nwritten submission, para. 563.\n2289 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 806 (referring to Appellate\n2290 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 806 (referring to Appellate\n2291 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 806 (referring to Appellate\nBody Report, US – FSC, para. 90), and para. 808 (referring to Appellate Body Report, US – FSC (Article 21.5 –\nEC), para. 89).\n2292 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 809.\n2293 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 809 (referring to Appellate\nBody Report, US – FSC (Article 21.5 – EC), para. 90).\n2294 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 809 (referring to Appellate\nBody Report, US – FSC (Article 21.5 – EC), para. 92).\n\ndetermining the fiscal treatment in the absence of the contested measure 2295 and emphasized the\nneed to take into account \"the structure of the dome stic tax regime and its organizing\nprinciples\".2296\n8.870. In light of the guidance provided by the Appellate Body, we consider that the tax\ntreatment of property covered by the Boeing F ILOT Agreement and the Project Emerald F ILOT\nAgreement is a financial contribut ion within the meaning of Article 1.1(a)(1)(ii) because it is an\ninstance of a government giving up an entitlement to raise revenue that it could otherwise have\nraised. We find support for this view in꞉ ( a) the characterization of the FILOT agreements by the\nSouth Carolina tax authorities ; (b) the nature of the FILOT agreements as conditional tax\nincentives that provide benefits in consideration of commitments by co mpanies regarding levels of\ninvestment and employment ; and (c) the application to the facts of this case of the three -step\nanalysis set out by the Appellate Body in the original proceeding.2297\n8.871. First, the South Carolina tax authorities themselves describe the benefits of FILOT\nagreements by comparing them with the rule that applies generally to manufacturing property,\nand have explicitly characteri zed FILOT agreements as involving savings on property taxes that\nwould be otherwise due on a project:\nIndustries investing at least $2.5 million in South Carolina may negotiate for a\nfee-in-lieu of property taxes, resulting in a savings of about 40% on the property\ntaxes otherwise due for a project. Additionally, certain large investments may be able\nto further reduc e their liability. Under a fee in lieu of property tax agreement, the\nassessment ratio can be negotiated down from 10.5 % to 6%. For large investments,\nthe assessment ratio can be reduced down to 4%. The county and the industry may\nagree to either set the m illage rate for the entire agreement period or have the\nmillage change every five years in step with the average millage rate for the area\nwhere the industry's project is located. Any personal property subject to the fee in lieu\nof property taxes depreciat es in accordance with South Carolina law while the real\nproperty is either set at cost for the life of the agreement or can be appraised every\nfive years.2298\n8.872. Second, as reflected in the text of the Boeing F ILOT Agreement and Project Emerald FILOT\nAgreement, FILOT agreements are conditional tax incentives available to all companies able and\nwilling to make or expand manufacturing investments of a certain magnitude in South Carolina,\nand are aimed at inducing companies to locate within the state by counteracting the relatively high\nproperty tax assessment ratio set in the South Carolina Constitution. For example, the first two\nrecitals of the Boeing FILOT Agreement state the following:\nWhereas, to induce companies to locate in the State and to encourage companie s now\nlocated in the State to expand their investments and thus to make use of and employ\nworkers and other resources of the State, the County is authorized by Title 12,\nchapter 44 (the \"Fee Act\"), Code of Laws of South Carolina 1976, as amended, (the\n\"Code\") and specifically Section 12-44-30(7) of the Fee Act, to enter into an enhanced\ninvestment fee agreement with companies meeting the requirements of such Fee Act\nwhich identifies certain property of such companies as economic development\nproperty …\nWhereas, pursuant to the Act, and based on factual representations by the Company\nto the County, the County finds that: (a) it is anticipated that the Project (as defined\nherein) will benefit the general public welfare of the County by providing services,\nemployment and other public benefits not otherwise adequately provided locally; (b)\nneither the Project nor any documents or agreements entered into by the County in\n\n2295 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 810 (referring to Appellate\nBody Report, US – FSC, para. 91, and to Appellate Body Report, US – FSC (Article 21.5 – EC), fn 66). See also\nAppellate Body Report, US – FSC (Article 21.5 – EC), paras. 815, 818, and 823.\n2296 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 815.\n2297 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), paras. 812-814 (reproduced below\nat para. 8.874).\n2298 South Carolina Department of Revenue, \"Fee in Lieu\", available at:\n<http://www.sctax.org/tax/fee-in-lieu>, accessed 1 September 2016, (Exhibit EU-1436).\n\nconnection therewith will give rise to any pecuniary liability of the County or\nincorporated mu nicipality or to any charge against their general credit or taxing\npower; (c) the purposes to be accomplished by the Project are proper governmental\nand public purposes; and (d) the benefits of the Project to the public are greater than\nthe costs to the public … .2299\nThe Boeing F ILOT Agreement states that \"the County agreed to make available to Boeing the\nbenefits of certain programs, including a payment-in-lieu of taxes arrangement, in consideration of\nBoeing's agreement to invest in the County through the d evelopment, acquisition, and installation\nof certain facilities\".2300\n8.873. Thus, statements of the South Carolina tax authorities and the text of the agreements at\nissue clearly indicate that the treatment of manufacturing property provided for in the Boeing\nFILOT Agreement and the Project Emerald F ILOT Agreement is understood as a \"benefit\" that\ncompanies receive in return for making certain commitments with respect to levels of investment\nand employment and which constitutes a departure from the otherwise applicable rule under which\nmanufacturing property is subject to an assessment ratio of 10.5%. The measure can be properly\ncharacterized as conditional tax incentives that embody a quid pro quo arrangement where an\nentity is granted some form of tax advantage in exchange for fulfilling set requirements, and\nconversely a taxing authority relinquishes an existing entitlement to raise revenue that it could\notherwise raise where an entity fulfils the set requirements.\n8.874. Our tentative conclusion that the challenged FILOT agreements involve a situation in which\nthe government gives up an entitlement to raise revenue that it could have raised otherwise finds\nfurther support in the application to the facts of this case of the three -step analysis set out by the\nAppellate Body in the original proceeding:\nThe identification of circumstances in which government revenue that is otherwise due\nis foregone requires a comparison between the tax treatment that applies to the\nalleged subsidy recipients and the tax treatment of compara ble income of comparably\nsituated taxpayers. Accordingly, a panel examining a claim under Article 1.1(a)(1)(ii)\nof the SCM Agreement should first identify the tax treatment that applies to the\nincome of the alleged recipients. Identifying such tax treatmen t will entail\nconsideration of the objective reasons behind that treatment and, where it involves a\nchange in a Member's tax rules, an assessment of the reasons underlying that change.\nAs a second step, the panel should identify a benchmark for comparison –that is, the\ntax treatment of comparable income of comparably situated taxpayers. We recognize\nthat this is not always a straightforward exercise, and may in some circumstances be\nexceedingly difficult. Identifying a benchmark involves an examination of the structure\nof the domestic tax regime and its organizing principles. In some cases, the principles\nwill be ones well recognized in the tax regimes of Members; in other cases, they will\nbe unique to the particular domestic regime. It may be that disparate tax measures,\nimplemented over time, do not easily offer up coherent principles serving as a\nbenchmark. In any event, the task of the panel is to develop an understanding of the\ntax structure and principles that best explains that Member 's tax regime, and to\nprovide a reasoned basis for identifying what constitutes comparable income of\ncomparably situated taxpayers. Evidence relied upon in such an analysis must be\nlocated in the \"rules of taxation that each Member, by its own choice, establishes for\nitself\". In doing so, a Member will be held to account for the tax structure and\nprinciples that it itself employs. This is akin to the approach undertaken in the field of\npublic finance for purposes of estimating what are known as \"tax expenditures\".\nFinally, as a third step, the panel should compare the reasons for the challenged tax\ntreatment with the benchmark tax treatment it has identified after scrutinizing a\nMember's tax regime. Such a comparison will enable a panel to determine whether, in\nthe light of the treatment of the comparable income of comparably situated taxpayers,\n\n2299 Boeing FILOT Agreement, (Exhibit EU-470), p. 1. Similarly, see Project Emerald FILOT Agreement,\n(Exhibit EU-556), recitals 4 and 5.\n2300 Boeing FILOT Agreement, (Exhibit EU-470), recital 3. Similarly, see Project Emerald FILOT\nAgreement, (Exhibit EU-556), recital 4.\n\nthe government is foregoing revenue that is otherwise due in relation to the income of\nthe alleged recipients.2301\n8.875. As to the first step of this analysis, we have described the tax treat ment applicable to the\nproperty covered by the Boeing FILOT Agreement and the Project Emerald FILOT Agreement above\nin paragraphs 8.857 and 8.858. We consider that the \"objective reasons behind that treatment\"\ncan be discerned from the stated purpose of the agreements. As expressed in the Boeing F ILOT\nAgreement, the purpose is \"to induce companies to locate in the State and to encourage\ncompanies now located in the State to expand their investments a nd thus to make use of and\nemploy workers and other resources of the State\".2302\n8.876. We observe that the disagreement between the parties primarily concerns the second step\nof the Appellate Body 's analysis, namely the identification of the benchmark tax treatmen t and\nmore specifically how \"comparably situated taxpayers \" should be defined. The identification of\ncomparable taxable, income, activity or property of \"comparably situated taxpayers \" and the tax\ntreatment applicable to such taxpayers under the second ste p of the Appellate Body's analysis has\ndirect implications for the comparison carried out under the third step, and the determination of\nwhether the Boeing F ILOT Agreement and the Project Emerald F ILOT Agreement involve the\nforegoing of revenue that is otherwise due. For the reasons detailed below, we are of the view that\nthe group of comparably situated taxpayers in this instance should be considered to comprise\nmanufacturers subject to the tax rules set out in the South Carolina Constitution with regard t o\nmanufacturing property, rather than large industrial users eligible for enhanced investment fee\nagreements, as argued by the United States.\n8.877. First, regarding the \"structure and organising principles \", a central feature of South\nCarolina's property tax reg ime is that it distinguishes between broad categories of property, with\ndifferent rules applying to each of these categories. 2303 This suggests to us that, in the case at\nhand the \"comparable property of comparably situated taxpayers \"2304 is manufacturing proper ty\nand therefore that the appropriate benchmark is the constitutional assessment ratio of 10.5% that\napplies generally to manufacturing property. Under the approach advanced by the United States,\nBoeing and other large industrial taxpayers are \"comparably situated\" because they satisfy the\nsame eligibility requirements relating to investment and employment levels. This means that the\ngroup of comparably situated taxpayers is defined by the criteria attached to the very measure\nthat is alleged to give rise to the foregoing of revenue otherwise due. We find the circularity of this\nargument to be problematic. Since the granting of tax incentives is often conditioned on criteria\nsimilar to the criteria that determine the eligibility for the FILOT agreements at i ssue in this\ndispute, accepting the argument advanced by the United States would imply that an important\ncategory of measures could not be found to be financial contribution s within the meaning of\nArticle 1 of the SCM Agreement. Indeed, if one follows the reasoning of the United States, the\nBoeing FILOT Agreement and the Project Emerald FILOT Agreement could only be found to involve\nrevenue foregone otherwise due if there were not a single taxpayer in South Carolina which met\nthe same criteria for eligibili ty for the same type of FILOT agreement and was thus comparably\nsituated. However, the United States does not explain the legal and conceptual basis for such a\nnarrow conception of the scope of Article 1.1(a)(1)(ii).\n8.878. Further to the above, the comparison su ggested by the United States of the tax treatment\nof one individual taxpayer under a challenged measure with the treatment of other taxpayers who\nqualify for the same tax treatment is at odds with cases in which the Appellate Body has\narticulated the compa rability test, which examine measures applicable to a more abstractly\nidentified group of taxpayers. The Appellate Body found in those cases that there was revenue\nforegone when the treatment of one category of taxpayers was more favourable than the\ntreatment of another comparable category. It gave as examples of comparable situations the\nfollowing: \"{i}n general terms, in this comparison, like will be compared with like. For instance, if\nthe measure at issue involves income earned in sales transactions, it might not be appropriate to\n\n2301 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), paras. 812-814 (fns omitted). While\nthe above analysis refers to comparable income, the Appellate Body has noted that it \"understand{s} that the\nsame approach would apply to identifying any comparable taxable activity, transaction, or property of\ncomparably situated taxpayers\". (Appellate Body Report, US – Large Civil Aircraft (2nd complaint), fn 1667).\n2302 See para. 8.872 above.\n2303 See para. 8.855 above.\n2304 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), fn 1667.\n\ncompare the treatment of this income with employment income\".2305 Furthermore, \"{f}or instance,\nif the measure at issue is concerned with the taxation of foreign -sourced income in the hands of a\ndomestic corporation, it might not be appropriate to compare the measure with the fiscal\ntreatment of such income in the hands of a foreign corporation \".2306 The very narrow benchmark\nsuggested by the United States is at odds with these examples of comparable situations given by\nthe Appellate Body.\n8.879. Second, to find that there is revenue forgone based on a comparison with \"comparably\nsituated taxpayers\" defined as comprising \"manufacturers\" is consistent with the analysis in the\noriginal proceeding of certain Washington State tax measures. The or iginal panel determined that\na Washington State B&O tax rate reduction for manufacturing of commercial aircraft and\ncomponents of such aircraft provided for under HB 2294 constituted a financial contribution under\nArticle 1.1(a)(1)(ii) of the SCM Agreement . In arriving at this conclusion, the panel made a\ncomparison between a general tax rate applicable to manufacturing activities in the State of\nWashington and the tax rate applicable under H B 2294 with respect to the manufacturing of\ncommercial aircraft an d components. The panel noted, in this regard, that it was possible to\nidentify a general rule applicable to \"every person … engaging in business as a manufacturer \".2307\nThe panel found further support for its characterization of the B&O tax rate reduction as a\ndeviation from a standard rate on the basis that HB 2294 provided that where certain\nrequirements were not met the reduced rate would cease to apply and the aircraft manufacturers\nwould be subject to the general rate for manufacturing. 2308 The Appellate Body observed that this\nsupported the panel 's view as to what were the benchmark tax rates because these rates\n\"reflected what would currently apply to these activities if the conditions for the lower rates were\nnot met\".2309\n8.880. The implication of the approach in the original proceeding is that , where tax treatment is\naccorded that is more favourable than the treatment resulting from a general rule, subject to\ncertain conditions, the measure involves the foregoing of revenue otherwise due based on a\ncomparison with the situation that would exist if the conditions for the more favourable treatment\nwere not met. In the case of the Boeing F ILOT Agreement and the Project Emerald F ILOT\nAgreement, it is clear that South Carolina 's tax code sets forth general rules on the taxation of\ndifferent types of property, including an assessment ratio of 10.5% for manufacturing property ,\nand that where a party to a FILOT agreement fails to meet the requirements to qualify for the\nlower assessment ratios, the higher assessment ratio under the general rule will be applied\nretroactively to the property covered by the agreements.2310\n8.881. In light of our view that the group of \"comparably situated taxpayers \" in this instance\nshould be considered to comprise manufacturers, subject to the constit utional property tax\nassessment ratio of 10.5% in respect of manufacturing property, rather than large industrial users\neligible for Enhanced FILOT agreements, we find that a comparison of the challenged tax\ntreatment with the properly identified benchmark tax treatment, in light of the reasons for the\nchallenged tax treatment2311, indicates the foregoing of government revenue otherwise due.\n8.882. We therefore conclude that each of the Boeing FILOT Agreement and the Project\nEmerald F ILOT Agreement involves a financial contributio n within the meaning of\nArticle 1.1(a)(1)(ii).\n\n2305 Appellate Body Report, US – FSC (Article 21.5 – EC), para. 90.\n2306 Appellate Body Report, US – FSC (Article 21.5 – EC), para. 92.\n2307 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.123.\n2308 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.127.\n2309 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 823. See also para. 825:\nThe Panel also determined that commercial aircraft and component manufacturers\nare subject to a lower tax rate, which would in certain circumstances revert to the\nhigher, general tax rates. The Panel moreover considered that the scope of the\ngeneral tax rates in relation to that of various lower tax rates did not alter its\nconclusion that th e general rates reflected what would have been applied to\ncommercial aircraft and component manufacturers in the absence of the B&O tax\nreduction.\n2310 Fee in Lieu of Tax Simplification Act, S.C. Code, Title 12, chapter 44, (Exhibit USA-245), section 12-\n44-140(B); Boeing FILOT Agreement, (Exhibit EU-470), sections 5.7(b) and 5.7(c); and Project Emerald FILOT\nAgreement, (Exhibit EU-556), section 4.3(a).\n2311 See para. 8.872 above.\n\n8.883. Further to the above, we note that the Boeing F ILOT Agreement and the Project Emerald\nFILOT Agreement include fee rebates. We recall the European Union 's position that if the Panel\nfinds that th e Boeing F ILOT Agreement and the Project Emerald F ILOT Agreement as a whole\nprovide financial contributions through the foregoing of government revenue otherwise due, within\nthe meaning of Article 1.1(a)(1)(ii), the Panel need not consider the European Uni on's alternative\nargument that the revenue credits can also be characteri zed as a direct transfer of funds within\nthe meaning of Article 1.1(a)(1)(i).2312 In light of our finding that the Boeing FILOT Agreement and\nthe Project Emerald F ILOT Agreement each involve a financial contribution within the meaning of\nArticle 1.1(a)(1)(ii), it is therefore unnecessary for us to pronounce on the European Union 's\nalternative argument.\n8.884. Finally, we recall the United States ' argument that the Project Emerald F ILOT Agreement\ndoes not provide a financial contribution to Boeing. While we f ind that the Project Emerald F ILOT\nAgreement involves a financial contribution within the meaning of Article 1.1(a)(1)(ii), we consider\nit a separate question whether this financial contribution was provided to Boeing. We note that the\nEuropean Union has not argued that any benefit from the Project Emerald F ILOT Agreement\npassed through to Boeing. In light of our conclusion below that the challenged FILOT agreements\nare not specific within the meaning of Article 2, we do not consider it necessary to answer the\nseparate question of whether the Project Emerald F ILOT Agreement provided a financial\ncontribution to Boeing.2313\n8.2.8.7.3.2 Whether there is a benefit\n8.885. The United States makes no substantive arguments to refute the European Union 's\nposition that the foregoing of taxes that are otherwise due \"clearly confers a benefit\".2314 We agree\nwith the panel in US – FSC that the foregoing of certain taxes that would otherwise be due confers\na benefit on the taxpayer concerned.2315 We therefore find that the reduction in property tax\nliability provided through the Boeing F ILOT Agreement and the Project Emerald F ILOT\nAgreement each confers a benefit within the meaning of Article 1.1(b).\n8.2.8.7.3.3 Whether the subsidy is specific\n8.886. The first question raised by the parties' arguments is whether the subsidy granted through\nthe property tax reductions provided for in the Project Emerald F ILOT Agreement and the Boeing\nFILOT Agreement, respectively, is specific within the meaning of Article 2. 1(a); i.e. whether \"the\ngranting authority, or the legislation pursuant to which the granting authority operates, explicitly\nlimits access to a subsidy to certain enterprises\".2316\n8.887. An analysis of whether a subsidy is specific within the meaning of Article 2. 1(a) must focus\non whether the granting authority, or the legislation pursuant to which the granting authority\noperates, limits the eligibility to receive the subsidy to certain enterprises. 2317 The European Union\n\n2312 European Union's second written submission, para. 715; first written submission, para. 684.\n2313 See Section 8.2.8.7.3.3 below.\n2314 European Union's first written submission, para. 687 (citing Panel Report, US – FSC, para. 7.103).\n2315 Panel Report, US – FSC, para. 7.103: \"{i}n our view, the financial contribution clearly confers a\nbenefit, in as much as both FSCs and their parents need not pay certain taxes that would otherwise be due.\"\n2316 The Appellate Body has explained that \"a subsidy is specific under Article 2.1(a) if the limitation on\naccess to the subsidy to certain enterprises is express, unambiguous, or clear from the content of the relevant\ninstrument, and not merely 'implied' or 'suggested\"'. (Appellate Body Report, US – Anti-Dumping and\nCountervailing Duties (China), para. 372). See also Panel Report, US – Large Civil Aircraft (2nd complaint),\npara. 7.192. With regard to the term \"certain enterprises\", the Appellate Body has explained that \"the relevant\nenterprises must be 'known and particularized', but not necessarily 'explicitly identified', and that they may\nhave 'some mutual or common relation or purpose', or 'degree of similarity'\". (Appellate Body Report, US –\nCarbon Steel (India), para. 4.365). \"{A}ny determination of whether a number of enterprises or industries\nconstitute 'certain enterprises' can only be made on a case-by-case basis\". (Appellate Body Report, US –\nAnti-Dumping and Countervailing Duties (China), para. 373 (quoting Panel Report, US – Upland Cotton,\npara. 7.1142)). See also Appellate Body Report, US – Washing Machines, paras. 5.220 and 5.221 (explaining\nthat the notion of \"certain enterprises\" in Article 2.2 of the SCM Agreement does not depend on the legal\npersonality of the subsidy recipients).\n2317 See, in particular, Appellate Body Report, US – Anti-Dumping and Countervailing Duties (China),\npara. 368 (\"Article 2.1(a) thus focuses not on whether a subsidy has been granted to certain enterprises, but\non whether access to that subsidy has been explicitly limited. This suggests that the focus of the inquiry is on\nwhether certain enterprises are eligible for the subsidy, not on whether they in fact receive it.\" (emphasis\n\ndoes not argue that the eligibility for the s ubsidy at issue is explicitly limited by virtue of\npronouncements of the granting authority; rather, the question before us is whether such an\nexplicit limitation exists by virtue of the legislation pursuant to which the granting authority\noperates.\n8.888. Since \"eligibility is key to a consideration of de jure specificity under subparagraphs (a)\nand (b) of Article 2.1 of the SCM Agreement \"2318, we consider that the term \"legislation pursuant\nto which the granting authority operates \" in Article 2.1(a) must be unders tood to mean the\nlegislation that defines the criteria of eligibility for a subsidy. 2319 Charleston County entered into\nthe Project Emerald FILOT Agreement and the Boeing FILOT Agreement pursuant to the provisions\nof the Simplified FILOT Act that authorize th e conclusion of enhanced investment fee agreements\nwith companies meeting the requirements set out in those provisions. 2320 Accordingly, these\nprovisions constitute \"the legislation pursuant to which the granting authority operates \" for\npurposes of the analysis under Article 2.1(a).2321\n8.889. We note, in this respect, that the European Union does not advance any argument as to\nhow the text of the relevant provisions of the Simplified FILOT Act relating to enhanced investment\nfee agreements limits the eligibility for th e subsidy to certain enterprises. While the Act provides\nthat such agreements can be concluded only if certain conditions relating to levels of investment\nand/or employment are satisfied 2322, we consider that these conditions do not expressly limit the\neligibility for enhanced investment fee agreements to certain enterprises.\n8.890. Because the Simplified FILOT Act is \"the legislation pursuant to which the granting\nauthority operates \", we see no merit in the argument of the European Union that the subsidy\nshould be f ound to be specific under Article 2.1(a) on the basis that certain resolutions and\nordinances pursuant to which Charleston County authorized and approved the Project Emerald\nFILOT Agreement and Boeing F ILOT Agreement \"explicitly limited the availability of the FILOT\narrangement\" to the Project Emerald companies and to Boeing. 2323 The fact that the County\nResolution and Ordinance adopted by Charleston County in connection with the FILOT agreements\nat issue only identify the Project Emerald companies and Boeing as beneficiaries of an enhanced\ninvestment fee agreement simply reflects the application of the Simplified FILOT Act in individual\ncases and does not demonstrate an \"explicit limitation \" of access to the subsidy to certain\nenterprises.2324\n8.891. In this respect, we disagree with the European Union 's argument that \"the actions of\nCharleston County are the proper focus for whether the granting authority explicitly limited access\nto the subsidy to certain enterprises \". Even assuming that in this case Charleston County could be\n\noriginal)), and US – Large Civil Aircraft (2nd complaint), para. 753 (\"{t}his inquiry focuses not only on whether\nthe subsidy was provided to the particular recipients identified in the complaint, but focuses also on all\nenterprises or industries eligible to receive that same subsidy\").\n2318 Appellate Body Report, US – Carbon Steel (India), para. 4.384.\n2319 This interpretation is also supported by a reading of Article 2.1(a) in the context of Article 2.1(b).\nSee Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 750.\n2320 The agreements and associated county resolutions and ordinances explicitly refer to the relevant\nprovisions of section 12-44-30 of the South Carolina Code. (Project Emerald FILOT Agreement, (Exhibit EU-\n556), p. 2; Charleston County Council, Minutes of 21 December 2004 Meeting where an Inducement Resolution\nis approved, (Exhibit EU-561), p. 52; Charleston County, Ordinance 1476 (19 December 2006), (Exhibit EU-\n562), p. 1; Boeing FILOT Agreement, (Exhibit EU-470), p. 1; Charleston County Council, Minutes of\n17 November 2009 Meeting where an Inducement Resolution is approved, (Exhibit EU-540), section 2; and\nCharleston County Council, Minutes of 12 January 2010 Meeting where a County Ordinance is approved,\n(Exhibit EU-541), p. 4).\n2321 The Appellate Body Report in the original proceeding emphasizes the need for an inquiry concerning\nspecificity under Article 2.1(a) properly to take into account the broader legislative framework pursuant to\nwhich the subsidy has been provided. (Appellate Body Report, US – Large Civil Aircraft (2nd complaint),\nparas. 750, 753, and 841). Also see Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.565.\n2322 See para. 8.856 above. See Fee in Lieu of Tax Simplification Act, S.C. Code, Title 12, chapter 44,\n(Exhibit USA-245), section 12-44-30(7), for the definition of an \"enhanced investment\" project.\n2323 See para. 8.862 above.\n2324 The European Union argues that \"each of these fee agreements is explicitly restricted to a specific\ncompany or group of companies\". (European Union's second written submission, fn 1206). In our view, this has\nno bearing on whether the eligibility for the subsidy is explicitly limited to certain enterprises. We also consider\nthat the fact that the Project Emerald FILOT Agreement was entered into pursuant to agreements concluded\nbetween Charleston County and the Project Emerald Companies does not demonstrate that access to the\nsubsidy is explicitly limited to certain enterprises.\n\nconsidered a granting authority within the meaning of Article 2.1(a), a proper analysis of whether\neligibility for the subsidy is limited to certain enterprises must take into account that Charleston\nCounty operates pursuant to legislation of Sout h Carolina. Charleston County does not\nautonomously define the conditions of eligibility for the subsidy; rather, when Charleston County\n(or any other county in South Carolina) enters into a FILOT agreement, it acts on the basis of\nconditions of eligibilit y provided for in legislation adopted by South Carolina. Thus, treating\nCharleston County as \"granting authority \" provides no justification to narrow the scope of the\nanalysis under Article 2.1(a) to \"the actions of Charleston County \".2325 We recall, in this respect,\nthat in the original proceeding the Appellate Body rejected the view that the use of the term\n\"granting authority\" in Article 2.1(a) means that \"the analysis of specificity must be limited to the\nauthority actually granting the alleged subsidy \", \"in isolation from the legislative and regulatory\nframework within which {the granting authority} operates\".2326\n8.892. In light of the above, we find that the European Union has failed to establish that access to\nthe subsidy granted through the property tax reducti ons provided for in the FILOT Agreements at\nissue is explicitly limited to certain enterprises within the meaning of Article 2.1(a).\n8.893. Having made such a finding that the subsidy is not specific under Article 2.1(a), we find it\nunnecessary to pronounce on t he issues raised by the parties with regard to whether the\nconditions attached to the subsidy satisfy the requirements of Article 2.1(b). 2327 We note that in\nthe original proceeding the Appellate Body observed that \"having found that the IRB subsidies are\n\n2325 We note, in this regard, that consistent with our approach to whether the FILOT Agreements at\nissue are specific, within the meaning of Article 2.1(a), the original panel concluded that subsidies provided\nthrough industrial revenue bonds issued by the City of Wichita were not specific in the sense of Article 2.1(a),\nbased on an examination of the relevant Kansas State statutory provisions. Thus, the panel did not consider\nthat the fact that the Bonds were issued by the City of Wichita warranted a limitation of the scope of the\nanalysis to \"the actions of\" the City of Wichita as granting authority. (Panel Report, US – Large Civil Aircraft\n(2nd complaint), para. 7.743). See also Appellate Body Report, US – Large Civil Aircraft (2nd complaint),\npara. 875.\n2326 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 783. Also see paras. 756-760.\nThe Appellate Body considered the question of how the notion of \"the granting authority\" relates to the scope\nof the specificity analysis in the context of an appeal by the European Union of the panel's finding that,\nassuming arguendo that the allocation of patent rights under NASA and DOD contracts and agreements with\nBoeing were a subsidy, that subsidy would not be specific under Article 2 of the SCM Agreement. The Appellate\nBody stated that it did \"not consider that the use of the term 'granting authority' in the singular limits the\ninquiry. The use of the term 'granting authority', in our view, does not preclude there being multiple granting\nauthorities. Rather, this is likely where a subsidy is part of a broader scheme.\" (Appellate Body Report, US –\nLarge Civil Aircraft (2nd complaint), para. 749). The Appellate Body also noted that \"{w}hile the scope and\noperation of the granting authority is relevant to the question of whether such an access limitation with respect\nto a particular class of recipients exists, it is important to keep in mind that it is not the purpose of a specificity\nanalysis to determine whether the authorities involved in granting the subsidies constitute a single subsidy\ngrantor or several grantors\". (Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 756\n(emphasis original)). In concluding this Section of the Report, the Appellate Body noted that \"the granting\nauthority (which may amount to a number of such authorities) and the legislation pursuant to which such\ngranting authority(ies) operate(s) must be assessed within the legal framework of the WTO Member concerned\nat various levels of government, legislation, and regulation\". (Appellate Body Report, US – Large Civil Aircraft\n(2nd complaint), para. 760).\n2327 The United States argues that FILOT agreements are not specific, within the meaning of\nArticle 2.1(b) of the SCM Agreement, because the eligibility criteria attached to these agreements regarding\ninvestment and employment levels are \"objective criteria or conditions\", within the meaning of Article 2.1(b)\n(and fn 2) of the SCM Agreement. (United States' first written submission, para. 635; second written\nsubmission, para. 550). While the European Union does not challenge the characterization of the investment\nand employment-related criteria as \"objective\", it points out that Article 2.1(b) requires that the objective\ncriteria govern both eligibility and amount of the subsidy and that eligibility be automatic. According to the\nEuropean Union, the eligibility criteria for the FILOT agreements do not satisfy these conditions because \"the\namount of the subsidy depends on the specific terms negotiated between the county and the project sponsor,\nwhile the US' purportedly 'objective' criteria are merely minimum requirements for a county's discretionary\ndecision to negotiate a FILOT agreement\". (European Union's second written submission, para. 720). See also\nEuropean Union's comments on United States' response to Panel question No. 139, fn 17 and para. 17 (citing\nexplanation by the South Carolina Department of Revenue that \"{a} fee in lieu of property taxes is granted by\nthe county and it is in the sole discretion of the county as to whether to grant a fee in lieu of property taxes for\na particular project\"). The United States rejects this criticism as unfounded because the European Union \"fails\nto explain whether or how these 'negotiations' affect the eligibility for, or the amount of, the alleged subsidy\"\nand has not identified any instances in which two taxpayers with projects with identical investment and\nemployment profiles have been treated differently with respect to either eligibility for, or the amount of, the\nalleged subsidy. (United States' second written submission, para. 551).\n\nnot specific within the meaning of Article 2.1(a), analysis by the Panel under Article 2.1(b) was not\nnecessary\".2328\n8.894. The second question relating to specificity raised by the parties ' claims and arguments is\nwhether the subsidy granted through the property tax reductions provided for in the Project\nEmerald F ILOT Agreement and the Boeing F ILOT Agreement is specific within the meaning of\nArticle 2.1(c) of the SCM Agreement. The European Union argues that the subsidy is specific in\nterms of each of the four factor s listed in the second sentence of Article 2.1(c). 2329 The first of\nthese factors is the \"use of a subsidy programme by a limited number of certain enterprises\".2330\n8.895. According to data provided by the United States in response to a Panel question, 954\nFILOT agreements were concluded in South Carolina between 2000 and 2012. Furthermore, of the\ntotal of 954 FILOT agreements concluded by South Carolina between 2000 and 2012, 929\nagreements provided for a 6% assessment ratio and 25 agreements provided for a 4%\nassessment ratio. Of the agreements with a 4% assessment ratio, 20 were accompanied by special\nsource revenue credits. The data provided by the United States also shows that with regard to\nCharleston County, 29 FILOT agreements were concluded between 2000 -2012. Of that total, 26\nwere agreements with a 6% assessment ratio and three were agreements with a 4% assessment\nratio. Th e th ree agreements with a 4% assessment ratio were accompanied by special source\nrevenue credits.2331\n8.896. The parties disagree on whether the anal ysis of specificity under this and other factors\nenumerated in the second sentence of Article 2.1(c) should be conducted at the level of South\nCarolina or at the level of Charleston County. In our view, it is not necessary to decide this issue.\nEven assumi ng that, as argued by the European Union, the analysis should be confined to\nCharleston County as granting authority2332, we consider that the European Union has not provided\nsufficient reasoning and evidence to warrant a finding that the subsidy is specific in fact by reason\nof the use of the subsidy programme by a limited number of certain enterprises.\n8.897. The European Union argues that the fact that Charleston County has entered into only two\nenhanced investment FILOT agreements, three FILOT agreements of any kind providing for a 4%\nassessment ratio and only thirty -three negotiated FILOT agreements overall is indicative of \"a\n\n2328 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 876.\n2329 See para. 8.862 above.\n2330 The Appellate Body has explained that this factor is to be interpreted to mean that \"a limited\nquantity of enterprises or industries qualifying as 'certain enterprises' must be found to have used the subsidy\nprogramme, without requiring that the limited quantity represent a subset of some larger grouping of 'certain\nenterprises'\". (Appellate Body Report, US – Carbon Steel (India), para. 4.378). Moreover, this first factor does\nnot require a finding of discrimination between \"certain enterprises\" and other, similarly situated enterprises.\n(Appellate Body Report, US – Carbon Steel (India), paras. 4.381-4.390). According to the Appellate Body,\n\"{w}hat matters for the inquiry called for by subparagraph (a) and the first factor in subparagraph (c) is the\nexistence of a limitation on access to, or use of, a subsidy\". (Appellate Body Report, US – Carbon Steel (India),\npara. 4.385; see also Panel Report, US – Carbon Steel (India), para. 7.121). The Appellate Body has also\nindicated that a \"subsidy programme\" as used in this first factor in Article 2.1(c) means a \"plan or scheme of\nsome kind\". (Appellate Body Report, US – Countervailing Measures (China), para. 4.141).\n2331 United States' response to Panel question No. 142, paras. 14 and 15. In response to the same\nquestion the United States also provided a list of all (28) FILOT agreements with a 4% assessment ratio\nconcluded in South Carolina between 2000 and 2014 (Exhibit USA-553).\n2332 While the panel in the original proceeding examined the existence of specificity under Article 2.1(a)\nin the case of the tax abatements granted by industrial revenue bonds issued by the City of Wichita on the\nbasis of the relevant Kansas State legislation, the panel limited the scope of its examination of specificity under\nArticle 2.1(c) to the City of Wichita as granting authority. (Panel Report, US – Large Civil Aircraft (2nd\ncomplaint), paras. 7.746-7.779). The panel explained that for purposes of the analysis required by the last\nsentence of Article 2.1(c) of the extent of diversification of economic activities within the jurisdiction of the\ngranting authority, the City of Wichita was the relevant granting authority:\nIn the case of the IRBs provided to Boeing and Spirit, although the State of Kansas\nimplemented the legislation authorizing the issuance of IRBs, individual cities and\ncounties are responsible for actually granting the IRBs. Therefore , the City of\nWichita is the relevant granting authority and the diversification of the Wichita\neconomy must be considered.\n(Panel Report, US – Large Civil Aircraft (2nd complaint), fn 2125)\nThe panel's approach to the scope of the de facto specificity analysis was not raised on appeal. (Appellate Body\nReport, US – Large Civil Aircraft (2nd complaint), paras. 859-889).\n\nlimited number of users \".2333 The European Union contends that the data on the number of FILOT\nagreements provided by the United States in r esponse to a Panel question shows that the number\nof FILOT agreements concluded by Charleston County is \"quite small \", both in absolute and in\nrelative terms, and thus supports its position that FILOT agreements have been used by \"a limited\nnumber of certain enterprises\" within the meaning of Article 2.1(c).2334\n8.898. We note, first, that in making these arguments purporting to demonstrate how the subsidy\nprogramme is used by a limited number of certain enterprises, the European Union does not\naddress the two factor s that must be taken into account in any analysis of de facto specificity\nunder the last sentence of Article 2.1(c) , i.e. the extent of diversification of economic activities\nwithin the jurisdiction of the granting authority, and the length of time during which the subsidy\nprogramme has been in operation. 2335 Second, if, \"{i}t is the function of the inquiry under\nsubparagraph (c) to determine whether, for example, only a limited number of certain enterprises,\nin fact, have access to the subsidy \"2336, it is necess ary to provide some reasoning as to how a\ngiven number of enterprises using a subsidy programme reflects the existence of a limitation on\naccess to the subsidy. 2337 That Charleston County has entered into three enhanced investment\nFILOT agreements, and thirty-three negotiated FILOT agreements in total may simply be a logical\nconsequence of the application of the conditions attached to the subsidy in the particular context\nof that County 's economy.2338 To qualify a given number of agreements as \"quite small \" is not\nsufficient, in our view, to conclude that there is de facto specificity based on the use of the subsidy\nprogramme by a limited number of certain enterprises.\n8.899. On the other hand, if we ascertain whether there is in this case use of a subsidy\nprogramme by a limited number of certain enterprises at the level of South Carolina, we note that\nthe information before us indicates that 954 FILOT agreements of different types were concluded\nin South Carolina from 2000 to 2012 and that the European Union has not con tested that , as\nargued by the United States, this involved a wide variety of industries and enterprises. The\nEuropean Union argues that the number of FILOT agreements concluded in South Carolina is not\nrelevant, but nevertheless notes that this number is \"quite small\" on the basis that the number of\nall active FILOT agreements in South Carolina in 2013 represented at most 25% of all\nmanufacturing establishments in South Carolina. 2339 This argument suffers from the same flaws\n\n2333 European Union's first written submission, para. 689; Charleston County, Chart of negotiated\nFee-in-Lieu-of-Taxes (FILOT) Agreements, (Exhibit EU-544); and Charleston County Negotiated FILOT\nAgreements, (Exhibit EU-545).\n2334 European Union's comments on United States response to Panel question No. 142, para. 22.\n2335 Article 2.1(c), last sentence. See Panel Reports, US – Countervailing Measures (China),\nparas. 7.250-7.256; and US – Washing Machines, paras. 7.251-7.255. While these reports addressed the\nrequirements of the last sentence of Article 2.1(c) in the context of countervailing duty determinations, there is\nnothing in that sentence to suggest that it does not also apply to determinations of de facto specificity in\nproceedings under Part III of the SCM Agreement. We recall that the panel in the original proceeding rejected\nan argument of the European Communities that industrial revenue bonds granting property tax abatements\nwere de facto specific by virtue of the use of the subsidy programme by a limited number of certain enterprises\nbecause the European Communities failed to take into account the two factors identified in the last sentence of\nArticle 2.1(c). (Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.778).\n2336 Appellate Body Report, US – Carbon Steel (India), para. 4.384.\n2337 We agree, in this regard, with the observations of the panel in US – Carbon Steel (India) on the\nrelationship between Articles 2.1(a) and 2.1(c):\nThese two provisions complement one another. Article 2.1(a) concerns limitations\non access to subsidies that exist in law. Article 2.1(c) concerns limitations on\naccess that are not expressly provided for in legal instruments, but whose\nexistence may nevertheless be determined by reference to facts. In both cases,\nwhat matters is the existence of a restriction on access to the subsidy, in the sense\nthat the subsidy is available to certain enterprises, i ndustries, or groups of\nenterprises or industries, but not to others.\n(Panel Report, US – Carbon Steel (India), para. 7.121)\n2338 The European Union asserts that according to the data provided by the United States, Charleston\nCounty had 29 active FILOT agreements in 2012, representing at most 10% of the total number of\nmanufacturing establishments in Charleston County. (European Union's comments on United States' response\nto Panel question No. 142, para. 22). The European Union does not explain how this comparison of the number\nof FILOT agreements with the total number of manufacturing establishments in Charleston County indicates\nthat the subsidy is specific in fact by virtue of the use of a subsidy programme by a limited number of certain\nenterprises. In particular, the European Union's argument fails to address the possibility that the total number\nof FILOT agreements in Charleston County can be logically explained as resulting from the application of the\nconditions attached to the different types of FILOT agreements in the context of that County's economy.\n2339 European Union's comments on United States' response to Panel question No. 142, para. 22.\n\nthat we have discussed above in respect of the European Union's argument concerning the number\nof FILOT agreements concluded by Charleston County.\n8.900. Third, the argument of the European Union to support its claim that the subsidy is de facto\nspecific because of \"the granting of disproportiona tely large amounts of subsidy to certain\nenterprises\", is inconsistent with the guidance provided by the Appellate Body as to how this\n\"relational concept\" should be applied.2340 The various arguments made by the European Union in\nthis regard fail to address the question of whether there is a \"disparity between the expected\ndistribution of that subsidy, as determined by the conditions of eligibility, and its actual\ndistribution\" and, more specifically, \"whether the actual allocation of the 'amounts of subsidy ' to\ncertain enterprises is too large relative to what the allocation would have been if the subsidy were\nadministered in accordance with the conditions for eligibility for that subsidy\".\n8.901. The European Union argues that Boeing and its suppliers are \"disproportionate users \"\nbased on the fact that both enhanced investment FILOT agreements, and two of three FILOT\nagreements entered into by Charleston County were concluded with Boeing and its suppliers , and\nthat the FILOT agreements concluded with Boeing and its suppliers accounted for more than 55%\nof the total minimum amounts of investment covered by the FILOT agreements concluded by\nCharleston County.2341 This argument does not demonstrate that there is disproportionality within\nthe meaning of Article 2.1(c) beca use it does not involve any analysis of the actual allocation of\nthe amounts of the subsidy at issue and of how that allocation is different from what would be\nexpected in light of the eligibility conditions attached to the conclusion of enhanced investmen t\nFILOT agreements.\n8.902. The European Union also argues that Boeing and Westvaco, \"have received 100 per cent of\nthe 4 per cent FILOT granted by Charleston County since 1998 \" but account for only 27% of total\nemployment in manufacturing employment in the Charl eston MSA and 44% of the manufacturing\nemployment in Charleston County. 2342 The European Union does not explain, and we fail to see,\nhow a comparison of the number of the agreements with the percentage of manufacturing\nemployment provides any indication of a disparity between the actual distribution of the amounts\nof the subsidy and the distribution that would be expected on the basis of the eligibility criteria\nprovided for in the Simplified FILOT Act. In particular, apart from the fact that it does not ident ify\nthe amount of the subsidy and how that amount is distributed, the European Union does not\n\n2340 The Appellate Body has discussed this issue as follows:\nThe language of Article 2.1(c) indicates that the f irst task is to identify the\n\"amounts of subsidy\" granted. Second, an assessment must be made as to\nwhether the amounts of subsidy are \"disproportionately large\". This term suggests\nthat disproportionality is a relational concept that requires an assessmen t as to\nwhether the amounts of subsidy are out of proportion, or relatively too large. When\nviewed against the analytical framework set out above regarding Article 2.1(c), this\nfactor requires a panel to determine whether the actual allocation of the \"amou nts\nof subsidy\" to certain enterprises is too large relative to what the allocation would\nhave been if the subsidy were administered in accordance with the conditions for\neligibility for that subsidy as assessed under Article 2.1(a) and (b). In our view,\nwhere the granting of the subsidy indicates a disparity between the expected\ndistribution of that subsidy, as determined by the conditions of eligibility, and its\nactual distribution, a panel will be required to examine the reasons for that\ndisparity so as ultimately to determine whether there has been a granting of\ndisproportionately large amounts of subsidy to certain enterprises.\n(Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 879 (fn omitted)).\nSee also para. 883 (\"{w}here the actual distribution of a subsidy deviates materially from the expected\ndistribution of that subsidy, a panel would need to examine the reasons provided by the parties to explain that\noutcome\"), and para. 886 (\"a panel's inquiry under Article 2.1(c) should focus on the reasons that explain any\ndisparity between the actual and expected distributions of a subsidy\"). The Appellate Body reiterated its view\nthat the third factor in Article 2.1(c) reflects a relational concept in its Report in US – Carbon Steel (India),\nparas. 4.388 and 4.389. See also Panel Report, US – Washing Machines, paras. 7.231-7.244. The panel in US –\nWashing Machines concluded from its review of Appellate Body case law on this issue that \"the relational\nnature of the analysis {means} that a finding of disproportionality must be based on an assessment of how the\namount of subsidy actually received relates to an objective benchmark indicative of the amount of subsidy that\nthe recipient would have been expected to receive if the subsidy were distributed proportionately, in\naccordance with the conditions for eligibility\". (Panel Report, US – Washing Machines, para. 7.236).\n2341 European Union's first written submission, para. 690; second written submission, para. 717.\n2342 European Union's response to Panel question No. 112, paras. 199 and 200. (underlining original,\nemboldening removed)\n\nprovide any reasoning as to why, in light of those eligibility criteria, one would expect a\ndistribution of the subsidy in proportion to the percentage of manufac turing employment\naccounted for by the companies in question.\n8.903. Finally, we see no merit in the argument that \"the United States cannot justify why the\ninvestments of Boeing, its suppliers (Vought/Global Aeronautica), and Westvaco were accorded a\n4% assessment rate, while all of the other 30 recipients were accorded a 6 % assessment rate\".\nSince this difference is a direct consequence of the application of the eligibility criteria, it cannot\nform the basis for a finding of disproportionality within the analyt ical framework set out by the\nAppellate Body.2343\n8.904. Regarding the fourth factor listed in the second sentence of Article 2.1(c), we find that the\nEuropean Union has failed to show that the FILOT agreements at issue in this dispute are de facto\nspecific within the meaning of Article 2.1(c) on account of \"the manner in which discretion has\nbeen exercised by the granting authority in the decision to grant a subsidy\". The mere existence of\ndiscretion is not a sufficient basis to find that a subsidy is de facto specific under Article 2.1(c).\nRather there must be analysis of how discretion has been exercised by the granting authority in\nthe grant of the subsidy. 2344 In that regard, footnote 3 to Article 2.1(c) requires consideration of\n\"information on the frequency with which applications for a subsidy are refused or approved and\nthe reasons for such decisions \". The European Union does not submit any such information in\nsupport of its argument that the Boeing F ILOT Agreement is specific because of the discretionary\nnature of the measure. The fact that FILOT agreements are individually negotiated with particular\ncompanies and must be approved as to the particular agreement by the county council 2345 says\nnothing about how discretion \"has been exercised in the grant of the subsi dy\" and can therefore\nnot justify a finding of specificity under Article 2.1(c).\n8.905. Finally, we note that the European Union also argues that the subsid y provided through\nthe property tax reductions under the Project Emerald F ILOT Agreement and the Boeing F ILOT\nAgreement is specific pursuant to Article 2.3 of the SCM Agreement. Article 2.3 provides that\n\"{a}ny subsidy falling under the provisions of Article 3 shall be deemed to be specific\". We reject\nthis argument because in Section 10 of this Report we find that the European Union has failed to\nestablish that any subsidy at issue in this proceeding is prohibited by Articles 3.1 and 3.2 of the\nSCM Agreement.\n8.906. In light of the above, we find that the European Union has failed to establish that\nthe subsidy provid ed through the property tax reduction s under the Project Emerald\nFILOT Agreement and the Boeing F ILOT Agreement is specific within the meaning of\nArticles 2.1(a) or (c) of the SCM Agreement.\n8.907. We recall that while we f ind in Section 8.2.8.7.3.1 above that the property tax reduction s\nprovided for through the Project Emerald F ILOT Agreement constitute a financial contribution, we\nhave left open the question of whether this is a direct financial contribution to Boeing. In light of\nour finding that the subsidy provided through the Project Emerald FILOT Agreement is not specific,\nwe consider it unnecessary to decide that issue.\n8.2.8.7.4 Conclusion\n8.908. In light of our findings above, we conclude that the European Union has failed to establish\nthat the fee-in-lieu-of taxes arrangements set forth in the Boeing F ILOT Agreement and Project\nEmerald FILOT Agreement are specific, and therefore involve specific subsidies within the meaning\nof Articles 1 and 2 of the SCM Agreement.\n\n2343 European Union's response to Panel question No. 112, para. 203.\n2344 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 798; and Panel Report, US –\n2345 European Union's first written submission, para. 691.\n\n8.2.8.8 Whether the corporate inco me tax credits in connection with the designation of\nthe Project Gemini and Project Emerald portions of the Project Site as part of the\nCharleston-Colleton multi-county industrial park involve specific subsidies to Boeing\n8.2.8.8.1 Introduction\n8.909. In paragraph 24 of it s panel request, the European Union identifies as one of the Project\nGemini-related subsidies presently benefiting Boeing:\nThe provision of corporate income tax credits, as provided for in S.C. Code\n§ 12-6-3360(E)(1), by virtue of designating the Boeing si te in North Charleston as\npart of a business/industrial park jointly established and developed by Charleston\nCounty and Colleton County, South Carolina.\n8.910. In paragraph 25 of its panel request, the European Union identifies as one of the Project\nEmerald-related subsidies presently benefiting Boeing:\nThe provision of corporate income tax credits, as provided for in S.C. Code\n§ 12-6-3360(E)(1), by virtue of designating the Project Emerald site at Charleston\nInternational Airport as part of a business/industrial park jointly established and\ndeveloped by Charleston County and Colleton County, South Carolina.\n8.911. The European Union argues that these above-referenced tax credits reduce Boeing's South\nCarolina income tax liability, and thereby constitute specific subsid ies to Boeing within the\nmeaning of Articles 1 and 2 of the SCM Agreement.\n8.912. The South Carolina Income Tax Act, contained in Title 12, chapter 6 of the South Carolina\nCode, provides for various types of corporate income tax credits, including a \"job tax credi t\" for\nnew full -time jobs created in the state pursuant to section 12 -6-3360(C) of the South Carolina\nCode. In addition, the Act provides that \"{t}axpayers which qualify for the job tax credit provided\nin subsection C and which are located in a business or industrial park jointly established and\ndeveloped by a group of counties pursuant to Section 13 of Article VIII of the Constitution of this\nState are allowed an additional one thousand dollar credit for each new full -time job created\".2346\nThese additional tax credits (the MCIP job tax credits) are at issue in the present proceeding.\n8.913. Section 13 of Article VIII of the South Carolina Constitution provides that \"{c}ounties may\njointly develop an industrial or business park with other counties within the geograp hical\nboundaries of one or more of the member counties \". Pursuant to this authority, Charleston County\nand Colleton County entered into an Agreement for Development for a Joint County Industrial Park\nin September 1995.2347 This original Agreement was amended from time to time to add or remove\nproperty to or from the Charleston -Colleton Multi -County Industrial Park (Charleston -Colleton\nMCIP). In December 2006, Charleston County included inter alia the Project Emerald-portion of the\nProject Site within the limit s of the Charleston -Colleton MCIP 2348, as Charleston County had\nundertaken to do in an Inducement and Millage Rate Agreement concluded on 21 December 2004\nas part of Project Emerald. 2349 In February 2010, Charleston County included the Project Gemini -\n\n2346 South Carolina Income Tax Act, S.C. Code, Title 12, chapter 6, (Exhibit EU-509), section 12-6-\n3360(E)(1).\n2347 See United States' first written submission, para. 572.\n2348 Charleston County Council Ordinance 1475, 5 December 2006, An Ordinance to amend Ordinance\nNo. 972, adopted September 19, amending the agreement for development of a joint county industrial park\neffective as of September 1, 1995, by and between Charleston County, South Carolina and Colleton County,\nSouth Carolina, providing for the development of a jointly owned and operated industrial/business park so as\nto (1) revise and clarify certain terms of the agreement, (2) include additional property in Charleston County\nas part of the joint county industrial park, (3) remove certain property in Charleston County from the industrial\npark, (4) and other matters relating thereto (Charleston County Council Ordinance 1475 (5 December 2006),\n(Exhibit EU-555)).\n2349 Section 2.06 of that Agreement provides: \"{t}he County council covenant to take all action\nnecessary to expand the park pursuant to the terms of the Park Agreement in order that the Site will be\nlocated entirely within the Park. The County will use its good faith best efforts to ensure that the Site remains a\npart of the Park as long as is necessary to enable the Company to claim the maximum jobs tax credits for each\njob created by the Company at the Project\". (Inducement and Millage Rate Agreement between Charleston\nCounty and Project Emerald (21 December 2004), (Exhibit EU-553), p. 4).\n\nportion of the Project Site within the limits of the Charleston -Colleton MCIP 2350, as Charleston\nCounty had undertaken to do in the Boeing F ILOT Agreement concluded on 2 December 2010 as\npart of Project Gemini.2351\n8.2.8.8.2 Main arguments of the parties\n8.914. The European Union argues that the additional job tax credits 2352, provided to Boeing by\nvirtue of Charleston County's designation of the Project Gemini and Project Emerald portions of the\nProject Site as part of the Charleston -Colleton MCIP, constitute specific subsidies to Boeing wit hin\nthe meaning of Articles 1 and 2 of the SCM Agreement. 2353 A comparison of the tax treatment of\njobs created at Boeing 's facilities with the tax treatment of jobs created at facilities outside of an\nMCIP demonstrates that the tax treatment granted to Boeing by means of the challenged MCIP job\ntax credits represents the foregoing of government revenue otherwise due. 2354 The reductions of\nBoeing's state income tax liability through the MCIP job tax credits confer benefits within the\nmeaning of Article 1.1(b) 2355, and are specific within the meaning of Articles 2.1(a) and 2.1(c).\nIndeed, the Charleston County Ordinances designating the Project Gemini and Project Emerald\nportions of the Project Site as part of the Charleston -Colleton MCIP explicitly limit access to th e\nchallenged MCIP job tax credits to certain enterprises. In addition, Charleston County has\ndesignated the premises of only a limited number of enterprises as within a multi-county industrial\npark, and the manner in which the county has exercised its disc retion further indicates specificity.\nFinally, the MCIP job tax credits are regionally specific, since they are limited to certain enterprises\nlocated within a designated geographic region within the jurisdiction of the granting authority.2356\n8.915. The United Stat es argues that the European Union has failed to establish a prima facie\ncase that the MCIP job tax credits are financial contributions or confer benefits: since the European\nUnion claims that Boeing will have no South Carolina taxable income as a result of the Income\nAllocation and Apportionment Agreement, the MCIP job tax credits will offset nothing. 2357\nNotwithstanding the above, the MCIP job tax credits are not specifi c within the meaning of\nArticle 2 since they are broadly available and widely used. Indeed , neither the State of South\nCarolina nor the South Carolina Income Tax Act explicitly limit s access to job tax credits to certain\nenterprises. Furthermore, MCIP designations are commonplace in the State of South Carolina, and\n\n2350 Charleston County Council Ordinance 1626 (2 February 2010), An Ordinance to further amend the\nagreement for development of a joint county industrial park, by and between Charleston County, South\nCarolina and Colleton County, South Carolina, providing for the development of a jointly owned and operated\nindustrial/business park, so as to include additional property in Charleston County as part of the joint county\nindustrial park (Charleston County Ordinance 1626 (2 February 2010), (Exhibit EU-516), section 1). This\nOrdinance amended the Original Agreement so as to expand the Park premises located within Charleston\nCounty by including a parcel \"owned by the Charleston County Aviation Authority and leased to The Boeing\nCompany\". This parcel, also referred to in the Ordinance as the \"Boeing Tract\", is described in detail in Exhibit\nA to the Ordinance. The Ordinance also provides for the distribution of revenues generated by the Park through\nthe payment of fees in lieu of ad valorem property taxes. See Charleston County Ordinance 1626\n(2 February 2010), (Exhibit EU-516), section 2.\n2351 Section 5.3 of the Boeing FILOT Agreement provides that \"{t}he County will designate the Project\nas part of a Multi-County Park pursuant to the Multi-County Park Act and will, to the extent permitted by law,\nuse its best, reasonable efforts to maintain such designation on terms which provide any additional jobs tax\ncredits afforded by the laws of the State for projects located within multi-county industrial or business parks\nfor all jobs created by the Company during the Investment Period and which facilitate the Special Source credit\narrangements set forth herein\". (Boeing FILOT Agreement, (Exhibit EU-470), section 5.3).\n2352 The European Union does not challenge the standard job tax credits provided under S.C. Code\nsection 12-6-3360(c). (See European Union's first written submission, para. 628).\n2353 With respect to Project Gemini-related job tax credits, see European Union's first written\nsubmission, paras. 627-641; and second written submission, paras. 675-682. With respect to Project\nEmerald-related additional tax credits, see European Union's first written submission, paras. 709-720; and\nsecond written submission, paras. 733-736.\n2354 European Union's first written submission, paras. 631-634 and 712-714; second written submission,\nparas. 675-677, 733, and 734.\n2355 European Union's first written submission, paras. 636, 637, 715, and 716 (referring to Panel Report,\nUS – FSC, para. 7.103).\n2356 European Union's first written submission, paras. 638-641 and 717-720; second written submission,\nparas. 679-682, 735, and 736.\n2357 United States' first written submission, paras. 571-574 and 607; second written submission,\npara. 606.\n\nthey are provided to a number of enterprises located within any number of different MCIPs\nthroughout the state.2358\n8.2.8.8.3 Evaluation by the Panel\n8.916. In this Section of the Report, the Panel evaluates the European Union 's claims that the\nMCIP job tax credits, granted to Boeing by virtue of the de signation of the Project Gemini and\nProject Emerald portions of the Project Site as part of the Charleston -Colleton MCIP, are specific\nsubsidies to Boeing within the meaning of Articles 1 and 2 of the SCM Agreement.\n8.2.8.8.3.1 Whether there is a financial contribution\n8.917. The first question before the Panel is whether the MCIP job tax credits, granted to Boeing\nby virtue of the designation of the Project Gemini and Project Emerald portions of the Project Site\nas part of the Charleston-Colleton MCIP, constitute financial contributions through the foregoing of\ngovernment revenue that is otherwise due, within the meaning of Article 1.1(a)(1)(ii).\n8.918. The European Union argues that Ordinances 1626 and 1475, relating to Project Gemini and\nProject Emerald respectively, involve financial contributions by a government within the meaning\nof Article 1.1(a)(1)(ii), namely the foregoing of government reve nue otherwise due. The\nEuropean Union refers to the three -step approach to analysing claims under Article 1.1(a)(1)(ii)\nset out by the A ppellate Body in the original proceeding.2359 First, the tax treatment applicable to\nBoeing's corporate income in South Carolina is Boeing 's eligibility for MCIP job tax credits for the\njobs created through the establishment of the 787 final assembly and deli very facility, and for the\njobs related to the 787 fuselage fabrication and integration complex. 2360 Second, the benchmark\ntax treatment of comparable taxable activity of comparable taxpayers is the treatment afforded to\nidentical taxpayers carrying out ident ical activities outside of an MCIP. 2361 Third, a comparison of\nthis benchmark tax treatment with the treatment received by Boeing, in light of the reasons for\nthe establishment of the MCIP job tax credits and the designation of the Project Site as part of an\nMCIP, clearly shows that the treatment accorded to Boeing amounts to the foregoing of\ngovernment revenue otherwise due.2362 The European Union estimates the amount of the financial\ncontribution as USD 19 million between 2011 and 2016, and at USD 3.8 million p er year from\n2012 to 2015.2363\n8.919. The United States ' arguments focus on an alleged inc onsistency between the\nEuropean Union's arguments on the challenged MCIP job tax credits and another South Carolina\nmeasure; the Income Allocation and Apportionment Agreement for state corporate income tax.\nThe United States notes that the European Union asserts that , as a result of the special\nmethodology for apportioning Boeing's income provided for in th e Income Allocation and\nApportionment Agreement, Boeing will have no Sou th Carolina taxable income, and thus no\nincome tax liability in South Carolina. Since the MCIP job tax credits are non -refundable, may not\nbe sold or transferred, and may only be used to offset South Carolina income ta x, the\nEuropean Union's own arguments that the Income Allocation and Apportionment Agreement is a\nsubsidy to Boeing imply that the actual value of the MCIP job tax credits to Boeing is zero, and\nthat there is no financial contribution or benefit to Boeing.2364\n8.920. However, as pointed out by the European Union, the United States has previously indicated\nthat Boeing [***].2365 In its request for information pursuant to Article 13 of the DSU , the Panel\nasked the United States to \"indicate the annual value to Boeing of the additional USD1000 -per-job\nportion of a new job tax credit for locating within a multi-county industrial park\". The United States\nresponded that \"the annual value of such tax credits for jobs generated by Boeing (i.e. exclusive of\n\n2358 United States' first written submission, paras. 638-643; second written submission, paras. 605-612.\n2359 European Union's first written submission, para. 632 (referring to para. 594, in turn referring to\nAppellate Body Report, US – Large Civil Aircraft (2nd complaint), paras. 812-814).\n2360 European Union's first written submission, paras. 632 and 713.\n2361 European Union's first written submission, paras. 633 and 713.\n2362 European Union's first written submission, para. 634.\n2363 European Union's first written submission, para. 635.\n2364 United States' first written submission, paras. 574 and 607.\n2365 European Union's second written submission, paras. 676 and 677.\n\nsubsidiaries) is as follows [***]\".2366 The information provided by the United States in response to\nthe Panel's Article 13 request, indicating that [***], is at odds with the contention that the value\nto Boeing of the MCIP job tax credits is zero. The United States does not advance any other\nargument to refute the E uropean Union 's contention that the MCIP job tax credits granted to\nBoeing by virtue of the designation of the Project Gemini and Project Emerald portions of the\nProject Site as part of the Charleston-Colleton MCIP involve financial contributions to Boeing. We\ntherefore find that the MCIP job tax credits involve a financial contribution in the form of\nthe foregoing of revenue otherwise due within the meaning of Article 1.1(a)(1)(ii).\n8.2.8.8.3.2 Whether there is a benefit\n8.921. The United States does not advance arguments as to whether the MCIP job tax credits\nconfer a be nefit, other than its argument concerning the alleged inconsistency between the\nEuropean Union' s position that: (a) the Income Allocation and Apportionment Agreement is a\nsubsidy because it reduces Boeing's i ncome tax liability in Sout h Carolina to zero ; and (b) the\nMCIP job tax credits are a subsidy because the y reduce Boeing's South Carolina income tax. We\nhave already rejected th is argument of the United States in the context of our determination of\nwhether the MCIP job tax credits involve a financial co ntribution, owing to the information\nprovided by the United States' response to our request for information pursuant to Article 13 of\nthe DSU [***]. Having found t hat the MCIP job tax credits involve a financial contribution to\nBoeing in the form of the foregoing of revenue otherwise due , we conclude that the financial\ncontribution confers a benefit, in as much as the MCIP job tax credits mean that Boeing pays less\nstate income tax than would otherwise be due. We therefore find that the MCIP job tax\ncredits confer a benefit within the meaning of Article 1.1(b) of the SCM Agreement.2367\n8.2.8.8.3.3 Whether the subsidy is specific\n8.922. With respect to whether the subsidy provided to Boeing as a result of the MCIP job tax\ncredits is specific, the issues raised by the disagreement between the parties relate to\nArticles 2.1(a), 2.1(c), and 2.2 of the SCM Agreement. The parties first disagree on whether the\nMCIP job tax credits are specific within the meaning of Article 2.1(a). In partic ular, the parties\ndisagree on the level at which the specificity analysis should be carried out.\n8.923. The European Union argues that the analysis of specificity should be carried out at the\nlevel of Charleston County. While MCIP job tax credits are available t o enterprises satisfying the\nminimum requirements set out in the relevant provisions under South Carolina tax law, the State\nof South Carolina effectively delegates the role of the granting authority to the counties, since the\nstatutory minimum requirement s are that the location of an enterprise 's facility be designated as\nbeing within an MCIP by two or more counties. 2368 The European Union argues that the challenged\nMCIP job tax credits are de jure specific within the meaning of Article 2.1(a) since: ( a) the area\ndesignated as part of the Charleston -Colleton MCIP by Charleston County Ordinance 1626 was\nexpressly identified as a parcel \"leased by The Boeing Company \"2369; and (b) the area designated\nas part of the Charleston -Colleton MCIP by Charleston County Ordin ance 1475 was expressly\nidentified by reference to Project Emerald, as well as three unrelated companies located\nelsewhere, thereby explicitly limiting access to each subsidy to certain enterprises.2370\n8.924. The United States considers that specificity should be assessed at the level of the State of\nSouth Carolina, and that the European Union 's focus on county ordinances as a basis for its\narguments under Article 2.1(a) is misplaced. According to the United States, t he European has\nfailed to demonstrate how either the proper granting authority (i.e. the State of South Carolina) or\nthe legislation pursuant to which the State acts in providing the additional jo bs tax credit (i.e.\nsection 12-6-3360(E)(1) of the South Carolina Code) explicitly limits access to MCIP job tax credits\nto certain enterprises within the meaning of Article 2.1(a). 2371 The United States argues that the\ntext of the relevant legislation makes it clear that the tax treatment available under that provision\n\n2366 United States' response to the Panel's request for information pursuant to Article 13 of the DSU,\ndated 28 February 2013, (Exhibit USA-198) (BCI), para. 158.\n2367 Also see para. 8.885 above on tax reductions conferring a benefit.\n2368 European Union's second written submission, para. 680.\n2369 European Union's first written submission, para. 638; second written submission, para. 679.\n2370 European Union's first written submission, para. 717.\n2371 United States' first written submission, paras. 640 and 641.\n\nis available to all enterprises that satisfy the minimum requirements set out in that provision and\nthat otherwise qualify for the standard job tax credit. 2372 The role of the counties is a minor one\ngiven that MCIP designation is commonplace in South Carolina, and MCIP status is essentially\navailable to any substantial business that requests that its property be included in an MCIP.2373\n8.925. For the reasons detailed below, we consider that the European Union has failed to establish\nthat the subsidy provided through the MCIP job tax credits is specific within th e meaning of\nArticle 2.1(a). Although Boeing receives the additional MCIP job tax credits as a result of the\ninclusion of the Project Gemini and Project Emerald portions of the Project Site in the Charleston -\nColleton MCIP by virtue of Ordinances 1626 and 1 475 respectively, these ordinances do not\nprovide the challenged MCIP job tax credits. Rather the MCIP job tax credits are provided by the\nState of South Carolina in application of section 12-6-3360(E)(1) of the South Carolina Income Tax\nAct. An assessment of whether the subsidy provided through the MCIP job tax credits is specific\nwithin the meaning of Article 2.1(a) therefore requires a state -level analysis of whether the\nrelevant provision of the Act explicitly limits the availability of the MCIP job tax credits to certain\nenterprises. Pursuant to section 12-6-3360 of the South Carolina Code, the additional MCIP job tax\ncredits are available to taxpayers that: ( a) qualify for the standard job tax credits ; and (b) are\nlocated in a business or industrial pa rk jointly established and developed by a group of Counties\npursuant to section 13 of Article VIII of the South Carolina Constitution. There is nothing in this\nprovision to suggest that any enterprise meeting these conditions could be denied access to the\nadditional MCIP job tax credits. In addition, the two conditions (satisfaction of requirements for the\nstandard job tax credit and location in a multi -county industrial park) do not inherently limit the\navailability of the additional MCIP job tax credit s to certain enterprises. The eligibility for the\nstandard job tax credit depends on criteria relating to employment levels. 2374 As to the\nrequirement that the taxpayer be located in a multi -county industrial park, there is nothing in the\nevidence before the Panel to suggest that South Carolina or the legislation of South Carolina limits\nthe possibility to establish multi-country industrial parks or to include business property in a multi-\ncounty industrial park to certain enterprises.2375 For these reasons we find that the European Union\nhas failed to establish that the subsidy provided through the MCIP job tax credits is specific within\nthe meaning of Article 2.1(a).\n8.926. Second, the parties disagree on whether the MCIP job tax credits are specific within the\nmeaning of Article 2.1(c). Consistent with its position that the analysis of specificity should be\nundertaken at the county level, the European Union argues that the MCIP job tax credits are de\nfacto specific within the meaning of Article 2.1(c) since, to the best of the European Union 's\nknowledge, Charleston County has only designated the premises of a limited number of\nenterprises as being within a multi-county industrial park .2376 In addition, \"the manner in which\nCharleston County has exercised its discretion by amen ding the area for the purpose of providing\nBoeing with MCIP job tax credits indicates that the subsidy is specific to Boeing and a limited\nnumber of other beneficiaries\".2377\n8.927. The United States argues that the European Union provides no support for its assert ion\nthat Charleston County has only designated the premises of a limited number of enterprises as\nbeing within a multi-county industrial park. Moreover, even if this assertion were true, the\nUnited States argues that it would say nothing about the number o f enterprises benefiting from\nMCIP job tax credits in other multi-county industrial parks elsewhere in South Carolina, which is\nthe correct level at which to undertake the analysis of specificity. According to the United States,\nMCIP designations are in fa ct so commonplace in South Carolina that they are the rule, not the\n\n2373 United States' second written submission, para. 610.\n2374 See South Carolina Income Tax Act, S.C. Code, Title 12, chapter 6, (Exhibit EU-509), section\n12-6-3360(C)(1).\n2375 Whether the very fact that the MCIP job tax credits are available only to taxpayers located in\nmulti-county industrial parks makes the measure de jure specific is discussed below. See paras. 8.929-8.931\nbelow.\n2376 European Union's first written submission, para. 718.\n2377 European Union's first written submission, paras. 639 and 718 (fn omitted). The European Union\nconsiders that the United States' response to the Panel's request for a list of Charleston county ordinances\namending MCIP designations for identified projects or companies amounts to a failure to cooperate. It requests\nthe Panel to draw appropriate inferences and to find that Project Gemini and Project Emerald are \"the only\nidentified projects or companies for which Charleston County has amended an MCIP designation\".\n(European Union's second written submission, fn 1142).\n\nexception.2378 The United States also argues that the European Union fails to provide any analysis\nor explanation to support its assertion that the manner in which Charleston County has exerc ised\ndiscretion indicates that the subsidy is specific to Boeing, and that in any event the\nEuropean Union wrongly considers Charleston County as the granting authority.2379\n8.928. We conclude that the European Union has failed to establish that the subsidy provided\nthrough the MCIP job tax credits is specific within the meaning of Article 2.1(c). First, as explained\nabove, the European Union focuses on the actions of Charleston County when the proper granting\nauthority is instead the State of South Carolina. Second, the European Union's argument regarding\nthe exercise of discretion is inconsistent with the text of Article 2.1(c) insofar as it does not\nprovide any evidence of instances in which applications for the receipt of the subsidy have been\nrejected.2380\n8.929. The third specificity issue before the Panel is whether the MCIP job tax credits are \"limited\nto certain enterprises located within a designated geographical region within the jurisdiction of the\ngranting authority \" and thereby specific within the meaning of Artic le 2.2. The European Union\nargues that the MCIP job tax credits provided to Boeing are specifi c within the meaning of\nArticle 2.2 because they are \"limited to certain enterprises located within a designated geographic\nregion within the jurisdiction of the granting authority \". The European Union considers that the\nCharleston-Colleton MCIP, like other multi-county industrial parks in South Carolina, is a particular\ngeographic region designated by two counties, within the jurisdiction of the State of South\nCarolina, the granting authority .2381 The European Union argues that, c ontrary to the United\nStates' assertions, Article 2.2 does not require a contiguous geographic region.2382 Furthermore,\nthe number of enterprises located within a designated geographic region is irrelevant to an\nanalysis of specificity under Article 2.2.2383\n8.930. The United States argues that the MCIP job tax credits are not specific within the meaning\nof Article 2.2 because they are not \"limited to certain enterprises located within a designated\ngeographic region \". Rather they are provided to a number of enterprises located within any\nnumber of different multi-county industrial parks throughout the State of South Carolina. The\nUnited States asserts that multi -county industrial parks are pervasive in Sou th Carolina, and are\navailable to any business that requests the inclusion of its property within a multi-county industrial\npark.2384 Since counties can freely add to or subtract property from multi-county industrial parks at\nany time, a multi-county industrial park is not really a \"designated\" region.2385\n8.931. We conclude that the European Union has not established that the challenged MCIP job tax\ncredits are specific within the meaning of Article 2.2. The panel in US – Anti-Dumping and\nCountervailing Duties (China) considered the question of whether \"a designated geographical\nregion\" in the sense of Article 2.2 must necessarily have some sort of formal administrative or\neconomic identity, or whether any identified tract of land within the territory of a granting\nauthority can be a \"designated geographical region \" for the purposes of Article 2.2. The panel\nconcluded that a designated geographical region is any identified tract of land within the\njurisdiction of the granting authority. 2386 The findings of the panels in US – Anti-Dumping and\nCountervailing Duties (China) and US – Countervailing Measures (China) seem to imply that those\npanels considered that an industrial park or economic development zone can amount to \"a\ndesignated geographical region\".2387 While it is true th at MCIP job tax credits are available only to\n\n2378 United States' first written submission, para. 643.\n2379 United States' first written submission, para. 642.\n2380 In light of this finding, we do not consider it necessary to address the European Union's request for\nthe Panel to \"draw appropriate inferences\". (See European Union's second written submission, fn 1142). Also\nsee United States' response to Panel question No. 149, paras. 17-19; and Charleston County Ordinances,\n(Exhibit USA-555).\n2381 European Union's first written submission, paras. 640 and 719.\n2382 European Union's second written submission, para. 681.\n2383 European Union's second written submission, para. 682.\n2384 United States' first written submission, para. 643.\n2385 United States' second written submission, para. 612.\n2386 Panel Report, US – Anti-Dumping and Countervailing Duties (China), paras. 9.143 and 9.144.\n2387 See Panel Reports, US – Anti-Dumping and Countervailing Duties (China), paras. 9.159 and 9.162;\nand US – Countervailing Measures (China), para. 7.352. We note that the Appellate Body recently addressed\nseveral aspects of the interpretation of Article 2.2 in its Report in US – Washing Machines. Specifically, the\nAppellate Body agreed with the panel in that dispute that:\n\ntaxpayers within a multi-county industrial park, it does not follow that the measure is \"limited\" to\ncertain enterprises located within a designated region. If a subsidy is provided only to enterprises\nlocated within a region that has a fixed geographic identity, such a subsidy is \"limited\" to certain\nenterprises within that region because it is not possible for enterprises not located within that\n\"designated region \" to have access to the measure. In such a situ ation, the location of an\nenterprise is the determining eligibility factor for the subsidy. In the case at hand, however, this\nreasoning does not apply. The location of an enterprise at any particular place in South Carolina\ndoes not prevent it from receiv ing MCIP job tax credits, because the MCIP designation itself is\nreadily available upon request to any company. The availability of the MCIP designation upon\nrequest means that, while the MCIP job tax credits are available to enterprises located within a\nmulti-county industrial park and not available to enterprises not located within such an industrial\npark, this cannot be meaningfully considered to amount to a limitation under Article 2.2. We\ntherefore find that the European Union has failed to establish that the subsidy provided\nthrough the MCIP job tax credits is specific within the meaning of Article 2.2 of the SCM\nAgreement.\n8.932. Finally, we note that the European Union also argues that the subsid y provided to Boeing\nthrough the MCIP job tax credits is specific pursuant to Article 2.3 of the SCM Agreement.\nArticle 2.3 provides that \"{a}ny subsidy falling under the provisions of Article 3 shall be deemed to\nbe specific\". We reject this argument because in Section 10 of this Report we find that the\nEuropean Union has failed to establish that any subsidy at issue in this proce eding is prohibited by\nArticles 3.1 and 3.2 of the SCM Agreement.\n8.2.8.8.4 Conclusion\n8.933. In light of our findings above with respect to the corporate income tax credits arising from\nthe designation of t he Project Gemini and Project Emerald portions of the Project Site as part of\nthe same multi-county industrial park, we conclude that the European Union has failed to establish\nthat the subsidy is specific within the meaning of Articles 1 and 2 of the SCM Agreement.\n8.2.8.9 Whether reductions of state corporate income taxes through an income\nallocation and apportionment agreement are a specific subsidy to Boeing\n8.2.8.9.1 Introduction\n8.934. In paragraph 24 of its panel request, the European Union identifies as one of the Project\nGemini-related subsidies presently benefiting Boeing:\nReductions of state corporate income taxes through an income allocation and\napportionment agreement, entered into pursuant to S.C. Code § 12 -6-2320(B), as\namended by Section 1 of H3130, thereby providing a financial contribution within the\nmeaning of Article 1.1(a)(1)(ii) of the SCM Agreement.\n8.935. The European Union claims that the State of South Carolina reduces Boeing 's state\ncorporate income taxes by making Boeing eligible for, and providing Boeing with, a n income\nallocation and apportionment agreement that excludes significant portions of Boeing 's South\nCarolina income from the calculation of its tax liability. 2388 According to the European Union, the\neffect of the income allocation and apportionment agreemen t is to exclude from Boeing 's South\n\n(i) the term \"certain enterprises\" in Article 2.2 of the SCM Agreement is not limited\nto entities with legal personality, but also encompasses sub -units or constituent\nparts of a company – including, but not limited to, its branch offices and the\nfacilities in which it conducts manufacturing operations – that may or may not have\ndistinct legal personality; (ii) the \"designation\" of a region for purposes of\nArticle 2.2 need not be affirmative or explicit, but may also be carried out by\nexclusion or i mplication, provided that the region in question is clearly discernible\nfrom the text, design, structure, and operation of the subsidy at issue; and (iii) the\nconcept of \"geographical region\" in Article 2.2 does not depend on the territorial\nsize of the area covered by a subsidy.\n(Appellate Body Report, US – Washing Machines, para. 5.240)\n\n2388 European Union's first written submission, para. 607.\n\nCarolina-based income the proceeds from sales of aircraft that would otherwise be treated as sales\nwithin South Carolina and subject to South Carolina corporate income tax, thereby reducing the\namount of South Carolina corporate income tax that Boeing must pay.\n8.936. \"Apportionment\" refers to the process of determining the portion of corporate income\nearned in multiple jurisdictions that is properly attributable to, and thus subject to taxation in, a\nparticular jurisdiction. I n South Carolina, business income of manufacturers and retailers is\napportioned by multiplying the taxpayer's net income (after certain allocations not relevant to the\npresent case) by a \"sales factor \"; a fraction in which the numerator is the total sales of the\ntaxpayer in the State of South Carolina during the taxable year, and the denominator is the total\nsales of the taxpayer everywhere during the taxable year. 2389 The amount of taxable income\nattributed to South Carolina is multiplied by South Carolina's corporate income tax rate of 5%.2390\n8.937. Section 12-6-2320(B) of the South Carolina Code authorizes the allocation and\napportionment of a taxpayer's income on alternative bases for periods of up to five years or ten\nyears, by agreement with the taxpayer, for tax payers planning new or expanded facilities in South\nCarolina. H3130 amended section 12-6-2320(B) of the South Carolina Code to set forth certain\nconditions that must be satisfied by a taxpayer to qualify for an income allocation and\napportionment agreement of up to ten years. These conditions include:\na. the taxpayer is planning a new facility in the state and invests at least USD 750 million\nin real or personal property or both in a single county in the state and creates at least\n3,800 full -time new jobs with in seven years from the date on which the taxpayer\nrequests an agreement with an alternative allocation and apportionment method2391;\nb. the South Carolina Coordinating Council for Economic Development certifies that the new\nfacility will have a significant bene ficial economic effect on the region for which it is\nplanned and that its benefits to the public exceed its costs to the public.2392\n8.938. Under the amendment to South Carolina 's Income Tax Act effected by H3130, the\ntaxpayer may begin operating under an income allocation and apportionment agreement beginning\nwith the tax year in which the agreement is executed. If the taxpayer fails to meet the investment\nand employment requirements set forth above, the taxpayer will be assessed any tax due as a\nresult of that fail ure. For any subsequent year that the taxpayer fails to maintain 3,800 full -time,\nnew jobs, the South Carolina Department of Revenue may assess any tax due for that year.2393\n8.939. On 10 August 2010, Boeing made an application for \"Qualification of Income\nApportionment Incentive\" with the South Carolina Coordinating Council for Economic Development\nin respect of \"construction of an aerospace manufacturing facility in Charleston County, City of\nNorth Charleston with 3,800 jobs and a capital investment of USD 750 mill ion\".2394 On\n8 September 2010, the S outh Carolina Coordinating Council for Economic Development certified\nBoeing's eligibility to enter into negotiations with the S outh Carolina Department of Revenue to\nreceive the \"Income Apportionment Incentive \". It also ce rtified that the facility described in\n\n2389 South Carolina Income Tax Act, S.C. Code, Title 12, chapter 6, (Exhibit EU-509), sections 12-6-\n2252 and 12-6-2280.\n2390 South Carolina Income Tax Act, S.C. Code, Title 12, chapter 6, (Exhibit EU-509), section 12-6-530.\nSouth Carolina taxable income includes not only business income subject to apportionment under S.C. Code,\nsection 12-6-2252, but also any income that is allocated to South Carolina pursuant to sections 12-6-2220 and\n12-6-2230.\n2391 South Carolina Act No. 124, S.C. Code, Acts 1092, H3130 (30 October 2009), (Exhibit EU-466),\nsection 1 (amending South Carolina Income Tax Act, S.C. Code, Title 12, chapter 6, (Exhibit EU-509), 12-6-\n2320 to add (B)(3)(a)(ii) and (b)(3)(b)).\n2392 South Carolina Income Tax Act, S.C. Code, Title 12, chapter 6, (Exhibit EU-509), section 12-6-\n2320(B)(3)(c).\n2393 South Carolina Income Tax Act, S.C. Code, Title 12, chapter 6, (Exhibit EU-509), section 12-6-\n2320(B)(4).\n2394 Boeing, Application for Qualification of Income Apportionment Incentive, (10 August 2010),\n(Exhibit EU-12).\n\nBoeing's application would have a significant beneficial economic effect on the region for which the\nproject is planned, and that the benefits to the public exceed the costs to the public.2395\n8.940. Boeing and the S outh Carolina Department of Revenue entered into a Special Allocation\nand Apportionment Agreement as of 1 January 2012 (Income Allocation and Apportionment\nAgreement).2396 Under the Income Allocation and Apportionment Agreement, Boeing and the\nSouth Carolina Department of Revenue agree that [***2397 ***2398].\n8.941. [***].\n8.2.8.9.2 Main arguments of the parties\n8.942. The European Union argues that the Income Allocation and Apportionment Agreement\ninvolves a financial contribution to Boeing in the form of the foregoing of government revenue\notherwise due, within the meaning of Article 1.1(a)(1)(ii) of the SCM Agreement, which confers a\nbenefit, and is specific.\n8.943. The European Union considers that, under the Income Allocation and Apportionment\nAgreement, Boeing 's sales of aircraft that are received by a purchaser in South Carolina are\ndeemed not to be \"sales in this State\" when the sales are to: (a) an airline or other customer with\na principal place of business outside of the United States ; (b) a leasing company for the ultimate\nuse of an operator with a principal place of business outside of the United States ; (c) a special\nentity established for the purpose of U .S. Export-Import Bank financing of sales to operators\nhaving their principal place of business outside of the United States; or (d) a separate Boeing sales\ncompany for the ultimate use of an operator with a principal place of business outside of the\nUnited States.2399 According to the European Union, this tax treatment differs from the benchmark\ntax treatment of comparable income of comparable tax payers, namely, the single factor\napportionment method set forth in South Carolina Code sections 12-6-2252 and 12-6-2280, under\nwhich the foregoing transactions would be considered sales within the State of South Carolina.2400\n8.944. The European Union argues there fore that the effect of the Income Allocation and\nApportionment Agreement is to lower the numerator of Boeing 's \"sales factor\" (i.e. Boeing's sales\nallocated to South Carolina), without changing the denominator (i.e. Boeing 's total sales\neverywhere), there by reducing the sales factor. Accordingly, when Boeing 's total income is\nmultiplied by the lower sales factor, the result is a reduction in Boeing 's taxable income, and\nconsequently, a reduction in the amount of South Carolina corporate income tax that Boe ing must\npay.2401 The Income Allocation and Apportionment Agreement with Boeing therefore results in a\nfinancial contribution by a government ; namely, the foregoing of government revenue otherwise\ndue within the meaning of Article 1.1(a)(1)(ii) of the SCM Agreement.2402\n\n2395 Letter from A. D. Young, Executive Director, South Carolina Coordinating Council for Economic\nDevelopment to Boeing Company, dated 8 September 2010. (Boeing, Application for Qualification of Income\nApportionment Incentive, (10 August 2010), (Exhibit EU-12), pdf p. 10).\n2396 Special Allocation and Apportionment Agreement between South Carolina Department of Revenue\nand The Boeing Company, Inc. (1 January 2012) (Income Allocation and Apportionment Agreement) (formerly\nExhibit US-13-294), (Exhibit EU-510) (BCI).\n2397 Income Allocation and Apportionment Agreement, (Exhibit EU-510) (BCI), [***].\n2398 Income Allocation and Apportionment Agreement, (Exhibit EU-510) (BCI), section 3.1.\n2399 European Union's first written submission, para. 611.\n2400 European Union's first written submission, para. 618:\nUnder this apportionment methodology, transactions that would otherwise be\nconsidered sales in South Carolina (and therefore taxable in South Carolina) are\nexcluded from Boeing's taxable income on the basis of the princip al place of\nbusiness of the ultimate operator – a concept otherwise wholly absent from South\nCarolina's laws on apportionment of income – thus artificially reducing the amount\nBoeing pays in state income taxes.\n2401 European Union's first written submission, para. 612.\n2402 European Union's first written submission, para. 617.\n\n8.945. The European Union argues that the Income Allocation and Apportionment Agreement also\nconfers a benefit on Boeing's LCA division within the meaning of Article 1.1(b), with the entirety of\nthe financial contribution representing the amount of the benefit.2403\n8.946. The European Union additionally argues that the Income Allocation and Apportionment\nAgreement is specific within the meaning of Articles 2.1(a) and 2.1(c) of the SCM Agreement. With\nrespect to de jure specificity under Article 2.1(a), the Europe an Union asserts that the statutory\nprovision establishing Boeing's eligibility for an alternative apportionment method was enacted as\npart of H3130, the Boeing incentive legislation. Additionally, the provision is subject to investment\nand employment cond itions which make it applicable solely to Boeing. 2404 Finally, the Income\nAllocation and Apportionment Agreement was entered into with Boeing alone, and the Special\nApportionment Method is applicable only to Boeing. 2405 As to de facto specificity within the\nmeaning of Article 2.1(c), the subsidy is used by a limited number of taxpayers. To the best of the\nEuropean Union 's knowledge, Boeing is the only recipient of a ten -year allocation and\napportionment agreement. Boeing is necessarily also the predominant user a s well as a\ndisproportionate beneficiary, receiving 100% of the subsidy. 2406 Furthermore, the European Union\npoints to the \"untrammelled discretion\" exercised by the granting authority in respect of allocation\nand apportionment agreements, noting that a taxpa yer applying for an alternative apportionment\nmethodology is allowed to propose its own methodology. According to the European Union, Boeing\nwas approved for a \"highly customized methodology, specifically tailored to Boeing 's specific\nbusiness practices an d commercial interests, and which bears no relation to the statutory\nallocation method or any legitimate public interests \".2407 The European Union also argues that the\nIncome Allocation and Apportionment Agreement is a pr ohibited subsidy under Articles 3.1(a) and\n3.2, footnote 4 and annex I, Item (e) of the SCM Agreement because, pursuant to the Special\nApportionment Method, sales of Boeing aircraft delivered in South Carolina are deemed not to be\nSouth Carolina sales on condition that they are destined for ex port markets outside the\nUnited States.2408\n8.947. The United States argues that the European Union has failed to establish that the Income\nAllocation and Apportionment Agreement involves a financial contribution or confers a benefit.\nIndeed, the United States consi ders that the European Union 's arguments that the Income\nAllocation and Apportionment Agreement involves a subsidy are based on a misunderstanding of\nSouth Carolina's income tax law.2409\n8.948. The United States considers that the European Union incorrectly interpre ts \"sales in this\nState\" in South Carolina Code section 12 -6-2280, which represent the numerator of the sales\nfactor for purposes of the single factor apportionment method set forth in South Carolina Code\nsection 12-6-2252, as including sales in South Carolina to airlines with a principal place of business\noutside the United States. It is on this basis that the European Union argues that the Special\nApportionment Method set forth in the Income Allocation and Apportionment Agreement alters the\ntreatment of \"sales in this State \" for purposes of calculating the sales factor , by excluding such\nsales from the numerator, thereby reducing Boeing's South Carolina income tax liability. According\nto the United States, however, \"sales in this State \" is defined in South Carolina Code\nsection 12-6-2280(B) as including sales of goods, merchandise or property that are \"received by a\npurchaser in this State\". South Carolina Code section 12-6-2280(B) further provides that the place\nat which the goods are received by a purchas er is the place where the goods are received by the\npurchaser \"after all transportation is completed \". Where receipt occurs outside the United States,\nas is the case for sales to airlines with a principal place of business outside the United States,\nthere will be no \"sales in this State\" according to the single factor apportionment method.2410\n8.949. The United States also rejects the European Union 's arguments that the Income Allocation\nand Apportionment Agreement is specific. The United States notes that income all ocation and\n\n2403 European Union's first written submission, paras. 622 and 623.\n2404 European Union's first written submission, para. 624.\n2405 European Union's first written submission, para. 624; second written submission, para. 668 and\nfn 1127.\n2406 European Union's first written submission, para. 625.\n2407 European Union's first written submission, para. 625.\n2408 European Union's first written submission, paras. 749 and 750; response to Panel question No. 36,\nparas. 202-204.\n2409 United States' first written submission, para. 603.\n2410 United States' first written submission, para. 604.\n\napportionment agreements are part of a widely available effort by South Carolina to ensure that\nthe apportionment of a taxpayer's income represents the extent of the taxpayer's business activity\nin the state, as well as to provide an incentive to companies that are planning new or expanded\nfacilities in South Carolina. 2411 The European Union incorrectly limits its specificity analysis to the\nIncome Allocation and Apportionment Agreement, without addressing the question of whether the\nlegislation or granting authority imposes limitations on access to the subsidy. 2412 Even assuming\narguendo that the specific provision authorizing the use of the ten -year allocation and\napportionment agreement in H3130 were the proper focus of the analysis, the European Un ion has\nfailed to articulate how the provision contains an express limitation on access to certain\nenterprises.2413\n8.950. The United States also considers that the European Union has failed to establish that the\nmeasure is de facto specific under Article 2.1(c). According to the United States, approximately 40\nprojects have been approved for special allocation and apportionment methods since 1996.\nMoreover, South Carolina Code section 12 -6-2320(B) sets forth objective criteria that must be\nsatisfied before an income allocation and apportionment agreement can be entered into. The\nEuropean Union has not questioned that those criteria were satisfied in Boeing 's case. Nor has it\nexplained how the manner in which discretion has been exercised by the granting authority in the\ndecision to grant the subsidy indicates that the measure is specific. 2414 The United States argues\nthat the European Union's claims under Article 3 of the SCM Agreement with respect to the Income\nAllocation and Apportionment Agreement also fail, owing to its misunderstanding of South Carolina\nincome tax law and consequent failure to establish a prima facie case that the Income Allocation\nand Apportionment Agreement confers a specific subsidy to Boeing, let alone a subsidy that is\ncontingent on export performance.2415\n8.2.8.9.3 Evaluation by the Panel\n8.2.8.9.3.1 Whether there is a financial contribution\n8.951. We here examine the European Union's claim that the special sourcing rules provided for in\nthe Income Allocation and Apportionment Agreement constitute a specific subsidy within th e\nmeaning of Articles 1 and 2 of the SCM Agreement. We begin by determining whether the\nEuropean Union has demonstrated that the Income Allocation and Apportionment Agreement, and\nmore specifically, [***], involves a foregoing of government revenue otherwise due, and thus is a\nfinancial contribution within the meaning of Article 1.1(a)(1)(ii) of the SCM Agreement.\n8.952. The tax treatment at issue involves the method by which South Carolina assesses Boeing 's\nliability for state corporate income taxes. As previousl y explained, when a taxpayer has taxable\nbusiness income in multiple jurisdictions, taxing jurisdictions may apply various apportionment\nmethodologies to determine how much of the taxpayer 's total income is properly taxable by that\ntaxing jurisdiction. Sou th Carolina mainly applies a single factor; namely sales, to apportion the\nbusiness income of manufacturers and retailers for purposes of assessing liability to South Carolina\nincome taxes. Thus, under section 12 -6-2252 of the South Carolina Code , manufact urers and\nretailers in South Carolina are assessed income tax on their income \"apportioned\" to the State of\nSouth Carolina, based on their net income (after certain allocations) multiplied by a ratio\nrepresenting the proportion of their sales in South Caro lina, compared to their overall total sales\n(the sales factor). 2416 The \"sales factor \" is more precisely defined in South Carolina Code\nsection 12-6-2280:\n(A) The sales factor is a fraction in which the numerator is the total sales of the\ntaxpayer in this State during the taxable year and the denominator is the total sales of\nthe taxpayer everywhere during the taxable year.\n\n2411 United States' first written submission, para. 644.\n2412 United States' first written submission, para. 645.\n2413 United States' first written submission, para. 645.\n2414 United States' first written submission, para. 646.\n2415 United States' first written submission, para. 677.\n2416 South Carolina Income Tax Act, S.C. Code, Title 12, chapter 6, (Exhibit EU-509), section 12-6-\n2252(A).\n\n(B) The term \"sales in this State \" includes sales of goods, merchandise, or property\nreceived by a purchaser in this State. The place wher e goods are received by the\npurchaser after all transportation is completed is considered the place at which the\ngoods are received by the purchaser. Direct delivery into this State by the taxpayer to\na person designated by a purchaser constitutes delivery to the purchaser in this State.\n8.953. Under the Income Allocation and Apportionment Agreement, [***], which is the focus of\nthe European Union 's challenge, provides that Boeing will use the general apportionment method\nset forth in South Carolina Code section 12-6-2252. [***].\n8.954. The difference between the parties centres around whether, under the definition of \"sales\nfactor\" in South Carolina Code section 12-6-2280(A), and more particularly, the numerator of the\nsales factor which consists of the \"sales in this S tate\" as defined in South Carolina Code\nsection 12-6-2280(B), Boeing's sales of LCA to foreign customers are sales in this State, such that\nthe Income Allocation and Apportionment Agreement would change their status to out -of-state\nsales for purposes of assessing Boeing's liability to South Carolina income taxes, or whether under\nSouth Carolina Code section 12-6-2280, such sales would in any case be considered out -of-state\nsales, such that they are treated in the same way under both the general provisions o f South\nCarolina income tax law and the Income Allocation and Apportionment Agreement.\n8.955. The United States disagrees that South Carolina Code section 12-6-2280(B) defines \"sales\nin this State\" in a manner that includes sales by Boeing of airplanes to foreign purchasers. For the\nUnited States, export sales are treated in the same way under South Carolina income tax law and\nunder the Income Allocation and Apportionment Agreement: In both cases, income from export\nsales is apportioned outside South Carolina. The refore, the special sourcing rules in the Income\nAllocation and Apportionment Agreement do not entail a more favourable apportionment of\nBoeing's income from foreign sales of LCA than would apply under the terms of South Carolina\nCode section 12-6-2280 itself.\n8.956. The United States supports its position by noting that , while the first sentence of South\nCarolina Code section 12-6-2280(B) provides that the term \"sales in this State\" includes sales of\ngoods, merchandise or property received by a purchaser in this State, the second sentence of\nSouth Carolina Code section 12-6-2280(B) provides that the place where goods are received by\nthe purchaser is considered the place at which the goods are \"received\" by the purchaser \"after all\ntransportation is completed \". For the United States, an export sale of an LCA manufactured by\nBoeing in South Carolina involves the transportation of the aircraft outside of South Carolina and\nthe territory of the United States. For purposes of South Carolina Code section 12-6-2280(B), the\naircraft is therefore \"received\" outside South Carolina. Because export sales of aircraft must be\ntransported to the airline outside the United States, they are not i n any event \"received\" in\nSouth Carolina.2417\n8.957. The European Union contests this understandin g of when and where an aircraft is\n\"received\" by a foreign customer for purposes of South Carolina Code section 12 -6-2280(B).\nAccording to the European Union, Boeing aircraft are formally delivered (covering actual handover\nand legal transfer of title) at Boeing's Washington and South Carolina delivery centres. The\nEuropean Union argues that, u nder South Carolina Code section 12-6-2280(B), the sale of an\naircraft to a foreign purchaser which is delivered to the purchaser at Boeing's delivery centre in\nSouth Carolina would be treated as a sale \"in this State\". According to the European Union, South\nCarolina Code section 12 -6-2280(B) does not make any reference to whether the purchaser or\neventual operator is located outside of the United States. Rather, the apportionment of sales inside\nor outside South Carolina is based on the place where the purchaser \"receives\" the good. The\nEuropean Union argues therefore that, when a foreign customer takes formal delivery of an aircraft\nat Boeing's 787 delivery centre in South Carolina, the aircraft is \"received by the purchaser \" in\n\n2417 United States' response to Panel question No. 35, para. 147: \"{b}y definition, export sales involve\ntransporting goods outside the territory of the country where the goods were manufactured. Thus, an export\nsale involving LCA manufactured by Boeing in South Carolina would involve the transportation of the LCA\noutside of South Carolina and the territory of the United States. Therefore, South Carolina law does not require\nincome from export sales to be apportioned to South Carolina because they are not 'sales in this state'\".\n\nSouth Carolina, and the income from such sale would therefore be apportioned to\nSouth Carolina.2418\n8.958. The question that arises therefore is when particular goods (aircraft) can be considered to\nbe \"received\" by a purchaser ( in particular, a foreign customer) for purposes of South Carolina\nCode section 12-6-2280(B), and more particularly, whether aircraft are received by a foreign\ncustomer \"after all transportation is completed\" at the time of formal delivery to the customer at\nBoeing's delivery centre in South Carolina, or when the aircraft are transported to the airline's\nheadquarters outside the United States. This necessarily requires the Panel to interpret South\nCarolina Code section 12-6-2280. Although it is not the role of WTO panels to interpret a Member's\ndomestic legislation as such, it is permissible, and in this case, essential, that the Panel interpret\nthe relevant provisions of South Carolina's income tax law in order to resolve the quest ion of\nwhether the measure in question (which is not South Carolina Code sections 12-6-2252 or 12 -6-\n2280, but rather, the Special Apportionment Method set forth in the Income Allocation and\nApportionment Agreement) involves a foregoing of revenue otherwise due, and thus a financial\ncontribution within the meaning of Article 1.1(a)(1)(ii) of the SCM Agreement.2419\n8.959. In respect of the types and threshold of evidence that may be required to prove a\nparticular construction of municipal law, the Appellate Body in US – Carbon Steel (India) has\nexplained that the nature and extent of evidence required to satisfy the burden of proof will vary\nfrom case-to-case:\nThus, whereas in some cases the text of the relevant legislation may suffice to clarify\nthe content and meaning of the relevant legal instruments, in other cases the\ncomplainant will also need to support its understanding of the content and meaning of\nsuch legal instruments with evidence beyond the text of the instrument, such as\nevidence of consistent application of such laws, pronouncements of domestic courts on\nthe meanings of such laws, the opinions of legal experts, and the writings of\nrecognized scholars.2420\n8.960. In that regard, the Appellate Body stated in US – Countervailing and Anti -Dumping\nMeasures (China) that, in ascertaining the meaning of municipal law, a panel should undertake a\nholistic assessment of all relevant elements, starting with the text of the law and including, but not\nlimited to, relevant practices of administering agencies, or legal interpretatio ns of municipal law\ngiven by a domestic court.2421 In respect of the burden of proof, the Appellate Body in US – Carbon\nSteel also clarified that the party asserting that another party's municipal law, as such, is\ninconsistent with relevant treaty obligations bears the burden of introducing evidence as to the\nscope and meaning of such law to substantiate that assertion. 2422 We consider that the burden\n\n2418 The European Union also disagrees that the term \"after all transportation is completed\" in the\nsecond sentence of S.C. Code section 12-6-2280(B) could be interpreted to mean that goods that are\n\"physically received\" in South Carolina but then removed from that state can be considered to be \"received by\nthe purchaser\" in the place to which the goods are removed. Rather, the idea expressed in the second\nsentence of S.C. Code section 12-6-2280(B), that the place of \"receipt\" of goods is the place in which they are\nreceived by the purchaser \"after all transportation is completed\" should be understood to address cases where\ngoods are received in-state by a common carrier but are then shipped by that carrier to the purchaser\nout-of-state. In that case, the purchaser \"receives\" the goods not when they are given by the seller to the\nshipper in-state, but when the shipper delivers those goods to the purchaser out-of-state.\n2419 The Appellate Body has acknowledged that in a number of previous disputes, panels and the\nAppellate Body have been required to ascertain the meaning of municipal law in order to determine whether\nthe challenged measure was consistent with a provision of the covered agreements. The Appellate Body\nconsidered in US – Hot-Rolled Steel that, \"{a}lthough it is not the role of panels or the Appellate Body to\ninterpret a Member's domestic legislation as such, it is permissible, indeed essential, to conduct a detailed\nexamination of that legislation in assessing its consistency with WTO law.\" (Appellate Body Report, US –\nHot-Rolled Steel, para. 200). The Appellate Body has stated moreover that, as part of their duties under\nArticle 11 of the DSU, \"panels have the obligation to examine the meaning and scope of the municipal law at\nissue in order to make an objective assessment of the matter before it, including an objective assessment of\nthe facts of the case and the applicability and conformity with the covered agreements.\" (Appellate Body\nReports, US – Countervailing and Anti-Dumping Measures (China), para. 4.98; and US – Carbon Steel (India),\npara. 4.445).\n2420 Appellate Body Report, US – Carbon Steel (India) para. 4.446.\n2421 Appellate Body Report, US – Countervailing and Anti-Dumping Measures (China), para. 4.101. See\nalso Appellate Body Reports, US – Carbon Steel (India), para. 4.446; and EU – Biodiesel (Argentina),\nparas. 6.201 and 6.202.\n2422 Appellate Body Report, US – Carbon Steel, para. 157.\n\nshould be allocated in the same manner in the situation before us; namely, where the European\nUnion as complaining party asserts a particular interpretation of South Carolina's income tax law in\norder to demonstrate that the measure at issue (namely, the Special Apportionment Method under\nthe Income Allocation and Apportionment Agreement) involves a foregoing of reve nue otherwise\ndue, for purposes of Article 1.1(a)(1)(ii) of the SCM Agreement.\n8.961. With these principles in mind, and mindful of the need to conduct a holistic assessment of\nthe evidence before us, we begin our interpretation of the sales factor apportionment method\napplicable under South Carolina's income tax law by examining the relevant text of South Carolina\nCode section 12-6-2280.\n8.962. The term \"sales in this State\" is defined in South Carolina Code section 12-6-2280(B) to\ninclude \"sales of goods, merchandise , or property received by a purchaser in this State \". There is\nno disagreement that aircraft qualify as \"goods, merchandise, or property\". As we have noted, the\ndisagreement involves the circumstances under which aircraft are considered to be \"received by a\npurchaser in this State\" for purposes of the first sentence of South Carolina Code\nsection 12-6-2280(B). The second sentence of South Carolina Code section 12-6-2280(B) provides\nthat the \"place where goods are received by the purchaser after all transpor tation is completed is\nconsidered the place at which the goods are received by the purchaser \". The third sentence of\nSouth Carolina Code section 12-6-2280(B) provides that \"{d}irect delivery into this State by the\ntaxpayer to a person designated by a purch aser constitutes delivery to the purchaser in this\nState\".2423\n8.963. The European Union considers that aircraft are \"received by a purchaser in this State\", for\npurposes of South Carolina Code section 12-6-2280(B), when a customer takes formal delivery of\nan aircraft. Formal delivery of all Boeing aircraft to all Boeing customers worldwide occurs only at\nBoeing's delivery centres in Washington State, and since 2012, in South Carolina. The evidence\nbefore us indicates that f ormal delivery of an aircraft is a process that takes place over\napproximately two weeks and involves numerous inspections, test flights by Boeing flight crew,\nvarious \"acceptance flights\" by customer flight crew, the handover of legal title to the aircraft in\nexchange for final payment or other f inancing arrangements, delivery by the FAA (or its foreign\nequivalent in the case of foreign purchasers) of the certificate of airworthiness, and the flight by\nthe airline's pilots back to the airline's headquarters or base for further checks and\ncustomization.2424\n8.964. The meaning of \"sales in this State\" in South Carolina Code section 12 -6-2280(B), and\nmore particularly, the circumstances in which an aircraft would be considered \"received by the\npurchaser after all transportation is completed\" for purposes of th e second sentence of South\nCarolina Code section 12 -6-2280(B), is not clear to the Panel on the face of the text of South\nCarolina Code section 12 -6-2280(B). More specifically, it is not clear to the Panel that formal\ndelivery of an aircraft at Boeing's de livery centre in South Carolina would be considered a \"sale in\nthis State\" under South Carolina Code section 12-6-2280(B), on the basis that the aircraft was\n\"received by the purchaser after all transportation is completed\" in South Carolina. The Panel is\nnot persuaded on the basis of the factual material before it that all transportation is completed,\nand that an aircraft can be considered to have been received by a customer, when the customer's\nrepresentatives attend Boeing's South Carolina delivery centr e to engage in aspects of the formal\ndelivery process.\n8.965. We note that the underlying objective of the sales factor apportionment methodology for\nassessing liability to South Carolina income taxes is expressed in South Carolina Code\nsection 12-6-2210(B). South Carolina Code section 12-6-2210(B) provides that, where a taxpayer\nis transacting or conducting business partly within and partly without South Carolina , South\nCarolina income tax is imposed on a base which reasonably represents the proportion of the tr ade\nor business carried on within the state .2425 We are not persuaded that Boeing's manufacture of\n\n2423 The third sentence of S.C. Code section 12-6-2280(B) thus appears to qualify the scope of \"after all\ntransportation is completed\" in the second sentence, by providing that, in situations where an agent is\ndesignated to collect the goods on behalf of the purchaser inside South Carolina, this would be \"delivery to\"\n(and presumably a receipt by) the purchaser in the State, although \"all transportation\" would not in fact have\nbeen completed in that scenario.\n2424 See C. Sloan, \"SpeciAAl Delivery Flight Event: American Airlines Boeing 777-300ER (Part Two) –\nAircraft Acceptance, Handover Event and Delivery\", Airchive.com, 27 April 2013, (Exhibit EU-1119).\n2425 S.C. Code section 12-6-2210(B):\n\naircraft in South Carolina would necessarily be considered a trade or business that is carried on\nwithin South Carolina , in circumstances where the aircraft in question are manufactured for\nout-of-state customers, which may not have any connection with South Carolina, for use wholly\noutside South Carolina. Owing to the nature of large civil aircraft, the process of purchasing the\ngood requires the customer to collect the aircraft from a U.S.-based delivery centre and fly it back\nto its own headquarters or base , from where it will be further tested before it is then \"placed into\nservice\" for that customer. In those circumstances, it would in our view be a strained\ninterpretation of South Carolina Code section 12-6-2280(B) to consider the customer as having\nreceived the airplane \"after all transportation is completed\" in South Carolina.\n8.966. The United States has submitted a statement of the Administrator of Audits for t he South\nCarolina Department of Revenue in support of its interpretation of South Carolina's income tax\nlaw, treating sales of airplanes to foreign customers as out -of-state sales. In the statement, th e\nofficial expresses the view that, under South Carolin a income tax law, the sale of an airplane\ninvolving a purchaser who \"picks up\" the airplane at Boeing 's facility in South Carolina and then\nflies that airplane directly to a foreign jurisdiction where it will be put into use carrying passengers\non commercial flights, will be sourced to the foreign jurisdiction for purposes of the South Carolina\nsingle sales apportionment formula, and will not be considered a sale in South Carolina.2426\n8.967. The European Union challenges the authoritativeness of this statement as the \"conclusory\nstatement by a South Carolina government employee with respect to a narrow factual\nhypothetical\".2427 The European Union points out that the statement in question is neither a\nrevenue ruling (i.e. an advisory opinion providing general guidance as to the interpretation of state\ntax law) nor a private letter ruling (i.e. an advisory opinion which although not having the force of\nlaw, is binding on agency personnel with respect to the person to whom it was issued based on the\nspecific facts and cir cumstances presented). 2428 The European Union alleges that Boeing could\nhave sought a private letter ruling had it wanted certainty regarding the interpretation of South\nCarolina's income apportionment rules to aircraft sales, and notes that neither Boeing nor the\nUnited States appear to have done so. 2429 However, it is not clear to us that the South Carolina\nDepartment of Revenue would have considered it appropriate to issue a private letter ruling in the\ncircumstances.2430 In addition, although the Audit Services Division of the South Carolina\nDepartment of Revenue is not the division responsible for legal interpretation, advice and\nguidance, it is the division responsible for audits conducted by the Department relating to the\napportionment of income by corporation s and the sourcing of that income. 2431 Moreover, we note\nthat the European Union does not produce a legal opinion contradicting the views expressed in the\nstatement of the South Carolina tax official, or otherwise supporting its interpretation of South\nCarolina Code section 12-6-2280 as meaning that formal delivery of an aircraft in South Carolina\nto an out-of-state purchaser is a \"sale in this State\". 2432 There is similarly no evidence before the\nPanel of the application of this law, or pronouncements of domestic courts on its interpretation.\n\nIf a taxpayer is transacting or conducting business partly within and partly without\nthis State, the South Carolina income tax is imposed upon a base which reasonably\nrepresents the proportion of the trade or business carried on within this State.\n2426 Statement of R. Taylor, State of South Carolina Department of Revenue on Application of South\nCarolina Tax Law Regarding Sourcing of Income, (Exhibit USA-533).\n2427 European Union's comments on the United States' response to Panel question No. 145, para. 391.\n2428 European Union's comments on the United States' response to Panel question No. 145, para. 393.\nSee also South Carolina Department of Revenue, Revenue Procedure No. 09-3, 20 March 2009, (Exhibit\nEU-1432), pp. 2-5.\n2429 European Union's comments on the United States' response to Panel question No. 145, para. 394.\n2430 We note in particular that the South Carolina Department of Revenue may exercise its discretion not\nto issue a private ruling letter on a number of grounds, including where the inquiries concern purely\nhypothetical situations, on matters in litigation, and when requests are best handled by another means. (South\nCarolina Department of Revenue, Revenue Procedure No. 09-3, 20 March 2009, (Exhibit EU-1432), p. 5).\n2431 Statement of R. Taylor, State of South Carolina Department of Revenue on Application of South\nCarolina Tax Law Regarding Sourcing of Income, (Exhibit USA-533). Moreover, the Audit Division is the division\nof the South Carolina Department of Revenue listed in the \"Notices\" section of the Income Allocation and\nApportionment Agreement and thus presumably is the division responsible for negotiating and administering\nthat agreement with Boeing. (Income Allocation and Apportionment Agreement, (Exhibit EU-510) (BCI),\nsection 6.1).\n2432 See Panel Report, Thailand – Cigarettes (Philippines), paras. 7.708 and 7.709 for an analogous\nsituation in which the Philippines submitted an expert opinion in support of its position that an individual who\nresells domestic cigarettes is exempt from personal income tax, and thus, unlike resellers of imported\n\n8.968. Finally, we note that [***2433]. This is additional evidence that tends to suggest that\nBoeing also did not consider, for those years at least, that its income tax liability in South Carolina\nwould be any different under South Carolina income tax law or the Income Allocation and\nApportionment Agreement.2434\n8.969. On the basis of our holistic assessment of the text of South Carolina Code\nsection 12-6-2280(B), in light of the underlying purpose of the apportionment rules as expressed\nin South Carolina Code section 12 -6-2210 (namely, to impose income tax on a base which\nreasonably represents the proportion of the trade or business \"carried on within this State\"), along\nwith evidence before us regarding the interpretation of the apportionme nt rules in South Carolina\nCode section 12-6-2280: (a) the statement of the Administrator of Audits for the S outh Carolina\nDepartment of Revenue to the effect that income from Boeing 's sales of aircraft to foreign\ncustomers would not be treated as sales in South Carolina under South Carolina income tax law;\nand (b) [***], we are not satisfied that, under South Carolina Code section 12-6-2280, formal\ndelivery of the aircraft at Boeing's delivery facility in South Carolina to an out -of-state customer\nwould be apportioned to South Carolina. It seems to us that the more reasonable interpretation of\nSouth Carolina Code section 12-6-2280(B), in the context of the sale and delivery of aircraft, is\nthat the place where the goods are received by the purchaser \"after all transportation is\ncompleted\" is the place to which the aircraft are flown for entry into service, and that, where this\nis outside South Carolina, such sales will not be apportioned to South Carolina under South\nCarolina Code section 12-6-2280(B).2435\n8.970. We are not persuaded that the European Union has demonstrated that the special\nsourcing rules provided for in the Income Allocation and Apportionment Agreement, insofar as they\nsource income from sales and deliveries of airplanes to foreign customers, or to l easing companies\nor special purpose entities , to the principal place of business of the ultimate operator of the\nairplane, as sales \"outside South Carolina\", involve different tax treatment from that which would\nbe afforded to such sales and deliveries und er South Carolina Code sections 12-6-2252 and\n12-6-2280.2436\n\ncigarettes, need not prepare and maintain revenue and expense reports. Based on that opinion, considered\ntogether with the text of the relevant provisions, and in the absence of any evidence submitted by Thailand to\ncontradict that expert opinion, the panel concluded that it had been established that resellers of domestic\ncigarettes were exempt from income tax, and consequently from the obligation to file revenue and expense\nreports.\n2433 [***] (Income Allocation and Apportionment Agreement, (Exhibit EU-510) (BCI), pdf p. 17).\n2434 We caution that we do not assign significant weight to this factor, owing to the fact that Boeing did\nnot begin making deliveries of the 787 from its South Carolina facility until 2012, and we do not have\ninformation before us as to the customers that received those aircraft.\n2435 We recognize that, under this interpretation, aircraft that are transported outside South Carolina but\nwithin the United States are also not \"received\" in South Carolina for purposes of South Carolina income tax\nlaw. Moreover, under the Special Apportionment Method in the Income Allocation and Apportionment\nAgreement, such sales would be apportioned to South Carolina. In other words, the Income Allocation and\nApportionment Agreement would appear to involve an apportionment method that differs from the prescribed\nstatutory method in respect of sales of aircraft to U.S. customers outside South Carolina, and to apportion\nthose sales to South Carolina, when they would not otherwise be so apportioned. The United States\nacknowledges that \"it is possible that the tax treatment of Boeing's income from sales to U.S. airline customers\nlocated outside South Carolina may change under the Apportionment Agreement.\" (United States' response to\nPanel question No. 36, para. 151). However, it explains that it is unclear how this potential change would affect\nBoeing's actual tax liability in the absence of information as to the U.S. state to which that income would\notherwise have been apportioned, and whether that other U.S. state's effective tax rate applied to such income\nwould represent an increase or decrease over the effective tax rate applied by South Carolina. (United States'\nresponse to Panel question No. 36, para. 152).\n2436 If it is the case, as appears to us, that the Special Apportionment Method under the Income\nAllocation and Apportionment Agreement does not involve a different apportionment of Boeing's LCA sales to\nforeign purchasers than would be the case under the general sales factor apportionment rules in South\nCarolina Income Tax Act sections 12-6-2252 and 12-6-2280, the question naturally arises as to why South\nCarolina and Boeing would enter into the Income Allocation and Apportionment Agreement. Indeed, the\nEuropean Union cautions that the Panel should exercise a degree of scepticism regarding the United States'\narguments that the Income Allocation and Apportionment Agreement has no effect on Boeing's tax liability.\n(European Union's response to Panel question No. 37, para. 212). In response to a question from the Panel,\nthe United States explains that entering into the Income Allocation and Apportionment Agreement provides\nBoeing with certainty regarding the apportionment of income generated by its significantly expanded South\nCarolina operations over the ten-year term of the Agreement, once it is \"activated\". More specifically, it\nreduces Boeing's exposure to changes in applicable tax rules after Boeing makes significant investments in the\n\n8.971. In light of the foregoing, we therefore consider that the European Union has\nfailed to establish that the Income Allocation and Apportionment Agreement involves\nSouth Carolina foregoing revenue tha t would otherwise be due in respect of Boeing's\nstate corporate income tax liability.\n8.972. We reach this conclusion independently of the separate questions of whether Boeing has in\nfact \"activated\" the Income Allocation and Apportionment Agreement and whether t he Panel\nshould make findings in the absence of evidence to that effect. We recall that the [***2437].2438\n8.973. In response to the Panel 's request for information pursuant to Article 13 of the DSU, the\nUnited States advised on 28 February 2013 that Boeing had not yet notified the South Carolina\nDepartment of Revenue that it wished to begin using the Special Apportionment Method set out in\nthe Income Allocation and Apportionment Agreement.2439 The United States further advised , in its\nresponse to Panel questions on 5 Dece mber 2013, that Boeing is not \"currently using\" the Special\nApportionment Method because it had not yet provided the notice required by section 3.1 of the\nIncome Allocation and Apportionment Agreement.2440 The United States once again advised that it\nhad confirmed with South Carolina tax authorities that Boeing had not, as of 1 December 2014,\nprovided notification under the Income Allocation and Apportionment Agreement to activate the\nSpecial Apportionment Method.2441\n8.974. The European Union considers that, just beca use Boeing may not yet have provided the\nrequired notification to the South Carolina authorities, it does not mean that Boeing is not\ncurrently using the Special Apportionment Method under the Income Allocation and Apportionment\nAgreement. According to the European Union, Boeing is able to benefit from the Income Allocation\nand Apportionment Agreement for up to 15 months before it provides the required notification to\nthe South Carolina Department of Revenue.2442\n8.975. The evidence on record indicates that, as of 1 December 2014, Boeing had not yet notified\nthe South Carolina Department of Revenue that it wished to begin using the Special\nApportionment Method in respect of any tax year. Moreover, we are satisfied on the evidence that\nBoeing's South Carolina corporate income tax for [***].2443 It is possible that Boeing provided the\n\ncompany's operations, as well as to unanticipated disputes with tax authorities. The United States contends\nthat it is commonplace for companies in a wide range of industries and jurisdictions to enter into similar types\nof agreements in order to achieve greater certainty with respect to future tax liability. (United States' response\nto Panel question No. 147, paras. 299 and 300). Having regard to the other ways potentially open to South\nCarolina and Boeing to clarify the interpretation of the sales factor apportionment rules under the South\nCarolina income tax laws in the case of sales of LCA (e.g. legislative amendment, revenue ruling or private\nletter ruling, or litigation) it appears to us that the option of reaching a contractual agreement for a defined\nperiod of time through a mechanism already contemplated under S.C. Code section 12-6-2320(B), which\nBoeing may elect to activate anytime within seven years from 1 January 2010, provides certain distinct\nadvantages for both South Carolina and Boeing. On South Carolina's side, there is no need to amend legislation\nor issue a general revenue ruling that could potentially benefit other taxpayers in an unforeseen manner\nwithout those taxpayers being required to undertake the significant investments in South Carolina that are the\ncondition for Boeing being able to use the Special Apportionment Method in the Income Allocation and\nApportionment Agreement. On Boeing's side, it obtains a contractually enforceable right protecting it from\nchanges in South Carolina income tax law which could supersede or modify any general revenue ruling or\nprivate letter ruling it may otherwise have sought to obtain. In addition, it is able to elect if and when it wishes\nto use the Special Apportionment Method. We therefore consider it plausible that Boeing could have considered\nit advantageous to enter into an agreement that provides it with a measure of certainty regarding the way in\nwhich income from sales both outside and within the United States would be apportioned for purposes of its\nSouth Carolina income tax liability.\n2437 Income Allocation and Apportionment Agreement, (Exhibit EU-510) (BCI), sections 3.1 and 1.1.\n2438 Income Allocation and Apportionment Agreement, (Exhibit EU-510) (BCI), section 3.1.\n2439 United States' response to the Panel's request for information pursuant to Article 13 of the DSU,\ndated 28 February 2013, response to question No. 74, para. 157.\n2440 United States' response to Panel question No. 36, fn 175.\n2441 United States' response to Panel question No. 146, para. 298.\n2442 The European Union explains that corporate tax returns are due on the 15th day of the third month\nafter the close of the corporation's tax year. Boeing's tax year ends on 31 December, meaning that under\nsection 3.1 of the Income Allocation and Apportionment Agreement, Boeing could elect to have its corporate\nincome tax liability for the previous year assessed on the basis of the Special Apportionment Method by\nnotifying the South Carolina Department of Revenue by 15 March of the following year. (See Boeing,\nApplication for Qualification of Income Apportionment Incentive, (10 August 2010), (Exhibit EU-12), item F.1).\n2443 United States' response to Panel question No. 146, para. 298.\n\nSouth Carolina authorities with the required notice by the 15 March 2015 due date for its tax\nreturn for the tax year ended 31 December 2014. If this were the case, there would be a factual\nbasis for surmising that Boeing's South Carolina income tax for the year ended 31 December 2014\nwas, or at least will be, assessed on the basis of the Special Apportionment Method. However, in\nthe absence of such information, it is difficult to see how the Panel could make a finding in respect\nof an event which not only has not yet occurred, but in fact may not occur. However, our\ninterpretation of \"sales in this State \" under South Carolina Code section 12-6-2280(B), as applied\nto sales and deliveries of Boe ing LCA to foreign customers at Boeing 's South Carolina delivery\nfacility, renders it unnecessary to further address this issue.2444\n8.2.8.9.4 Conclusion\n8.976. As we explain above, we are not satisfied that the European Union has demonstrated that\nthe Special Apportionment M ethod to be applied under the Income Allocation and Apportionment\nAgreement, insofar as it sources income from sales and deliveries of airplanes to foreign\ncustomers, or to leasing companies or special purpose entities to the principal place of business of\nthe ultimate operator of the airplane, as sales \"outside South Carolina \", involves a different tax\ntreatment from that which would be afforded to such sales and deliveries under South Carolina\nCode sections 12-6-2252 and 12 -6-2280(B). Accordingly, the Eur opean Union has failed to\nestablish that the Income Allocation and Apportionment Agreement involves South Carolina\nforegoing revenue that would otherwise be due in respect of Boeing 's state corporate income tax\nliability.\n8.977. In light of the foregoing, w e conclude that the European Union has failed to establish that\nthe measure involves a financial contribution within the meaning of Article 1.1(a)(1)(ii) of the SCM\nAgreement and therefore a specific subsidy within the meaning of Articles 1 and 2 of the SCM\nAgreement.\n8.2.8.10 Whether the property tax exemption in respect of Boeing 's large cargo\nfreighters is a specific subsidy to Boeing\n8.2.8.10.1 Introduction\n8.978. In paragraph 24 of its panel request, the European Union identifies as one of the Project\nGemini-related subsidies presently benefiting Boeing:\nProperty tax exemptions for Boeing's Large Cargo Freighters, pursuant to S.C. Code §\n12-37-220(B)(33), as amended by Section 1 of H3482, Act No. 45, 2009 S.C. Acts\n763.\n8.979. As already explained in the context of our evaluation of the Proj ect Emerald and Boeing\nFILOT Agreements, South Carolina imposes a property tax assessment rate equal to 10.5% of the\nfair market value of property owned and used by manufacturers in the conduct of their\nbusiness.2445 South Carolina also provides various gener al exemptions from property tax.\nSection 12-37-220(A) of the South Carolina Code , entitled \"General exemption from taxes \", sets\nforth 11 exemptions from ad valorem taxation, pursuant to the provisions of section 3 of Article X\nof the State Constitution and subject to the provisions of section 12 -4-720. Section 12-37-220(B)\nof the South Carolina Code then provides:\nIn addition to the exemptions provided in subsection (A), the following classes of\nproperty are exempt from ad valorem taxation subject to the pr ovisions of Section\n12-4-720:\n…\n\n2444 Accordingly, we do not consider it necessary to address the European Union's request for the Panel\nto \"draw the appropriate inferences\". (European Union's response to Panel question No. 172, fn 1106; and\ncomment on United States' response to Panel question No. 36, para. 218).\n2445 County Equalization and Reassessment, S.C. Code, Title 12, chapter 43, (Exhibit EU-525),\nsection 12-43-220(a)(1).\n\n(33)(a) All personal property including aircraft of an air carrier which operates an air\ncarrier hub terminal facility in this State for a period of ten consecutive years from the\ndate of qualification , if its qualifications are maintained. An air carrier hub terminal\nfacility is defined in Section 55-11-500.\n(b) All aircraft, including associated personal property, owned by a company owning\naircraft meeting the requirements of Section 55 -11-500(a)(3)(i) without regard to the\nother requirements of Section 55 -11-500. An aircraft qualifying for the exemption\nallowed by this subitem may not be used by the operator of the aircraft as the basis\nfor an exemption pursuant to subitem (a) of this item.\n8.980. The exemption set forth in secti on 12 -37-220(B)(33)(b) above was effected through an\namendment to section 12 -37-220 by H3482. 2446 It was signed into law on 2 June 2009 and was\nexpressed to apply to property tax years beginning after 2006. Its effect was to exempt from ad\nvalorem taxation all aircraft and associated personal property owned by a company owning two or\nmore specially equipped planes that are used for the transportation of specialized cargo (the LCF\nproperty tax exemption).2447\n8.981. Boeing employs \"Dreamlifter\" LCFs, modified 747-400 aircraft, to transport components of\nthe 787 Dreamliner from various manufacturing facilities to assembly lines in Everett, Washington,\nand North Charleston, South Carolina. 2448 Boeing operates four such Dreamlifter LCFs from its\nfacility in North Charleston.2449 The European Union argues that Boeing has benefited from the LCF\nproperty tax exemption set forth above since 2009, and that this constitutes a specific subsidy\nwithin the meaning of Articles 1 and 2 of the SCM Agreement.\n8.2.8.10.2 Main arguments of the parties\n8.982. The European Union argues that the LCF property tax exemption is a financial contribution\nby a government within the meaning of Article 1.1(a)(1)(ii), namely the foregoing of government\nrevenue otherwise due.2450 The European Union identifies the tax treatment a pplicable to Boeing's\nLCFs in South Carolina as the exemption from property taxes for \"specially equipped planes\" used\nto transport \"specialized cargo\", as well as associated personal property, set out in section 12 -37-\n220(B)(33)(b) of the South Carolina C ode.2451 According to the European Union, the legislative\nhistory of H3482 suggests that the reason for Boeing's tax treatment is to provide a major subsidy\nto Boeing. The European Union identifies the benchmark tax treatment of comparable taxable\nactivity of comparable taxpayers as the tax treatment of aircraft ownership by a manufacturer or\nany other taxpayer in South Carolina; namely, an assessment ratio of 10.5% under section 12-43-\n220 of the South Carolina Code .2452 The European Union argues that a compariso n of the\nbenchmark tax treatment and the treatment received by Boeing under the LCF property tax\nexemption, in light of the reasons for the LCF property tax exemption, demonstrates that the tax\ntreatment accorded to Boeing represents the foregoing of revenue otherwise due.2453\n\n2446 South Carolina Act No. 45, S.C. Code, Acts 763 H3482 (2 June 2009), (Exhibit EU-522).\n2447 See section 1 of South Carolina Act No. 45, S.C. Code, Acts 763 H3482 (2 June 2009), (Exhibit\nEU-522), which amends S.C. Code section 12-37-220(B)(33)(b) to exempt from ad valorem taxes: \"{a}ll\naircraft, including associated personal property, owned by a company owning aircraft meeting the\nrequirements of Section 55-11-500(a)(3)(i) without regard to the other requirements of Section 55-11-500\".\nSection 55-11-500(a)(3)(i), which was enacted in 2005 to expand the definition of an \"air carrier hub terminal\nfacility\" for purposes of South Carolina's air hub bonds legislation, to include an airport terminal facility from\nwhich an air carrier operates \"two or more specially equipped planes that are … used for the transportation of\nspecialized cargo\". (See South Carolina Act No. 33, R34 H3234 (2005), (Exhibit EU-1387)).\n2448 Boeing 747 Dreamlifter Fact Sheet, available at\n<http://www.boeing.com/commercial/787family/dreamlifter_fact.html>, accessed 1 September 2016, (Exhibit\nEU-443).\n2449 South Carolina Department of Revenue, Boeing Applications for Property Tax Exemptions,\n28 April 2010, (Exhibit EU-521).\n2450 European Union's first written submission, para. 646.\n2451 European Union's first written submission, para. 647.\n2452 The European Union further specifies that the benchmark property tax treatment of aircraft in South\nCarolina is the same regardless of whether the owner is a manufacturer or other type of taxpayer.\n(European Union's first written submission, para. 648; second written submission, para. 685 and fn 1150).\n2453 European Union's first written submission, para. 649.\n\n8.983. The European Union argues that the LCF property tax exemption provides Boeing with\nbenefits on non -market terms, and therefore confers a benefi t within the meaning of\nArticle 1.1(b).2454\n8.984. The European Union argues that the LCF property tax exemption is specific within the\nmeaning of Articles 2.1(a) and 2.1(c) on a number of grounds. First, the LCF property tax\nexemption is specific within the meaning of Article 2.1(a) since H3482 explicitly limits the\nexemption to an industry or group of en terprises, namely \"compan{ies} owning aircraft meeting\nthe requirements of Section 55 -11-500(a)(3)(i)\".2455 Second, the LCF property tax exemption is\nspecific within the meaning of Article 2.1(c) since, to the best of the European Union's knowledge,\nBoeing is the only beneficiary of this subsidy. 2456 In any event, the exemption is de facto specific\nsince the United States itself confirms that the subsidy has been used by only a limited number of\ncertain enterprises.2457 Third, the European Union argues that the LCF property tax exemption falls\nunder the provisions of Article 3, and is therefore deemed to be specific pursuant to Article 2.3.\n8.985. The United States argues that the European Union has failed to demonstrate that the LCF\nproperty tax exemption amounts to govern ment revenue foregon e within the meaning of\nArticle 1.1(a)(1)(ii), and in any case, overestimates th e value of any such exemption. Moreover,\nthe LCF property tax exemption is not specific within the meaning of Article 2.\n8.986. The United States argues that the European Union has failed to identify any statements in\nthe legislative history of H3482 that establish that it was intended to benefit Boeing. 2458\nFurthermore, the European Union fails to carry out the comparison of taxpayers in the context of\nthe tax system since it ignores the availability of equivalent treatment to other entities in the\nstate.2459 In addition, as a factual matter, the European Union overstates the value of the LCF\nproperty tax exemption.\n8.987. As to whether the LCF property tax exemption is specific, the United States argues that the\nspecificity analysis should be carried out at the level of South Carolina 's property tax exemptions\ncollectively. Indeed, the LCF property tax exemption is part of South Carolina 's larger efforts to\nensure that the Sta te's tax structure does not impede investment and other economic activity\nwithin the State. 2460 On this basis, the United States argues that, as a group, South Carolina 's\nproperty tax exemptions are not specific within the meaning of Article 2.1(a) since they are not\nexplicitly limited to certain enterprises. With respect to the text of the LCF property tax exemption\nin particular, the mere requirement that a company own a certain number of certain aircraft in\norder to take advantage of a tax exemption for tho se aircraft is not an express limitation to any\nparticular industry or group of enterprises. 2461 The United States contends that the LCF property\ntax exemption is non-specific under Article 2.1(b) on the basis that the exemption is statutory and\nthere is no d iscretion involved on the part of any government entity as to whether to grant the\nexemption or not. 2462 Finally, the LCF property tax exemption is not de facto specific under\nArticle 2.1(c). Property tax exemptions are widely available and widely used in South Carolina. The\nproperty tax exemption provided in section 12 -37-220-(B)(33) of the South Carolina Code in\nparticular has been used by the United Parcel Service, Air South, and Boeing.2463\n\n2454 European Union's first written submission, para. 651.\n2455 European Union's first written submission, para. 653; second written submission, para. 697.\n2456 European Union's first written submission, para. 654.\n2457 The European Union notes that, in response to a Panel question under Article 13 of the DSU, the\nUnited States stated that the property tax exemptions under subsections (a) and (b) of\nsection 12-37-220(B)(33), concerning the LCF property tax exemption as well as a property tax exemption for\nair carriers which operate an air carrier hub terminal facility, have been used by three entities in total,\nincluding Boeing. (European Union's first written submission, para. 655; second written submission,\npara. 698).\n2458 United States' comments on European Union's response to Panel question No. 113, paras. 209-212.\n2459 United States' first written submission, paras. 609 and 610; second written submission, para. 570.\n2460 Furthermore, South Carolina property tax exemptions are all contained in the South Carolina tax\ncode and expressed as exemptions to the general rate set out in that code. (United States' first written\nsubmission, para. 652).\n\n8.2.8.10.3 Evaluation by the Panel\n8.2.8.10.3.1 Whether there is a financial contribution\n8.988. The question before the Panel is whether the LCF property tax exemption involves a\nfinancial contribution in the form of the foregoing of revenue otherwise due, within the meaning of\nArticle 1.1(a)(1)(ii) of the SCM Agreement.\n8.989. As in the case of the FILOT agreements challenged in this proceeding, the parties structure\ntheir arguments according to the three -step analysis set out by the Appellate Body in the original\nproceeding for determining the existence of revenue foregone. As we have explained in that\ncontext, we consider it essential to look at the broader legal rationale underlying this analysis\nbefore studying its specific stages. 2464 In particular, the Appellate Body has observed that the\nforegoing of revenue otherwise due implies that less revenue has bee n raised by the government\nthan would have been raised in a different situation, and crucially that \"the word 'foregone'\nsuggests that the government has given up an entitlement to raise revenue that it could\n'otherwise' have raised\".2465 This entitlement does not exist in the abstract, and must therefore be\nassessed against some defined, normative benchmark.2466\n8.990. Assessing the LCF property tax exemption in light of the guidance provided by the\nAppellate Body, we are of the view that this measure is a financial co ntribution within the meaning\nof Article 1.1(a)(1)(ii) because it is an instance of a government giving up an entitlement to raise\nrevenue that it could otherwise have raised. The very nature of the challenged measure as a tax\nexemption suggests that it is an instance of the taxing authority giving up an entitlement to raise\nrevenue that it could otherwise have raised under the South Carolina property tax rules.\n8.991. Our tentative conclusion that the LCF property tax exemption amounts to revenue\nforegone finds further support in the application of the three-step analysis set out by the Appellate\nBody in the original proceeding.\n8.992. The European Union argues that the benchmark tax treatment of comparable taxable\nactivity of comparable taxpayers is the \"tax treatment of aircraft in South Carolina \" which is\nsubject to a property tax assessment ratio of 10.5%, whether owned by manufacturers or other\ntaxpayers.2467 The United States responds that the European Union fails to consider the availability\nof equivalent treatment t o other entities in the state, without however specifying what this\nequivalent treatment is. 2468 We consider the benchmark identified by the European Union to be\nreasonable and appropriate, particularly in the absence of any alternative proposed by the United\nStates.\n8.993. As to the tax treatment of aircraft in South Carolina, we note that subparagraph 33(a) of\nsection 12-37-220(B) provides an exemption in respect of aircraft of an air carrier which operates\nan air carrier hub terminal facility for a period of 10 c onsecutive years. The analysis of the S outh\nCarolina Office of Research and Statistics indicated that th is hub exemption \"has not been used\nvery often\"2469, suggesting that for the most part, aircraft in South Carolina are subject to property\ntaxes, either at the rate of 10.5% set forth in the South Carolina Constitution, or potentially at a\nlower rate if the taxpayer in question has entered into a FILOT agreement covering its aircraft\npursuant to the various FILOT statutes.2470\n\n2464 See paras. 8.868 and 8.869 above.\n2465 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 806 (referring to Appellate\n2466 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 806 (referring to Appellate\n2467 European Union's first written submission, para. 648; second written submission, para. 685.\n2468 United States' first written submission, paras. 609 and 610; second written submission, para. 570.\n2469 South Carolina Office of Research and Statistics, Statement of Estimated Local Revenue Impact,\nH.B. 3482, 12 May 2009, (Exhibit EU-529).\n2470 We recall that Boeing, along with Vought and Global Aeronautica, was party to the 2006 Project\nEmerald FILOT Agreement which, as explained in Section 8.2.8.7.1 above, exempted the project property from\nad valorem taxes in exchange for the payment of a negotiated \"fee\". Boeing LCFs are specifically identified in\nthe Project Emerald FILOT Agreement as items of project property that would be assessed at the rate provided\nfor under the fee agreement. However, unlike the other project property, which is subject to the 4%\n\n8.994. With respect to the objective rea sons behind the challenged tax treatment, there is no\ndirect evidence before us that sets forth the objective reasons why the South Carolina legislature\namended section 12 -37-220(B)(33) in June 2009 to provide the additional LCF property tax\nexemption. The tax treatment involves an exemption from ad valorem taxes in respect of Boeing's\nLCFs and associated personal property , provided by virtue of section 12-37-220(B)(33)(b). The\nexemption in question was ratified on 27 May 2009 and approved on 2 June 2009. It is expressed\nto apply for property tax years beginning after 2006. 2471 The European Union argues that it can be\nlogically inferred that the amendment effected by H3482 was intended to subsidize Boeing through\na major property tax break connected to Boeing 's \"Dreamlifter\" LCFs \"likely in order to signal\nSouth Carolina's willingness to provide financial incentives to win the second 787 final assembly\nline\".2472\n8.995. We note that the initial version of H3482 introduced into the South Carolina House of\nRepresentatives in February 2009 would have exempted from property taxation all personal\nproperty (including aircraft), owned by a company meet ing the requirements of\nsection 55-11-500(a)(3)(i).2473 Section 55 -11-500(a)(3)(i) refers to a certified or licensed air\ncarrier that operates two or more specially equipped planes that are used for the transportation of\n\"specialized air cargo\". The South Carolina Office of Research and Statistics conducted an analysis\nof the estimated revenue impact of the initial version of H3482 for the South Carolina Senate\nCommittee on Finance in May 2009. The analysis noted that there was at least one entity in South\nCarolina that was known to qualify for this property tax exemption. However, there was no\ndefinition of \"specially equipped\" or \"specialized cargo\".2474 While the South Carolina Department\nof Revenue had informed the S outh Carolina Office of Research and Statistics that it would\n\"construe the specialized cargo provision very strictly \", the South Carolina Office of Research and\nStatistics concluded that local property tax revenues could be affected because \"it may be difficult\nto narrow the scope of this exemption Statewide \", and all personal property would be\nexempted.2475\n8.996. The version of H3482 that was ratified and signed into law some two t o three weeks later\nnarrowed the scope of the LCF property tax exemption from \"all personal property, including\naircraft\" owned by a company owning two or more specially equipped planes used for the\ntransportation of specialized air cargo to \"all aircraft, including associated personal property \"\nowned by such companies. In our view, the subsequent narrowing of the scope of the exemption\nto aircraft (from all personal property), in light of the advice to the South Carolina Senate Finance\nCommittee that there was some uncertainty as to whether there would be more than one entity in\nSouth Carolina that could potentially qualify for the property tax exemption given the absence of\ndefinitions of \"specially equipped\" or \"specialized cargo\", supports a reasonable i nference that the\nreason underlying the amendment to section 12 -37-220(B)(33) effected by H3482 was to provide\na tax exemption to the one entity in the State that was known to qualify for the exemption.\nMoreover, we are satisfied on the balance of probabilities that Boeing was the one qualifying entity\nreferred to in the analysis of the S.C Office of Research and Statistics. Indeed, Boeing itself listed\nthe \"100% abatement of the LCFs \" as one of the components of South Carolina 's \"incentive offer\"\nin a pres entation to Boeing 's Board of Directors regarding the Pro ject Gemini proposal in\nOctober 2009, suggesting that Boeing at least considered itself to be that one entity. 2476 We\ntherefore conclude that the amendment effected by H3482 was intended to provide a pr operty tax\nexemption in respect of Boeing's LCFs.\n8.997. When we compare the LCF property tax exemption with the benchmark tax treatment of\naircraft in South Carolina, whether owned by manufacturers or other taxpayers, taking into\naccount the reasons behind the challenged tax treatment, we are satisfied that the State of South\n\nassessment ratio under the FILOT agreement, the LCFs are subject to a 9.5% assessment ratio. (Project\nEmerald FILOT Agreement, (Exhibit EU-556), section 4.1).\n2471 South Carolina Act No. 45, S.C. Code, Acts 763 H3482 (2 June 2009), (Exhibit EU-522), section 3.\n2472 European Union's first written submission, para. 647; response to Panel question No. 113,\npara. 204.\n2473 See South Carolina H3482, as introduced (10 February 2009), (Exhibit EU-520), section 1.\n2474 South Carolina Office of Research and Statistics, Statement of Estimated Local Revenue Impact,\nH.B. 3482, 12 May 2009, (Exhibit EU-529).\n2475 South Carolina Office of Research and Statistics, Statement of Estimated Local Revenue Impact,\nH.B. 3482, 12 May 2009, (Exhibit EU-529).\n2476 Boeing Board of Directors, \"Gemini Update\", Presentation, 19 October 2009, (Exhibit USA-323),\nslide NLRB-004283.\n\nCarolina is foregoing property taxes that would otherwise be due in relation to the LCFs owned by\nBoeing in South Carolina. We conclude that the European Union has established that the\nLCF property tax exemption in section 12 -37-220(B)(33)(b) of the South Carolina Code\ninvolves a financial contribution within the meaning of Article 1.1(a) (1)(ii) of the SCM\nAgreement.\n8.2.8.10.3.2 Whether there is a benefit\n8.998. While the United States argues that the European Union overvalues the amount of the LCF\nproperty tax exemption2477, it does not appear to contest the European Union 's argument that the\nexemption confers a benefit within the meaning of Article 1.1(b). In light of our finding on financial\ncontribution above, we find that the LCF pr operty tax exemption in\nsection 12-37-220(B)(33)(b) of the South Carolina Code confers a benefit within the\nmeaning of Article 1.1(b) of the SCM Agreement.2478\n8.2.8.10.3.3 Whether the subsidy is specific\n8.999. The parties inter alia disagree on whether the subsidy provided through the LCF property\ntax exemption is specific within the meaning of Article 2.1(c). The European Union 's position is\nthat the subsidy is de facto specific because Boeing is the only known beneficiary of the subsidy,\nand even the \"hub exemption\" set forth in section 12-37-220(B)(33)(a) of the South Carolina Code\nis used only by two enterprises besides Boeing, both of which are air transport companies and thus\nwould constitute \"certain enterprises\" within the meaning of Article 2.1. The United States' position\nis that the LCF property tax exemption is part of a broader programme of property tax exemptions\nset out in section 12 -37-220 of the South Carolina Code as a whole, and that specificity must\ntherefore be assessed at the level of that programme. When viewed in that proper context, the\nsubsidy provided through the LCF property tax exemption is not specific within the meaning of\nArticle 2.1(c).\n8.1000. For the reasons detailed below, we consider that the European Union has established that\nthe subsidy provided through the LCF property tax exemption is de facto specific within the\nmeaning of Article 2.1(c). The United States has provided little argumentation or evidence in\nsupport of its assertion that specificity in relation to the LCF prope rty tax exemption should be\nassessed at the level of a broader subsidy scheme. In particular, we do not consider that the\nUnited States has adequately substantiated its argument that the LCF property tax exemption is\npart of South Carolina 's larger efforts to ensure that the South Carolina's tax structure does not\nimpede investment and other economic activity within the state.2479\n8.1001. We note that there are many exemptions provided in section 12 -37-220 of the South\nCarolina Code, which vary widely in nature, and appear to pursue a number of purposes, some of\nwhich are not obviously related to the promotion of investment and other economic activity. 2480\nThe South Carolina Department of Revenue groups the various exemptions under such diverse\ncategories such as: \"Manufacturing Exemptions \", \"Research and Development Exemptions \",\n\"Corporate Headquarters, Corporate Office Facility, and Distribution Facility Exemptions \",\n\"Exemptions for Inventory and Intangibles \", \"Exemption for Personal Property in Transit \",\n\"Pollution Con trol Exemption \", \"Environmental Cleanup Exemption \", \"Fire Sprinkler System\nExemption\", and \"Other Particular Business Exemptions \".2481 The LCF property tax exemption is\nincluded under \"Other Particular Business Exemptions \".2482 The other \"particular business\nexemptions\" listed in this category of property tax exemptions seem to have few \"links or\n\n2477 In particular, the parties disagree on how many LCFs Boeing sought the LCF exemption for in 2009.\nSee Section 8.2.8.10.4 below.\n2478 Also see para. 8.885 above on tax reductions conferring a benefit.\n2479 United States' first written submission, para. 652.\n2480 For example, section 12-37-220 provides exemptions from property taxes for, among other things,\nproperties used for public purposes and owned by the State, counties, municipalities, school districts,\ncharitable institutions such as hospitals and aged care institutions, public libraries, for certain types of private\nproperty held by eligible individuals, and for property owned and used for particular purposes by certain\nnon-profit organizations such as The Boy Scouts of America, The Girl Scouts of America, the Young Women's\nChristian Association, Young Men's Christian Association, and The Salvation Army.\n2481 South Carolina Tax Incentives, (Exhibit EU-494), pp. 141-163.\n2482 South Carolina Tax Incentives, (Exhibit EU-494), pp. 162 and 163.\n\ncommonalities\"2483 between them. We are not persuaded that the LCF property tax exemption can\nbe considered to be part of a broader programme of property tax exem ptions set out in\nsection 12-37-220 of the South Carolina Code such that we should treat the whole of section 12 -\n37-220 of the South Carolina Code as the \"proper subsidy scheme \" for purposes of our analysis\nunder Article 2.1(c). 2484 We will therefore carry out the spec ificity analysis at the level of the\nchallenged LCF property tax exemption.\n8.1002. The only other argument made by the United States in support of its position that the\nsubsidy provided through the LCF property tax exemption is not specific within the meaning of\nArticle 2.1(c) is the assertion in its first written submission that \"the property tax exemption\nprovided in Section 12 -37-220(B)(33)\" has been used by United Parcel Service and Air South in\naddition to Boeing.2485 As previously explained, the LCF property tax exemption that is the focus of\nthe European Union 's subsidy claim is the exemption set forth in subparagraph (33)(b) of\nsection 12-37-220(B), which is the subparagraph added through an amendment effected by\nH3482. The United States ' response does not cl arify whether United Parcel Service and Air South\nused the LCF property tax exemption in subparagraph (33)(b) or the \"hub exemption\" provided in\nsubparagraph (33)(a). Moreover, the European Union argues that the United States' assertion is\ncontradicted by the response received by the European Union from the South Carolina Department\nof Revenue to a request it made in July 2012 under the South Carolina Freedom of Information Act\nfor any applications by a taxpayer for tax exemptions provided in South Carolina Code section 12-\n37-220(B)(33)(a) or (b), because this response identifies only applications made by Boeing. 2486 It\nis conceivable that United Parcel Service and Air South requested the tax exemptions after the\ndate of the European Union 's request under the South Carolina Freedom of Information Act to the\nSouth Carolina Department of Revenue but prior to February 2013, when the United States\nprovided its response to the Panel 's request for information. However, the United States does not\npursue this line of argument in its second written submission. The United States does not offer any\nresponse in that submission to the assertion of the European Union that the information provided\nby the South Carolina Department of Revenue indicates that applications for tax e xemptions\nprovided for in South Carolina Code section 12-37-220(B)(33)(a) or (b) had been received only\nfrom Boeing. The only argument of the United States in its second written submission with respect\nto whether the subsidy provided through the LCF proper ty tax exem ption is specific under\nArticle 2.1(c) is that \"property tax exemptions in general are widely available and widely used in\nSouth Carolina\"2487, an argument that depends on treating the LCF property tax exemption as part\nof a broader property tax ex emption scheme. We have rejected that argument as insufficiently\nsubstantiated.\n8.1003. We therefore find that the evidence before us supports the argument of the\nEuropean Union that Boeing has been the only user of the LCF property tax exemption provided for\nin South Carolina Code section 12-37-220(B)(33)(b). In our view the subsidy provided through the\nLCF tax exemption is specific within the meaning of Article 2.1(c) because of the \"use of {the}\nsubsidy programme by a limited number of certain enterprises\". We n ote that there is evidence to\nsupport the view that the LCF property tax exemption was tailored specifically for Boeing. 2488 To\nfind a subsidy specific within the meaning of Article 2.1(c) where the subsidy has been used by\nonly one company and the evidence s uggests that the subsidy was tailored specifically for that\ncompany is consistent with the approach taken by the original panel in finding that certain\nsubsidies provided to Boeing under the Illinois Corporate Headquarters Relocation Act were specific\nunder Article 2.1(c). 2489 We also recall, in this regard, our observations above on the meaning of\nthe phrase \"use of a subsidy programme by a limited number of certain enterprises\" in\nArticle 2.1(c). We are satisfied that the fact that only Boeing has used the s ubsidy provided\nthrough the LCF property tax exemption clearly indicates the existence of a limitation of access to\nthe subsidy. In making this finding that the subsidy at issue here is specific within the meaning of\n\n2483 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 851.\n2484 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), paras. 752 and 753.\n2485 United States' first written submission, para. 656 (referring to United States' response to the Panel's\nrequest for information pursuant to Article 13 of the DSU, dated 28 February 2013, (Exhibit USA-198) (BCI),\npara. 162).\n2486 European Union's second written submission, para. 698; and South Carolina Department of Revenue\nFOIA Correspondence, 5 July 2012, (Exhibit EU-1124).\n2487 United States' second written submission, para. 580.\n2488 See para. 8.996 above.\n2489 Panel Report, US – Large Civil Aircraft (2nd complaint), paras,. 7.918 and 7.920. See also\npara. 8.1046 below.\n\nthe second sentence of Article 2.1(c) on the grounds that it has been used by \"a limited number of\ncertain enterprises\" we have also consider ed the last sentence of Article 2.1(c), which requires\nthat account be taken of \"the extent of diversification of economic activities within the jurisdict ion\nof the granting authority, as well as of the length of time during which the subsidy programme has\nbeen in operation\". We see no basis in the facts before us to support an argument that ,\nnotwithstanding that the subsidy provided through the LCF tax exe mption has been used by only\none company, the subsidy should not be considered to be specific because of the limited extent of\ndiversification of economic activities in South Carolina or the limited length of time during which\nthe programme has been in ope ration. We note that the United States does not make any such\nargument.\n8.1004. We therefore conclude that the European Union has established that the subsidy\nprovided through the LCF property tax exemption is de facto specific within the meaning\nof Article 2.1(c) of the SCM Agreement. Having found that the subsidy is specific within\nthe meaning of Article 2.1(c), we do not consider it necessary to address the\nparties' arguments under Articles 2.1(a) and 2.1(b).2490\n8.1005. Finally, we note that the European Union also argues that the subsidy provided to Boeing\nthrough the LCF property tax exemption is specific pursuant to Article 2.3 of the SCM Agreement.\nArticle 2.3 provides that \"{a}ny subsidy falling under the provisions of Article 3 shall be deemed to\nbe specific\". We rej ect this argument because in Section 10 of this Report we find that the\nEuropean Union has failed to establish that any subsidy at issue in this proceeding is prohibited by\nArticles 3.1 and 3.2 of the SCM Agreement.\n8.2.8.10.4 The amount of the subsidy\n8.1006. The parties disagree on the amount of the subsidy to Boeing 's LCA division from the LCF\nproperty tax exemption. Their disagreement focuses on the number of Boeing LCF s in operation\nand subject to the exemption in 2009, as well as the rate of de preciation used by the\nEuropean Union in its amount calculation. The European Union estimates the amount of the\nfinancial contribution conferred by the LCF property tax exemption, which in the case of foregoing\nof revenue otherwise due corresponds to the amount of the subsidy, at USD 25.82 million between\n2013 and 2015.2491 This amount was calculated on the basis of depreciated estimates of the value\nof each of Boeing 's four tax -exempt LCF s at the time they entered into service. 2492 The\nUnited States argues that the European Union has sig nificantly overstated the amount of the\nfinancial contribution because it has erroneously assumed that three LCF s were subject to South\nCarolina property tax in 2009, when there is no basis to conclude that Boeing operated more than\na single LCF in 2009. 2493 The United States argues that the European Union's calculation in fact\nunderstates the initial values to Boeing of each LCF 2494, and disregards the actual LCF values\nprovided by the United States.2495 In addition, the United States argues that the European Union\nhas arbitrarily selected a 5% rate of depreciation to estimate the value of the LCFs in future\nyears.2496 The United States provides an estimate of the value to Boeing of the LCF property tax\nexemption as USD [***] between 2012 and 2014.2497\n8.1007. The parties first disagree on the number of Boeing LCF s in operation in 2009 and subject\nto the challenged tax exemption in that year. The European Union explains that its position that\nthree LCFs were in operation in 2009 is based on the Expert Report of Mr Hugh McTeague 2498,\nwhich in turn relies on Individual Aircraft Reports from ACAS, an industry database. 2499 The\n\n2490 See Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.928.\n2491 South Carolina Subsidies to Boeing's LCA Division, (Exhibit EU-39), p. 4. Also see European Union's\nfirst written submission, para. 650.\n2492 European Union's first written submission, para. 650 and fn 1473; also see para. 652 and fn 1476;\nand H. McTeague, Aircraft Valuation for a Boeing B747-400 LCF (\"Dreamlifter\"), (21 November 2012), (Exhibit\nEU-27); and South Carolina Subsidies to Boeing's LCA Division, (Exhibit EU-39), p. 4.\n2493 United States' first written submission, para. 613.\n2494 United States' first written submission, para. 612.\n2495 United States' second written submission, para. 573.\n2496 United States' first written submission, para. 612.\n2497 Boeing \"But-For\" LCF Exemption Value and Depreciation Information, (Exhibit USA-336) (BCI).\n2498 H. McTeague, Aircraft Valuation for a Boeing B747-400 LCF (\"Dreamlifter\"), (21 November 2012),\n(Exhibit EU-27).\n2499 ACAS Individual Aircraft Reports on Boeing's Large Cargo Freighters, (Exhibit EU-1125).\n\ninformation in the ACAS reports is consistent with information contained in Boeing 's tax exemption\napplications for 2010 and 2011 2500, as well as with statements of Boe ing officials. 2501 The\nEuropean Union explains that it has not used the figures provided by the United States in response\nto the Panel 's request for information pursuant to Article 13 of the DSU because [***].\nFurthermore, the valuations provided by the Unite d States do not indicate a source for the listed\nfigures, lack markings indicating an official government document, and do not associate listed\nvalues with particular LCFs.2502\n8.1008. We do not find that the European Union 's reliance on the information contained in\nBoeing's tax exemption application for 2010 lend s support to its position that three LCF s were in\noperation in 2009. The European Union explains in its second written submission that it was\nlimited to relying on Boeing 's 2010 and 2011 applications because these were the only ones\nprovided to it through its request under South Carolina 's Freedom of Information Act. 2503 The tax\nexemption application for 2010 indicates that [***].2504 We agree with the United States that this\nreveals nothing about the number of LCF s for which Boeing requested an exemption in 2009. 2505\nThe only information shown by [***].2506 This cannot serve as support for the proposition that\nthree LCFs were in operation that year.\n8.1009. However, through other evidence it relies on, the European Union has est ablished that\nthree LCFs were indeed in operation in 2009. The European Union 's subsidy estimate at page 4 of\nExhibit EU -39 identifies the three LCF s that were allegedly in operation and subject to the\nexemption in 2009 as the aircraft with registration nu mbers N747BC, N780BA, and N249BA.\nAccording to the ACAS reports on which the European Union 's Expert Report relies, the LCF\nN747BC was converted to a freighter in 2006, and after having its operational role changed to\n\"research/development\" in 2006, had it s operational role changed to \"freighter\" in 2007.2507 The\nLCF N780BA was converted to a freighter and had its operational role changed to \"freighter\" in\n20072508, while the LCF N249BA was converted to a freighter and had its operational role changed\nto \"freighter\" in 2008. 2509 This information from the ACAS reports is corroborated by certain\nstatements by a Boeing official. A Vice President of Marketing for Boeing Commercial Airplanes\nstated in a blog post dated June 2008 that a third LCF Dreamlifter \"will enter into service by early\nJuly\" 20082510, to accompany the \"first two \" that \"have been in use since 2007 \".2511 The dates\nreferred to in these statements are in line with the information from the ACAS reports, which show\nthat the operational roles of the LCF s with regi stration numbers N747BC and N780BA were\nchanged to \"freighter\" in 2007, while the change for N249BA was made in 2008. This information\nsuggests to us that by 2009, there were indeed three Boeing LCFs in operation.\n8.1010. The United States has failed to rebut the case made by the European Union in support of\nits position that three LCF s were in operation in 2009. The e vidence submitted by the\nUnited States in response to Panel question No. 144 and intended to settle the question of how\nmany LCFs were in operation in 2009 fails in its task. We agree with the European Union that it is\nnot clear that Exhibit USA -5282512 is, in fact, Boeing 's 2009 application for the LCF property tax\nexemption. It is unclear whether the property listed in that exhibit is an airplane. In B oeing's\napplications for 2010 and 2011, the subject property is identified by vehicle identification numbers\n\n2500 South Carolina Department of Revenue, Boeing Applications for Property Tax Exemptions,\n28 April 2010, (Exhibit EU-521).\n2501 R. Tinseth, Boeing Commercial Airplanes, \"Three of four\", Randy's Journal blog post, 12 June 2008,\n(Exhibit EU-1126).\n2502 European Union's second written submission, para. 689.\n2503 European Union's second written submission, para. 687.\n2504 European Union's first written submission, para. 644 and fn 1466.\n2505 United States' first written submission, para. 613.\n2506 See South Carolina Department of Revenue, Boeing Applications for Property Tax Exemptions,\n28 April 2010, (Exhibit EU-521), pdf p. 2.\n2507 ACAS Individual Aircraft Reports on Boeing's Large Cargo Freighters, (Exhibit EU-1125), p. 12.\n2508 ACAS Individual Aircraft Reports on Boeing's Large Cargo Freighters, (Exhibit EU-1125), p. 7.\n2509 ACAS Individual Aircraft Reports on Boeing's Large Cargo Freighters, (Exhibit EU-1125), p. 2.\n2510 R. Tinseth, Boeing Commercial Airplanes, \"Three of four\", Randy's Journal blog post, 12 June 2008,\n(Exhibit EU-1126).\n2511 R. Tinseth, Boeing Commercial Airplanes, \"Three of four\", Randy's Journal blog post, 12 June 2008,\n(Exhibit EU-1126).\n2512 While the United States refers to Exhibit USA-530 (BCI) in its response to Panel question No. 144,\npara. 295, we understand the correct reference to be to Exhibit USA-528 (BCI). (See European Union's\ncomment on United States' response to Panel question No. 144, fn 572).\n\nmatching FAA registration numbers for Boeing LCF, the type of LCF and the make \"747\". Exhibit\nUSA-528 instead reads [***2513]. The European Union further notes that the application pre-dates\nthe enactment of the LCF tax exemption legislation, and therefore seems to concern some other\nexemption.2514\n8.1011. Other evidence provided by the United States also fails to rebut the case made by the\nEuropean Union. We agr ee with the European Union that Exhibit USA -222, entitled \"LCF Values\",\nlacks any indication of the source of the listed figures. 2515 Exhibit USA-336 provided by the\nUnited States in its second written submission, entitled \"Boeing 'But For' LCF Exemption Value and\nDepreciation Information\"2516 and described as \"a spreadsheet provided by Boeing's Corporate Tax\nDepartment\"2517, fails to lend support to the United States ' position. The United States contends\nthat the exhibit reconfirms the original information provided in response to the Panel 's request for\ninformation pursuant to Article 13 of the DSU 2518, namely Exhibit USA -222. However, we have\ndifficulty seeing how Exhibit USA-336 confirms the information in Exhibit USA-222, when the\ninformation seems rather contradict ory: in Exhibit USA-222, values are shown [***], whereas in\nExhibit USA-336 values are shown [***]. The latter exhibit states that only one LCF had its first\nyear of exemption in 2009, and that [***] The Exhibit does not explain this statement further,\nnor has the United States explained or argued this anywhere in its submissions. To us, Exhibit\nUSA-336 seems to concede that [***]. However, this is not an argument the United States has\nmade anywhere in its submissions.\n8.1012. In sum, we take the view that the Uni ted States has failed to rebut the case made by the\nEuropean Union that three Boeing LCF s were in operation and subject to the LCF property tax\nexemption in 2009.\n8.1013. The second point of disagreement between the parties concerns the depreciation rate\nused by t he European Union in its amount calculation. Section 12-37-930 of the South Carolina\nCode provides that \"{t}he fair market value for vehicles, watercraft, and aircraft must be based on\nvalues derived from a nationally recognized publication of vehicle valu ations, except that the value\nmay not exceed ninety-five percent of the prior year's value.\"2519 The European Union argues that,\nlacking published values for Boeing 's unique customised LCF s, it used the valuation method\nprovided in South Carolina tax law, namely 95% of the previous year's value, which it considers to\nbe the least arbitrary basis for assessing depreciation based on publicly available information. 2520\nThe United States argues that the European Union assumes the lowest possible depreciation rate\nto be applicable to the LCFs, without providing any explanation of why that figure was chosen and\nwhy it should be considered an accurate depreciation rate for LCF s. Thus, even aside from the fact\nthat the Panel has actual depreciated figures in Exhibit USA -222 (BCI), the European Union has\nfailed to provide an estimate upon which the Panel can reasonably rely.2521\n8.1014. While the United States objects to the depreciation rate selected by the European Union,\nit does not propose any more reasonable rate of depreciation for the Panel to use instead. While\nExhibit USA-336 (BCI), submitted by the United States in its second written submission, [***],\nthe United States fails to explain this statement any further.\n8.1015. In light of the fact that the depreciation rate used by the E uropean Union is authorised\nunder South Carolina tax law, and the United States has failed to provide a more reasonable rate\nof depreciation, or a more reasonable life -time for the asset over which to apply depreciation, we\nare of the view that the 5% rate proposed by the European Union is a reasonable rate of\ndepreciation.\n\n2513 South Carolina Department of Revenue, Boeing Application for Property Tax Exemption, PT-401,\n2009, (Exhibit USA-528) (BCI).\n2514 European Union's comment on United States' response to Panel question No. 144, paras. 387-390.\n2515 European Union's second written submission, para. 689.\n2516 There is no indication what \"But-For\" refers to.\n2517 United States' second written submission, para. 572.\n2518 United States' second written submission, para. 574.\n2519 Assessment of Property Taxes, S.C. Code, Title 12, chapter 37, (Exhibit EU-523), section 12-37-\n930.\n2520 European Union's second written submission, para. 690.\n2521 United States' first written submission, para. 614; second written submission, paras. 573 and 574.\nAlso see para. 8.1011 above.\n\n8.1016. We therefore consider the European Union 's estimate of the amount of the subsidy at\nUSD 25.82 million between 2013 and 2015 to be reasonable.2522\n8.2.8.10.5 Conclusion\n8.1017. In light of our above findings, we conclude that the European Union has established that\nthe property tax exemption for Boeing's large cargo freighters provided in South Carolina Code\nsection 12-37-220(B)(33)(b) involves a specific subsidy within the meaning of Articles 1 and 2 of\nthe SCM Agreement, in the amount of USD 25.82 million between 2013 and 2015.\n8.2.8.11 Whether the sales and use tax exemptions for aircraft fuel, computer\nequipment, and construction materials are specific subsidies to Boeing\n8.2.8.11.1 Introduction\n8.1018. In paragraph 24 of its panel re quest, the European Union identifies as among the Project\nGemini-related subsidies presently benefiting Boeing:\nExemptions from state sales and use taxes for aircraft fuel, computer equipment, and\nconstruction materials, established by Sections 2, 3, and 4 of H3130, respectively, and\ncodified at S.C. Code § 12-36-2120(9)(e) and (f), (65)(b), and (67).\n8.1019. The European Union argues that these above -referenced provisions exempt Boeing 's\npurchases of aircraft fuel, computer equipment , and construction materials fr om South Carolina\nand local sales and use tax, and thereby constitute a specific subsidy to Boeing within the meaning\nof Articles 1 and 2 of the SCM Agreement.\n8.1020. Retail sales and retail purchases of tangible personal property are subject to South\nCarolina sales and use tax, respectively. A 6% tax applies to gross proceeds of sales by persons\nengaged in the business of selling tangible personal property at retail in South Carolina 2523, as well\nas to the sales price of tangible personal property purchased at reta il for use, storage, or other\nconsumption in the state. 2524 Local governments also have the authority to impose certain\nadditional local sales and use taxes. 2525 South Carolina tax legislation nonetheless provides\nnumerous exclusions and exemptions from sales and use taxes.2526\n8.1021. H3130, signed into law on 30 October 2009, created three sales and use tax exemptions\nwith respect to: ( a) fuel sold to manufacturers, electric power companies, and transportation\ncompanies for \"the generation of motive power for test flights of aircraft by the manufacturer of\nthe aircraft\" and for \"the transportation of an aircraft prior to its completion from one facility of the\nmanufacturer of the aircraft to another facility of the manufacturer of the aircraft, not including the\ntransportation of major component parts for construction or assembly, or the transportation of\npersonnel\"2527; (b) the sales of \"computer equipment … used in connection with a manufacturing\nfacility\"2528; and ( c) the sales of \"construction materials used in the constructi on of a new or\nexpanded single manufacturing facility \".2529 These permanent exemptions, effective from\nNovember 2009, are available to taxpayers that: ( a) invest at least USD 750 million in real or\npersonal property in a single manufacturing facility over a seven-year period; (b) create 3,800 full-\n\n2522 We therefore do not consider it necessary to address the European Union's request for the Panel to\n\"draw reasonable inferences\". (European Union's second written submission, para. 691).\n2523 The South Carolina Sales and Use Tax Act, S.C. Code, Title 12, chapter 36, (Exhibit EU-493),\nsections 12-36-910(A) and 12-36-1110.\n2524 The South Carolina Sales and Use Tax Act, S.C. Code, Title 12, chapter 36, (Exhibit EU-493),\nsections 12-36-1110 and 12-36-1310.\n2525 See South Carolina Tax Incentives, (Exhibit EU-494), p. 207.\n2526 See, generally, The South Carolina Sales and Use Tax Act, S.C. Code, Title 12, chapter 36, (Exhibit\nEU-493), section 12-36-2120(1)-(80). Also see South Carolina Tax Incentives, (Exhibit EU-494), pp. 210, 212,\nand 213.\n2527 H3130, section 2, enacted as The South Carolina Sales and Use Tax Act, S. C. Code, Title 12,\nchapter 36, (Exhibit EU-493), sections 12-36-2120(9)(e) and (f).\n2528 H3130, section 3, enacted as The South Carolina Sales and Use Tax Act, S.C. Code, Title 12,\nchapter 36, (Exhibit EU-493), section 12-36-2120(65)(B).\n2529 H3130, section 4, enacted as The South Carolina Sales and Use Tax Act, S.C. Code, Title 12,\nchapter 36, (Exhibit EU-493), section 12-36-2120(67).\n\ntime new jobs at the manufacturing facility over the seven -year period 2530; and ( c) notify the\nSouth Carolina Department of Revenue of their intent to use th e exemption prior to\n15 October 2015.2531\n8.2.8.11.2 Main arguments of the parties\n8.1022. The European Union argues that the sales and use tax exemptions for aircraft fuel,\ncomputer equipment, and construction materials, enacted as part of H3130, are a specific subsidy\nwithin the meaning of Articles 1 and 2.\n8.1023. The European Union argues tha t the sales and use tax exemptions for aircraft fuel,\ncomputer equipment, and construction materials, enacted as part of H3130, involve a financial\ncontribution by a government within the meaning of Article 1.1(a)(1)(ii), namely the foregoing of\ngovernment revenue otherwise due. In its argumentation, the European Union follows the\nthree-step approach to analysing claims under Article 1.1(a)(1)(ii) set out by the Appellate Body in\nthe original proceeding. 2532 First, the European Union identifies the tax treatme nt applicable to\ngoods purchased by Boeing in South Carolina (or outside of South Carolina for use within South\nCarolina) as a permanent exemption from sales and use taxes for three types of goods, namely\naircraft fuel, computer equipment, and construction materials.2533 The reason for this tax\ntreatment; namely, to reduce Boeing 's South Carolina tax liability , is evident from the legislative\ncontext in which the exemptions were adopt ed, as well as their terms and conditions. 2534 Second,\nthe European Union identi fies the benchmark tax treatment of comparable taxable activity of\ncomparable taxpayers as the tax treatment of purchases of aircraft fuel, computer equipment, or\nconstruction materials by any other manufacturer in South Carolina, that is a sales and use t ax\nrate of 7% at state -level and 8% in Charleston County. 2535 Third, a comparison of this benchmark\ntax treatment with the treatment received by Boeing, in light of the reasons for enacting the\nexemptions, clearly shows the foregoing of government revenue oth erwise due. 2536 The\nEuropean Union estimates the amount of the financial contribution at USD 49.14 million between\n2010 and 2035.2537\n8.1024. The European Union argues that the challenged tax exemptions confer a benefit within\nthe meaning of Article 1.1(b).2538\n8.1025. The European Union also argues that the challenged tax exemptions are specific within\nthe meaning of Articles 2.1(a) and 2.1(c). First, the exemptions are de jure specific within the\nmeaning of Article 2.1(a) since the statutory language establishing these exemptio ns explicitly\nrestricts the recipients to certain enterprises, namely those with Boeing 's precise investment\nprofile.2539 Second, the tax exemptions are de facto specific within the meaning of Article 2.1(c)\n\n2530 The South Carolina Sales and Use Tax Act, S.C. Code, Title 12, chapter 36, (Exhibit EU-493),\nsections 12-36-2120(9)(E)(i) and (ii), (9)(F)(i) and (ii), 65(B)(i) and (ii), and 67(i) and (ii).\n2531 South Carolina Act No. 124, S.C. Code, Acts 1092, H3130 (30 October 2009), (Exhibit EU-466),\nsections 2(B), 3(B), and 4(B). Also see South Carolina Tax Incentives, (Exhibit EU-494), pp. 215, 217, and\n218. We note that the exemption on construction materials was effectively subsumed in July 2011 by a\npreviously enacted exemption for construction materials used in the construction of a single manufacturing or\ndistribution facility that invests at least USD 100 million over 18 months at a single site in South Carolina. (See\nS.C. Code, section 12-36-2120(67)). Also see European Union's first written submission, fn 1389; and United\n2532 European Union's first written submission, para. 594 (referring to Appellate Body Report, US – Large\nCivil Aircraft (2nd complaint), paras. 812-814).\n2533 European Union's first written submission, para. 595.\n2534 European Union's first written submission, para. 596; second written submission, para. 644.\n2535 European Union's first written submission, paras. 597 and 588; second written submission,\nparas. 645 and 646.\n2536 European Union's first written submission, para. 598.\n2537 European Union's first written submission, paras. 599-601; second written submission,\nparas. 647-651. The European Union argues that its estimate takes into account the fact that the challenged\nexemption for construction materials under section 12-36-2120(67) of the South Carolina Code was effectively\nsubsumed by another exemption in July 2011 subject to different eligibility criteria. (See European Union's\nsecond written submission, fn 1089. See also European Union's second written submission, para. 652; and\ncomments on United States' response to Panel question No. 150, paras. 26 and 27).\n2538 European Union's first written submission, paras. 602 and 603 (referring to Panel Report, US – FSC,\npara. 7.103). The European Union is of the view that the entirety of the financial contribution can be\nconsidered to confer a benefit to Boeing. (European Union's first written submission, para. 603).\n2539 European Union's first written submission, para. 604; second written submission, para. 660.\n\nsince, to the best of the European Union 's knowledge, Boeing is the only taxpayer to benefit from\nthese exemptions.2540 Third, the European Union rejects the United States' claim that Article 2.1(b)\nshows that the exemptions are not specific, since the very specific and narrow criteria governing\neligibility for the exemptions clearly favour certain enterprises over others.2541 The European Union\nalso argues that the Panel should assess the challenged exemptions individually, rather than as\npart of a broader single programme as argued by the United States.2542\n8.1026. The United States argues that the European Union fail s to establish the existence of a\nfinancial contribution with respect to the sales and use tax exemptions for aircraft fuel, computer\nequipment, and construction materials, enacted as part of H3130 . Moreover, the European Union\noverstates any financial contribution and benefit provided by the exemptions, and does not\ndemonstrate that they are specific.\n8.1027. The United States argues that the European Union has not met its burden of proof for\nestablishing the existence of a financial contribution, since it fails in its application of the Appellate\nBody's three -step analysis for determining the existence of revenue foregone. 2543 First, the\nEuropean Union fails to identify the tax treatment applicable to Boeing 's sales and use taxes,\nbecause it restricts its examination to the specific exemptions for fuel, computer equipment, and\nconstruction materials, and fails to address the reason for applying those exemptions in the full\ncontext of the South Carolina sales and use tax system and the availability of equivalent treatment\nto numerous other entities in the state.2544 Second, the European Union fails in the identification of\nthe tax treatment of sales and use taxes of comparably situated taxpayers, by making the\nunsupported assertion that there are no comparable taxpayers. Third, the European Union fails to\ncarry out a comparison of Boeing 's tax treatment and that of other comparably situated taxpayers\nin the context of an examination of the structure of the domestic tax regime a nd its organising\nprinciples.2545 Notwithstanding the above, the European Union overstates the value of the\nchallenged exemptions to Boeing, since it does not even refer to the actual figures provided by the\nUnited States in response to the Panel 's request for information pursuant to Article 13 of the DSU,\nand disregards the availability of other sales and use tax exemptions to Boeing.2546\n8.1028. The United States also argues that the challenged tax exemptions are not specific within\nthe meaning of Article 2. First, th e sales and use tax exemptions are not specific within the\nmeaning of Article 2.1(a) since they are not explicitly limited to ce rtain enterprises. The\nEuropean Union does not in fact claim that the exemptions are explicitly limited to Boeing or to\naerospace manufacturing, but instead claims that they are limited to enterprises with Boeing 's\ninvestment profile.2547 Second, an analysis under Article 2.1(b) confirms that the exemptions are\nnot specific, since they are available to any manufacturer meeting the \"objective criteria \" on\nnotification, investment, and job creation. These criteria are automatic and strictly adhered to. 2548\nThird, the challenged exemptions are not specific within the meaning of Article 2.1(c). 2549 In\naddition to the above, the European Union's specificity claims under both Articles 2.1(a) and 2.1(c)\nignore the fact that the challenged exemptions form part of a scheme to provide widely available\nexemptions to a variety of industries in order to ensure that the state 's tax structure does not\nimpede investment and other economic activities.2550 Finally, in response to the Panel's request for\ninformation pursuant to Article 13 of the DSU, the United States indicated that taxpayers other\n\n2540 European Union's first written submission, para. 605.\n2541 European Union's second written submission, fn 1107.\n2542 European Union's second written submission, paras. 656-659 (referring to Appellate Body Report,\nUS – Large Civil Aircraft (2nd complaint), paras. 849 and 851).\n2543 United States' first written submission, para. 587 (referring to Appellate Body Report, US – Large\nCivil Aircraft (2nd complaint), paras. 812-814).\n2545 United States' first written submission, para. 588.\n2546 United States' first written submission, paras. 589-597; second written submission, paras. 584-590.\n2547 United States' first written submission, para. 658.\n2549 United States' first written submission, para. 661.\n2550 United States' first written submission, paras. 591 and 657-661 (referring in particular to Panel\nReport, US – Large Civil Aircraft (2nd complaint), para. 7.198).\n\nthan Boeing have notified the South Carolina Department of Revenue of their intention to use the\nchallenged tax exemptions.2551\n8.2.8.11.3 Evaluation by the Panel\n8.2.8.11.3.1 Whether there is a financial contribution\n8.1029. The first question before the Panel is whether the sales and use tax exemptions for\naircraft fuel, computer equipment , and construct ion materials, enacted as part of H3130,\nconstitute a financial contribution through the foregoing of government revenue that is otherwise\ndue, within the meaning of Article 1.1(a)(1)(ii). The European Union 's position is that these\nexemptions were specifi cally designed to exempt Boeing 's purchases of aircraft fuel, computer\nequipment, and building materials from normal rates of South Carolina and local sales and use tax.\nThe United States ' position is that the European Union fails to consider the availabil ity of\nequivalent treatment to numerous other entities in the state.\n8.1030. As in the case of the FILOT agreements and the LCF property tax exemption challenged in\nthis proceeding, the parties structure their arguments according to the three -step analysis set out\nby the Appellate Body in the original proceeding for determining when revenue that is otherwise\ndue has been foregone . As we have explained in more detail in the context of the FILOT\nagreements, we consider it essential to look at the broader legal ratio nale underlying this analysis\nbefore studying its specific stages. 2552 In particular, the Appellate Body has observed that the\nforegoing of revenue otherwise due implies that less revenue has been raised by the government\nthan would have been raised in a diff erent situation, and crucially that \"the word 'foregone'\nsuggests that the government has given up an entitlement to raise revenue that it could\n'otherwise' have raised\".2553 This entitlement does not exist in the abstract, and must therefore be\nassessed against some defined, normative benchmark.2554\n8.1031. Assessing the challenged sales and use tax exemptions in light of the guidance provided\nby the Appellate Body, we are of the view that these measure s involve a financial contribution\nwithin the meaning of Article 1.1 (a)(1)(ii), because they are instances of a government giving up\nan entitlement to raise revenue that it could otherwise have raised. As in the case of the LCF\nproperty tax exemption 2555, the very nature of the challenged measures as tax exemptions\nsuggests that they are instances of the taxing authority giving up an entitlement to raise revenue\nthat it could otherwise have raised under the South Carolina sales and use tax rules. Furthermore,\nsimilar to the Boeing F ILOT Agreement and the Project Emerald F ILOT Agreement challenged in\nthis proceeding, the sales and use tax exemptions for aircraft fuel, computer equipment , and\nconstruction materials are conditional tax incentives available to companies able and willing to\nmake investments of a certain magnitude in the State of South Carolina. They embody a quid pro\nquo arrangement whereby an entity is granted some form of tax advantage in exchange for\nfulfilling set requirements, and conversely a taxing authority relinquishes an existing entitlement to\nraise revenue that it could otherwise raise where an entity fulfils the set requirements.2556\n8.1032. Our tentative conclusion that the challenged sales and use tax exemptions amount to\nrevenue foregone finds further support in the application of the three -step analysis set out by the\nAppellate Body in the original proceeding. Both parties refer extensively to this analysis, but\ndisagree on its application to the present situation.\n8.1033. First, the parties disagree on the framing of the relevant tax treatment applicable to\nBoeing, as well as the reasons behind that treatment. The Appellate Body stated in the original\nproceeding, in the context of income tax, that the first step in determining the existence of the\nforegoing of government revenue otherwise due entails \"identify{ing} the tax treatment that\n\n2551 United States' response to the Panel's request for information pursuant to Article 13 of the DSU,\ndated 28 February 2013, response to question No. 72, para. 155; first written submission, paras. 662 and 663,\nand fn 1025.\n2552 See paras. 8.868 and 8.869 above.\n2553 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 806 (referring to Appellate\n2554 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 806 (referring to Appellate\n2555 See para. 8.990 above.\n2556 See para. 8.873 above.\n\napplies to the income of the alleged recipients. Identifying such tax treatment will entail\nconsideration of the objective reasons behind that treatment and, where it involves a change in a\nMember's tax rules, an assessment of the reaso ns underlying that change \".2557 The\nEuropean Union identifies the tax treatment applicable to goods purchased by Boeing in South\nCarolina (or outside of South Carolina for use within South Carolina) as a permanent exemption\nfrom sales and use taxes for three types of goods, namely aircraft fuel, computer equipment, and\nconstruction materials.2558 The European Union argues that the reasons for this tax treatment are\nto materially reduce the expense to Boeing of constructing those portions of Project Gemini not\nalready provided by South Carolina, outfitting the facilities with the computer equipment necessary\nfor a state -of-the-art LCA production facility, and flying the finished 787 aircraft to be painted at\nBoeing's facility in Amarillo, Texas, and back. These rea sons are evident from the following: the\nexemptions were enacted as part of H3130, the Boeing incentive legislation; the eligibility criteria\nfor the exemptions match Boeing 's investment and job creation commitments in South Carolina;\nthe exemptions are on ly available for a limited period of time; and the exemptions are tailored to\nthe specific needs of Boeing 's manufacturing activities in South Carolina. 2559 By contrast, the\nUnited States takes the view that the European Union construes the object of the reve nue\nforegone analysis overly narrowly by restricting its examination to the exemptions for fuel,\ncomputers, and construction materials2560, and merely assumes that South Carolina sought to give\nincentives to Boeing without considering the availability of equivalent treatment to numerous other\nentities in the state.2561\n8.1034. We consider the proper object of the revenue foregone analysis to be the tax treatment\nthat applies to Boeing's purchases of aircraft fuel, computer equipment, and construction materials\nin South C arolina (or outside of South Carolina for use within South Carolina), namely a\npermanent exemption from sales and use taxes by virtue of the three exemptions enacted as part\nof H3130. Indeed, the evidence before the Panel shows that Boeing has notified the South Carolina\nDepartment of Revenue of its intention to use all three exemptions 2562, and has been granted\nexemptions for such purchases. 2563 As a result, all of Boeing 's purchases of computer equipment\nare exempt from sales and use tax by virtue of section 12 -36-2120(65)(b) of the South Carolina\nCode; its purchases of construction materials used in the construction of a new or expanded single\nmanufacturing facility are exempt by virtue of section 12 -36-2120(67); and its purchases of\naircraft fuel are exempt by virtue of sections 12 -36-2120(9)(e) and (f). We understand such\nexemptions to be permanent on account of Boeing having fulfilled the investment, job creation and\nnotification requirements. There is no evidence before us that Boeing has used any sales and use\ntax exemptions for aircraft fuel, computer equipment or construction materials other than those\nchallenged in this proceeding.\n8.1035. Furthermore, with respect to the objective reasons behind this treatment, there is\nevidence on the record before us to suppor t the European Union 's position that the sales and use\ntax exemptions for aircraft fuel, computer equipment, and construction materials were intended to\nreduce Boeing's tax liability. In particular, we note that the eligibility criteria for the exemptions,\nnamely a minimum investment of USD 750 million and the creation of a minimum of 3.800\nfull-time jobs at a single manufacturing facility over a seven -year period, precisely match the\ncommitments made by Boeing to South Carolina. Furthermore, the exemption on aircraft fuel,\nwhich applies to \"the generation of motive power for test flights of aircraft by the manufacturer \"\nand to \"the transportation of an aircraft prior to its completion from one facility of the\nmanufacturer of the aircraft to another facility of the manufacturer of the aircraft, not including the\ntransportation of major component parts for construction or assembly, or the transportation of\npersonnel\" seem tailor-made to the circumstances of Boeing's operations in South Carolina. Added\nto the above circumstances is the fact that the exemptions on aircraft fuel, computer equipment,\nand construction materials, while being permanent, are only available between November 2009\nand October 2015. Moreover, certain statements by South Carolina authoritie s support this view.\nIndeed, a statement of the South Carolina Board of Economic Advisors observes, in the context of\n\n2557 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 812.\n2558 European Union's first written submission, para. 595; second written submission, para. 644.\n2559 European Union's first written submission, para. 596; second written submission, para. 644.\n2560 See United States' first written submission, para. 588; second written submission, para. 583.\n2561 United States' first written submission, para. 588.\n2562 In November 2009 for construction materials, in June 2010 for computer equipment, and in\nMarch 2011 for aircraft fuel. (See South Carolina Department of Revenue Notifications, (Exhibit US-13-292)\n(BCI)).\n2563 South Carolina Department of Revenue Exemptions, (Exhibit US-13-293) (BCI).\n\nsections on all three exemptions, that \"{s}ince we are not currently collecting any tax revenue\nfrom a manufacturer that meets these criteria, this section is not expected to reduce state General\nFund revenue in FY2009 -10.\" This statement was made at the time that H3130 was passed, just\nprior to the establishment of Project Gemini. 2564 The European Union also highlights a statement\nby the then-Governor of South Carolina in the press to the effect that Boeing would receive \"some\nsales-tax exemptions specific to the company\", adding that \"{t}here are some special incentives in\nterms of exemptions that were important to make the case for South Caro lina versus other\nplaces\".2565 Finally, we note that a letter from Boeing notifying the South Carolina Department of\nRevenue of its intention to use the exemption relating to con struction materials in November 2009\nsuggests a link between Boeing 's decision to locate operations in South Carolina and a sales tax\nincentive.2566\n8.1036. Second, the parties disagree on the identification of the benchmark tax treatment for\ncomparison. The Appellate Body stated in the original proceeding, in the context of income tax,\nthat dete rmining the existence of the foregoing of government revenue otherwise due entails\n\"identify{ing} a benchmark for comparison – that is, the tax treatment of comparable income of\ncomparably situated taxpayers\".2567 The European Union argues that the benchmark tax treatment\nis the tax treatment of purchases of aircraft fuel, computer equipment , and construction materials\nby any other manufacturer in South Carolina, which is the application of South Carolina 's normal\nrates of state and local sales and use tax. The United States rejects the European Union's position,\nand seems to suggest that other comparable taxpayers have been granted similar treatment , by\nreferring to prior incentive packages granted to large companies investing in South Carolina.2568\n8.1037. We do not agr ee with the United States ' position, but rather consider the appropriate\ncomparator to be the tax treatment applicable to purchases of aircraft fuel, computer equipment ,\nand construction materials by other manufacturers in South Carolina (or for use in Sou th\nCarolina). We see a parallel between the United States ' arguments here and with respect to the\nFILOT agreements discussed in Section 8.2.8.7 above. As in the case of the FILOT agreements, the\nUnited States considers that \"comparably situated taxpayers\" are other large industrial taxpayers\nin South Carolina. 2569 As we explain in that context, we find problematic the circularity of the\nUnited States' argument that \"comparably situated taxpayers\" are other taxpayers eligible for th e\nsame favourable treatment because they meet the same eligibility requirements. This would mean\nthat the group of comparably si tuated taxpayers is defined by the criteria a ttached to the very\nmeasure that is alleged to give rise to the foregoing of government revenue otherwise due. We are\nof the view that the United States' approach goes against the guidance provided by the Appellate\nBody of comparable situations in the context of revenue foregone . The comparison suggested by\nthe United States between the tax treatment of one individual taxpayer under a challenged\nmeasure and the treatment of other taxpayers who qualify for the same tax treatment is at odds\nwith cases in which the Appellate Body has articulated the comparability test, which examined\nmeasures applicable to a more abstractly identified group of taxpayers, in contrast with the very\nsame narrow benchmark suggested by the United States.2570\n8.1038. Turning to the tax treatment applicable to purchases of aircraft fuel, computer\nequipment, and construction m aterials by other manufacturers in South Carolina (or for use in\nSouth Carolina), we observe on the one hand that South Carolina state law imposes a sales and\nuse tax rate of 6% on sales and purchases in South Carolina, or for consumption in South Carolina\n(while also granting local governments the authority to impose certain additional local sales and\n\n2564 South Carolina Board of Economic Advisors, Statement of Estimated State Revenue Impact,\nH.B.3130, 27 October 2009, (Exhibit EU-507), pdf pp. 3 and 4. Also see European Union's first written\nsubmission, para. 605.\n2565 G. Ratnam, \"Boeing Incentives for South Carolina Plant May Be $400 Million\", Bloomberg,\n20 November 2009 (Exhibit EU-508), pdf p. 2.\n2566 South Carolina Department of Revenue Notifications, (Exhibit US-13-292) (BCI), pdf p. 3: \"I am\nwriting to confirm my understanding that The Boeing Company's … official announcement to the Governor and\nstate of South Carolina on Wednesday October 28th 2009 regarding the selection of Charleston, SC, as the\nhome for the second manufacturing line of the 787 serves as Boeing's notification under the requirements of\namended Section 12-36-2120(67) of the 1976 Code of our intention to utilize the sales tax incentive under this\nsection.\"\n2567 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 813.\n2568 United States' first written submission, para. 588 (referring to section III.K.2.a of the first written\nsubmission). Also see European Union's second written submission, fn 1073.\n2569 United States' first written submission, para. 588.\n2570 See paras. 8.877-8.880 above.\n\nuse taxes). On the other hand, the United States has presented some evidence of other\nexemptions contained in section 12 -36-2120 of the South Carolina Code that could potentially\napply to purchases of aircraft fuel, computer equipment, and construction materials by other\nmanufacturers in South Carolina (or for use in South Carolina).2571 However, the United States has\nnot explained why such other exemptions would constitute the appropriate benchmark tax\ntreatment. In particular, the United States has provided no reasoning to support a finding that the\nappropriate benchmark tax treatment for assessing a tax exemption should be other tax\nexemptions. Furthermore, the European Union correctly observes that some of the exemptions\nreferred to by the United States have a narrower application than the exemptions challenged in\nthis proceeding.2572 In light of our review of the relevant tax structure and principles, we consider\nthe appropriate benchmark tax treatment to be the sales and use tax rates imposed by the State\nof South Carolina and local governments.\n8.1039. The third and final step of the Appellate Body's three-step analysis concerns a comparison\nof the challenged tax treat ment with the benchmark tax treatment, in light of the reasons for the\nchallenged treatment. 2573 In this instance, a comparison of Boeing 's tax treatment under the\nchallenged sales and use tax exemptions, taking into account the reasons for that treatment; i.e. a\npermanent exemption from sales and use taxes on purchases of aircraft fuel, computer equipment,\nand construction materials , with the benchmark tax treatment indicates the foregoing of\ngovernment revenue otherwise due.\n8.1040. We therefore find that the sales and use tax exemptions for aircraft fuel,\ncomputer equipment, and construction materials, enacted as part of H3130, each involve\na financial contribution within the meaning of Article 1.1(a) (1)(ii) of the SCM\nAgreement.\n8.2.8.11.3.2 Whether there is a benefit\n8.1041. While the parties disagree on the amount of the sales and use tax exemptions for aircraft\nfuel, computer equipment , and construction materials 2574, the United States does not appear to\ncontest the European Union 's argument that the sales and use tax exemptions confer a benefit\nwithin the meaning of Article 1.1(b). In light of our finding on financial contribution above, we\ntherefore find that the sales and use tax exemptions for aircraft fuel, computer\nequipment, and construction materials, enacted as part of H3130, c onfer a benefit\nwithin the meaning of Article 1.1(b) of the SCM Agreement.2575\n8.2.8.11.3.3 Whether the subsidy is specific\n8.1042. With respect to whether the subsidy provided by the sales and use tax exemptions for\naircraft fuel, computer equipment and construction materials is specific within the meaning of\nArticle 2.1, the parties mainly disagree on the level at which the analysis should be conducted. The\nUnited States argues that the specificity determination should be carried out at the level of South\nCarolina sales and use tax exemptions collectively, because the exemptions challenged by the\nEuropean Union form part of a scheme to provide widely available exemptions to a variety of\nindustries in order to ensure that the state 's tax structure does not impede investment and ot her\neconomic activities. When viewed in this context, it is clear that these exemptions are not specific\nwithin the meaning of Article 2 of the SCM Agreement. 2576 The Eu ropean Union rejects the\nUnited States' position on the existence of a broader single prog ramme, pointing to the lack of\nlinks or commonalities between exemptions. Instead, it argues that the various exemptions\n\n2571 United States' response to Panel question No. 150, paras. 20-22.\n2572 See European Union's comments on United States' response to Panel question No. 150,\nparas. 26-27; as well as State of South Carolina, Department of Revenue, S.C. Revenue Ruling #04-7, (Exhibit\nEU-1438), pp. 3 and 13; and State of South Carolina, Department of Revenue, S.C. Revenue Ruling #13-3,\n(Exhibit EU-1439), p. 3.\n2573 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 814.\n2574 See United States' first written submission, paras. 589-598; second written submission,\nparas. 584-590.\n2575 Also see para. 8.885 above on tax reductions conferring a benefit.\n2576 United States' first written submission, paras. 657, 660, and 661.\n\ncontained in South Carolina tax law are separate exemptions that favour certain enterprises\nthrough selective eligibility.2577\n8.1043. As already explained above2578, the Appellate Body emphasized in the original proceeding\nthe need for a specificity inquiry to take into account the broader legislative framework within\nwhich a measure has been adopted.2579 With respect to how to determine whether a subsidy forms\npart of a broader programme, the Appellate Body observed the following in the original\nproceeding:\nDetermining whether multiple subsidies are part of the same subsidy is not always a\nclear-cut exercise. As we have explained, it requires careful sc rutiny of the relevant\nlegislation – whether set out in one or several instruments – or the pronouncements\nof the granting authority(ies) to determine whether the subsidies are provided\npursuant to the same subsidy scheme. Another factor that may be consid ered is\nwhether there is an overarching purpose behind the subsidies. Of course, this\noverarching purpose must be something more concrete than a vague policy of\nproviding assistance or promoting economic growth.2580\nThe Appellate Body further observed that \"where multiple subsidies are part of the same subsidy\nscheme, one would expect to find links or commonalities between those subsidies\".2581\n8.1044. In light of our review of the evidence before us, we disagree with the United States'\nposition that specificity should b e assessed at the level of all sales and use tax exemptions\ncontained in South Carolina legislation. We see no single \"overarching purpose\"2582, and few \"links\nor commonalities \"2583 in the sales and use tax exemptions in section 12 -36-2120 of the South\nCarolina Code. These exemptions are numerous and varied, and seem to serve a number of\npurposes. South Carolina sales and use tax law contains over 80 full exemptions. For the purposes\nof a South Carolina Department of Revenue tax manual, these exemptions are divid ed into six\nbroad categories, namely: ( a) government -related exemptions (e.g. material necessary to\nassemble missiles) 2584; ( b) business -related exemptions (including the three challenged\nexemptions); ( c) agricultural exemptions (e.g. fuel used to cure agricu ltural products) 2585; ( d)\neducational exemptions (e.g. meals or food used in furnishing meals to K -12 students in\nschools)2586; (e) general public good exemptions (e.g. concession sales by non -profit organisations\nat festivals)2587; and (f) alternative energy exemp tions (e.g. building material used to construct a\nnew or renovated building in a research district and machinery or equipment located in a research\ndistrict).2588 With just under 40 exemptions, business-related exemptions are the largest category.\nThese exemptions range from the fairly broad (e.g. exemption for depreciable assets as part of a\nsale of an entire business)2589 to the very specific (e.g. exemption for sweetgrass baskets made by\n\n2577 European Union's second written submission, paras. 656-659 (referring to Appellate Body Report,\nUS – Large Civil Aircraft (2nd complaint), paras. 849 and 851).\n2578 See Section 8.2.8.6.3.3 above.\n2579 See Appellate Body Report, US – Large Civil Aircraft (2nd complaint), paras. 750 and 753. See also\nPanel Report, US – Large Civil Aircraft (2nd complaint), para. 7.565.\n2580 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 752.\n2581 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 851.\n2582 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 752.\n2583 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 851.\n2584 The South Carolina Sales and Use Tax Act, S.C. Code, Title 12, chapter 36, (Exhibit EU-493),\nsection 12-36-2120(22).\n2585 The South Carolina Sales and Use Tax Act, S.C. Code, Title 12, chapter 36, (Exhibit EU-493),\nsection 12-36-2120(18).\n2586 The South Carolina Sales and Use Tax Act, S.C. Code, Title 12, chapter 36, (Exhibit EU-493),\nsection 12-36-2120(10)(a).\n2587 The South Carolina Sales and Use Tax Act, S.C. Code, Title 12, chapter 36, (Exhibit EU-493),\nsection 12-36-2120(39).\n2588 The South Carolina Sales and Use Tax Act, S.C. Code, Title 12, chapter 36, (Exhibit EU-493),\nsection 12-36-2120(72).\n2589 The South Carolina Sales and Use Tax Act, S.C. Code, Title 12, chapter 36, (Exhibit EU-493),\nsection 12-36-2120(42).\n\nartists of South Carolina using locally grown sweetgrass). 2590 In total, ten of these exemptions\ncontain investment and job requirements.2591\n8.1045. Nonetheless, we also see that a subset of the exemptions contained in\nsection 12-36-2120 of the South Carolina Code appears to have certain \"links and commonalities\"\nwith the three sales and us e tax exemptions challenged in this proceeding. 2592 Certain of these\nexemptions operate in a similar manner to the three challenged exemptions, as they are subject to\nprecise investment requirements (different from those under the challenged exemptions): the\nexemption for \"material handling systems … used in the operation of a … manufacturing facility \" is\nsubject to an investment of USD 35 million over a five -year period and notification to the South\nCarolina Department of Revenue 2593, while the exemption effecti ve as of July 2011 for\n\"construction materials used in the construction of a new or expanded single manufacturing or\n\n2590 The South Carolina Sales and Use Tax Act, S.C. Code, Title 12, chapter 36, (Exhibit EU-493),\nsection 12-36-2120(64).\n2591 In addition to the three challenged exemptions, see S.C. Code section 12-36-2120(51), providing an\nexemption for material handling systems and material handling equipment used in the operation of a\ndistribution facility or a manufacturing facility of a taxpayer that invests at least USD 35 million in South\nCarolina; S.C. Code section 12-36-2120(65) (apparently enacted by H3130), providing an exemption for\ncomputer equipment used in connection with, and electricity and certain fuel used by, a technology intensive\nfacility that invests USD 300 million over five years, creates at least 100 new jobs during the five years with a\ncertain average compensation, and spends at least 60% of the USD 300 million investment on computer\nequipment; S.C. Code section 12-36-2120(67) (apparently enacted by H3130), providing an exemption for\nconstruction materials used in the construction of a single manufacturing or distribution facility, or one that\nserves as both, that invests at least USD 100 million at a single site in South Carolina over an 18-month\nperiod; S.C. Code section 12-36-2120(73), providing an exemption for amusement park rides and associated\nparts, machinery and equipment, requiring an investment of USD 250 million and the creation of 250 full-time\njobs and 500 part-time jobs or seasonal jobs over a five-year period; S.C. Code section 12-36-2120(78),\nproviding an exemption for materials and electricity used in the operation of a facility researching and testing\nthe impact of natural hazards, requiring an investment of USD 20 million over a three-year period; and S.C.\nCode section 12-36-2120(79), providing an exemption for computer equipment, software and electricity used\nwithin a datacenter, requiring a taxpayer to invest at least USD 50 million in real or personal property or both\nover a five-year period, or several taxpayers to invest at least USD 75 million in such property over the same\nperiod, creating and maintaining at least 25 full-time jobs with a certain average compensation, and subject to\ncertain notification requirements and deadlines. (The South Carolina Sales and Use Tax Act, S.C. Code,\nTitle 12, chapter 36, (Exhibit EU-493)). Also see S.C. Code section 12-62-30, providing an exemption for\ntangible personal property purchased by a certified motion picture production company for use in connection\nwith the filming or production of motion pictures in South Carolina for a company planning to spend at least\nUSD 250,000 in South Carolina within a consecutive twelve-month period (referred to in South Carolina Tax\nIncentives, (Exhibit EU-494), p. 219).\n2592 With respect to fuel, South Carolina tax legislation provides exemptions from sales and use taxes for\nfuel sold to manufacturers for \"the generation of heat or power used in manufacturing tangible personal\nproperty for sale\", \"the generation of electric power or energy for use in manufacturing tangible personal\nproperty for sale\", and \"the generation of motive power for transportation\". (The South Carolina Sales and Use\nTax Act, S.C. Code, Title 12, chapter 36, (Exhibit EU-493), section 12-36-2120(9)(b)-(d); see United States'\nfirst written submission, para. 659). With respect to computer equipment, South Carolina tax law provides at\nleast four other exemptions, namely: (a) an exemption for \"machines used in manufacturing … tangible\npersonal property for sale\" (S.C. Code § 12-36-2120(17) (Exhibit EU-493), section 12-36-2120(17); see\nUnited States' response to Panel question No. 150, para. 21); (b) an exemption for \"material handling systems\n… used in the operation of a … manufacturing facility\", subject to an investment of USD 35 million over a five-\nyear period and notification to the South Carolina Department of Revenue (The South Carolina Sales and Use\nTax Act, S.C. Code, Title 12, chapter 36, (Exhibit EU-493), section 12-36-2120(51); see United States'\nresponse to Panel question No. 150, para. 21); (c) an exemption from sales and use taxes for \"machines used\nin research and development\", being defined as \"machines used directly and primarily in research and\ndevelopment, in the experimental or laboratory sense, of new products, new uses for existing products, or\nimprovement of existing products\" (The South Carolina Sales and Use Tax Act, S.C. Code, Title 12, chapter 36,\n(Exhibit EU-493), section 12-36-2120(56); United States' first written submission, para. 598, and response to\nPanel question No. 150, paras. 21 and 22); and (d) an exemption for \"original or replacement computers,\ncomputer equipment, and computer hardware and software purchases used within a datacenter\" (The South\nCarolina Sales and Use Tax Act, S.C. Code, Title 12, chapter 36, (Exhibit EU-493), section 12-36-2120(79);\nUnited States' response to Panel question No. 150, para. 21). With respect to construction materials, we recall\nthat the challenged exemption was effectively subsumed in July 2011 by another exemption applying to\n\"construction materials used in the construction of a new or expanded single manufacturing or distribution\nfacility\" subject to different eligibility criteria, namely a capital investment of USD 100 million in real and\npersonal property at a single site in South Carolina over an eighteen-month period. (The South Carolina Sales\nand Use Tax Act, S.C. Code, Title 12, chapter 36, (Exhibit EU-493), section 12-36-2120(67)).\n2593 The South Carolina Sales and Use Tax Act, S.C. Code, Title 12, chapter 36, (Exhibit EU-493),\nsection 12-36-2120(51).\n\ndistribution facility \" is subject to an investment of USD 100 million at a single site over an\neighteen-month period. 2594 Despite this, we see no single \"overarching purpose \" in these\nexemptions. Rather than creating a coherent programme, these exemptions appear to form a\npatchwork of more or less narrowly defined exemptions. We have therefore decided to carry out\nthe specificity analysis at the level of the challenged sales and use tax exemptions.\n8.1046. Assessing specificity at the level of the sales and use tax exemptions on aircraft fuel,\ncomputer equipment, and construction materials, enacted through H3130, we are of the view that\nthe challenged exemptions are specific within the meaning of Article 2.1(c) because of \"the use of\n{the} subsidy programme by a limited number of certain enterprises\" . While the United States\nargues that an unidentified number of other taxpayers have notified the South Car olina\nDepartment of Revenue of their intention to use the challenged tax exemptions, there is no\nevidence before the Panel that these exemptions have been used by any entity other than\nBoeing.2595 We therefore find that the European Union has established that Boeing has been the\nonly recipient of the subsidies provided through the sales and use tax exemptions at issue. This is\nunsurprising since there is evidence to support the view that the challenged exemptions were\ntailored specifically for Boeing: the elig ibility criteria for the three challenged exemptions precisely\nmatch Boeing's South Carolina commitments; the exemptions themselves seem tailor -made to the\ncircumstances of Boeing 's operations in South Carolina; the notification deadlines for the use of\nthe exemptions are set to coincide with the beginning of Boeing 's Gemini operations in South\nCarolina; and certain statements by South Carolina authorities suggest that the exemptions were\ndesigned for Boeing.2596 We consider our finding to be in line with that of the panel in the original\nproceeding concerning the Illinois Corporate Headquarters Relocation Act. Indeed, the requirement\nof a high revenue threshold meant that Boeing was the only company to meet the eligibility\ncriteria for certain incentives provi ded by the Act. 2597 The panel also noted that the narrow time\nwindow for applying for incentives under the Act only reinforced its finding that the incentives were\ndesigned specifically for Boeing.2598\n8.1047. We also recall, in this regard, our observations above in p aragraph 8.898 on the meaning\nof the phrase \"use of a subsidy programme by a limited number of certain enterprises\". We are\nsatisfied that the fact that only Boeing has used the subsidies provided through the sales and use\ntax exemptions clearly indicates the existence of a limitation of access to the subsidies.\n8.1048. In making this finding that the subsidies are specific within the meaning of Article 2.1(c)\non the grounds that they have been used by \"a limited number of certain enter prises\" we have\nalso considered the last sentence of Article 2.1(c), which requires that account be taken of \"the\nextent of diversification of economic activities within the jurisdiction of the granting authority, as\nwell as the length of time during which the subsidy programme has been in operation\". We see no\nbasis in the facts before us to support an argument that notwithstanding that the subsidies have\nbeen used by only one company, they should not be considered to be specific because of the\nlimited extent of diversification of economic activities in South Carolina or the limited length of\ntime during which the subsidies programmes have been in operation. 2599 We note that the\nUnited States does not make any such argument. Having found the challenged exempt ions to be\nspecific within the meaning of Article 2.1(c), we do not consider it necessary to address the\nparties' arguments under Articles 2.1(a) and 2.1(b).2600\n8.1049. We therefore conclude that the European Union has established that the subsid y\nprovided through t he sales and use tax exemptions on aircraft fuel, computer\nequipment, and construction materials enacted through H3130 is specific within the\n\n2594 The South Carolina Sales and Use Tax Act, S.C. Code, Title 12, chapter 36, (Exhibit EU-493),\nsection 12-36-2120(67).\n2595 See United States' response to the Panel's request for information pursuant to Article 13 of the DSU,\ndated 28 February 2013, response to question No. 72, para. 155; first written submission, paras. 662 and 663,\nand fn 1025; and European Union's second written submission, para. 661.\n2596 See para. 8.1035 above.\n2597 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.918.\n2598 Panel Report, US – Large Civil Aircraft (2nd complaint), paras. 7.923 and 7.919.\n2599 If anything, with regard to the duration during which the subsidy programmes have been in\noperation we consider that the fact that the notification deadlines for the use of the exemptions are set to\ncoincide with the beginning of Boeing's Gemini operations in South Carolina is further support for our finding\nthat the subsidies are specific in fact.\n2600 See Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.928.\n\nmeaning of Article 2.1 (c) of the SCM Agreement. Having found that the subsidy is\nspecific within the meaning of A rticle 2.1(c), we do not consider it necessary to address\nthe parties' arguments under Articles 2.1(a) and 2.1(b).2601\n8.1050. Finally, we note that the European Union also argues that the subsid y provided through\nthe sales and use tax exemptions is specific pursuant to Article 2. 3 of the SCM Agreement.\nArticle 2.3 provides that \"{a}ny subsidy falling under the provisions of Article 3 shall be deemed to\nbe specific\". We reject this argument because in Section 10 of this Report we find that the\nEuropean Union has failed to establish that any subsidy at issue in this proce eding is prohibited by\nArticles 3.1 and 3.2 of the SCM Agreement.\n8.2.8.11.4 The amount of the subsidy\n8.1051. The parties disagree on the amount of the subsidy to Boeing's LCA division from the sales\nand use tax exemptio ns for aircraft fuel, construction materials, and computer equipment. The\nEuropean Union estimates the amount of the financial contribution conferred by the tax\nexemptions, which in the case of the foregoing of revenue otherwise due corresponds to the\namount of the subsidy, at USD 49.14 million between 2010 and 2035 2602, or USD 2.25 million\nbetween 2013 and 2015.2603 In arriving at its estimate , the European Union estimates the portion\nof costs attributable to purchases of construction materials and computer equi pment in Boeing 's\nreported investment in new buildings, machinery, and equipment in South Carolina.\n8.1052. The United States argues that the European Union 's estimate is speculative and\nunsupported, overvalues the alleged subsidy 2604, and fails to even refer to the actual figures\nprovided by the United States. 2605 The United States estimates the amount of the subsidy at\n[***] in the period 2010-2012.2606. It does not provide an estimate of the future projected value\nof the subsidy in the post-2012 period.\n8.1053. As to the diverg ences in the parties' amount estimates for the 2010 -2012 period, t he\ndisagreement stems primarily from the method used by the European Union in estimating the\namount of the subsidy and its rejection of the estimate provided by the United States in response\nto the Panel's request for information pursuant to Article 13 of the DSU. 2607 The European Union's\nestimate of the subsidy (a total of USD 49.14 million between 2010 and 2035 )2608 represents the\nsum of an estimated amount of USD 31.14 million in the period 2010 -2011, and USD 18 million in\nthe period 2012-2035. In a first phase of its estimate, the European Union estimates the amount\nof the subsidy for the period 2010 -2011 to be at least USD 31.14 million. 2609 Based on a\ndeclaration by an employee of the European Aeonautics Defence and Space Company N.V. (EADS),\nthe European Union considers the costs of construction materials and computer equipment to\nrepresent [***] of the overall cost of buildings, and [***] of the overall cost of machinery and\nequipment, respectiv ely.2610 According to the cost -benefit analysis of the South Carolina\nDepartment of Commerce, Boeing 's total investment of USD 1 billion in Project Gemini includes\n\n2601 See Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.928.\n2602 European Union's first written submission, paras. 599-601; second written submission,\nparas. 647-651.\n2603 South Carolina Subsidies to Boeing's LCA Division, (Exhibit EU-39), p. 1.\n2604 United States' first written submission, para. 598.\n2605 United States' first written submission, paras. 590-597.\n2606 United States' response to the Panel's request for information pursuant to Article 13 of the DSU,\ndated 28 February 2013, response to question No. 73, para. 156; first written submission, para. 590.\n2607 The Panel had asked the United States, in question 73 of its request for information pursuant to\nArticle 13 of the DSU, to \"indicate, with supporting documents, the annual value to Boeing of each tax\nexemption listed in question 71\" which had listed the three sales and use tax exemptions, and to \"provide\ncurrent projections of the annual value of each of these tax exemptions for future years\". The United States\nresponded with estimated values to Boeing of the listed tax exemptions for the tax years 2010, 2011 and\n2012, and advised that it \"is not aware of existing future projections\". (United States' response to the Panel's\nrequest for information pursuant to Article 13 of the DSU, dated 28 February 2013, response to question\nNo. 73, para. 156).\n2608 European Union's first written submission, paras. 599-601; second written submission,\nparas. 647-651.\n2609 European Union's first written submission, para. 600; also see South Carolina Subsidies to Boeing's\nLCA Division, (Exhibit EU-39), p. 3.\n2610 Declaration of Patrick Libralesso, EADS General Procurement, 26 February 2013, (Exhibit EU-26)\n(BCI).\n\nUSD 625.3 million in new buildings and USD 400 million in machinery and equipment 2611,\naccordingly yielding a construction materials cost of [***] and a computer equipment cost of\n[***]. The European Union estimates that half of these purchases were made in Charleston\nCounty, subject to an average 8% sales and use tax rate, and half made elsewhere in S outh\nCarolina, subject to a 7% tax rate. 2612 Applying these tax rates equally to the construction\nmaterials and computer equipment costs, the total amount of the tax exemption for construction\nmaterials is at least [***] and the total amount of the tax exempt ion for computer equipment is\nat least [***], or at least USD 31.14 million in total over the period 2010 -2011, which\ncorresponds to Boeing 's timeline for construction and operation of the 787 final assembly and\ndelivery facility.2613\n8.1054. Nonetheless, the European Union considers the figure of USD 31.14 million in the period\n2010-2011 underestimates the total amount of the subsidy, since this amount does not include\nsales and use tax exemptions for purchases of aircraft fuel, which the European Union is unable to\nestimate. Furthermore, the amount does not account for Boeing 's subsequent capital investments\nin South Carolina, including new facilities and the expansion of existing facilities. Thus, in a second\nphase, the European Union calculates the subsidy to represent an additional amount of at least\nUSD 18 million in the period 2012-2035. The European Union argues that, in the absence of better\ninformation, Boeing can be assumed to continue to spend USD 10 million each year on goods\nsubject to the two 2614 sales and u se tax exemptions, thereby benefit ing from a subsidy of\nUSD 750,000 each year. Over the 25 -year useful life of the Gemini facilities, this amounts to an\nadditional subsidy of USD 18 million. Combining both phases of its estimate, the European Union\nestimates the amount of the subsidy at USD 49.14 million between 2010 and 2035.2615\n8.1055. The United States objects in particular to the second phase of the European Union 's\nsubsidy estimate: whereas the European Union 's estimate for the period 2010 -2011 has some\ngrounding in evidence, albeit incorrect and based on unwarranted assumptions, its estimate for\nthe period 2012 -2035 is a complete fiction. 2616 With respect to the period 2010 -2011, the\nEuropean Union's estimate is based on the unsupported assumption that Boeing 's investment of\nUSD 1 billion was entirely made in the years 2010 -2011, as well as a summary statement by a\nBoeing competitor on the proportion of costs allocated to construction materials and computer\nequipment.2617 With respect to the period 2012 -2035, the Unite d States argues that the\nEuropean Union, rather than trying to estimate the value of any alleged further investments by\nBoeing, arbitrarily selects the figure of USD 10 million as representing Boeing's annual\nexpenditures for 2012 to 2035, making no effort to explain how this figure was derived, or how it\n\n2611 South Carolina Department of Commerce, Cost-Benefit Analysis, The Boeing Company, Charleston\nCounty, (Exhibit EU-499), p. 1. The South Carolina Department of Commerce and the South Carolina Board of\nEconomic Advisors agree in their respective cost-benefit analyses of Project Gemini that Boeing's capital\ninvestment amounts to approximately USD 1 billion. However, where the analyses diverge, the European Union\nconsiders the figures provided by the South Carolina Department of Commerce to be more accurate. Neither\nanalysis includes the challenged sales and use tax exemptions. (See European Union's first written submission,\npara. 599).\n2612 European Union's first written submission, para. 599.\n2613 European Union's first written submission, para. 600; also see South Carolina Subsidies to Boeing's\nLCA Division, (Exhibit EU-39), p. 3.\n2614 While the European Union refers to the three sales and use tax exemptions in its first written\nsubmission when discussing the post-2011 period, it states in its second written submission that this was a\nsimple drafting error since the European Union does not contest that the challenged exemption for construction\nmaterials was effectively subsumed by the exemption in section 12-36-2120(67) of the S.C. Code as of\nJuly 2011. (See European Union's second written submission, fn 1089).\n2615 European Union's first written submission, para. 601; second written submission, para. 651. The\nEuropean Union states that it does not rely on the estimate provided by the United States because of the\nUnited States' alleged failure to adequately respond to the Panel's request for information pursuant Article 13\nof the DSU. The United States provided, without any supporting documentation, estimated values for the three\nsales and use tax exemptions from 2010 to 2012 which are based on what the European Union considers is the\nunsupported assumption that materials and labour each account for half of Boeing's total construction costs.\n(European Union's second written submission, para. 648 and fn 1081). The European Union requests the Panel,\nto the extent necessary, to draw appropriate inferences from the United States' alleged non-cooperation in the\ninformation-gathering process. (European Union's second written submission, para. 649).\n2617 United States' first written submission, paras. 592 and 593. The United States notes that the\nEuropean Union decided to rely on the guesswork of an EADS employee even before it had received the\nUnited States' answer to the Panel's request for information under Article 13 DSU. (United States' second\nwritten submission, para. 586).\n\nreflects Boeing's current or future investment plans.2618 While the European Union claims that it is\nrelying on this figure in the absence of better information, the absence of information does not\njustify resorting to wholly arbitrary figures. 2619 Moreover, while the European Union acknowledges\nthat the challenged sales and use tax exemption for construction materials, which constitutes the\nmajor component of the subsidy amount for 2010 and 2011, was effectively subsumed by another\nexemption as of July 2011, it still estimates an amount for this exemption throughout the period\n2012-2035.2620\n8.1056. We first consider the European Union 's estimate of the amount of the subsidy for the\nperiod 2010 -2011, as well as the estimate provided by the United States for the period 2010 -\n2012. For the reasons detailed below, we are of the view that the United States' estimate is a\nreasonable approximation of the amount of the subsidy for 2010-2012, since it is corroborated by\nother evidence before the Panel. The record before us includes two separate cost -benefit analyses\nof Project Gemini, the first prepared by the South Carolina Department of Commerce and\nundated2621, the second prepared by the South Carolina Board of Economic Advisors, addr essed to\nSenator Hugh K. Leatherman Sr. and dated 8 October 2009. 2622 The European Union relies on the\nformer, stating that it is more accurate regarding the actual terms of Boeing 's investment since\nthe South Carolina Department of Commerce is the lead state agency for attracting economic\ndevelopment projects and was primarily responsible for negotiating the Project Gemini incentive\npackage with Boeing. In contrast, the Board of Economic Advisors analysed a hypothetical capital\ninvestment project by a manufac turing project based on specific characteristics described in a\nstate senator 's analysis request. 2623 The two cost -benefit analyses mainly diverge in their\nrespective allocations of Boeing 's USD 1 billion investment to new buildings on the one hand, and\nmachinery and equipment on the other. Under the heading \"Announced Capital Investment \", the\nanalysis of the South Carolina Department of Commerce allocates USD 625.3 million to new\nbuildings and USD 400 million to machinery and equipment. Under the same heading , the analysis\nof the Economic Board of Advisors allocates USD 250 million to new buildings and USD 731 million\nto machinery and equipment.2624 Notwithstanding the European Union's reasons for relying on the\nfigures provided by the South Carolina Department o f Commerce, which the United States does\nnot contest, we observe that applying the European Union 's assumptions 2625 to the figures\nprovided by the South Carolina Board of Economic Advisers leads to a subsidy amount of\nUSD 16.7 million for the period 2010 -2011, or USD 8.35 million in each of those years. While we\nacknowledge that the United States ' amount estimat e varies year-on-year, the average annual\namount of subsidy estimated by the United States is [***].2626 This annual amount estimate is\nwithin a very close range to that resulting from the application of the European Union 's calculation\nmethod to the estimates provided by the South Carolina Board of Economic Advisors. We therefore\n\n2618 United States' second written submission, para. 588.\n2619 United States' first written submission, para. 595.\n2620 United States' first written submission, paras. 596 and 597; second written submission, paras. 589\nand 590.\n2621 South Carolina Department of Commerce, Cost-Benefit Analysis, The Boeing Company, Charleston\nCounty, (Exhibit EU-499).\n2622 Letter from W. C. Gillespie, South Carolina Board of Economic Advisors, to Senator H. K.\nLeatherman, Cost-Benefit Analysis, 8 October 2009, (Exhibit EU-498).\n2623 European Union's first written submission, para. 599. See Letter from W. C. Gillespie, South Carolina\nBoard of Economic Advisors, to Senator H. K. Leatherman, Cost-Benefit Analysis, 8 October 2009, (Exhibit\nEU-498), p. 1.\n2624 Letter from W. C. Gillespie, South Carolina Board of Economic Advisors, to Senator H. K.\nLeatherman, Cost-Benefit Analysis, 8 October 2009, (Exhibit EU-498), p. 2. The evidence on the record does\nnot allow the Panel to determine what the actual allocation was. We note that the exhibit Boeing Investment in\nSouth Carolina (2010-3Q2012), (Exhibit USA-324) (BCI) aggregates expenditure on the Final Assembly and\nDelivery Facility and site work. Also see United States' response to Panel question No. 128, para. 265.\n2625 The European Union's assumptions are that [***] % of building costs is made up by construction\nmaterials, while [***] % of machinery and equipment costs is made up by computer equipment, and that\npurchases are made half in Charleston County, subject to a tax rate of 8%, and half in South Carolina, subject\nto a tax rate of 7%. See European Union's first written submission, para. 599. The United States objects to the\nEuropean Union's estimate of the proportions of costs allocated to construction materials and computer\nequipment merely on the basis that the Declaration of Patrick Libralesso is cursory. (See United States' first\nwritten submission, para. 593). However, we note that the United States itself estimates the cost of\nconstruction materials to account for [***] of total construction costs. (United States' response to the Panel's\nrequest for information pursuant to Article 13 of the DSU, dated 28 February 2013, response to question\nNo. 73, para. 156).\n2626 United States' response to the Panel's request for information pursuant to Article 13 of the DSU,\ndated 28 February 2013, response to question No. 73, para. 156; first written submission, para. 590.\n\nconsider that the United States' estimate of the amount of the subsidy as [***] over the period\n2010-2012 is reasonable.\n8.1057. As to the estimated amount of the subsidy for the post -2012 period, we note that the\nUnited States does not provide an estimate, and the European Union's projections are based on a\nmethodology that the United Sta tes alleges involves the arbitrary selection of USD 10 million as\nthe annual amount of Boeing investment expenditures in South Carolina in the 2012 -2035 period.\nWe agree that the European Union has provided no support for its selection of the figure of\nUSD 10 million in Boeing spending in each year from 2012 to 2035 , although we note that the\nUnited States does not suggest any alternative amount of Boeing's projected spending on which to\nbase an estimate of the amount of the subsidy to Boeing in the post-2012 period. Having reviewed\nthe record however, we are satisfied that the European Union's estimate of the annual amount of\nthe subsidy in the post -2012 period; i.e. USD 750,000, is corroborated by other evidence and is\ntherefore a reasonable approximation of the annual amount of the subsidy for the 2013 -2015\nperiod. The European Union submitted as an exhibit a 2010 report prepared by an economic\nconsulting firm on behalf of The Alliance for South Carolina's Future, entitled \"The Economic\nImpact of Boeing in South Carolina\". 2627 In this report, the authors provide an estimate of the\nstate component of the Project Gemini incentive package, including an estimate of the total\namount of the \"Statutory Sales Tax Incentives\", which it estimates at USD 41 million. 2628 We\nacknowledge that a significant portion of Boeing's expenditures would have been made early on in\nthe construction of the Gemini facilities and infrastructure. We therefore deduct from this figure\nthe United States' estimate of USD [***] for the period 2010-2012. If we allocate the remainder\n(USD [***]) over the average 25-year useful life of the Gemini facilities and infrastructure2629, we\narrive at an average annual subsidy amount of USD [***]. This figure is sufficiently close to the\nEuropean Union's annual estimate of USD 750,000, which is in turn the basis for its estimate of\nUSD 2.25 million in the period 2013-2015.\n8.1058. We therefore consider the European Union's estimate of the amount of the\nsubsidy as USD 2.25 million over the period 2013-2015 is reasonable.2630\n8.2.8.11.5 Conclusion\n8.1059. In light of the findings above, we conclude that the European Union has established that\nthe sales and use tax exemptions for aircraft fuel, computer equipment, and construction\nmaterials, provided in South Carolina Code sections 12-36-2120(9)(e) and (f), (65)(b), and (67)\ninvolve a specific subsidy within the meaning of Articles 1 and 2 of the SCM Agreement, in the\namount of USD 2.25 million between 2013 and 2015.\n8.2.8.12 Whether the workforce recruitment, training and development programme\nprovided to Boeing is a specific subsidy to Boeing\n8.2.8.12.1 Introduction\n8.1060. In paragraph 24 of its panel request, the European Union identifies as one of the Project\nGemini-related subsidies presently benefiting Boeing:\nEstablishment of workforce recruitment, training and deve lopment programs for\nBoeing.\n8.1061. The European Union argues that the workforce recruitment, training, and development\nprogrammes provided to Boeing through the South Carolina Technical College System (Boeing\n\n2627 Alliance for South Carolina's Future, The Economic Impact of Boeing in South Carolina, (May 2010),\n(Exhibit EU-489).\n2628 See Alliance for South Carolina's Future, The Economic Impact of Boeing in South Carolina,\n(May 2010), (Exhibit EU-489), p. 12.\n2629 Beyond noting in the context of other South Carolina measures that the 25-year average useful life\nof the facilities used by the European Union is shorter than the actual useful life of the facilities and\ninfrastructure, which ranges from ten to 40 years, the United States does not appear to object to the use of\nthis period of time. (See United States' first written submission, fns 904 and 923).\n2630 In light of our conclusion, we do not consider it necessary to address the European Union's request\nfor the Panel to \"draw appropriate inferences\". (European Union's second written submission, para. 649).\n\nworkforce programme) constitute a specific subsidy to Boeing within the meaning of Articles 1 and\n2 of the SCM Agreement.\n8.1062. The Boeing workforce programme challenged by the European Union is delivered as part\nof the South Carolina Technical College System 's job training programme (readySC). The readySC\nprogramme has provided customised training for new and expanding business and industry in\nSouth Carolina since 1961. 2631 The Boeing workforce programme consists of South Carolina\nrecruiting and training assemblers/fabricators for Boeing 's 787 final assembly and del ivery facility\nat no cost to Boeing. The multi -phase training provided under the challenged programme spans\nthe identification and selection of eligible candidates to training an FAA -certified workforce capable\nof assembling the 787 's composite -material fu selage. Between the fiscal year 2009 -2010 and\nFebruary 2013, over 2 ,660 Boeing employees have been trained through the challenged\nprogramme, while a total of 3,600 Boeing employees will be trained under the programme.2632\n8.2.8.12.2 Main arguments of the parties\n8.1063. The European Union argues that the Boeing workforce programme, provided through\nreadySC, constitutes a specific subsidy within the meaning of Articles 1 and 2 of the SCM\nAgreement. The programme involves a government provision of goods or services other than\ngeneral infrastructure within the meaning of Article 1.1(a)(1)(iii). Since Boeing would otherwise\nhave to pay for the selection, training and development of its workforce on market terms, the\nprogramme provided at no cost to Boeing confers a benefit within the meaning of\nArticle 1.1(b).2633 The programme is also specific within the meaning of Articles 2.1(a) and 2.1(c) ,\nsince the South Carolina Budget and Control Board provided special funding earmarked for\nBoeing's workforce programme, and Boeing is the predomina nt user of the subsidy and receives a\ndisproportionately large amount of the subsidy.2634\n8.1064. The United States argues that the European Union has failed to demonstrate that the\nBoeing workforce programme constitutes a financial contribution or confers a benefit 2635, and that\nin any event the programme is not specific within the meaning of Article 2.1. The readySC\nprogramme is broadly available and has been widely used throughout the economy of South\nCarolina, Boeing is neither the main or most frequent user of the p rogramme, nor is there any\nindication that discretion has been exercised in a manner indicating specificity.2636\n8.2.8.12.3 Evaluation by the Panel\n8.2.8.12.3.1 Whether there is a financial contribution and a benefit\n8.1065. The first question before the Panel is whether the Boeing workfo rce programme\nconstitutes a financial contribution through the provision of government services, within the\nmeaning of Article 1.1(a)(1)(iii). The European Union 's position is that the Boeing workforce\nprogramme, provided through readySC, provides free ser vices including screening and training of\napplicants that Boeing would otherwise have to pay for itself.2637 The United States' position is that\nthe European Union provides only a cursory analysis in support of its financial contribution claim,\nand has therefore failed to demonstrate the existence of a financial contribution.2638\n8.1066. In light of the uncontested evidence before us that South Carolina provides free\nworkforce screening, training and development services to Boeing under the readySC\n\n2631 readySC, \"About Us\", available at <www.readysc.org/about.htm>, accessed 1 September 2016,\n(Exhibit USA-240).\n2632 United States' response to the Panel's request for information pursuant to Article 13 of the DSU,\ndated 28 February 2013, response to question No. 77, paras. 163-169; and European Union's first written\nsubmission, paras. 657-660. Also see S. Wilhelm, \"Charleston, High-flying efforts to build a Boeing jet work\nforce\", Puget Sound Business Journal, 3 June 2011, (Exhibit EU-530).\n2633 European Union's first written submission, paras. 662-666; second written submission,\nparas. 699-701.\n2634 European Union's first written submission, paras. 667 and 668; second written submission,\nparas. 702 and 703.\n2636 United States' first written submission, paras. 647-651; second written submission, paras. 600-604.\n2637 European Union's first written submission, para. 663.\n2638 United States' second written submission, para. 599.\n\nprogramme2639, which Boeing would otherwise have to acquire at market rates, we find that the\nBoeing workforce programme involves a financial contribution within the meaning of\nArticle 1.1(a)(1)(iii) and confers a benefit within the meaning of Article 1.1(b).\n8.2.8.12.3.2 Whether the subsidy is specific\n8.1067. With respect to specificity, the first issue raised by the parties' arguments is whether the\nsubsidy provided through the Boeing workforce programme is specifi c within the meaning of\nArticle 2.1(a). In support of its argument that the Boeing wo rkforce programme, provided through\nreadySC, involves a subsidy that is specific within the meaning of Article 2.1(a), the\nEuropean Union asserts that the South Carolina State Budget and Control Board enacted a special\nresolution to provide special funding to the State Board for Technical and Comprehensive\nEducation for readySC, expressly earmarked for carrying out the Boeing workforce training,\nrecruitment, and development programme. 2640 The United St ates counters that the\nEuropean Union has failed to articul ate how this information is releva nt to an analysis under\nArticle 2.1(a).2641\n8.1068. For the reasons detailed below, we conclude that the European Union has failed to\nestablish that the subsidy provided through the Boeing workforce programme is specific within the\nmeaning of Article 2.1(a). The European Unions ' sole argument in support of its position that the\nsubsidy provided through the Boeing workforce programme is specific under Article 2.1(a) is based\non a resolution adjusting the amount of funding appropriated to the Center for Accelerated\nTechnology Training (CATT) Program as a consequence of expenditures anticipated in relation to\nBoeing's South Carolina operations. The resolution adopted on 23 February 2010 by the South\nCarolina Budget and Control Board appro ved \"an adjustment in state general fund appropriations\nwithin the Center for Accelerated Technology Training Program at the State Board for Technical\nand Comprehensive Education not to exceed $3,100,000\".2642 The Board adopted this resolution in\nresponse to a notification from the State Board for Technical and Comprehensive Education \"of an\nadditional need in the CATT budget for FY 2009 -10 estimated at between $2,203,505 and\n$3,100,000\".2643 The need for this adjustment reflected \"anticipated CATT expenditures f or the\nBoeing Project which are estimated at $3,100,000 for the remainder of FY 2009 -10. This\nUSD 3.1 million includes expenses for training classes such as staffing, material and supplies,\ntesting and operations\".2644\n8.1069. However, since the evidence before the Panel shows that the measure at issue is\nprovided pursuant to a pre -existing broader subsidy programme 2645, the relevant question under\nArticle 2.1(a) is whether access to that subsidy programme is explicitly limited. The fact that the\nresolution cited by the European Union adjusts appropriations to accommodate one specific\napplication of this broader programme is not evidence that access to the scheme as a whole is\nexplicitly limited to certain enterprises. In fact, the evidence indicates that no such limitat ion\nexists. The resolution itself notes that the CATT Program \"designs, develops and conducts training\nfor individuals seeking to fill jobs being created by new and expanding industries \".2646 Similarly,\nthe provision in the FY 2009-2010 Appropriation Act pursuant to which the resolution was adopted\nstates that \"it is the intent of the General Assembly that the State Board for Technical and\nComprehensive Education expend whatever funds as are necessary to provide direct training for\nnew and expanding business o r industry\".2647 There is nothing to suggest that the applicability of\nthis provision in the FY 2009 -2010 Appropriation Act is limited to certain enterprises. Aside from\n\n2639 See, in particular, United States' response to the Panel's request for information pursuant to\nArticle 13 of the DSU, dated 28 February 2013, response to question No. 77, paras. 163-169.\n2640 European Union's first written submission, para. 667; second written submission, para. 702.\n2641 United States' first written submission, para. 648.\n2642 State Budget and Control Board, Meeting Agenda, Regular Session Item No. 2, 23 February 2010,\n(Exhibit EU-537), pdf p. 2.\n2643 State Budget and Control Board, Meeting Agenda, Regular Session Item No. 2, 23 February 2010,\n(Exhibit EU-537), pdf p. 2.\n2644 State Budget and Control Board, Meeting Agenda, Regular Session Item No. 2, 23 February 2010,\n(Exhibit EU-537), pdf p. 2.\n2645 See, in particular, readySC, \"About Us\", available at <www.readysc.org/about.htm>, accessed\n1 September 2016, (Exhibit USA-240); and readySC, Annual Report, FY 2010-2011, (Exhibit USA-225).\n2646 State Budget and Control Board, Meeting Agenda, Regular Session Item No. 2, 23 February 2010,\n(Exhibit EU-537), pdf p. 2. (emphasis added)\n2647 State Budget and Control Board, Meeting Agenda, Regular Session Item No. 2, 23 February 2010,\n(Exhibit EU-537), pdf p. 9. (emphasis added)\n\nits argument based on the resolution of 23 February 2010, the European Union has advanced no\nother argument to show that the eligibility for the workforce development programme is expressly\nlimited to certain enterprises. We therefore find the European Union has failed to establish that the\nsubsidy provided through the workforce development programme is specific within the meaning of\nArticle 2.1(a).2648\n8.1070. The second issue raised by the parties ' arguments is whether the subsidy provided\nthrough the Boeing workforce programme is specific within the meaning of Article 2.1(c). The\nEuropean Union argues that the challenged programme is specifi c within the meaning of\nArticle 2.1(c) on the grounds that Boeing is the predominant user of the subsidy and receives a\ndisproportionately large amount of the subsidy. In this respect the European Union contends that\nthe Boeing workforce programme accounted for more than one -third of all readySC expenditures\nin 2010, that the training programme includes a focus on Boeing -specific job skills in the first\nphase and is provided directly to post -hire Boeing employees in a third phase. Moreover, the\nEuropean Union argues that the granting authority has exercised its discretion in a manner\nfavouring Boeing, including by providing a more extensive set of services to Boeing and conducting\ntraining on processes and equipment unique to Boeing.2649\n8.1071. The United States counters that readySC, through which the Boeing workforce\nprogramme is provided, is not used by a limited number of certain enterprises but rather works\nwith a number of businesses and industries in any given year. In fi scal year 2010-2011, readySC\ntrained 5 ,872 workers for 73 companies, and 4 ,400 workers for 82 companies in the following\nfiscal year. While readySC will train 3 ,600 workers for Boeing in total, it has trained 270 ,000\nworkers during the course of its existe nce.2650 Similarly, Boeing is not the predominant user of the\nprogramme, since Boeing 's usage of the programme over the course of any particular year does\nnot make it the main or most frequent user of a long -established programme.2651 Finally, the fact\nthat readySC conducts training on processes and equipment unique to Boeing is no indication that\ndiscretion has been exercised in a manner indicating specificity, since the programme provides\ntraining and skills that are designed for the particular needs of all participating companies.2652\n8.1072. For the reasons detailed below, we consider that the European Union has failed to\nestablish that the subsidy provided through the Boeing workforce programme is specific within the\nmeaning of Article 2.1(c). In light of the fact that the readySC programme has existed for over half\na century, we do not see any evidence before us to suggest that the programme is used by a\nlimited number of certain enterprises, that it is predominantly used by certain enterprises, that\ndisproportionately large amounts of subsidy have been granted to certain enterprises, or that\ndiscretion has been exercised by the granting authority in a manner indicating specificity. In\nparticular, the fact that in one year of the programme 's over fifty -year existence , Boeing\naccounted for more than one-third of all readySC expenditures, does not demonstrate that Boeing\nis the predominant user of readySC, or that it receives a disproportionately large amount of the\nsubsidy. The European Union furthermore fails to conduct the kind of disproportionality analysis\nthat accords with the framework set out by the Appellate Body in the original proceeding. 2653\nMoreover, the European Union has not established that discretion was exercised so as to limit\naccess to the subsidy programme to certain enterprises: the fact that the training focuses on\nBoeing job skills and is provided directly to post -hire Boeing employees is irrelevant as an\nindication of de facto specificity. The European Union further fails to provide any empirical\nevidence in support of its contention that the services provided to Boeing were more extensive\nthan those provided to other firms. We therefore find that the European Union has failed to\nestablish that the subsidy provided through the Boeing workforce programme is specific\nwithin the meaning of Article 2.1(c).\n\n2648 We note that in the original proceeding the panel found certain Washington State job training\nincentives to be a specific subsidy, within the meaning of Article 2.1(a) of the SCM Agreement. (See Panel\nReport, US – Large Civil Aircraft (2nd complaint), paras. 7.568-7.572 and 7.590-7.594). However, the measure\nat issue in that proceeding was not part of a pre-existing broader scheme, as is the case in this proceeding.\n2649 European Union's first written submission, para. 668.\n2651 United States' first written submission, para. 650 (referring to Panel Report, US – Large Civil Aircraft\n2652 United States' first written submission, para. 651; second written submission, paras. 603 and 604.\n2653 See Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 879.\n\n8.1073. Finally, we note that the European Union also argues that the subsid y provided to Boeing\nthrough the Boeing workforce programme is specific pursuant to Article 2.3 of the SCM Agreement.\nArticle 2.3 provides that \"{a}ny subsidy falling under the provisions of Article 3 shall be deemed to\nbe specific\". We reject this argument because in Section 10 of this Report we find that the\nEuropean Union has failed to establish that any subsidy at issue in this proceedin g is prohibited by\nArticles 3.1 and 3.2 of the SCM Agreement.\n8.2.8.12.4 Conclusion\n8.1074. In light of our above findings, we conclude that the European Union has failed to establish\nthat the workforce recruitment, training, and development programme involves a specific sub sidy\nwithin the meaning of Articles 1 and 2 of the SCM Agreement.\n8.3 Summary of the Panel 's conclusions as to whether the United States has failed to\nwithdraw the subsidy within the meaning of Article 7.8 of the SCM Agreement\n8.1075. In Section 8.1 of the Report, we evaluate whether the United States has failed to\nwithdraw the subsidy through the modifications it made to the particular pre -2007 NASA and DOD\naeronautics R&D measures that were the subject of the DSB recommendations and rulin gs. As a\nresult of our evaluation, we f ind that the European Union has established that the amendments\nmade by the United States through the Boeing Patent Licence Agreements to the terms of the pre -\n2007 NASA procurement contracts and DOD assistance instruments do not constitute a withdrawal\nof the subsidy within the meaning of Article 7.8 of the SCM Agreement. With respect to the pre -\n2007 Space Act Agreements, we f ind that the European Union has established that the United\nStates, having taken no action in respect of those instruments, has failed to withdraw the subsidy\nwithin the meaning of Article 7.8 of the SCM Agreement.\n8.1076. In Section 8.2 of the Report , we evaluate whether the United States has failed to\nwithdraw the subsidy by granting or maintaining post-2006 measures alleged to constitute specific\nsubsidies within the meaning of Article 1 and 2 of the SCM Agreement. As a result of our\nevaluation, we f ind that the European Union has established that the following measures invol ve\nspecific subsidies within the meaning of Articles 1 and 2 of the SCM Agreement, and that by\ngranting or maintaining these specific subsidies after the end of the implementation period, the\nUnited States has failed to withdraw the subsidy within the mean ing of Article 7.8 of the SCM\nAgreement:\na. certain transactions between NASA and Boeing pursuant to post -2006 NASA\nprocurement contracts, cooperative agreements, and Space Act Agreements ; while we\nare unable to estimate the amount of the subsidy on the basis of the evidence on the\nrecord, to the extent it is relevant to the Panel's a ssessment of whether the\nUnited States has withdrawn the subsidy , or taken appropriate steps to remove the\nadverse effects, within the meaning of Article 7.8 of the SC M Agreement, we find the\nUnited States' estimate of the amount of the financial contribution at [***] between\n2007 and 2012 to be the most credible estimate (Section 8.2.2);\nb. certain transactions between DOD and Boeing pursuant to post -2006 DOD assistance\ninstruments; while we are unable to estimate the amount of the subsidy on the basis of\nthe evidence on the record, to the extent that it is relevant, we find the United States'\nestimate of the amount of the financial contribution at [***] between 2007 and 2012 to\nbe the most credible estimate (Section 8.2.3);\nc. transactions pursuant to the Boeing CLEEN Agreement; while we are unable to estimate\nthe amount of the subsidy on the basis of the evidence on the record, to the extent that\nit is relevant, we find the European Uni on's estimate of th e amount of the financial\ncontribution at USD 27.99 million between 2010 and 2014 to be a credible estimate\n(Section 8.2.4);\nd. Washington State B&O tax rate reduction for the aerospace industry, in the amount of\nUSD 325 million between 2013 and 2015 (Section 8.2.7);\n\ne. Washington State B&O tax credits for preproduction/aerospace product development, as\namended by section 7 of SSB 6828, in the amount of [***] between 2013 and 2015\n(Section 8.2.7);\nf. Washington State B&O tax credit for property ta xes, as amended by HB 2466 to include\nleasehold excise taxes, in the amount of [***] between 2013 and 2015 (Section 8.2.7);\ng. Washington State sales and use tax exemptions for computer software, hardware, and\nperipherals, in the amount of [***] between 2013 and 2015 (Section 8.2.7);\nh. City of Everett B&O tax rate reduction, in the amount of USD 54.1 million between 2013\nand 2015 (Section 8.2.7);\ni. payments by South Carolina pursuant to commitments made in the Project Gemini\nAgreement to compensate Boeing for a portion of the costs incurred by Boeing in respect\nof the construction of the Project Gemini facilities and infrastructure through air hub\nbond proceeds, in the amount of USD 50 million (Section 8.2.8.6);\nj. South Carolina property tax exemption for Boeing's large cargo freighters, in the amount\nof USD 25.82 million between 2013 and 2015 (Section 8.2.8.10); and\nk. South Carolina sales and use tax exemptions for aircraft fuel, computer equipment , and\nconstruction materials, in the amount of USD 2.25 million between 2013 and 201 5\n(Section 8.2.8.11).\n8.1077. We also find that the European Union has failed to establish that the following measures\ninvolve specific subsidies within the meaning of Articles 1 and 2 of the SCM Agreement, and that\nthe European Union has consequently failed to establish that by granting or maintaining these\nspecific subsidies after the end of the implementation p eriod, the United States has failed to\nwithdraw the subsidy within the meaning of Article 7.8 of the SCM Agreement:\na. certain transactions between DOD and Boeing pursuant to pre-2007 and post-2006 DOD\nprocurement contracts, on the grounds that, assuming arguendo that these measures\ninvolve financial contributio ns within the meaning of Article 1.1(a)(1) of the SCM\nAgreement, the European Union has failed to establish that they confer a benefit within\nthe meaning of Article 1.1(b) of the SCM Agreement (Section 8.2.3);\nb. tax exemptions and exclusions under FSC/ETI legislation and successor legislation, on\nthe grounds that the European Union has failed to establish that Boeing actually received\nthe FSC/ETI tax benefits after 2006, and that the measure therefore involves a financial\ncontribution within the meaning of Article 1.1(a)(1)(ii ) of the SCM Agreement\n(Section 8.2.5);\nc. tax abatements provided through IRBs issued by the City of Wichita, on the grounds that\nthese tax abatements are no longer specific within the meaning of Article 2.1(c) of t he\nSCM Agreement and, as a result, the measure is no longer subject to the provisions of\nthe SCM Agreement on actionable subsidies (Section 8.2.6);\nd. South Carolina sublease of the Project Site, on the grounds that the European Union has\nfailed to establish that the sublease involves a subsidy to Boeing (Section 8.2.8.5);\ne. alleged provision by South Carolina of Gemini and Emerald facilities and infrastructure,\non the grounds that the European Union has failed to establish that th is measure\ninvolves a financial contribution within the meaning of Article 1.1(a)(1)(iii) of the SCM\nAgreement (Section 8.2.8.6);\nf. South Carolin a fee -in-lieu-of taxes arrangements set forth in the Boeing F ILOT\nAgreement and Project Emerald F ILOT Agreement, on the grounds that the\nEuropean Union has failed to establish that the subsidy provided through these\narrangements is specific within the mean ing of Article 2 of the SCM Agreement\n(Section 8.2.8.7);\n\ng. South Carolina corporate income tax credits in connection with the designation of the\nProject Gemini and Project Emerald facilities and infrastructure as part of the same\nmulti-county industrial park , on the grounds that the European Union has failed to\nestablish that the subsidy provided through the tax credits is specific within the meaning\nof Article 2 of the SCM Agreement (Section 8.2.8.8);\nh. South Carolina Income Allocation and Apportionment Agreement, on the grounds that\nthe European Union has failed to establish that the agreement involves a financial\ncontribution within the meaning of Article 1.1(a)(1)(ii ) of the SCM Agreement\n(Section 8.2.8.9); and\ni. South Carolina workforce recruitment, training and development programme, on the\ngrounds that the European Union has failed to establish that the subsidy provided\nthrough this programme is specific within the meaning of Article 2 of the SCM Agreement\n(Section 8.2.8.12).\n9 WHETHER THE UNITED ST ATES HAS FA ILED TO TAKE APPROPR IATE STEPS TO\nREMOVE THE ADVERSE E FFECTS, WITHIN THE MEANING O F ARTICLE 7.8 OF THE SCM\nAGREEMENT\n9.1 Introduction\n9.1. In this Section of the Re port, we assess whether the United States has failed to take\nappropriate step s to remove the advers e effects , within the meaning of Article 7.8 of the SCM\nAgreement, in relation to the measures that we have ruled are within the scope of this proceeding,\nand which are specific subsidies that have not been withdrawn for purposes of Article 7.8.\n9.2. The European Union argues that the subsidies that the United States has failed to withdraw,\nand which it grants and maintains at the end of the implementation period , cause present adverse\neffects, in the form of certain kinds of serious prejudice to the interests of the European Union ,\nwithin the meaning of Articles 5(c) and 6.3 of the SCM Agreement, after the end of the\nimplementation period. Accordingly, the United States has failed to comply with the DSB\nrecommendations and rulings and has acted inconsistently wi th Articles 5, 6, and 7.8 of the SCM\nAgreement. The United States argues that it has withdrawn the subsidy in relation to the three\nmeasures the subject of the DSB recommendations and rulings of any significance (the NASA\nprocurement contracts, DOD assista nce instruments, and the FSC/ETI subsidies) and that the\nminor subsidies (Washington State B&O tax rate reduction and tax abatements provided through\nthe City of Wichita IRBs) are not of a magnitude that they could plausibly cause adverse\neffects.2654 The European Union therefore does not establish its case that \"the United States grants\nand maintains subsidies to Boeing after the end of the implementation period that cause present\nadverse effects.\"2655\n9.3. In Section 6, we explain that, in light of how the European Union has framed its case, our\ntask in this proceeding is to determine, for the subsidies that the United States has failed to\nwithdraw after the end of the implementation period, whether the subsidies cause present adverse\neffects, in the form of certain kinds of serious prejudice to the interests of the European Union,\nwithin the meaning of Articles 5(c) and 6.3 of the SCM Agreement.\n9.4. With respect to subsidies to the 787 and 777X alleged to affect the A350XWB and A330, the\nEuropean Union argues2656:\na. That the combined effects of certain aeronautics R&D subsidies that improve the quality\nand accelerate the launch and delivery positions of the 787 fami ly and 777X, and other\n\n2654 United States' Compliance Communication, paras. 9-11; first written submission, para. 679.\nMoreover, with respect to the tax abatements related to the City of Wichita IRBs, the United States argues that\nit has withdrawn the subsidy because it is no longer specific. (United States' opening statement at the meeting\nwith the Panel, paras. 94 and 99).\n2655 United States' first written submission, para. 679 (quoting European Union's first written\nsubmission, para. 790).\n2656 European Union's first written submission, section VII.H.\n\nsubsidies that enable Boeing to lower the prices of these aircraft , collectively, are a\ngenuine and substantial cause of:\ni. Significant lost sales of the A350XWB, within the meaning of Article 6.3(c) of the\nSCM Agreement, and threat thereof.\nii. Impedance of imports of the A350XWB to the United States, within the meaning of\nArticle 6.3(a) of the SCM Agreement, and threat thereof.\niii. Impedance of exports of the A350XWB , within the meaning of Article 6.3(b) of the\nSCM Agreement to various third-country markets, and threat thereof.2657\niv. Significant price suppression of the A350XWB, within the meaning of Article 6.3(c) of\nthe SCM Agreement, and threat thereof.\nb. That the original adverse effects of the pre-2007 aeronautics R&D subsidies in respect of\nthe A330 and Original A350 continue in the post-implementation period as:\ni. Significant price suppression of the A 330 through orders of A330 LCA placed during\nthe 2004-2006 reference period (owing to deliveries of those aircraft occurring later,\nalong with the prices fixed at that time through options and purchase rights\nexercised later, as well as \"follow-on\" orders based on A330 pricing expecta tions\nfrom 2004-2006); and post-2006 A330 orders by all other customers.\nii. Significant price suppression of the A350XWB ( based on Original A350 orders\nconverted to A350XWB orders and on new A350XWB orders).\niii. Significant lost sales of the A350XWB, in that the adverse effects arising from sales\nof the 787 that were the basis for lost sales findings for the Original A350 (and also\nthe other alleged Original A350 lost sales that were not resolved) in the original\nproceeding, continue a t present to the extent those aircraft have not yet been\ndelivered.\niv. Significant lost sales of the A350XWB after the original reference period (i.e.\npost-2006), to the extent that the relevant Boeing LCA remain undelivered.\nv. Threat of impedance of exports of the A350XWB resulting from 787 deliveries, the\nresult of Original A350 lost sales in the original reference period, occurring in the\npost-implementation period.\n9.5. With respect to subsidies to the 737 MAX alleged to affect the A320neo, the European Union\nargues that the combined effects of: (a) certain aeronautics R&D subsidies that enhance the\nquality and enable the earlier availabil ity of the 737 MAX ; and (b) other subsidies that enable\nBoeing to lower the prices of the 737 MAX, collectively, are a genuine and substantial cause of2658:\na. Significant lost sales of A320neo , within the meaning of Article 6.3(c) of the SCM\nAgreement, and threat thereof.\nb. Threat of impedance of future A320neo imports to the United States market , within the\nmeaning of Article 6.3(a) of the SCM Agreement, and threat of impedance of future\nA320neo exports to various third-country markets, within the meaning of Article 6.3(b)\nof the SCM Agreement.\n\n2657 Based on the causal mechanisms that the European Union argues indicate higher counterfactual\nsales volumes and market shares for Airbus, absent the U.S. subsidies, and on evidence of alleged lost sales of\nAirbus LCA in relevant country markets, as well as evidence that in the European Union's view demonstrates\nthat Boeing is projected to make significantly more than 50% of present and future deliveries of \"new\ntechnology, twin-aisle\" aircraft into these markets. (European Union's first written submission, paras. 1592,\n1593, 1598, and 1599; second written submission, paras. 1551-1553 and 1560-1563; and response to Panel\nquestion No. 169, paras. 468, 469, 476, and 477).\n2658 European Union's first written submission, section VII .I.\n\nc. Significant price suppression of the A320neo , within the meaning of Article 6.3(c) of the\nSCM Agreement, and threat thereof.\n9.6. With respect to subsidies to the 737NG alleged to affect the A320ceo , the European Union\nargues that the subsidie s that enable Boeing to lower the prices of the 737NG, collectively, are a\ngenuine and substantial cause of2659:\na. Significant lost sales of the A320ceo , within the meaning of Article 6.3(c) of the SCM\nAgreement, and threat thereof.\nb. Displacement, impedance , and/or threat s thereof, of A320ceo imports to the United\nStates market , within the meaning of Article 6.3(a) of the SCM Agreement, and of\nA320ceo exports to various third country markets , within the meaning of Article 6.3(b)\nof the SCM Agreement.\nc. Significant price suppression of the A320ceo, and threat thereof.\n9.7. As in the original proceeding, the European Union's seriou s prejudice arguments focus on the\neffects of the subsidies on Airbus' prices and sales through their effects on Boeing's product\ndevelopment and prices.2660 Accordingly, with the exception of an additional argument regarding\nthe continuation of the original adverse effects of the pre -2007 aeronautics R&D subsidies\ndescribed in item (b) in paragraph 9.14 below, the European Union's serious prejudice claims\nunder Article 6.3 involve two phases of analysis:\na. how certain subsidies aff ected Boeing's product development behaviour (for subsidies\nalleged to operate through a \"technology causal mechanism\"), and how certain other\nsubsidies affected Boeing's LCA pricing behaviour (for subsidies alleged to operate\nthrough a \"price causal mechanism\"); and\nb. how the effects of the subsidies on Boeing's product development and pricing collectively\nthereby affect Airbus sales and prices in the post -implementation period, as empirically\ndemonstrated on the basis of the evidence of Boeing and Airbus prices and sales.\n9.8. The parties' arguments on whether the United States has taken appropriate steps to remove\nthe adverse effects , within the meaning of Article 7.8 of the SCM Agreement , reveal significant\ndisagreement on a number of issues. They disagree , for example, on the delineation of the\nrelevant product markets for analysing the European Union's serious prejudice claims, and more\nparticularly, whether the A330 and 777 compete with the \"new technology\" wide -body, twin-aisle\nLCA (i.e. the 787, 777X and A 350XWB), and whether the A320ceo and 737NG compete with the\n\"new technology\" single-aisle, narrow-body LCA (i.e. the 737 MAX and A320neo).\n9.9. The parties also disagree as to how the various subsidies should be collectively assessed for\npurposes of determining whether they are a genuine and substantial cause of serious prejudice, as\nwell as the standard for determining whether subsidies are a genuine cause of serious prejudice.\n9.10. The parties disagree on whether the aeronautics R&D subsidies that are alleged to o perate\nthrough a technology causal mechanism do in fact affect Boeing's product development of LC A in\nthe post-implementation period, as well as how that evaluation should be undertaken. They also\ndisagree as to the operation of the post -2006 subsidies, an d more particularly, whether such\nsubsidies, in light of their magnitude, structure and operation, and the relevant conditions of\ncompetition, do in fact affect Boeing's LCA pricing behaviour in a manner that renders them\ncapable of causing the various Article 6.3 market phenomena.\n\n2659 European Union's first written submission, section VII.J.\n2660 See Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1657. The European Union\nexplains that, in following a \"unitary\" approach to demonstrating the adverse effects of the subsidies, it first\nsets out the nature of the subsidies and how they affect, in light of the conditions of competition, the\ncommercial behaviour of Boeing. On that basis, the European Union then seeks to establish the particular\nmarket phenomena in Article 6.3 for the various Airbus products and the markets in which they compete.\n(European Union's first written submission, para. 796).\n\n9.11. The European Union generally presents arguments concerning the effects of the subsidies\non Boeing's product development and pricing behaviour on a horizontal basis. This means that the\nEuropean Union seeks to demonstrate that the pre-2007 aeronautics R&D subsidies affect Boeing's\nproduct development , and that the post -2006 subsidies affect Boeing's LCA pricing behaviour 2661,\nbased on the nature of the particular subsidy or group of subsidies at issue, rather than the\nparticular Boeing LCA said to be subsidized by the various subsidies in combination. 2662 Based on\nconclusions that the European Union draws from the effects of the subsidies at issue on Boeing's\ntechnology development and pricing behaviour, respectively, the European Union then presents\narguments that , collectively, the subsidies adversely impact competing Airbus LCA in the\npost-implementation period.\n9.12. The Panel has decided to address the European Union's arguments concerning the effects of\nthe various subsidies on Boeing's product development and pricing behaviour in the context of the\nparticular LCA product markets and the particular Boeing LCA that are said to benefit from the\nsubsidies. It is only in the context of the particular LCA and product markets that the Panel is able\nto meaningfully evaluate whether subsidies that may, in the abstract, be argued to affect Boeing's\nproduct development and pricing behaviour, do in fact have those alleged effects in relation to\nparticular Boeing LCA. Once we determine that a subsidy or aggregated group of subsidies has\naffected the technological development or prices of a particular Boeing LCA family, we then\nconsider how such effects have impacted the sales and prices of the competing Airbus aircraft in\nthat product market.\n9.13. In Section 9.2 we begin by addressing various factors that provide necessary background\nfor our consideration of the case: (a) developments in the LCA industry since the original\nproceeding and the implications of these developments f or the appropriate LCA product market\ndelineation in this proceeding; (b) the concept of price in the context of the LCA markets and the\nway in which airframe manufacturers such as Boeing set their LCA prices; (c) the standard of\ncausation and related issu e of the subsidies that may appropriately be aggregated in order to\nassess their effects in an integrated manner; and (d) the relevant time -period over which to\nassess whether the non -withdrawn subsidies cause serious prejudice in the post -implementation\nperiod.\n9.14. We then address, i n Section 9.3, whether subsidies benefiting the 787 and 777X cause\nserious prejudice in respect of the A350XWB and A330. Accordingly, we evaluate both aspects of\nthe European Union's serious prejudice case concerning the A350XWB and A330: (a) whether the\ncombined effects of: (i) pre-2007 and certain post-2006 aeronautics R&D subsidies alleged to\naccelerate the launch and delivery positions of the 787 family and 777X , and (ii) the post -2006\nsubsidies alleged to enable Boeing to lower its prices, collectively, are a genuine and substantial\ncause of various forms of serious prejudice in respect of the A350XWB and A330 in the post -\nimplementation period; and (b) whether the original adverse effects of the pre -2007 aeronautics\nR&D subsidies on the A330 and Original A350 continue into the post -implementation period as\nserious prejudice to the interests of the European Union in respect of the A350XWB and A330.\n9.15. In Section 9.4 we address whether subsidies benefiting the 737 MAX and 737NG cause\nserious prejudice in respect of the A320neo and A320ceo, respectively. This involves a\nconsideration of whether: (a) the combined effects of: (i) certain aeronautics R&D subsidies\nalleged to improve the quality and accelerate the launch and delivery positions of the 737 MAX ,\nand (ii) the post-2006 subsidies alleged to enable Boeing to lower its 737 MAX prices, collectively,\nare a genuine and substantial cause of various forms of ser ious prejudice in relation to the\nA320neo in the post -implementation period ; and (b) the post -2006 subsidies alleged to enable\nBoeing to lower its 737NG prices, collectively, are a genuine and substantial cause of various forms\nof serious prejudice in relation to the A320ceo in the post-implementation period.\n\n2661 With the exception of a relatively small number of individual post-2006 aeronautics R&D subsidies,\nwhich according to the European Union, operate through a technology causal mechanism in the same manner\nas the pre-2007 aeronautics R&D subsidies. See paras. 9.85, 9.198, 9.199, 9.356, and 9.357 below.\n2662 See e.g. European Union's first written submission, section VII.E (Technology Causal Mechanism)\nand section VII.F (The U.S. Subsidies Cause Adverse Effects Through a Price Causal Mechanism) (dealing in a\nhorizontal fashion with the arguments concerning the technology causal mechanism and price causal\nmechanism), compared to section VII.H (Effects of U.S. Subsidies Benefiting the 787 and 777X on the A330\nand A350XWB), section VII.I (Effects of U.S. Subsidies Benefiting the 737 MAX on the A320neo), and\nsection VII.J (Effects of the U.S. Subsidies Benefiting the 737NG on the A320ceo) (dealing with the collective\neffects of all of the subsidies benefiting the various Boeing aircraft on the competing Airbus aircraft).\n\n9.2 Preliminary considerations relevant to the Pan el's evaluation of the\nEuropean Union's serious prejudice case\n9.2.1 Developments in the LCA industry since the original proceeding and their\nimplications for the identification of the relevant LCA product markets\n9.16. In this Section, we describe developments in the LCA industry since the original proceeding\nin order to determine whether the Panel should assess the competitive impact of U.S. subsidies\nbenefiting certain Boeing LCA on the basis of the LCA product markets identified by the original\npanel, or on the basis of differently delineated product markets. The two main issues that arise are\nwhether current conditions of competition mean that existing and new tech nology aircraft of\nsimilar capacity, range and maximum take -off weight (MTOW) no longer exercise meaningful\ncompetitive constraints upon one another, and are more appropriately considered to occupy\ndistinct product markets, and whether the trend towards la rger variants of wide -body, twin-aisle\nLCA means that it is no longer meaningful to apply the 200 -300 seat and 300 -400 seat product\nmarket delineation that the original panel adopted.\n9.17. In the original proceeding, the panel described certain key features of the LCA markets in\nwhich Boeing and Airbus LCA compete. According to the European Union, f or the most part, these\nfeatures remain unchanged. 2663 Thus, the LCA industry is effectively a competitive, supply -side\nduopoly, in which Boeing and Airbus are the only manufacturers of LCA. 2664 Boeing and Airbus\neach holds significant market share and possess es a degree of market power, meaning that each\nmanufacturer's decisions regarding the supply and pricing of its products have the ability to\ninfluence the pricing of the other, and more generally, the market price for LCA.2665 Overall market\ndemand for LCA is understood to be fairly inelastic with respect to price, due to the lack of viable\nalternatives to LCA and the cost of the aircraft itself representing only a small p ortion of total\nairline operating costs. However, individual firms, such as Boeing and Airbus, face elastic demand\nfor their individual LCA products, given the ability of customers to negotiate significant discounts\non LCA, exploiting the substitutability of aircraft from the two suppliers.2666\n9.18. Technological innovation is a crucial element of competition between LCA manufacturers.2667\nThe marketing life of an aircraft is determined largely by the life of the technology that defines the\nmodel. Once the technology is superseded, the LCA manufacturer will no longer be able to sell the\nmodel without making major capital investments to incorporate the latest available\ntechnologies.2668\n9.19. Given the enormous costs associated with the development of a new LCA family, both\nAirbus and Boeing are necessarily limited in the number of different LCA families (including size\nvariants within an LCA family) that they are able to offer customers. Each LCA family, therefore, is\nideally optimised in terms of size and range (among other fa ctors) to cover as wide a base of\ncustomer needs as possible. B oth Airbus and Boeing design the physical characteristics of their\nLCA families in consultation with , and according to the needs of , airlines and leasing companies,\nand as a result have develop ed broadly similar LCA families with overlapping physical\ncharacteristics and customer end -uses.2669 Airbus and Boeing each offers a full line of LCA, and\nboth manufacturers source material and technology worldwide, often from the same suppliers. 2670\nAt the same time, Airbus and Boeing compete by differentiating their aircraft, optimising new size\nvariants to fill existing gaps in the market.\n\n2663 European Union's first written submission, para. 839.\n2664 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1688; and Appellate Body Report, US\n– Large Civil Aircraft (2nd complaint), para. 903. While certain manufacturers other than Boeing and Airbus\nhave attempted to produce single-aisle LCA (notably Bombardier, Embraer, Comac, and United Aircraft\nCorporation), their market shares and product ranges are limited.\n2665 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1688; and Appellate Body Report, US\n2666 Moreover, used aircraft can represent a viable alternative for some customers also, contributing to\npressure on LCA manufacturers to price their new LCA near competitive levels. (M. Baye, NERA, Response to\nthe EU's Allegations Regarding the Nature and Effect of U.S. Aeronautics R&D Subsidies to Boeing\n(6 October 2015) (Baye Report), (Exhibit USA-581), para. 9 and fn 6).\n2667 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1769.\n2668 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1651.\n2669 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 903.\n2670 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 903.\n\n9.20. Aircraft acquisitions form the key element of an airline's business and strategic plan. 2671\nEvery LCA sales campaign involve s a unique focus on the needs of the particular airline or leasing\ncompany. Airlines generally evaluate the competing Airbus and Boeing offers according to factors\nsuch as price and pricing expectations, direct operating costs, capacity differences, dates of\ndelivery, options, asset value expectations, residual value assumptions, disposal of used aircraft,\nthe \"family concept\", engine manufacturers, guarantees, support, financing, cost of change , and\ncost of diversifying and subjective factors. 2672 While diffe rences in price, capacity and direct\noperating costs generally are the most significant factors that determine the outcome of an LCA\nsales campaign, the significance of those factors in any LCA sales campaign varies depending on\nthe fleet and business plans of the customer, and its strategic goals.2673\n9.21. During an LCA sales campaign, the customer will conduct its own technical and economic\nevaluations of each LCA manufacturer's proposal, and assess the total cost and anticipated\nrevenue stream presented by the particular proposal. This evaluation involves arriving at an\nestimate of the present value of costs associated with the acquisition of a new fleet of aircraft (e.g.\nprice, maintenance costs, direct and indirect operating costs, financing, training costs) a gainst the\npresent value of the revenue stream that would be expected to be generated by the proposed\nfleet. The resultant calcul ation is the net present value (NPV) to the customer. Price concessions\nmade by the manufacturer can offset disadvantages assoc iated with certain \"non -price\" factors\nthat are part of the NPV calculation, but offsetting certain non -price factors through price\nconcessions can, in certain cases, be costly.2674\n9.22. In the original proceeding, the panel found that the market for LCA is a glo bal market\ngeographically, and neither party disputes that this remains the case. 2675 The European\nCommunities had presented its original case on the basis that there were five LCA product\nmarkets, of which the following three LCA product markets and aircraft were relevant to its\nclaims2676:\na. Single-aisle aircraft with a capacity of approximately 100 to 200 passengers in a\ntwo-class configuration, and a short to medium range. The relevant Boeing and Airbus\naircraft in this LCA product market were the 737NG and A3 20ceo families of LCA,\nrespectively.\nb. Wide-body aircraft with a capacity of approximately 200 to 300 passengers in a\nthree-class configuration, and a medium to long or ultra-long range. The relevant Boeing\naircraft in this LCA product market were the 767 an d the 787 -8. The relevant Airbus\naircraft in this LCA product market were the A330 and A350XWB-800.\n\n2671 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1693. Airlines either purchase new\nLCA outright from Boeing or Airbus, finance purchases through instruments such as finance leases, lease the\naircraft that they operate, or purchase used aircraft from other airlines or leasing companies.\n2672 Statement of C. Mourey, \"Current Competitive Conditions in the LCA Industry\", 27 March 2013\n(Mourey Statement), (Exhibit EU-34) (BCI), para. 44. The \"family concept\" refers to LCA manufacturers'\npractice of offering several derivatives of one base LCA, generally with limited differences in the airframe\n(aside from its length), on-board systems, cockpits and handling qualities. This concept reduces costs by\nallowing flight crews to operate a range of LCA, since the training and licensing requirements qualify crews to\nshift from one aircraft to another within the same family. (Mourey Statement, (Exhibit EU-34) (BCI), para. 55).\nThe subjective factors that influence an airline customer or leasing company's evaluation of Airbus and Boeing\noffers include the impact on the image of an airline of flying a particular LCA, value of product features such as\ncabin width and aesthetics, the long-term viability of the product and manufacturer, long-term risks of new\ntechnologies and materials and risks associated with a single engine choice. (Mourey Statement, (Exhibit\nEU-34) (BCI), para. 61).\n2673 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1694. Direct operating costs include\nfuel burn, maintenance costs, user charges (e.g. take-off, landing, and navigation fees), and costs for crew.\nAccording the Airbus' Christophe Mourey, direct costs are almost always among the crucial factors analysed by\nairlines in purchasing LCA. Together with the capital costs of the aircraft, direct costs determine the cost basis\nof the airline, and thus have a significant impact on its profitability. (Mourey Statement, (Exhibit EU-34) (BCI),\npara. 47).\n2674 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1694.\n2675 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1671.\n2676 Panel Report, US – Large Civil Aircraft (2nd complaint), paras. 7.1669 and 7.1670. The two other\nLCA product markets not relevant to the original proceeding are: (a) wide-body aircraft with a capacity of 400\nto 500 passengers in a three-class configuration (or the respective cargo equivalent) and a long range; and (b)\nsuper wide-body aircraft with a capacity in excess of 500 passengers in a three-class configuration (or the\nrespective cargo equivalent), and a long range.\n\nc. Wide-body aircraft with a capacity of approximately 300 to 400 passengers in a\nthree-class configuration, and a long or ultra -long range. The relevant Boein g aircraft in\nthis LCA product market were the 777 family of LCA. The relevant Airbus aircraft in this\nLCA product market were the A340 and A350XWB-900 and A350XWB-1000 families.\n9.23. The panel evaluated the European Communities' serious prejudice claims on the basis of the\nLCA product markets it had identified and the three groups of \"subsidized\" Boeing LCA which\ncorresponded to three groups of Airbus \"like\" products in each product market. 2677 Neither party\nappealed this aspect of the original panel's serious pre judice evaluation and the Appellate Body\nconsidered the European Union's appeal on the basis of these LCA product markets. Since 2006\n(the end of the reference period in the original proceeding) there have been important\ndevelopments in the LCA product mar kets; notably, the launch of new single -aisle and wide-body\nLCA incorporating new generation technologies, which are intended ev entually to supersede\nexisting current generation aircraft marketed by both Boeing and Airbus.\n9.24. With regard to wide -body LCA, Bo eing continues to produce the 767, although it receives\nlimited orders. 2678 Airbus continues to produce the A330, which has two size variants, the\nA330-200 and the A330-300.2679 As described in the original proceeding, the 787 programme was\nlaunched by Boeing in 2004, and in response, Airbus launche d the A350XWB programme in\nlate 2006.2680 The 787 family has three size variants; the 787 -8, which is the Boeing aircraft\nclosest in size (as represented by maximum seat number) to the A3 30-200, while the 787 -9 is\nclosest in size to the A330 -300. The 787 -10, launched in June 2013, is close in size to the 777 -\n200ER which, along with the 777 -300ER, is in the process of being replaced by two larger size\nvariants, the 777 -8X and the 777 -9X.2681 The A350XWB family also has three s ize variants, the\nA350XWB-800, the A350XWB -900, and the A350XWB -1000. The A350XWB -1000 is roughly\nequivalent in size to the new 777 -8X, the A350XWB-900 to the 787-10 (and the 777-200ER), and\nthe A350XWB-800 to the 787-9.2682 The 777X was formally launched in November 2013, although\nBoeing has had authorization to offer the 777X in sales campaigns and take commitments to\npurchase since May 2013. 2683 The new 777 -9X (which is replacing the 777 -300ER) has no\nequivalently-sized Airbus competitor.2684\n9.25. Table 4 below provides a comparison of the existing and new technology Airbus and Boeing\nwide-body, twin-aisle LCA at issue in this proceeding, based on seating capacity, MTOW, range and\nlist price.\n\n2677 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1672.\n2678 According to Christophe Mourey, the 767 averages eight aircraft per year since the beginning of\n2007, although the Tanker version of the 767 recently won a major contract from the U.S. Air Force. (Mourey\nStatement, (Exhibit EU-34) (BCI), para. 95). Boeing's 767 assembly line includes a 767 derivative to support\nthe military aircraft refuelling tanker programme. In its 2014 Annual Report, Boeing reported that in\nOctober 2014 it increased its combined tanker and commercial production rate from 1 to 1.5 per month and\nplanned to increase to two per month in 2016. (Subsidies to Boeing's LCA Division (2013-2014 Update),\n(Exhibit EU-1451), annex A: Boeing's Annual Report on Form 10-K for the fiscal year ended\n31 December, 2014, p. 28).\n2679 While the original panel found, among other things, that A330 prices and sales in the 2004-2006\nreference period were adversely affected by the launch of the 787 in 2004, in more recent years the A330\nappears to have enjoyed significant sales. (See Mourey Statement, (Exhibit EU-34) (BCI), paras. 97 and 116).\nFurther, Airbus launched the A330neo family (comprising the A330-800neo and A330-900neo), a re-engined\nversion of the A330 which features certain other incremental innovations. (See Airbus Press Release, \"Airbus\nlaunches the A330neo\", 14 July 2014, (Exhibit EU-1667)). At the time of launch in July 2014, Airbus expected\nthat deliveries of the A330neo would start in the final quarter of 2017.\n2680 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1777.\n2681 D. Tsang, \"Boeing 777X & 787-10X unfazed by 787 battery woes\", Aspire Aviation,\n14 February 2013, (Exhibit EU-611); and \"787-10 to come later than suggested\", Leeham, News and\nComment, 14 August 2012, (Exhibit EU-612).\n2682 Boeing Press Release, \"Boeing Launches 777X with Record-Breaking Orders and Commitments\",\n17 November 2013, (Exhibit EU-1299), p. 2.\n2683 D. Gates, \"Boeing to offer 777X for sale as launch nears\", Seattle Times, 1 May 2013, (Exhibit\nEU-1300).\n2684 Boeing Press Release, \"Boeing Launches 777X with Record-Breaking Orders and Commitments\",\n17 November 2013, (Exhibit EU-1299), p. 2.\n\nTable 4: Airbus and Boeing wide-body, twin-aisle aircraft compared on the basis of\nseating capacity, MTOW, range and price2685\nLCA model Seats MTOW (t) Range\n(nautical miles)\nList price\n(USD millions)\n787-8 246 227.93 7,350 206.8\n\nA330-200 246 238.00 6,850 208.6\n\nA350XWB-800\n\n276 259.00 8,200 245.5\n787-9 280 247.21 7,600 243.6\n\nA330-300 300 235.00 5,600 231.1\n\n777-200ER 302 297.55 7,350 258.8\n\nA350XWB-900 315 268.0 7,750\n\n277.7\n787-10 300-330 250.8 7,000 290\n\n777-300ER 360 351.53 7,650 315\n\nA350XWB-1000 369 308.0 8,000\n\n320.6\n777X (8) 350 315 9,300 349.8\n\n777X (9) 400 344 8,200 377.2\n\n9.26. There have also been developments in the single -aisle LCA offered by Boeing and Airbus,\ndriven largely by advances in engine technologies. In December 2010, Airbus launched a\nre-engined A320 f amily aircraft (A319, A320, and A321 models) as a new engine option (neo)\nfamily. First deliveries were scheduled for October 2015. Some eight months later, in August 2011,\nBoeing launched an allegedly similarly fuel -efficient, improved version of its 737N G family with\nnew engines, the 737 MAX family, with first deliveries scheduled for 2017.2686\n9.27. The European Union argues that there have been a number of other developments in the\nLCA markets since 2006 that complement the launches of the new generations of LC A and impact\nthe competitive relationships among the relevant Boeing and Airbus LCA, warranting a different\ndelineation of the relevant LCA product m arkets from that adopted by the panel in the original\nproceeding.2687 More specifically, the European Union po ints to rising fuel prices, which have\nincentivized airlines to update their older fleets with new, more technologically advanced , fuel\nefficient aircraft. New technology aircraft, however, are only available for deliveries in the long -\nterm, whereas exist ing technology aircraf t are still available for short -term delivery needs. 2688\nFurther, increasing congestion and slot constraints at hub airports, resulting from growing air\n\n2685 The data in Table 4 above is compiled from the following evidence; seating capacity: Boeing Press\nRelease, \"Boeing Launches 787 -10 Dreamliner\", 18 June 2013, (Exhibit EU -1159) for 787-10; Boeing website,\n\"777X Gallery Experience\", \"777X Details & Specifications\", (Exhibit EU -1302) for 777X8 and 9; and Mourey\nStatement, (Exhibit EU-34) (BCI) for all other LCA models; MTOW: D. Tsang, \"Boeing 777X & 787-10X unfazed\nby 787 battery woes\", aspire aviation , 14 February 2013, (Exhibit EU -611) for 787 -10, 777X8 and 9; and\nMourey Statement, (Exhibit EU -34) (BCI) for all other LCA models; range: Boeing Press Release, \"Boeing\nLaunches 787 -10 Dreamliner\", 18 Jun e 2013, (Exhibit EU -1159) for 787 -10; Boeing website, \"777X Gallery\nExperience\", \"777X Details & Specifications\", (Exhibit EU -1302) for 777X8 and 9; and Mourey Statement,\n(Exhibit EU-34) (BCI) for all other LCA models; and list price: Boeing Press Release, \"Boeing Launches New\nCommercial Airplane; Highlights Innovation, Efficiency and Partnerships a t 2013 Paris Air Show\",\n20 June 2013, (EU -1184) for 787 -10 (2013 list price), obtained by dividing approximate list price values of\norders by number of aircraft ordered; Boeing website, \"777X Gallery Experience\", \"777X Details &\nSpecifications\", (Exhibit EU-1302) for 777X8 and 9 (2013 list prices); Boeing List Prices, (EU -1210) for 787-8,\n787-9, 777 -200ER, and 777 -300ER (2012 list prices); and European Union's f irst written submission,\nparas. 907, 918, and 923 for all Airbus models (2012 list prices).\n2686 Mourey Statement, (Exhibit EU-34) (BCI), para. 81.\n2687 European Union's first written submission, paras. 888-893.\n2688 European Union's first written submission, paras. 889 and 890; and Mourey Statement, (Exhibit\nEU-34) (BCI), paras. 11-35.\n\ntraffic demand, have increased the attractiveness of larger aircraft within each of the aircraft\nfamilies.2689\n9.28. The European Union argues that as a result of the foregoing developments in the LCA\nindustry since 2006, the Panel should examine its claims in this proceeding on the basis of seven\n(rather than five) current global product markets. This product market delineation is based on the\nproposition that existing technology aircraft, which are less fuel efficient but avail able for earlier\ndelivery, and new technology aircraft , which are more fuel efficient but may not be available for\ndelivery for many years, despite their similarities in seating capacity, range, and MTOW, in fact do\nnot exercise meaningful competitive constraints on one another, and therefore are more\nappropriately considered to compete in distinct LCA product markets. 2690 The European Union's\nproposed delineation of the relevant LCA product markets is depicted below:\nTable 5: The European Union's proposed product market delineation\nEuropean Union's proposed product market delineation in this compliance proceeding2691\nRelevant product market Airbus LCA Boeing LCA\nSingle-aisle\nExisting technology/near-term delivery\n\nA320ceo family 737NG family\nSingle-aisle\nNew technology/late-term delivery\n\nA320neo family 737 MAX family\nMedium-sized twin-aisle\nExisting technology/near-term delivery\n\nA330 family N/A\nMedium- and large-sized twin-aisle\nNew technology/late-term delivery\nA350XWB-800\nA350XWB-900\nA350XWB-1000\n787-8\n787-9\n787-10\n777X\nLarge-sized twin-aisle\nExisting technology/near-term delivery\nN/A 777\n\n9.29. The dif ferences between the product market delineation relied on by the panel in the\noriginal proceeding, and the European Union's proposed product market delineation in this\nproceeding can be illustrated as follows:\n\n2689 European Union's first written submission, para. 889; and Mourey Statement, (Exhibit EU-34) (BCI),\nparas. 11-35.\n2690 European Union's first written submission, paras. 901-905 and 910-914.\n2691 Accordingly, the European Union considers that the 767, A340, and Original A350 are no longer in\nany LCA product market.\n\nTable 6: Comparison of the product market delineation in the original proceeding with\nthe European Union's proposed product market delineation\nProduct market delineation in the\noriginal proceeding\nEuropean Union's proposed product market\ndelineation in the compliance proceeding\n100-200 seat single-aisle LCA\nSingle-aisle\nExisting technology/near-term delivery\nSingle-aisle\nNew technology/late-term delivery\n200-300 seat wide-body LCA\nMedium-sized twin-aisle\nExisting technology/near-term delivery\nMedium- and large-sized twin-aisle\nNew technology/late-term delivery\n300-400 seat wide-body LCA\nLarge-sized twin-aisle\nExisting technology/near-term delivery\n\n9.30. As can be seen from the above table, the European Union's proposed LCA product market\ndelineation essentially means that the single-aisle LCA product market would be divided into two\nproduct markets (one for older technology, current generation LCA, and one for new t echnology,\nnew generation LCA). The 200-300 seat and 300 -400 seat wide-body, twin-aisle product markets\nwould be combined but then distinguished on the basis of the technological generation and\ndelivery availability. In other words, the European Union's proposed market delineation for wide -\nbody, twin-aisle LCA groups current generation, existing technology LCA in a medium-sized wide-\nbody segment with current generation, existing technology LCA in a large -sized wide -body\nsegment, neither of which compete s with any new technology, wide -body aircraft, and a new\ntechnology wide-body segment that covers both medium wide-body LCA and large wide-body LCA.\n9.31. The United States does not agree that the European Union's proposed LCA product markets\nare an accurate reflection of LCA competition and considers that the Panel would be justified in\nrejecting the European Union's adve rse effects claims becau se they are not based on valid\nmarkets, within the meaning of Articles 6.3(a) through (c) of the SCM Agreement.2692\n9.32. The European Union's proposed product market delineation raises two issues. The first is\nwhether the Eu ropean Union has demonstrated that existing and new technology aircraft, which\nhave different levels of fuel efficiency, but which otherwise have similar range, seating capacity,\nand MTOW, compete in separate product markets. The second is whether it is appropriate to\nabandon the original panel's delineation of the wide -body, twin-aisle aircraft product markets as\ncomprising separate product markets for smaller- and larger-sized twin-aisle aircraft, in favour of\nthe European Union's new approach, which treats all of th e new technology wide-body, twin-aisle\naircraft, regardless of variations in size, range, and MTOW, as competing in the same product\nmarket.\n9.33. As the Appellate Body has explained, the concept of serious prejudice relates to, and arises\nout of, competitive engag ement in a market. 2693 In other words, a subsidiz ed product can only\ncause serious prejudice to another product if the two products in question compete in the same\nmarket.2694 In this proceeding, the European Union argues that subsidies to certain Boeing LCA\nfamilies cause serious prejudice in respect of certain Airbus LCA families. In order to assess these\nclaims it is necessary to determine that the particular Boeing LCA identified by the European Union\nas the relevant \"subsidized product\" in fact compete (or potentially compete) in the same product\nmarket as the Airbus LCA to which they are alleged to have caused serious prejudic e. The\n\n2692 United States' first written submission, para. 695.\n2693 Appellate Body Report, EC and certain member States – Large Civil Aircraft, para. 1119.\n2694 Appellate Body Report, EC and certain member States – Large Civil Aircraft, para. 1119.\n\nAppellate Body has provided guidance on how different product markets might be identified,\nexplaining that \"two products would be in the same market if they were engaged in actual or\npotential competition in that market\". 2695 The Appellate Body said that this would be the case\nwhen two products are \"sufficiently substitutable so as to create competitive constraints on each\nother\".2696 The European Union's proposed product market delineation therefore raises the\nquestion of whether, due to developments in the conditions of c ompetition in the LCA markets,\nexisting technology and new technology LCA of similar capacity, range, and MTOW have ceased to\nexercise competitive constraints on each other, and as such now compete in separate product\nmarkets, justifying a departure from the product market delineation on which the original panel\nand Appellate Body based their analyses and findings.\n9.34. Our review of the evidence demonstrates that , among the various single -aisle LCA, and\namong various twin -aisle LCA, there is a high degree of similarity between Airbus and Boeing\nproducts regardless of whether they are current or new generation models.2697 Specifically, old and\nnew generation aircraft of similar capacity, range , and MTOW share close similarities in seat\nnumber, MTOW, length and wing-span.2698 This is more pronounced for single -aisle LCA, but there\nis nonetheless also sufficient overlap across all tw in-aisle LCA models. While such similarities\nbetween LCA of themselves are not necessarily determinative of whether the LCA in question place\nmeaningful competitive constraints on each other, they may well be di spositive where those\nsimilarities also point to the products serving the same purpose in terms of the routes and\npassenger volumes for which they are suitable, because they suggest that those LCA would likely\nmeet the specific requirements of the same customers. We also note that the Appellate Body has\nspecifically pointed to physical similarities between LCA as a relevant factor when determining the\ndemand-side substitutability of different aircraft.2699\n9.35. The European Union's argument that existing technology and new technology aircraft\noccupy separate product markets relies primarily on the evidence of Christophe Mourey, Senior\nVice President Contracts at Airbus (the Mourey Statement ).2700 The Mourey Statement explains\nthat airlines purchase LCA for specific missio ns, based on the timing, range, and passen ger\ndemand in the airline's route network. The suitability of an LCA model for a specific mission\ndepends primarily on its direct operating costs, size and range. These qualitative and quantitative\ndifferences and preferences are quantified into an NPV calculation, which represents a hypothetical\nassessment of the stream of future revenues and costs over time of the aircraft performing that\nspecific mission. Airline customers and leasing companies compare the NPV rates of competing\nAirbus and Boeing offers as part of their assessment of which aircraft manufacturer's offer will be\nthe more economical, and represent the best value over time.2701\n9.36. The Mourey Statement undertakes an NPV analysis of different pairings of new technology\nand existing technology aircra ft. Specifically, Mr Mourey calculates the NPV differences between,\nrespectively, the A320ceo versus the A320neo, and the A330 and A350XWB versus the 787, based\non an assumed common de livery date and a hypothetical typical mission . Mr Mourey concludes\nthat, when fuel costs are high , the NPV advantage of a new technology aircraft over its\nequivalently-sized, existing technology counterpart is so significant that customers would \"have a\nclear preference\" for the former. 2702 Mr Mourey then notes, however, that ne w technology aircraft\nhave later delivery availabilities than existing technology aircraft, and are therefore unable to fill\nan airline's more immediate needs, for example to secure capacity until delivery positions for new\ntechnology aircraft become avail able.2703 Mr Mourey argues that new technology a ircraft therefore\n\n2695 Appellate Body Report, EC and certain member States – Large Civil Aircraft, para. 1122.\n2696 Appellate Body Report, EC and certain member States – Large Civil Aircraft, para. 1120.\n2697 See Mourey Statement, (Exhibit EU-34) (BCI).\n2698 See Mourey Statement, (Exhibit EU-34) (BCI). See also Panel Report, EC and certain member States\n– Large Civil Aircraft (Article 21.5 – US) at paras. 6.1239-6.1240 and 6.1286 (for single-aisle LCA) and\n6.1295-6.1300 (for twin-aisle LCA). The panel in that case considered that, despite differences in maximum\nflying range between existing technology and new technology single-aisle LCA, the evidence before it\nsuggested that the new generation single-aisle LCA are marketed as updated, more fuel-efficient versions of\ntheir existing technology counterparts for the purpose of serving essentially the same missions already\noperated by existing technology LCA, at paras. 6.1246 and 6.1248.\n2699 Appellate Body Report, EC and certain member States – Large Civil Aircraft, para. 1134.\n2700 Mourey Statement, (Exhibit EU-34) (BCI).\n2701 Mourey Statement, (Exhibit EU-34) (BCI), para. 69.\n2702 Mourey Statement, (Exhibit EU-34) (BCI), paras. 74-92 (comparing the A320neo and the A320ceo),\nand 115-131 (comparing the A330 with the 787 and the A350XWB).\n2703 Mourey Statement, (Exhibit EU-34) (BCI), paras. 91 and 122-127.\n\ncompete in a market for long-term delivery positions while existing technology ai rcraft compete\nseparately in a market for short-term delivery positions. As explained above, on the basis of thi s\nanalysis, the Eur opean Union considers that the new technology A320neo and the 737 MAX\ncompete against each other in one LCA product market, while the existing technology A320ceo and\nthe 737NG compete against each other in another LCA product market. Similarly, contrary to the\nbasis on which the panel found serious prejudice in respect of the A330 in the original proceeding,\nthe European Union considers that the existing technology A330 can no longer be said to compete\nagainst the new technology 787 and now occupies an LCA product market of its own.\n9.37. We do not consider that the evidence presented in the Mourey Statement demonstrates that\nexisting technology aircraft and new technology aircraft of similar capacity, range , and MTOW\ncompete in separate LCA product markets. First, the Mourey Statement's NPV analysis, which\npurports to determine the value advantage of new technology aircraft over similarly -sized existing\ntechnology aircraft, compares the aircraft only on the basis of the operating costs of flyin g typical\nroutes over time. Mr Mourey's analysis excludes factors such as delivery availability and fleet\ncommonality, which can also significantly affect the value of a particular offer. On the basis of\ncomparing operating costs alone, the NPV advantage o f new technology aircraft appear s\nsignificant. It is th is degree of advantage that Mr Mourey argues cannot be offset by pricing\nconcessions on existing technology aircraft. By limiting the comparison to operating costs ,\nhowever, Mr Mourey overstates the ad vantage that a new technology aircraft might have in an\nactual sales campaign against an equivalently -sized, existing technology aircraft. 2704 If, for\nexample, the delivery availability of existing and new technology aircraft is taken into account, the\nvalue advantage o f the new technology aircraft's lower operating costs would be offset by the\nexisting technology aircraft's earlier availability. Similarly, if an existing technology aircraft shared\ncommonality with a customer's fleet, this advantage would, at least partially, also offset a new\ntechnology aircraft's operating cost advantage. Mr Mourey 's conclusion that the value difference\nbetween existing and new technology aircraft cannot reasonably be offset by price concession s\nassumes a value advantage in w hich no factors other than operating costs are taken into account\nin a customer's assessment of the value differential offered by the two typ es of aircraft. This is not\nthe case. 2705 We therefore do not accept the fundamental premise underlying Mr Mourey's\nargument, which is that the value advantage represented by a new technol ogy aircraft's lower\noperating costs cannot be offset by pricing con cessions on equivalently -sized existing technology\naircraft.\n9.38. Even if we were to accept that a new technology aircraft's operating cost advantage could\nnot be of fset by pricing concessions on existing technology aircraft, we do not consider that this\nwould necessarily demonstrate that the latter does not exercise competitive constraints on the\nformer.2706 The very fact of a new technology aircraft's better value assumes at least some cap on\nits price, which must be defined in relation to its existing technology alternative.2707 If the prices of\na new technology aircraft increased beyond a certain point, it would cease to be the more\neconomical choice, despite its large operating cost advantage. 2708 The Mourey Statement\ncompartmentalizes the needs of LCA customers into existing technology, near -term availability\nversus new technology, long-term availability in a way that in our view does not reflect the reality\nof the markets. The European Union supports its case that subsidies to the various Boeing aircraft\ncause serious prejudice to the European Union's interests in the post -implementation period by\nreference to evidence of the comp etitive interactions between Boeing and Airbus in particular LCA\nsales campaigns involving the 787, 777X, 737 MAX , and 737NG, on the one hand, and the\nA350XWB, A320neo, and A320ceo, on the other, between 2007 and 2015. We discuss this sales\n\n2704 See also Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),\nparas. 6.1263-6.1269, 6.1288, and 6.1345.\n2705 See para. 9.20 above.\n2706 Appellate Body Report, EC and certain member States – Large Civil Aircraft, para. 1120.\n2707 See also Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),\npara. 6.1262.\n2708 Indeed, there is evidence to suggest that Airbus set the prices of its new technology A320neo by\nreference to the prices of its existing technology A320ceo. (S. Hamilton, \"A320 NEO to have $7-8 million Price\nPremium\", Flight International, 23 August 2010, (Exhibit USA-361)). A 2013 article indicated that A320ceos\nand 737NGs were being \"massively discounted\" owing to customer preference for the more fuel-efficient\nversions of the A320neo and 737 MAX that were then in development. (\"Le vrai prix des avions d'Airbus et de\nBoeing\", Challenges, 13 June 2013, (Exhibit EU-1709)). We note that Airbus marketing materials suggest that\nthe existing technology A330 is compared to the new technology 787. (See F. Bregier, \"Airbus Results 2012,\nOutlook 2013\", Presentation at the Annual Press Conference, 17 January 2013, (Exhibit USA-296)).\n\ncampaign evidence in Sections 9.3.2.2 and 9.4.3 in connection with our evaluation of the European\nUnion's serious prejudice claims in the wide -body, twin-aisle, and narrow -body, single-aisle LCA\nproduct markets, a s well as in an appendix to th e Report which is designated as HSBI (the HSBI\nAppendix).2709 The sales campaign evidence shows that Airbus and Boeing will often offer a mix of\nboth old an d new technology LCA in individual sales campaigns, wherein existing tech nology\naircraft are operated as an interim solution, pending the delivery of new technology aircraft .2710 A\nparticularly attractive offer for the existing technology A320ceo, for example, will exercise\ncompetitive constraints on Boeing's competing \"package de al\" comprising 737NGs and new\ntechnology 737 MAXs. This is an example of existing technology aircraft exercising competitive\nconstraints on new technology aircraft.2711\n9.39. In light of the foregoing, we consider that the Europe an Union has not demonstrated that\nexisting technology aircraft and new technology aircraft of similar capacity, range , and MTOW no\nlonger exercise meaningful competitive constraints on each other such that they presently\ncompete in separate LCA product markets.2712\n9.40. Therefore, in evaluating the European Union's claims that the United States has failed to\nremove the adverse effects, within the meaning of Article 7.8 of the SCM Agreement, because the\nunwithdrawn subsidies cause present adverse effects , in the form of serious prejudice, after the\nend of the implementation period, we treat the existing technology A320ceo and 737NG, as well as\nthe new technology A320neo and 737 MAX, as all competing in the same product market for\nnarrow-body, single-aisle aircraft. We similarly treat the existing technology A330 and 777 families\nas competing with new technology twin-aisle, wide-body LCA of both Airbus (the A350XWB family)\nand Boeing (the 787 and 777X families) and not in their own distinct monopoly product markets.\n9.41. The second issue raised by the Euro pean Union's proposed product delineation is whether\nthe Panel should treat all of the wide -body, twin -aisle aircraft at issue in this proceeding,\nregardless of variations in seating capacity, range, and MTOW, as competing in one wide -body,\ntwin-aisle product market, as the European Union does in respect of its proposed \"medium - and\nlarge-sized twin aisle, new technology\" product market, or whethe r the variations in seating\n\n2709 See Appendix 2.\n2710 For single-aisle aircraft, seven of the sales campaigns submitted by the European Union involved\nsplit offers across existing and new technology aircraft. These sales campaigns are discussed at the following\nparagraphs of the HSBI Appendix (Appendix 2): 173-180; 181-187; 190-195; 196-201; 212-217; 218-223;\nand 224-230. For twin-aisle aircraft, at least three of the sales campaigns submitted by the European Union\ninvolved split offers across existing and new technology aircraft, including the sales campaigns discussed at the\nfollowing paragraphs of the HSBI Appendix (Appendix 2): 12-23; 24-30; and 51-60.\n2711For a number of the sales campaigns which the European Union submits in support of its claims of\nserious prejudice to Airbus new technology aircraft, the evidence specifically refers to aspects of the\nexisting-technology portion of Boeing's competing offer as posing a threat to Airbus' new-technology offer.\nWith respect to competition between current and new technology LCA in the single-aisle market, see e.g. the\nsales campaign discussed at paras. 181-187 of the HSBI Appendix (Appendix 2) and [[HSBI]] (Exhibit\nEU-898) (HSBI); the sales campaign discussed at paras. 190-195 of the HSBI Appendix (Appendix 2) and\n[[HSBI]] (Exhibit EU-906) (HSBI); the sales campaign discussed at paras. 196-201 of the HSBI Appendix\n(Appendix 2) (HSBI) and [[HSBI]] (Exhibit EU-924) (HSBI); the sales campaign discussed at paras. 212-217\nof the HSBI Appendix (Appendix 2) and [[HSBI]] (Exhibit EU-952) (HSBI); and the sales campaign discussed\nat paras. 218-223 of the HSBI Appendix (Appendix 2) and European Union's second written submission,\nparas.1709-1711. With respect to competition between existing and new technology LCA in the twin-aisle\nmarket, see e.g. the sales campaign discussed at paras. 63-65, 70-73, and 76 of the HSBI Appendix\n(Appendix 2) and [[HSBI]] (Exhibit EU-845) (HSBI); the sales campaign discussed at paras. 128-134 of the\nHSBI Appendix (Appendix 2) and [[HSBI]] (Exhibit EU-1484) (HSBI); and the sales campaign discussed in\n[[HSBI]] (Exhibit EU-787) (HSBI).\n2712 We note that the panel in EC and certain member States – Large Civil Aircraft (Article 21.5 – US)\nsimilarly concluded, on the basis of, inter alia, evidence which was not before this Panel, that for the purpose\nof the serious prejudice disciplines of the SCM Agreement, all Airbus and Boeing single-aisle aircraft compete in\none and the same LCA product market, and all five families of Airbus and Boeing twin-aisle LCA exercise\ndiffering but overall sufficient degrees of competitive constraints against each other such that they should all\nbe considered to fall within the same LCA product market for the purpose of the serious prejudice claims\nconsidered by that panel. (See Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5\n– US), paras. 6.1286 and 6.1370). We reach our conclusions as to the appropriate delineation of LCA product\nmarkets for purposes of this proceeding on the basis of the evidence before us as to the present conditions of\ncompetition in the LCA product markets. We acknowledge that these conditions will continue to evolve. We\ntherefore do not rule out the possibility that, in time, existing technology LCA could move into distinct product\nmarkets from their new technology counterparts.\n\ncapacity, range, and MTOW in fact warrant treating wide -body, twin-aisle aircraft, r egardless of\nthe vintage of their technologies, as competing in two or more distinct wide-body product markets.\n9.42. We recall that the original panel, for purposes of evaluating the European Communities'\nserious prejudice claims in the 2004-2006 period, had identified two relevant wide-body, twin-aisle\nLCA product markets in that proceeding: A 200 -300 seat market and a 300 -400 seat market. 2713\nSince the original proceeding, however, there has been a general shift toward s larger size variants\nwithin aircraft famil ies for both Airbus and Boeing LCA. The consequence is that competition\namong wide-body, twin-aisle aircraft no longer obviously o ccurs within the confines of a 200 -300\nseat and 300-400 seat product market delineation. Further, as explained above, Boeing and Airbus\nin fact compete by differentiating their aircraft and optimising new size -variants to fill existing\ngaps in the market. As such, it is not the case that one Airbus wide -body, twin-aisle LCA family is\ndesigned to compete primarily with an opposing Boeing wide-body, twin-aisle LCA family. Rather,\nwide-body, twin -aisle families contain a number of variants that compete against variants from\none or more competing wide-body, twin-aisle LCA families, depending on the particular size of the\nvariants involved. For example, both the 787 and the A350XWB families include variant models\nthat cover a variety of seating capacity and range requirements from 246 seats to 369 seats. 2714\nIn light of these developments in the LCA markets since the 2004 -2006 period considered by the\noriginal panel, we consider that it is no longer appropriate to base our evaluation of the\nEuropean Union's serious prejudice arguments involving wide-body, twin-aisle LCA on the 200-300\nseat and 300-400 seat product market delineation used by the original panel and Appellate Body.\n9.43. We note our earlier observation that, while there is overlap between twin -aisle models in\nterms of capacity, range, MTOW, length and wing -span, there is generally greater variation in\nthese factors for wide -body, twin-aisle LCA compared to narrow -body, single-aisle LCA. Further,\nour analysis of the sales campaign evidence suggests that, when purchasing wide-body, twin-aisle\nLCA, customers separately categoriz e their needs according to medium -sized, twin -aisle aircraft\nand larger -sized, twin-aisle aircraft, to the extent that they often effectively run two separate\ncompetitions within the same sales campaign. 2715 Further, having reviewed the sales campaign\nevidence for the wide -body, twin-aisle sales campaigns and the airc raft offered by each airframe\nmanufacturer to meet the customer's particular requirements, it seems that within the general\ncategories of medium -sized, twin-aisle aircraft and larger -sized, twin-aisle aircraft, the following\naircraft tend to be offered in competition with each other2716:\nTable 7: Competitive relationships between different wide-body, twin-aisle LCA\nRelevant product market Airbus LCA Boeing LCA\nMedium-sized twin-aisle aircraft A330 family\nA350XWB-800\n787-8\n787-9\nLarger-sized twin-aisle aircraft A350XWB-900\nA350XWB-1000\n787-10\n777-8X\n777-9X\n777 family\n\n9.44. We cauti on that it is not possible to draw a brigh t-line distinction. Wide -body, twin -aisle\naircraft are differentiated products, and customers' requirements in terms of size, routes to be\nserved and availability vary considerably. It is ce rtainly possible that a larger medium -sized\naircraft (e.g. the 787 -9) could in some circumstances, depending on the particular needs of the\n\n2713 Panel Report, US – Large Civil Aircraft (2nd complaint), paras. 7.1669-7.1675; and Appellate Body\nReport, US – Large Civil Aircraft (2nd complaint), para. 898.\n2714 Table 4 Airbus and Boeing wide-body, twin-aisle aircraft compared on the basis of seating capacity,\nMTOW, range and price.\n2715 See e.g. the sales campaign discussed at paras. 136-141 of the HSBI Appendix (Appendix 2),\n[[HSBI]] (Exhibit EU-1496) (HSBI), and [[HSBI]] (Exhibit EU-1498) (HSBI); the sales campaign discussed at\nparas. 144-149 of the HSBI Appendix (Appendix 2) and European Union's response to Panel question No. 169,\npara. 299; and the sales campaign discussed at paras. 152-158 of the HSBI Appendix (Appendix 2) and\n[[HSBI]] (Exhibit EU-1533) (HSBI).\n2716 See e.g. the split of aircraft considered \"medium\" and \"larger\" twin-aisle aircraft in the sales\ncampaigns discussed at paras. 135-142, 143-150, and 151-159, respectively, of the HSBI Appendix\n(Appendix 2).\n\ncustomer in terms of capacity and routes to be served, exercise meaningful compet itive\nconstraints on a smaller larger-sized aircraft (e.g. the A350XWB-900).\n9.45. Nonetheless, we consider that the particular product market delineation identified in Table 7\nabove is supported by t he evidence before us, and provides a reasonable and adequate basis on\nwhich to evaluate the European Union's serious prejudice claims. While we have departed from the\nEuropean Union's proposed product market delineation by rejecting the proposition that n ew\ntechnology LCA do not compete in the same product ma rkets as their similarly -sized existing\ntechnology counterparts, and by distinguishing competition between medium -sized twin-aisle LCA,\non the one hand, from competition between larger -sized twin-aisle on the other, we do not agree\nwith the United States that this justifies rejecting the European Union's adverse effects claims\nowing to a failure to frame the serious prejudice allegatio ns on the basis of the correct markets ,\nwithin the meaning of Articles 6.3(a) through (c) of the SCM Agreement.\n9.46. As stated by the original panel and Appellate Body, \"provided that the European\nCommunities demonstrated one of the alleged forms of serious prejudice in subparagraphs (a)\nthrough (c) of Article 6.3 in relation t o a particular Boeing subsidi zed LCA and a corresponding\nAirbus like product , it would establish serious pr ejudice for purposes of Article 5(c)\".2717 The\nEuropean Union's serious prejudice case in this proceeding is that, among other things, subsidies\nbenefiting particular Boeing wide -body, twin -aisle family LCA cause serious prejudice to its\ninterests in respect of particular Airbus wide -body, twin -aisle family LCA. Specifically, the\nEuropean Union argues that the effect of the U.S. subsidies benefiting the 7 87 is serious prejudice\nto its interests in respect of the A350XWB and the A330, while the effect of the U.S. subsidies\nbenefiting the 777X is serious prejudice to its interests in respect of the A350XWB. It is clear from\nthe product market deli neation in Table 7 above that certain size variations of the 787 compete\nwith certain size variations of the A350XWB and with the A330, while certain size variations of the\n777X compete with certain size variations of the A350XWB. We consider that the European Union's\nevidence satisfactorily demonstrates, for each of the pairings of Boeing and Airbus in the European\nUnion's serious prejudice case, that the relevant subsidi zed Boeing LCA compete against the\nrelevant, corresponding Airbus like product.\n9.47. On the basis of the foregoing:\na. We consider that it has not been demonstrated that new technology LCA and existing\ntechnology LCA of similar seating capacity, range, and MTOW compete in distinct LCA\nproduct markets.\nb. Therefore, we will evaluate th e European Union's claims regarding the effects of\nsubsidies to the 737 MAX on prices and sales of the A320neo, and the effects of\nsubsidies to the 737NG on prices and sales of the A320ceo , on the basis that these four\naircraft families all compete in a narrow-body, single-aisle aircraft LCA product market.\nc. We will similarly treat the A330 and 777 as competing with new technology A350XWB,\n787 and 777X family variants in the wide -body, twin -aisle LCA product markets. We\nconsider that it is possible to evalu ate the European Union's serious prejudice claims\ninvolving wide -body, twin -aisle aircraft even thoug h we do not accept the\nEuropean Union's proposed delineation of the wide -body, twin -aisle markets, because\nthose claims are based on the notion that the 78 7 and 777X families compete with\nvariants of the A350XWB.2718\n\n2717 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) para. 898, referring to Panel Report,\nUS – Large Civil Aircraft (2nd complaint), para. 7.1667. (emphasis added)\n2718 We consider that the A330 (an existing technology aircraft) competes with the smaller-sized\nvariants of the 787 and is in the same LCA product market as smaller-sized variants of the A350XWB. For\nreasons that we explain in fn 3173 below, however, our rejection of the European Union's argument that the\nA330 occupies its own \"medium-sized twin-aisle existing technology\" LCA product market does not affect the\noutcome of our analysis of the effects of the subsidies on the A330.\n\n9.2.2 The different aspects of LCA prices and how LCA manufacturers such as Boeing set\nLCA prices\n9.48. As we explain in greater detail in Sections 9.3.2.2 and 9.4.3, the European Union argues\nthat the post -2006 subsidies that operate through a price causal mechanism enable Boeing to\nlower the prices of its LCA in highly competitive LCA sales campaigns.2719 Our evaluation of these\narguments requires that w e first explain the various aspects of an LCA \"price\" as well as the\nfactors that influence the prices set by LCA manufacturers.\n9.49. As explained in the original proceeding, the \"net fly -away price\" of an aircraft comprises the\n\"total aircraft price\" less credits and price concessions offered by the LCA manufacturer (i.e. either\nBoeing or Airbus), estimated engine manufacturer discounts and other discounts offered by\nsuppliers of buyer furnished equipment. Concessions provided by the engine manufacturers and\nsuppliers of buyer furnished equipment are negotiated between the customer and the supplier,\nwithout the direct involvement of the LCA manufacturer. 2720 According to the\nEuropean Communities' expert in the original proceeding, pricing offered by engine manufac turers\nand suppliers of buyer furnished equipment can have a significant impact on the net fly -away price\nin a manner that is largely unknown to the LCA manufacturers.2721\n9.50. The \"total aircraft price\" in turn, is composed of the airframe basic price plus charges for\nchanges to standard specifications, buyer furnished equipment, supplier furnished equipment and\nthe engine basic list price. 2722 LCA manufacturers publish annual \"list\" or \"catalogue\" basic\nairframe prices for each model of LCA. List prices are not indi cative of the prices that airline\ncustomers and leasing companies actually pay for the airframe, however. 2723 Indeed, there appear\nto be no transparent, market prices for Boeing or Airbus LCA. Airframe prices are negotiated\nindividually with each customer in individual sales campaigns. Depending on the model of aircraft\nand the closeness of competition of potential substitutes for the customer's requirements, the size\nof the order and status of the customer, discounts from the published list prices can range f rom\n35-40% to as much as 60%.2724\n9.51. As previously mentioned, the European Union supports its case that subsidies to the various\nBoeing aircraft cause serious prejudice to the European Union's interests in the post -\nimplementation period by reference to evidence of the competitive interactions between Boeing\nand Airbus in particular LCA sales campaigns involving the 787, 777X, 737 MAX, and 737NG , on\nthe one hand, and the A350XWB, A320neo , and A320ceo, on the other, between 2007 and\n2015.2725 Much of this evidence ha s been designated as HSBI by the European Union and the\nUnited States, and we therefore discuss it in detail only in an HSBI Appendix (Appendix 2 of this\nReport). The real \"market price\" of Boeing and Airbus LCA has been described as the best -kept\nsecret of the industry.2726\n\n2719 The European Union explains that its challenge is confined to LCA sales campaigns that Boeing won\n\"which were characterised by particularly intense and close competition, and in which price, technology and\ndelivery dates played a substantial role in the purchase decision\". (European Union's response to Panel\nquestion No. 169, para. 174).\n2720 Engines are the single most expensive component of an LCA, representing between 20 and 30% of\nits total cost. (Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1690).\n2721 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1693 and fn 3566.\n2722 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1693.\n2723 In a 2013 article, an aircraft industry analyst stated that a customer has never purchased an aircraft\nat the list prices communicated by aircraft manufacturers. (\"Le vrai prix des avions d'Airbus et de Boeing\",\nChallenges, 13 June 2013, (Exhibit EU-1709)). Moreover, the actual prices paid by customers on delivery will\nbe affected by an \"escalation\" of the negotiated price to adjust for changes in aerospace industry costs of\nmaterials and labor between the date of order and date of delivery (which may be several years subsequent to\nthe date of order). (\"Le vrai prix des avions d'Airbus et de Boeing\", Challenges, 13 June 2013, (Exhibit\nEU-1709)).\n2724 Top tier Boeing customers, such as American Airlines, Delta Airlines, and Southwest Airlines,\nreportedly obtain the benefits of Boeing's \"most-favoured customer\" clause, in which Boeing guarantees that\nno other customer will obtain a lower price. \"Launch\" customers also are considered to generally obtain the\nlowest prices because the first aircraft produced in an LCA programme are frequently overweight. (\"Le vrai prix\ndes avions d'Airbus et de Boeing\", Challenges, 13 June 2013, (Exhibit EU-1709)).\n2725 See Appendix 2.\n2726 \"Le vrai prix des avions d'Airbus et de Boeing\", Challenges, 13 June 2013, (Exhibit EU-1709).\n\n9.52. The European Union argues that LCA sales are strongly determined by the dynamic nature\nof competition, in which each manufacturer faces inter -temporal strategic constraints and trade -\noffs, implying that current business decisions (e.g. on price and production) affect future demand\nand supply conditions. 2727 Boeing and Airbus do not compete for specific orders with the sole\nobjective of maximizing their short-run profits, in the sense of the profits pertaining to those\nspecific orders. Rather, they compete and set their prices with a view to maximizing their overall\nprofits across their long-term sales activity.2728 The European Union asserts that pricing incentives\nof LCA manufacturers like Boeing are therefore \"co -determined by the necessity of having to\nrecoup massive fixed cost investments and by the prevailing conditions of competition\" as well as\nby the need to keep production lines running, cover recurring costs and maintain a steady stream\nof cash flows2729:\nAs a result of these strictures, B oeing will decide to price extremely aggressively in\nsome sales campaigns (potentially below pure marginal costs, especially early -on in\nthe learning curve), while Boeing's pricing decisions in other campaigns allow it to\nrecoup some of its fixed investmen t costs (i.e., pricing substantially above marginal\ncosts). In any of these cases, Boeing must look at its costs holistically, and cannot\nafford to be uniquely guided by marginal cost considerations.2730\n9.53. In the original proceeding, the Appellate Body provided the following description of the\neconomics of LCA pricing, based on findings made by the panel and matters of common ground\nbetween the parties:\nThe LCA market is a duopoly. Airbus and Boeing each holds a significant share of the\nmarket and possesses a d egree of market power. Each manufacturer's decision\nregarding the supply and pricing of its products has the ability to influence the pricing\nof the other and, more generally, the market price.2731\n…\nLCA production involves substantial upfront development co sts over a period of\nseveral years, with a return over a considerably longer period – 18 years, on average.\nLCA production is generally characterized by steep learning curves. The production\ncosts of initial units of a new LCA model are much higher than the production costs of\nsubsequent units once the manufacturer has begun to realize learning curve\nefficiencies. Because such efficiencies are factored into an LCA manufacturer's\nprojected costs at the time of the launch of the new aircraft programme ,\nmanufacturers price initial units of LCA as though they were already at the bottom of\nthe learning curve. At the time of launch, the manufacturer sets pricing targets for the\nnew aircraft that, over its projected life, must exceed the manufacturer's fully loaded\naverage production costs by an amount sufficient to justify the investment.2732\n9.54. An empirical study of the commercial aircraft industry submitted by the European Union in\nthis proceeding indicates that production costs change drastically over time due to lea rning curve\nefficiencies, while prices are quite \"flat\" for all products, suggesting that mark -ups move to offset\nthe movements in costs.2733\n\n2727 European Union's comments on the United States' response to Panel question No. 158,\nparas. 100-105. The European Union refers to economic literature indicating that prices in dynamic games are\ntypically set in a way that departs from short-run profit maximization because firms must account for the\nimpact of their current actions or omissions upon their future activity and profits. (European Union's comments\non the United States' response to Panel question No. 158, para. 106 fn 187; and C.L. Benkard, \"A Dynamic\nAnalysis of the Market for Wide-Bodied Commercial Aircraft\", Review of Economic Studies, Vol. 71 (2004),\n(Exhibit EU-1697), pp. 581-611).\n2728 European Union's comments on the United States' response to Panel question No. 158, para. 109.\n2729 European Union's comments on the United States' response to Panel question No. 158, para. 121.\n2730 European Union's comments on the United States' response to Panel question No. 158, para. 122.\n(fn omitted)\n2731 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 903. (fns omitted)\n2732 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 905. (fns omitted)\n2733 C.L. Benkard, \"A Dynamic Analysis of the Market for Wide-Bodied Commercial Aircraft\", Review of\nEconomic Studies, Vol. 71 (2004), (Exhibit EU-1697), p. 585.\n\n9.55. There is also evidence in this proceeding regarding the Boeing 787 programme which\nillustrates how the profitability of an LCA programme depends on the LCA manufacturer being able\nto move down the learning curve and deliver subsequent units of LCA at a profit level that enables\nit to recoup deferred production costs and ensure that, over the long -term, the programme is\nsufficiently profitable to have justified the investment. In October 2015, Boeing was reported to\nhave accumulated some USD 32 billion in deferred production costs related to the 787 programme,\nwhich it expected to recoup over the following six years by del ivering another 900 aircraft at an\naverage profit of more than USD 35 million per plane. 2734 Its deliveries in the second quarter of\n2015 were estimated to represent a loss of approximately USD 25 million per aircraft. 2735 The\naccumulated deferred costs for the 787 programme are projected to peak at USD 33 billion in late\n2016, after which they are expected to decline, driving the per -unit costs of the aircraft down. 2736\nThe accumulated deferred losses do not include Boeing's original investment to develop the 787,\nwhich has been estimated by analysts at an additional USD 20 billion or more. 2737 According to\nindustry analysts, Boeing has been able to continue producing the 787 because of its \"cash cow\"\nprogrammes, i.e. the 737 and 777 programmes which, as mature program mes, have \"produced\ncash like mad\" .2738 Indeed, it seems that certain aircraft programmes are \"significant sources of\ncash\" for both Airbus and Boeing.2739\n9.56. Finally, there is HSBI evidence before the Panel which suggests that LCA manufacturers\nforecast costs and revenues for LCA programmes based on periodically revised cost, sales and\ndelivery expectations, in order to ensure that prices in individual sales and the programmes as a\nwhole remain profitable.2740\n9.2.3 Standard of causation and aggregation of subsidies\n9.57. We recall that, owing to the way that the European Union has chosen to demonstrate that\nthe United States has failed to comply with the DSB recommendations and rulings, in the sense of\nfailing to take appropriate steps to remove the adverse effects, the Panel is effectively evaluating a\nnew serious prejudi ce case under Article s 5 and 6.3 of the SCM Agreement . In other words, the\nPanel is evaluating whether the European Union has demonstrated that, after the end of the\nimplementation period, the subsidies that th e United States has failed to withdraw, within the\nmeaning of Article 7.8, are causing serious prejudice, within the meaning of Articles 5(c) and 6.3\nof the SCM Agreement.2741\n9.58. With this in mind, we set forth our understanding of the requisite causal link between the\nsubsidies and the serious prejudice phenomena in Article 6.3, pursuant to Articles 5(c) and 6.3 of\nthe SCM Agreement.\n\n2734 One analyst has calculated that Boeing would in fact need to sell the 787s it delivers after 2020 at a\nprofit of USD 50 million (representing a margin of more than 30%) in order for the overall programme to\nreturn a \"low single digit\" profit. (D. Gates, \"Will 787 program ever show an overall profit? Analysts grow more\nsceptical\", The Seattle Times, 17 October 2015, (Exhibit EU-1705), p. 6).\n2735 D. Gates, \"Will 787 program ever show an overall profit? Analysts grow more sceptical\", The Seattle\nTimes, 17 October 2015, (Exhibit EU-1705). Indeed, this article refers to the views of several industry analysts\nthat Boeing's accumulated deferred losses on the 787 programme are now so large that it will not be possible\nto avoid declaring a reach-forward loss, estimated by one analyst to be in the range of USD 5 billion.\n2736 Boeing expects the model mix of 787s to shift to higher-priced 787-9s and 787-10s, which cost only\n5 to 10% more than the original 787-8 but will represent 20 to 40% more revenue. (D. Gates, \"Will 787\nprogram ever show an overall profit? Analysts grow more sceptical\", The Seattle Times, 17 October 2015,\n(Exhibit EU-1705), p. 8).\n2737 D. Gates, \"Will 787 program ever show an overall profit? Analysts grow more sceptical\", The Seattle\nTimes, 17 October 2015, (Exhibit EU-1705), p. 6.\n2738 D. Gates, \"Will 787 program ever show an overall profit? Analysts grow more sceptical\", The Seattle\nTimes, 17 October 2015, (Exhibit EU-1705), p. 11. According to one industry analyst: \"It's an extraordinarily\nstrong Boeing Co. that has coped with the disaster that is the 787 without running out of cash.\"\n2739 \"UPDATE 2 – Airbus debates new A320 output hike, suffers test glitch\", Reuters, 28 May 2015\n(Exhibit EU-1686), reporting that medium-haul planes are \"significant sources of cash for both Airbus and\nBoeing\" and describing the A330 programme as \"another cash cow\" for Airbus.\n2740 See European Union's response to Panel question No. 169, fn 729.\n2741 See Section 6 above. See however, the European Union's \"parallel\" argument with respect to its\nserious prejudice allegations concerning wide-body, twin-aisle LCA, discussed in Section 9.3.3, which seems to\nbe based on a different theory of what it means to remove the adverse effects for purposes of Article 7.8 of the\nSCM Agreement; namely, that the adverse effects of the pre-2007 aeronautics R&D subsidies found to exist in\nthe original 2004-2006 reference period (in the form of certain kinds of serious prejudice) continue into the\npost-implementation period.\n\n9.59. The Appellate Body has consistently articulated the causal link required as \"a genuine and\nsubstantial relationship of cause and effect\".2742 The subsidies must contribute, in a \"genuine\" and\n\"substantial\" way, to producing or bri nging about one or more of the effects , or market\nphenomena, identified in Article 6.3. The genuine nature of the causal link requires a complaining\nparty to show that the nexus between cause and effect is \"real\" or \"true\" . The substantial\ncomponent of the causal relationship concerns the relative importance of the causal agent (i.e. the\nsubsidies at issue) in bringing about the adverse effects in question.2743\n9.60. One example of a situation in which the nexus between cause and effect was not sufficiently\nreal or true to justify a finding that the subsidy in question was a genuine cause of the Article 6.3\nmarket phenomena is provided by the Appellate Body in EC and ce rtain member States – Large\nCivil Aircraft. In that case, the Appellate Body found that the panel's generalized finding that the\nR&TD subsidies enabled Airbus to develop features and aspects of its aircraft faster than would\notherwise have been possible wa s insufficient to justify \"cumulating\" the effects of the R&TD\nsubsidies with the \"product effects\" of the launch aid/member State financing subsidies in enabling\nAirbus to launch particular models. Rather, in order to establish the requisite genuine causal link,\nthe panel should have made specific findings that technology or production processes funded by\nthe R&TD subsidies contributed to Airbus' ability to launch and bring to market particular models of\nLCA.2744 Another example is the four subsidies granted to Boeing in connection with the relocation\nof its corporate headquarters to the State of Illinois, which the European Communities in the\noriginal proceeding had argued may reasonably be deemed to benefit all of the company or the\nbusiness unit's products. The Appellate Body found that there was no genuine causal link between\nthese subsidies and the relevant market effects in the 100 -200 seat LCA product market because\nthese subsidies were not shown to have \"meaningfully contributed\" to Boeing's lowering of prices\nfor the 737NG.2745\n9.61. The Appellate Body has acknowledged that panels examining whether the causal\nrelationship between the subsidies at issue and the market phenomena ident ified in Article 6.3\nmeets the genuine and substantial standard may often be conf ronted with multiple factors that\nmay have contributed, to varying degrees, to the relevant market phenomena. Panels must seek\nto understand the interactions between the subsidies at issue and the various other factors, and\nmake an assessment of their connections to bringing about the relevant effects.2746 A subsidy need\nnot be the sole cause, or only substantial cause, of an effect in or der for it to be found to be a\ngenuine and substantial cause. Indeed, a subsidy may be found to be a genuine and substantial\ncause notwithstanding the existence of other factors that contribute to producing the relevant\nmarket phenomena if the contribution of the subsidy, in light of a proper consideration of all other\ncontributing factors and their effects, rises to that of ge nuine and substantial.2747 This assessment\nof whether subsidies are a genuine and substantial cause of any of the market phenomena\nidentified in Article 6.3 is a fact -intensive exercise and potentially there will be considerable\ndifferences in the ways complaining parties choose to demonstrate the links between the subsidies\nat issue and the effects, and in the nature of supporting evidence, in different cases.2748\n9.62. Related to the question of the causation standard applied by the Panel is the issue of how\nthe various different subsidies should be grouped together for purposes of assessing their effects.\nIn the original proceeding, t he Appellate Body addressed the permissible approaches that panels\nmay take to collectively assessing the effects of multiple subsidies. It said that the first involves an\nex ante decision to undertake a single analysis of the effects of multiple subsidies where the\nstructure, design , and operation of those subsidies are similar, and thereby to assess in an\nintegrated causation analysis t he collective effects of such subsidy measures ( so-called\n\"aggregation\" of subsidies).2749 The second involves an examination, taken after a panel has found\nthat at least one subsidy (or aggregated grouping of subsidies) has caused adverse effects, as to\nwhether the effects of other subsidies (or agg regated grouping of subsidies) complement and\n\n2742 Appellate Body Reports, US – Upland Cotton, para. 438; US – Upland Cotton (Article 21.5 – Brazil),\npara. 374; EC and certain member States – Large Civil Aircraft, para. 1232; and US – Large Civil Aircraft (2nd\ncomplaint), para. 913.\n2743 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 913.\n2744 Appellate Body Report, EC and certain member States – Large Civil Aircraft, paras. 1404 and 1407.\n2745 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 1342.\n2746 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 914.\n2747 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 914.\n2748 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 915.\n2749 This approach was employed by the panel in US – Upland Cotton.\n\nsupplement those effects (so-called \"cumulation\" of subsidies).2750 The Appellate Body said that, in\nselecting an appropriate approach to collectively assessing the effects of multiple subsidies, panels\nare confined in two ways: First, by the need not to \"unduly segment\" by considering the effects of\neach subsidy on an individual basis only (such that no subsidy is a \"substantial \" cause of the\nrelevant adverse effects)2751; and second, by the need not to combine multiple measures in such a\nway as to absolve a complainant of its burden of proving that each challenged measure is a\n\"genuine\" cause of, or \"genuinely contributes to producing\", the market phenomena identified in\nArticle 6.3.2752\n9.63. In the original proceeding, the panel conducted an aggregated analysis of the aeronautics\nR&D subsidies in evaluating their effects on Boeing's development of technologies for the 787. The\nEuropean Union argues that the group of pre -2007 aeronautics R&D subsidies operates through a\ntechnology causal mechanism to affect Boeing's development of technolo gies for the 787 and its\nother new technology LCA (i.e. the 777X and 737 MAX) . The United States does not object to the\naggregation of the pre -2007 aeronautics R&D subsidies. We consider it is appropriate to evaluate\nthe effects of the pre-2007 aeronautics R&D subsidies on Boeing's product development behaviour\nas an aggregated group.2753\n9.64. The European Union considers that at their most basic level, and in light of the conditions of\ncompetition in the LCA markets, all of the post-2006 subsidies , except certain post -2006\naeronautics R&D subsidies, enable Boeing to lower the prices of its LCA in competitive sales\ncampaigns and can therefore be treated as one group for purposes of assessing their impact on\nBoeing's LCA prices.2754 However, the European Union also acknowledges minor differences in the\nway that various sub -groupings of the post -2006 subsidies operate. To account for those\ndifferences, and \"to follo w the taxonomy\" of the original proceeding, the European Union\nstructures its discussion of the effects of the post -2006 subsidies on Boeing's LCA prices by\ndividing the post-2006 subsidies into three aggregated groups:\na. A tied tax category of aggregated s ubsidies, comprising the Washington State B&O tax\nrate reduction and the City of Everett B&O tax rate reduction. 2755 The European Union\nargues that these tied tax subsidies are triggered by sales of each LCA to which they\nrelate and directly enable Boeing to lower its prices while maintaining the profitability of\nthe sale.2756\n\n2750 The \"cumulation\" approach was employed by the panel in EC and certain member States – Large\nCivil Aircraft. The Appellate Body explained that whether both, either or neither of aggregation and cumulation\nare appropriate in a particular case will be a function of the particular subsidy measures at issue and their\neffects on prices and sales in the relevant market, the manner in which a complainant presents its claims and\nthe way in which the panel decides to structure its causation analysis. (Appellate Body Report, US – Large Civil\nAircraft (2nd complaint), para. 1290). See also paras. 9.89, 9.93, 9.467, and 9.468 below.\n2751 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 1284.\n2752 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 1290.\n2753 As explained in Sections 9.3.2.1.4 and 9.4.2.2 below, the European Union argues that a relatively\nsmall number of individual post-2006 aeronautics R&D subsidies operate through a technology causal\nmechanism to contribute to Boeing's development of innovative technologies for its current LCA. In paras. 9.85\nand 9.86 below, we explain that we will aggregate these particular post-2006 aeronautics R&D subsidies with\nthe pre-2007 aeronautics R&D subsidies.\n2754 European Union's first written submission, paras. 955 and 1113, and fn 1929; second written\nsubmission, para. 941; and response to Panel question No. 43, paras. 279 and 280. At fn 352 to its response\nto Panel question No. 43, the European Union makes two sequential conditional alternative arguments that,\nshould the Panel disagree that certain post-2006 aeronautics R&D subsidies operate, at present, through a\ntechnology causal mechanism, alternatively, they operate through a price causal mechanism under so-called\n\"Category 2\", and should the Panel disagree with that argument, alternatively, they operate \"on a different\nbasis\", through a \"price effects\" causal pathway, as described for so-called \"Category 3\" subsidies.\n2755 The European Union also includes the FSC/ETI subsidies and the South Carolina Income Allocation\nand Apportionment Agreement within this category of tied tax subsidies, however, as we explain in\nSections 8.2.5 and 8.2.8.9, respectively, we find that the FSC/ETI subsidies have been withdrawn and that the\nEuropean Union has failed to establish that the Income Allocation and Apportionment Agreement involves a\nsubsidy.\n2756 See European Union's first written submission, paras. 1132-1154; and second written submission,\npara. 941. The European Union identifies the Boeing LCA to which each particular \"tied tax\" subsidy is \"linked\"\nat para. 1135 of its first written submission. It discusses the structure, operation and design of subsidies in this\ncategory, their magnitude, and the role of competitive conditions, all as part of demonstrating that the tied tax\n\nb. State and local cash flow subsidies, comprising all of the non -aeronautics R&D subsidies\nthat are not tied tax subsidies, aggregated into a single category. These subsidies are\nalleged to provide Boeing with additional operating cash flow because they are linked to\n(and lower) Boeing's costs of researching, developing or producing Boeing LCA.2757\nc. Aeronautics R&D subsidies (NASA, DOD, and FAA) which, in contrast to the pre -2007\naeronautics R&D subsidies, operate through a price causal mechanism, in that they are\nalleged to lower Boeing's costs of licensing intellectual property rights to LCA technology,\nand of developing that technology, thereby providing Boeing with additional cash which\nBoeing can and does use to lower its LCA prices.2758\n9.65. The United States objects that the European Union discusses the alleged price effects of the\npost-2006 subsidies on the basis of their aggregation into three distinct groups, without\nconducting the aggregation analysis on a model-specific basis. According to the United States, this\nis important because not all of the subsidies in an aggregated group are even alleged to impact the\npricing of the 787, 737 MAX , and 737NG. 2759 The United States therefore disag rees with th e\nEuropean Union's aggregations of the tied tax and state and local cash flow subsidies on the basis\nthat these subsidies are not all alleged to impact the same aircraft and the European Union has\nfailed to describe the design, structure or operation of any of them in such a way as would warrant\ntheir aggregation.2760\n9.66. In the next three subsections, we determine whether it is appropriate to aggregate the\npost-2006 subsidies into three categories for purposes of conducting an integrated analysis of the\neffects of those subsidies within each aggregated group. Then in Section 9.2.3.4 we additionally\nconsider whether it is appropriate to further aggregate any of these groups with each other or with\nthe pre-2007 aeronautics R&D subsidies, which are alleged to operate through a technology causal\nmechanism, rather than a price causal mechanism. We summa rize our conclusions in\nSection 9.2.3.5.\n9.2.3.1 Aggregation of the tied tax subsidies\n9.67. In the State of Washington, B&O tax is levied on the gross proceeds of sale, gross incomes\nof a business , or the value of products. The City of Everett B&O tax is a tax on gross revenues\nwhich, with respect to manufacturing, are generally treated as the value of products\nmanufactured.2761 The Washington State and City of Everett B&O tax rate reductions reduce the\nB&O tax rates applicable to revenues earned from the sale of LCA attributable to Washington State\nor the City of Everett, as the case may be, lowering Boeing's taxes and thereby increasing Boeing's\nafter-tax profits.2762\n\nsubsidies impact Boeing's LCA pricing and thereby constitute a genuine and substantial cause of present\nadverse effects.\n2757 See European Union's first written submission, paras. 1155-1179; and second written submission,\npara. 941. The European Union identifies the Boeing LCA to which the subsidies in this category are \"linked\" at\nparas. 1159-1161 of its first written submission. It discusses the structure, operation and design of this\ncategory of subsidies, their magnitude, and the role of competitive conditions, all as part of demonstrating that\nthe state and local cash flow subsidies impact Boeing's LCA pricing and thereby \"cause or contribute to causing,\nalong with the other subsidies\" present adverse effects.\n2758 European Union's first written submission, paras. 1120 and 1180-1190. The European Union alleges\nat para. 1184 of its first written submission that the genuine causal link relates to the fact that the subsidies\nare in the form of support for R&D relating to aeronautics R&D applied or to be applied on Boeing LCA (i.e. the\nlinks to the technologies on the particular Boeing LCA). It discusses the structure, operation, and design of this\ncategory of subsidies, their magnitude, and the role of competitive conditions, all as part of demonstrating that\nthis category of subsidies result in lower Boeing LCA pricing and \"thereby cause, or contribute to causing, along\nwith the other subsidies, present adverse effects\". (European Union's first written submission, para. 1191).\n2759 United States' first written submission, para. 713.\n2760 We address the United States' objection concerning the aggregation of the tied tax subsidies into a\nsingle category for purposes of conducting an integrated analysis of their effects at para. 9.73 and concerning\nthe aggregation of the state and local cash flow subsidies into a single category for purposes of conducting an\nintegrated analysis of their effects at paras. 9.80-9.82 of our evaluation below.\n2761 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1806.\n2762 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1806. The Washington State B&O tax\nrate reduction and the City of Everett B&O tax rate reduction are the same in nature and operation, the\npertinent difference being that the former reduces taxes levied at the state level in respect of state revenues\n\n9.68. The European Union describes the Washington State B&O tax rate reduction and the City of\nEverett B&O tax rate reduction as \"tied\" to the production and sale of Boeing LCA. This was also\nthe term used by the panel and th e Appellate Body in the original proceeding to describe these\nsubsidies.2763 It is the per -unit production or sale of LCA that gives rise to the receipt of the\nsubsidies. The receipt of the tied tax subsidies by Boeing therefore corresponds directly with per-\nunit sales of Boeing LCA. F luctuations in Boeing's total sales volumes affect the total amounts of\nthese subsidies but do not affect the calculus regarding the profitability of a particular sale. Such\nper-unit subsidies can be contrasted with the state and local cash flow subsidies and the post-2006\naeronautics R&D subsidies, which are \"untied\" in the sense that the amounts of those subsidies\nreceived by Boeing do not vary in direct proportion to the number of aircraft produced or sold.2764\n9.69. It is important to note that the concept of \"tied\" used to describe the per -unit subsidies in\nthis proceeding is different from the concept of \"tied\" used in the context of determining the\nproducts over which subsidies provided to a company should be allocated in order to c alculate the\nlevel of countervailing duties that may be levied against those products. Articles 19.4 of the SCM\nAgreement and VI:3 of the GATT 1994 require Members to accurately determine the per -unit\nsubsidy amount found to exist with respect to the produ ct under investigation and to not impose\ncountervailing duties exceeding that amount. This may involve the identification of amounts of a\nsubsidy that a company has received in respect of the production or sale of a particular product in\nsituations where a company manufactures and sells a variety of products not covered by the\ninvestigation and which are made in the same production line.2765 Where a subsidy is considered to\nbe tied to the production or sale of a particular product, an investigating authority may allocate the\nsubsidy amounts received to those specific products, and thereby calculate the specific per -unit\nrate of subsidization for the product concerned. By cont rast, where the subsidy is not tied to any\nparticular product, it may be presumed that the company may allocate the subsidy across its\nentire production.2766\n9.70. The Appellate Body in US – Washing Machines recently discussed considerations relevant to\na determination of whether a subsidy is \"tied\" to a product in this different context of allocati ng\nsubsidies across the products of a company when calculating a per -unit rate of subsidization in\naccordance with Articles 19.4 of the SCM Agreement and Article VI:3 of the GATT 1994.2767\n9.71. In contrast, the tied tax subsidies at issue in this proceeding , as we ll as in the original\nproceeding, are \"tied\" in the sense that receipt of the subsidies is contingent on the production or\nsale of a particular product on a per -unit basis and this has relevance for the potential economic\n\nwhile the latter concerns municipal taxes in respect of municipal revenues. Boeing is subject to state B&O taxes\non revenues realized from all LCA it manufactures in Washington (i.e. 787, 777X, 737 MAX, and 737NG as well\nas the 767, 777, and 747). Accordingly, the European Union alleges that the Washington State B&O tax rate\nreduction applies to the 787, 777X, 737 MAX, and 737NG. Boeing is also subject to municipal B&O taxes on\nrevenues realized from all LCA manufactured at its facility in Everett, Washington (i.e. the 787 as well as the\n767, 777, 777X, and 747). Accordingly, the European Union argues that the City of Everett B&O tax rate\nreduction applies to the 787 and 777X. (European Union's second written submission, para. 1065). The\nEuropean Union requests the Panel to assess the effects of the tied tax subsidies on the prices for those Boeing\naircraft to which they apply. (European Union's second written submission, para. 934).\n2763 The Appellate Body has described this concept of a tied subsidy as being where the receipt of the\nsubsidy is contingent on the production or sale of a particular product on a per-unit basis. (Appellate Body\nReport, US – Large Civil Aircraft (2nd complaint), para. 1339).\n2764 Untied subsidies include so-called \"development subsidies\", such as R&D subsidies, which were\ndiscussed by Professor Luís Cabral in his report in the original proceeding. (See Panel Report, US – Large Civil\nAircraft (2nd complaint), appendix VII.F.2, para. 1).\n2765 Alternatively, a subsidy may be granted on a company basis rather than a product basis, and it may\nsimilarly be difficult to identify which portions were used by the company for manufacturing the product\nconcerned as opposed to other products.\n2766 The present proceeding does not require the Panel to allocate the subsidies in question over\nBoeing's products to arrive at a per-unit rate of subsidization and the imposition of countervailing duties\nconsistently with Articles 19.4 of the SCM Agreement and Article VI:3 of the GATT 1994. Rather, the Panel is\nrequired to assess how the receipt of the subsidies affected Boeing's commercial behaviour, in order to\ndetermine whether the effects of the subsidies are any of the market phenomena identified in Article 6.3 of the\nSCM Agreement.\n2767 See Appellate Body Report, US – Washing Machines, paras. 5.270-5.274. Notably, it did not refer to\nthe different sense in which it used the concept of \"tied\" in the Appellate Body Report in US – Large Civil\nAircraft (2nd complaint), i.e. as referring to situations where receipt of the subsidy was \"contingent on the\nproduction or sale of a particular product on a per-unit basis\". (Appellate Body Report, US – Large Civil Aircraft\n(2nd complaint), para. 1339). (emphasis added)\n\neffect of the receipt of the subsi dy on the actual pricing behaviour of the subsidy recipient . As the\nAppellate Body explained in the original proceeding:\nAll other things being equal , a firm provided with a subsidy that is tied to production\nor sale enjoys the ability to lower its price while nevertheless achieving the same\nprofit margin. In effect, the subsidy enhances the firm's ability to lower its prices in\norder to obtain a sale, notwithstanding that the outcome of any given sale, and the\nimportance of price to that outcome, will still be dictated by the prevailing competitive\nconditions, including the market power and the pricing strategies of the participants,\nin a particular market.2768\n9.72. In the original proceeding, both parties considered that, in light of the similarities in\nstructure and operation between the Washington State and City of Everett B&O tax rate\nreductions, it was appropriate for the panel to aggregate them and thereby conduct an integrated\nanalysis of their effects, along with the FSC/ETI subsidies, which were also tied to per-unit sales of\nLCA.2769 The panel therefore aggregated these subsidies and conducted an integrated analysis of\nthe effects.2770\n9.73. We consider that the particular nature and operation of these per -unit subsidies is such that\nit is appropriate to conduct an integrated analysis of their effects. We would add that, because the\nCity of Everett B&O tax rate reduction only impacts Boeing's revenues in respect of aircraft\nmanufactured in the City of Everett, it does not impact Boeing's reve nues in respect of the\n737 MAX or 737NG, which are not manufactured in Everett. Our consideration of the effects of the\ntied tax subsidies on Boeing's pricing of the 737 MAX and 737NG will therefore be confined to the\nWashington State B&O tax rate reduction.\n9.2.3.2 Aggregation of the state and local cash flow subsidies\n9.74. The European Union argues that the Panel may aggregate all of the subsidies that it\nidentifies within the category of state and local cash flow subsidies and conduct an integrated\nanalysis of their effects. This is because all of these subsidies allegedly operate to reduce certain of\nBoeing's fixed costs; namely, costs of researching, developing, selling, and producing LCA. 2771 The\nUnited States objects that the European Union only states that each such subsidy, regardless of i ts\nform, increases Boeing's operating cash flow, and that the \"majority\" consist of \"tax breaks\" while\nsome others involve the \"provision of goods and services\". 2772 According to the United States, the\nonly real similarity between these \"miscellaneous\" subsid ies is that they could not be placed into\nthe other two categories. 2773 The United States argues that, under the European Union's theory,\nliterally all subsidies that generally share a causal pathway and are not tied to a product would be\naggregated. The absence of a similarity, in the sense of a \"tie\" to the sale of the same product,\ncannot suffice as the only common feature to aggregate a group of subsidies. Accordingly, the\nEuropean Union has failed to show that any of the state and local cash flow subsidie s should be\naggregated with any other alleged subsidy.2774\n9.75. The state and local cash flow subsidies which the European Union considers should be\naggregated for purposes of conducting an integrated analysis of their effects , and which we find\nhave not been with drawn, within the meaning of Article 7.8, comprise the Washington State tax\nmeasures enacted under HB 2294 (other than the Washington State B&O tax rate reduction which\nis a tied tax subsidy as explained in Section 9.2.3.1 above), and the South Carolina subsidies.\n9.76. The relevant Washington State tax subs idies involve two B&O tax credits and one sales and\nuse tax exemption. The B&O tax credits are: (a) for certain preproduction development\nexpenditures on aeronautics -related resea rch, design, and engineering activities, as well as for\ncertain expenditures on design and preproduction development, computer software and hardware\n\n2768 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 1260. (emphasis added)\n2769 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1805. See also Appellate Body\nReport, US – Large Civil Aircraft (2nd complaint), para. 1296.\n2770 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), fn 2618.\n2771 European Union's second written submission, para. 935.\n2772 United States' first written submission, para. 753.\n2773 United States' first written submission, paras. 754-758.\n2774 United States' first written submission, para. 759.\n\nfor the digital design, and development of commercial airplanes2775; and (b) for property taxes and\nleasehold excise taxes related to new construction. 2776 These tax credits are applied against\nBoeing's total B&O tax liability, which accrues in connection with the manufacture and sale of all\nBoeing LCA produced in the State of Washington.2777 The third Washington State tax subsidy is the\nsales and use tax exemptions for computer software, hardware, and peripherals when these items\nare purchased for or used in the development of commercial airplanes or their components.2778\n9.77. The South Carolina subsidies involve: (a) a property tax exemption in respect of Boeing's\nLCFs; (b) sales and use tax exemptions in respect of aircraft fuel, computer equipment , and\nconstruction materials; and (c) the provision of USD 50 million by the South Carolina authorities\nthrough the issuance of air hub bonds to partially offset the costs of constructing certain facilities\nand infrastructure. These subsidies were among a number of incentives provided by the State of\nSouth Carolina to induce Boeing to locate its new 787 production facilities in South Carolina. The\nEuropean Union argues that these subsidies are \"linked\" to production of the 787 at facilities in\nSouth Carolina.2779\n9.78. In general terms, the state and local cash flow subsidies involve incentives provided by\nstate and mun icipal authorities relate d to Boeing's LCA production activities in var ious\njurisdictions. Unlike the tied tax subsidies, Boeing's receipt of the state and local cash flow\nsubsidies described above is not contingent upon per -unit production or sale of LCA. The\nEuropean Union asser ts that the state and local cash flow subsidies operate to reduce Boeing's\noverall costs. However, there is no evidence that the savings represented by these subsidies were\nfactored into the programme accounting for any of the Boei ng LCA programmes to actu ally offset\nor reduce any LCA programme costs. Nor is there evidence that Boeing otherwise applies the\nadditional cash represented by these subsidies to its specific LCA programmes.\n9.79. The European Union provided a table setting forth its assertions regarding the \"applicability\"\nof each post-2006 subsidy to particular LCA families. We have adapted that table to cover only the\nmeasures that we have found to be specific subsidies granted or maintained in the p ost-2006\nperiod. This table is as follows:\n\n2775 The European Union argues that the Washington State B&O tax credits for pre-production\ndevelopment are \"linked most closely\" to Boeing aircraft that are currently in pre-production, which would\nmean the 737 MAX, 787-10, and 777X. (European Union's first written submission, para. 1160; second written\nsubmission, para. 1066).\n2776 The European Union argues that the B&O tax credits for property taxes and leasehold excise taxes\nrelate to sites for which Boeing has made the largest investments in land and facilities (and in the case of the\nleasehold excise tax credit, the Dreamlifter Operations Center), and thus are \"most closely linked\" to sites\nproducing the 737NG, 737 MAX, and 787. (European Union's first written submission, para. 1160, second\nwritten submission, para. 1066).\n2777 The B&O tax is Washington's major business tax. It is a tax on gross receipts of all businesses\noperating in Washington, as a measure of the privilege of engaging in business. \"Gross receipts\" refers to the\ngross proceeds of sales, the gross income of a business, or the value of products, depending on which is\napplicable. Taxpayers are taxed based on the activities in which they engage in the State of Washington, such\nas manufacturing, wholesaling, retailing or the provision of services. (See Panel Report, US – Large Civil\nAircraft (2nd complaint), para. 7.47).\n2778 The European Union argues that the sales and use tax exemptions for computer software, hardware,\nand peripherals relate to the facilities where Boeing has made the largest investments in computer equipment,\nmeaning that they are \"most closely linked\" to the 737NG, 737 MAX, and 787. (European Union's first written\n2779 European Union's first written submission, para. 1161; second written submission, para. 1066.\n\nTable 8: Alleged \"applicability\" of various post-2006 subsidies to Boeing aircraft\nfamilies2780\nAggregated\nSubsidy group Subsidy 787 777X 737\nMAX\n737\nNG\nTax subsidies\ntied to sales\nWashington State B&O Tax Rate Reduction X X X X\nCity of Everett B&O Tax Rate Reduction X X\nState and\nLocal Cash\nFlow\nSubsidies\nWashington State B&O Tax Credits for\nPreproduction/Aerospace\nProduct Development\nX X\nWashington State B&O Tax Credit for Property Taxes\nand Leasehold Excise Taxes X X X X\nWashington State Sales and Use Tax Exemptions X X X X\nSouth Carolina Project Gemini Facilities &\nInfrastructure X\nSouth Carolina Project Gemini – Sales and Use Tax\nExemptions X\nSouth Carolina Project Gemini – Large Cargo Freighter\nProperty Tax Exemption X\nPost-2006\nR&D Subsidies\nNASA aeronautics R&D subsidies X X X X\nFAA aeronautics R&D subsidy X X X X\nDOD aeronautics R&D subsidies X X X X\n\n9.80. We have some difficulty reconciling the European Union's argument that these subsidies\nrepresent the func tional equivalent of additional cash, on the one hand, with its argument that\nthese subsidies should be \"linked\" to certain LCA because they allegedly reduce the costs of\nresearching, developing, selling, and producing those LCA, on the other. If the subsidies operate to\nfree up additional cash for Boeing, albeit in some way connected to LCA production, they should in\nour view be treated as the equivalent of additional cash . Th is is the way that the\nEuropean Communities in the original proceeding arg ued tha t a similar grouping of untied\nsubsidies (including the Washington State tax measures other than the Washington State B&O tax\nrate reduction) should be analysed.2781\n9.81. Moreover, the European Union does no t explain how amounts of the state and local cash\nflow subsidies that are alleged to be \"linked\" to more than one Boeing family LCA (e.g. the\nWashington state and local cash flow subsidies and the post-2006 aeronautics R&D subsidies)\nshould be apportioned across the various LCA families. In any case, a division of amounts of the\nsame untied subsidy across various Boeing LCA families would be at odds with the contention that\nthe subsidies represent the functional equivalent of additional untied cash.\n9.82. We do not consider that it is appropriate to allocate, from wi thin the category of subsidies\nthat the European Union identifies as state and local cash flow subsidies, certain amounts of\nparticular subsidies to certain Boeing LCA programmes based on the ir asserted \"links\" to those\nprogrammes. These subsidies are not tied to production of Boeing LCA on a per -unit basis, and at\nmost, operate in an indirect way t o affect Boeing's overall costs. In our view, t hey represent the\n\n2780 Total Financial Contribution (2007-2014) and Allocation to Boeing Aircraft Programmes, (Exhibit\nEU-1450). See also European Union's second written submission, para. 1072; first written submission,\nparas. 1135 and 1159-1161.\n2781 See Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1609. Indeed, the\nEuropean Union's argument that each of the state and local cash flow subsidies is \"linked\" to production of one\nor more specific families of Boeing LCA suggests that these subsidies should be divided into four aggregated\ncategories, representing the respective \"links\" between the subsidy in question and the production of the 787,\n777X, 737NG, and 737 MAX programmes. To recall, the United States objects to the European Union's\nproposed aggregation of the state and local cash flow subsidies into a single category, inter alia, on the basis\nthat not all of these subsidies are alleged to impact the same aircraft. (United States' first written submission,\npara. 713).\n\nfunctional equivalent of additional cash to Boeing. We therefore consider that it is appropriate to\naggregate them into one category for purposes of conducting an integrated analysis of their\neffects.\n9.2.3.3 Aggregation of the post-2006 aeronautics R&D subsidies\n9.83. The European Union argues that the technologies being developed with the assistance of the\nvast majority of the post -2006 aeronautics R&D subsidies (in contrast to the technologies\ndeveloped with the assistance of the pre -2007 aeronautics R&D subsidies), have not yet matured\nto the point at which they could be applied to Boeing aircraft that are currently being marketed.2782\nAccording to the European Union, these aeronautics R&D subsidies \"at present\" operate through a\nprice causal mechanism .2783 The European Union argues that the present effect of the post -2006\naeronautics R&D subsidies is to give Boeing access to and use of research results that enable it to\ncontinue maturing the technologies, without having to pay license fees for such access and use,\nthereby lowering Boeing's LCA costs in relation to currently marketed LCA.\n9.84. The European Union had origin ally argued, in its first written submission, th at the Panel\nshould conduct an aggregated analysis of \"the aeronautics R&D subsidies\", which it alleged to\ncause adverse effects \"through both technology and price causal mechanisms\". 2784 The\nUnited States objected to the aggregation of the FAA aeronautics R&D subsid y with the NASA and\nDOD aeronautics R&D subsidies. It also objected to the aggregation of the aeronautics R&D\nsubsidies for purposes of analysing their effects through a price causal mechanism because the\noriginal panel had concluded that the aeronautics R&D subsidies did not operate through a price\ncausal mechanism. 2785 As the European Union's arguments regarding the alleged effects of the\naeronautics R&D subsidies have developed throughout the course of the proceeding, however, it\nhas em erged that the European Union i s alleging only that (except as described below) the\npost-2006 aeronautics R&D subsidies should be analysed as operating through a price causal\nmechanism, and accordingly that only the post -2006 aeron autics R&D subsidies should be\naggregated for this purpose. 2786 With this clarification of the European Union's argument\nconcerning the subset of aeronautics R&D subsidies that should properly be aggregated for\npurposes of assessing their effects through a price causal mechanism, it would seem that the latter\nobjection of the United States is moot.2787\n9.85. The European Union's position regarding the FAA aeronautics R&D subsid y requires\nadditional explanation. The European Union argues that the flight test funding under the FAA\naeronautics R&D subsid y operates through a technology causal mechanism, while the non -flight\ntest funding under that subsidy operates through a price causal mechanism. 2788 However, it has\nalso requested the Panel to analyse the flight te st funding aspect of the FAA aeronautics R&D\nsubsidy as operating through a price causal mechanism if the Panel decides to reject its technology\neffects arguments regarding this aspect of the FAA aeronautics R&D subsid y.2789 We consider that\nit is appropriate to aggregate the non -flight test funding under the FAA aeronautics R&D subsid y\nwith the post-2006 NASA and DOD aeronautics R&D subsidies, owing to the fact that this aspect of\n\n2782 According to the European Union, the inability to \"link\" the majority of the post-2006 aeronautics\nR&D subsidies to Boeing LCA arises from the nature of these subsidies as funding early-stage R&D intended to\ncreate technologies that will not appear on aircraft for years or even decades. (European Union's response to\nPanel question No. 158, para. 72). The post-2006 aeronautics R&D subsidies are therefore \"similar in nature\"\nto the pre-2007 aeronautics R&D subsidies. (European Union's response to Panel question No. 43, para. 280).\n2783 European Union's response to Panel question No. 43, para. 280.\n2784 European Union's first written submission, para. 956.\n2785 United States' first written submission, para. 752.\n2786 European Union's second written submission, para. 933; opening statement at the meeting with the\n2787 In other words, we do not understand the United States to object to the aggregation of the\npost-2006 aeronautics R&D subsidies for purposes of examining their effects through a price causal\nmechanism, provided the European Union does not include in that aggregated group any aeronautics R&D\nsubsidies that are alleged to operate through a technology causal mechanism.\n2788 See Allocation of Post-2006 R&D Subsidies through Technology and Price Causal Mechanisms,\n(Exhibit EU-1265). See also fn 2753 above.\n2789 European Union's response to Panel question No. 43, fn 352.\n\nthe FAA aeronautics R&D subsid y is alleged to operate through a price causal me chanism in the\nsame way as the majority of post-2006 NASA and DOD aeronautics R&D subsidies.2790\n9.86. Accordingly, in conducting our assessment of the effects of the post -2006 aeronautics R&D\nsubsidies through a price causal mechanism, we will aggregate the post -2006 NASA and DOD\naeronautics R&D subsidies with the non -flight test funding portion of the FAA aeronautics R&D\nsubsidy.\n9.2.3.4 Whether any of the aggregated groupings of subsidies should be further\naggregated with each other\n9.87. In the analysis of the nature and operation of the various subsidies at issue above, we have\nconcluded that it is appropriate for us to aggregate them into the following four general categories,\nand for the subsidies so aggregated, conduct an integrated analysis of their effects within each\ncategory:\na. Pre-2007 aeronautics R&D subsidies, which are alleged to operate through a technology\ncausal mechanism.\nb. Tied tax subsidies; i.e. the Washington State and City of Everett B&O tax rate\nreductions, both of which correspond directly with sales of Boe ing LCA, such that\nfluctuations in Boeing's total sales volumes do not affect the calculus regarding the\nprofitability of a particular sale.2791\nc. State and local cash flow subsidies; i.e. the remaining Washington State subsidies and\nthe South Carolina subsidi es, owing to their nature as subsidies that Boeing receives in\nconnection with its LCA production activities generally, which operate to provide Boeing\nwith the equivalent of additional cash flow.\nd. Aeronautics R&D subsidies alleged to operate through a price causal mechanism; i.e. the\npost-2006 NASA and DOD aeronautics R&D subsidies and the non -flight test funding\nportion of the FAA aeronautics R&D subsidy.\n9.88. Based on the foregoing analysis and concl usions, we do not consider it appropriate to\nfurther aggregate any of categories of subsidies with each other in analysing their effe cts. In order\nto provide additional clarity, we explain this aspect of our analysis further.2792\n9.89. The tied tax subsidies and the state and local cash flow subsidies, although both ultimately\noperating through a price causal mechanism , are sufficiently different in their nature that it is not\nappropriate to aggregate these subsidies and assess their effects in an integrated manner. 2793 This\ndoes not mean that the effects of these two distinc t categories of aggregated subsidies ca nnot\nsubsequently be cumulated, provided one category is found to be a genuine and substantial cause\nof adverse effects in the post-implementation period, and the other is a genuine cause, the effects\nof which \"comple ment and supplement\" those of the first category. We addre ss this later in our\nanalysis.2794\n9.90. As to whether the Panel should aggregate the state and local cash flow subsidies with the\npost-2006 aeronautics R&D subsidies and conduct an integrated analysis of t heir effects, our\nreasons for declinin g to do so are as follows: The state and local cash flow subsidies are state\nlocation investment incentives that are provided in return for Boeing's location of its manufacturing\nfacilities in a particular place (and c onsequent investment in the local economy and creation of\nlocal employment opportunities). In very general terms, they are designed to offer Boeing a\nlower-cost manufacturing proposition for aircraft currently or soon to be in production than Boeing\n\n2790 In Section 9.3.2.1.4, we evaluate the effects of the flight test funding portion of the FAA aeronautics\nR&D subsidy, operating through a technology causal mechanism, on Boeing's development of technologies for\nits various new generation LCA.\n2791 We recall that the City of Everett B&O tax rate reduction does not apply to the 737NG and 737 MAX\nprogrammes, because only the 787 (and 777X) is produced in the City of Everett.\n2792 See Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 1299.\n2793 See Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 1326.\n2794 See paras. 9.468 and 9.469 below.\n\ncould presumably find by locating its production facilities elsewhere. The aeronautics R&D\nsubsidies are federal government measures that are designed to incentivize the U.S. aeronautics\nindustry to conduct R&D that industry would not otherwise consider it cost -efficient to undertake\nat that time, with a view to enhancing the speed at which industry is able to develop new\ntechnologies for application to future generations of LCA over an extended time horizon.\n9.91. The European Union argues that the aeronautics R&D su bsidies also enable Boeing to lower\nthe prices of the LCA that Boeing currently produces and markets, because Boeing can continue to\nmature the technologies it is researching without having to pay licence fees for the access to and\nuse of the intellectual property generated by the subsidized R&D. Regardless of whether we\nconsider that argument plausible or substanti ated, we note that the post-2006 aeronautics R&D\nsubsidies are connected in an even more indirect and speculative manner to production of any\nexisting LCA than the state and local cash flow subsidies. We therefore regard the nature and\noperation of the post -2006 aeronautics R&D subsidies, even assuming arguendo that they are\ntheoretically capable of being a nalysed in the way the European Union ass erts; i.e. as providing\nBoeing with access to and use of research results that enable it to continue maturing technologies\nfor the development of future LCA without having to pay licence fees for such access and use, as\nsufficiently distinct from the way in which the state and local cash flow subsidies are said to affect\nBoeing's LCA pricing. We therefore do not consider it appropriate to aggregate these two\ncategories of subsidies with each other and conduct an integrated analysis of their effects.\n9.92. We reach a similar conclusion regar ding the aggregation of the tied tax subsidies with the\npost-2006 aeronautics R&D subsidies, owing to the different nature of these two groupings of\nsubsidies, and the way they are alleged to operate to affect Boeing's LCA prices.\n9.93. For the sake of completeness, we also consider that it is not appropriate to aggregate the\npre-2007 aeronautics R&D subsidies with any of the other aggregated groupings of post -2006\nsubsidies. This is because the pre -2007 aeronautics R&D subsidies ar e alleged to operate through\na technology causal mechanism, which is significantly different from the price causal mechanism\nalleged in relation to the post -2006 subsidies. However, the fact that we do not consider it\nappropriate to aggregate the pre -2007 ae ronautics R&D subsidies with the post -2006 subsidies\nwhen analysing their effects does not mean that we will not consider, at a subsequent po int in the\nanalysis, whether the effects of the pre-2007 aeronautics R&D subsidies on Airbus' LCA sales and\nprices should be cumulated with those of any of the other subsidies at issue , provided we have\nestablished that one of those categories of subsidies is a genuine and substantial cause of those\neffects and the other is a genuine cause of those same effects.2795\n9.94. In re aching these conclusions, we have endeavoured to ensure that our analysis of the\neffects of the multiple subsidies in this proceeding is not unduly segmented or \"atomized\", and\nthat our decisions to aggregate certain subsidies in order to conduct an integr ated analysis of their\neffects enable us to determine that there is a \"genuine and substantial relationship of cause and\neffect\" between the subsidies and the alleged market phenomena in Article 6.3.2796\n9.2.3.5 Summary of conclusions regarding the aggregation of particular subsidies\n9.95. Based on the nature and operation of the U.S. subsidies before us, it is appropri ate to\naggregate the subsidies into the following categories and to conduct an integrated analysis of the\neffects of the subsidies within each of these categories:\na. Pre-2007 aeronautics R&D subsidies , which are alleged to operate through a technology\ncausal mechanism.\nb. A tied tax subsidies category, comprising the Washington State B&O tax rate reduction\nand the City of Everett B&O tax rate reduction.\nc. State and local cash flow subsidies, comprising all of the non -aeronautics R&D subsidies\nthat are not tied tax subsidies, aggregated into a single category.\n\n2795 We consider this approach consistent with the guidance in Appellate Body Report, US – Large Civil\nAircraft (2nd complaint), para. 1320.\n2796 See Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 1284.\n\nd. Post-2006 aeronautics R&D subsidies (NASA, DOD, and FAA) which, in contrast to the\npre-2007 aeronautics R& D subsidies, are alleged to operate th rough a price causal\nmechanism.\n9.2.4 The relevant time -period over which to assess whether the European Union has\ndemonstrated that the United States has failed to take appropriate steps to remove the\nadverse effects\n9.96. We recall that with respect to its claims under Articles 5 and 6.3 of the SCM Agreement in\nthe original proceeding, the European Communities requested the panel to assess the existence of\npresent adverse effects caused by the challenged subsidies over the period 2004-2006.2797\nAccordingly, the panel conducted its assessment of whether the effect of the subsidies at issue was\nserious prejudice within the 2004 to 2006 period. However, it explained that it would not limit the\ntemporal scope of the evidence that it cons idered relevant in undertaking that assessment, and\ntherefore, would take into account all of the relevant evidence submitted in the proceeding.2798\n9.97. In this proceeding, the Panel must determine wheth er the United States has taken\nappropriate step s to remove the adverse effects , within the meaning of Article 7.8 of the SCM\nAgreement. The European Union has chosen to discharge its burden of demonstrating the failure of\nthe United States to take such appropriate steps by purporting to show that variou s subsidies that\nhave not been withdrawn , within the meaning of Article 7.8 , are causing adverse effects after the\nend of the implementation period. The European Union argues that the Panel should assess\n\"whether the subsidies that the United States has failed to wi thdraw, and that it grants or\nmaintains after the end of the implementation period on 24 September 2012, cause present\nadverse effects after the end of that implementation period.\" 2799 In response to a question from\nthe Panel, the European Union further clari fied that the \"reference period\" for purposes of\nassessing whether any non -withdrawn subsidies \"presently\" cause adverse effects is the period\nsince the end of the implementation period, and not a period that begins immediately after the\nreference period f rom the original proceeding (i.e. 2004 t o 2006) or any date prior to\n24 September 2012.2800\n9.98. The evidence submitted by the European Union in its first written submission concerning the\nalleged non-withdrawal of the subsidies the subject of the DSB recommendati ons and rulings, and\nthe granting and maintaining of additional closely connected subsidies, covers the pre -2007\naeronautics R&D subsidies at issue in the original proceeding, as well as aeronautics R&D subsidies\nand other subsidies that have allegedly come into existence since the date of the panel req uest in\nthe original proceeding; i.e. subsidies alleged to exist since 2007. The evidence submitted by the\nEuropean Union in its first written submiss ion to substantiate its allegations of serious prejudice\nconcerns LCA sales campaigns between the relevant Boeing and Airbus aircraft that occurred\nbetween 2007 and 2012, as well as order, delivery and pricing data for the period 2007 to 2012.\n9.99. The general absence in the European Union's first written submission of direct evidence as\nto the existence of subsidies or of the market phenomena identified in Article 6.3 for the period\nafter 23 September 2012 is a consequence of the timing of the European Union's panel request\nand filing of its first written submission in relation to the expiration of the reasonable period of\ntime for the United States to comply with the DSB recommendations and rulings in the original\nproceeding. We briefly recount the relevant events.\n9.100. Under Article 7.9 of the SCM Agreement, the Unite d States had until 2 3 September 2012\nto comply with the DSB recommendations and rulings to \"take appropriate steps to remove the\nadverse effects or withdraw the subsidies\". 2801 On 23 September 2012, the United States notified\nthe European Union that the United States had taken a number of actions allegedly withdrawing\nthe subsidies or removing their adverse effects. 2802 The European Union requested consultations\n\n2797 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1677.\n2798 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1679.\n2799 European Union's first written submission, para. 832; response to Panel question No. 155, para. 52.\n2800 European Union's response to Panel question No. 155, para. 52 and fn 73.\n2801 Dispute Settlement Body, Minutes of the meeting held on 23 March 2012, WT/DSB/M/313\n(circulated 29 May 2012), para. 79.\n\nwith the United States on 25 September 2012.2803 Consultations were held on 10 October 2012,\nwith a view to reaching a mutually satisfactor y solution. The next day, on 11 October 2012, the\nEuropean Union requested the establishment of a panel in accordance with Articles 4.4 and 7.4 of\nthe SCM Agreement and Article 21.5 of the DSU. 2804 As a result of the Panel's pr eliminary rulings\nregarding information gathering un der Article 13 of the DSU on 26 November 2012, the Panel\nposed a number of questions to the U nited States in December 2012, based in large part upon\nquestions that had previously been prepared by the Euro pean Union in the context of its request\nthat the DSB initiate an Annex V procedure. 2805 Those questions generally sought information\nregarding the existence or continuation of various alleged subsidy programmes as well as\ninformation regarding Boeing's LCA o rders, deliveries, and pricing. The United States provided its\nresponses to the Panel's requests for information pursuant to Article 13 of the DSU in January,\nFebruary, and March of 2013.2806 The European Union filed its first and second written submissions\nin this proceeding on 28 March 2013 and 23 July 2013, respectively. The substantive meeting with\nthe parties was held on 29 to 31 October 2013.\n9.101. In sum, the short period of time that had elapsed since the end of the implementation\nperiod on 24 September 2012 and the European Union's initiation of the compliance proceeding\nthrough the request for the establishment of a panel (11 October 2012) and consequent filing of\nits first written submission (28 March 2013), necessarily meant that the information that the\nEuropean Union was able to present as to the existence or continuation of the challenged\nsubsidies, and the market phenomena in Article 6.3, for the period after 23 September 2012, was\nrelatively limited. It has also given rise to an issue concerning the European Union's allegations\nthat the U.S. subsidies benefiting the 777X cause adverse effects in the post -implementation\nperiod, because at the time of the expiration of the implementation period, as w ell as the time of\nthe European Union's panel request, the 777X had not yet been offered for sale.\n9.102. The 777X was formally launched on 17 November 2013, which is after the date of the\nEuropean Union's panel request and subsequent to the meeting of the Panel with the parties. 2807\nThe European Union had referred to the imminent launch of the 777X in its first written submission\nand argued that the adverse effects of the U.S. subsidies would be enhanced once that aircraft\nwas launched.2808 It also argued that the U.S. subsidies benefiting the 777X presently caused a\nthreat of significant lost sales and of threat of significant price suppression.2809\n9.103. In September 2015, the Panel requested the European Union to update the information on\nwhich it relies to demonstrate its claim of adverse effects to include 2013 and 2014, and to the\nextent possible, the elapsed portion of 2015.2810 In response, the European Union updated both its\nlost sales and displacement evidence to include the most recent data and developments since\n2013, as well as certain (but not all) pricing information u nderpinning its significant price\nsuppression arguments.2811 In this context, it submitted evidence concerning a number of sales\ncampaigns involving the 777X which the European Union alleges are evidence of significant lost\nsales of the A350XWB. The European Union argues that these sales demonstrate that the previous\n\n2803 European Union's request for consultations.\n2804 European Union's request for the establishment of a panel, para. 34.\n2805 The Panel's rulings regarding the applicability of the Annex V procedures to this compliance\nproceeding, and the request that the Panel seek information pursuant to its authority under Article 13 of the\nDSU by posing to the United States the questions that the European Union had prepared for submission under\nAnnex V of the SCM Agreement, are set forth in the Preliminary Ruling and Decision regarding Information-\nGathering under Article 13 of the DSU, dated 26 November 2012, in Annex E-1 to this Report.\n2806 United States' response to the Panel's request for information pursuant to Article 13 of the DSU,\ndated 25 January 2013, response to question Nos. 1-4, 11, 23, 24, and 30; response to the Panel's request for\ninformation pursuant to Article 13 of the DSU, dated 28 February 2013; and United States' communication in\nresponse to the Panel's request for information pursuant to Article 13 of the DSU, dated 22 March 2013\n(Exhibit USA-176).\n2807 Boeing Press Release, \"Boeing Launches 777X with Record-Breaking Orders and Commitments\",\n17 November 2013, (Exhibit EU-1299), p. 2.\n2808 European Union's first written submission, para. 1198.\n2809 European Union's first written submission, paras. 1555, 1318-1328, and 1555-1566; second written\nsubmission, paras. 1445-1452 and 1508-1515. The European Union's claims of impedance and displacement\n(including threat thereof) do not appear to involve the 777X. (See European Union's response to Panel question\nNo. 169, paras. 457-487).\n2810 Panel question No. 169, 15 September 2015.\n2811 European Union's response to Panel question Nos. 169 and 170.\n\nthreat of significant lost sales and the threat of significant price suppression have both now\nmanifested.2812\n9.104. The United States argues in its first written submi ssion that, because the 777X was not\nlaunched at the time of the European Union's panel request, alleged effects of subsidies to the\n777X could not contribute to a finding that there was non-compliance at the end of the compliance\nperiod, or that there were adverse effects as of the DSB's referral of the matter to the Panel.2813 In\nother words, the European Union must show that the alleged adverse effects existed at the time\nthe matter was referred to the Panel.2814\n9.105. The European Union responds that evidence coming into existence after the date of the\npanel request which demonstrates the adverse effects caused by the U.S. subsidies benefiting the\n777X is relevant to the Panel's assessment. It considers that the Panel is not precluded from\nfinding that the U.S. subsidies benefiting the 777X cause pre sent adverse effects merely because\nthe effects occurred after the date of the panel request. 2815 More generally, the European Union\nargues that the relevant time -period for the Panel's determination of wheth er any non-withdrawn\nsubsidies \"presently\" cause ad verse effects is the period after 2 3 September 2012 ( i.e. the\npost-implementation period ). In making that determination, the Panel should not limit the\ntemporal scope of the evidence that it considers relevant, and should take into account all relevant\nevidence submitted in this dispute. The European Union therefore purports to provide evidence of\n\"present adverse effects\", including relevant evidence from past time -periods, which it considers\n\"consistent with a longer -term counterfactual\".2816 Moreover, it ar gues that evidence of adverse\neffects prior to 24 September 2012 is \"relevant and probative\" as regards the Panel's assessment\nof present adverse effects where the United States has failed to remove any of the subsidies at\nissue, has granted new subsidies that are similar to its earlier subsidies, and the conditions of\ncompetition in which these subsidies cause present adverse effects have remained largely\nunchanged during the entire post-2007 period.2817\n9.106. We disagree with the United States to the extent that it maintains its objection to the\nPanel's consideration of adverse effects involving th e 777X on the basis that the 777X only came\ninto existence after the date of the European Union's panel request. The European Union's panel\nrequest identifies measures that existed at that time (including U.S. subsidies alleged to benefit\nthe 777X) which are alleged to be specific subsidies that have not been withdrawn as of the\nexpiration of the implementation period, and makes claims of adverse effects caused by those\nsubsidies in relation to the 777X in the post -implementation period. In determining whether the\nUnited States has taken appropriate step s to remove the adverse effects, within the meaning of\nArticle 7.8, the Panel should take into account developments subse quent to the date of the panel\nrequest to the extent that there is such evidence before it and that evidence is relevant to the\nquestion of whether compliance has been achieved.\n9.107. More generally, we consider that, consistent with the approach taken by the original panel,\nwe will not limit the temporal scope of the evidence that may be relevant to undertaking our\nassessment, and therefore will examine the entirety of the evidence submitted by the parties,\nincluding the most recent evidence, in light of the parties' arguments. However, we recognize that,\nin order for the European Union to make its case that the United States has failed to comply with\nArticle 7.8 of the SCM Agreement, it must establish the existence of adverse effects, in the form of\nserious prejudice within the meaning of Articles 5 (c) and 6.3 of the SCM Agreement, in the post -\nimplementation period, i.e. in the period after 23 September 2012. Accordingly, our conclusions as\nto whether the European Union has demonstrated that any or all of the U. S. subsidies that t he\nUnited States has failed to withdraw, within the meaning of Article 7.8, cause adverse effects, will\nfocus on serious prejudice data presented by the parties with respect to the post -implementation\n\n2812 European Union's response to Panel question No. 169, paras. 175, 179, 191, and 548. The\nEuropean Union also argues that options and purchases rights for additional 777Xs provided to customers in a\nnumber of sales campaigns in the 2013-2015 period constitute a further threat of significant lost sales.\n(European Union's response to Panel question No. 169, paras. 211 (Emirates 2013), 227 (Qatar Airways 2013),\nand 317 (Etihad Airways 2013)).\n2813 United States' first written submission, para. 699.\n2814 See also United States' response to Panel question No. 42, fn 190.\n2815 European Union's comments on the United States' response to Panel question No. 42,\nparas. 259-261.\n2816 European Union's first written submission, para. 834.\n2817 European Union's response to Panel question No. 155, para. 53.\n\nperiod, as it is only with respect t o the effects found to exist in th is period that the United States\nmay be found to have failed to comply with its obliga tion under Article 7.8 to take appropriate\nsteps to remove the adverse effects.\n9.108. We next evaluate, for the relevant groupings of competing Boeing and Airbus aircraft,\nwhether the European Union has demonstrated that the subsidies at issue are a genuine and\nsubstantial cause of serious prejudice to its interests, within the meaning of Articles 5(c) and 6.3,\nin the post-implementation period. We begin with an evaluation of the effects of the 787 and 777X\nwhich are alleged to adversely affect sales and prices of the A350XWB and A330.\n9.3 Whether subsidies benefiting the 787 and 777X cause serious prejudice to the\ninterests of the European Union, within the meaning of Articles 5(c) and 6.3, in respect\nof the A350XWB and A330 in the post-implementation period\n9.3.1 Introduction\n9.109. In this Section , we evaluate the European Union's case that the United States grants or\nmaintains subsidies to Boeing benefiting the 787 and 777X which cause present adverse effects, in\nthe form of certain kinds of serious prejudice to its interests, within the meaning of Articles 5(c)\nand 6.3, in respect of the A350XWB and A330 in the post-implementation period.\n9.110. As previously expl ained, the European Union for the most part presents its arguments as\nto how certain aeronautics R &D subsidies operate through a technology causal mechanism and\nhow the majority of post-2006 subsidies operate through a price causal mechanism on a horizontal\nbasis; i.e. based on the nature of the particular subsidy or subsidy groups at issue, rather than the\nparticular Boeing LCA said to be subsidized by the various subsidies in combination. 2818\nAccordingly, in Section VII.E of its first written submission, the European Union purports to\nestablish a \"genuine\" and \"substantial\" causal link between certain aeronautics R&D subsidies and\n\"present adverse effects through a technology effects causal mechanism\". 2819 In Section VII.F of\nits first written submission, the European Union purports to establish a \"genuine\" and \"substantial\"\ncausal link between the majority of the post -2006 subsidies and \"present adverse effects through\na price-based causal mechanism\".2820\n9.111. In Section VII.H of its first written submission, dealing w ith the effects of the subsidies\nbenefiting the 787 and 777X on the A350XWB and A330, the European Union presents its case\nthat the \"combined effects of: (i) certain of the US aeronautics R&D subsidies that improve the\nquality and accelerate the launch and availability of delivery positions of these Boeing LCA; and (ii)\nthe other US subsidies that enable lower Boeing prices, constitute a \"genuine and substantial \"\ncause of the adverse effects discussed below, and the corresponding harm to Boeing's sole\ncompetitor – Airbus.\"2821\n9.112. Owing to the conceptual and empirical differences underlying the European Union's main\ncase of post-implementation serious prejudice to its interests in respect of the A350XWB, and the\nparallel argument that the serious prejudice caused by the pre-2007 aeronautics R&D subsidies\nthat arose in 2004 -2006 in respect of the A330 and Original A350 continue s in the post -\n\n2818 See e.g. European Union's first written submission, section VII.E (Technology Causal Mechanism)\nand section VII.F (The U.S. Subsidies Cause Adverse Effects Through a Price Causal Mechanism), dealing in a\nhorizontal fashion with the arguments concerning the technology causal mechanism and price causal\nmechanism, compared to section VII.H (Effects of U.S. Subsidies Benefiting the 787 and 777X on the A330 and\nA350XWB), section VII.I (Effects of U.S. Subsidies Benefiting the 737 MAX on the A320neo), and section VII.J\n(Effects of the U.S. Subsidies Benefiting the 737NG on the A320ceo), dealing with the collective effects of all of\nthe subsidies benefiting the various Boeing aircraft on the competing Airbus aircraft.\n2819 See European Union's first written submission, para. 1205.\n2820 See European Union's first written submission, para. 1223.\n2821 European Union's first written submission, para. 1199. The European Union's main case as outlined\nin section VII.H of its first written submission is that the effects of: (a) certain aeronautics R&D subsidies which\nimprove the quality and accelerate the launch and delivery positions of the 787 and 777X LCA family aircraft\n(the so-called technology causal mechanism); and (b) the majority of the post-2006 subsidies which enable\nBoeing to lower its 787 and 777X prices (the so-called price causal mechanism), collectively, are a \"genuine\nand substantial\" cause of: significant lost sales (and threat of significant lost sales) of the A350XWB; significant\nprice suppression (and threat of significant price suppression) of the A350XWB; and impedance and threat of\nimpedance of the A350XWB in the U.S. market and a number of third country markets.\n\nimplementation period as present serious prejudice in respect of the A330 and A350XWB, we\nexamine the two lines of argument separately.\n9.113. First, i n Section 9.3.2, we address the European Union's main case : whether certain\nsubsidies granted or maintained by the United States after the end of the implementation period\nand benefiting the 787 and 777X cause serious prejudice to the interests of the European Union ,\nwithin the meaning of Articles 5(c) and 6.3 , with respect to the A350XWB in the\npost-implementation period. Second, i n Section 9.3.3, we address the European Union's par allel\nargument that the original serious prejudice to its interests caused by the pre-2007 aeronautics\nR&D subsidies that arose in 2004 -2006 in respect of the A330 and Original A350 continue s in the\npost-implementation period as serious prejudice to its in terests with respect to the A330 and\nA350XWB.\n9.3.2 The European Union's main case: Whether the pre -2007 aeronautics R&D\nsubsidies and certain post -2006 aeronautics R&D subsidies combined with the other\npost-2006 subsidies cause serious prejudice to the interes ts of the European Union,\nwithin the meaning of Articles 5(c) and 6.3, in respect of the A350XWB in the\npost-implementation period\n9.114. The European Union alleges that certain aeronautics R&D subsidies and the majority of the\npost-2006 subsidies , collectively, are a genuine and substantial cause of the following forms of\nserious prejudice with respect to the A350XWB in the post-implementation period:\na. Significant lost sales of the A350XWB , within the meaning of Article 6.3(c) of the SCM\nAgreement, and threat thereof.2822\nb. Impedance of imports of the A350XWB to the United States, within the meaning of\nArticle 6.3(a) of the SCM Agreement, and threat thereof.2823\nc. Impedance of exports of the A350XWB , within the meaning of Article 6.3(b) of the SCM\nAgreement, to the Chilean, Qatari, United Arab Emirates, Mexican, Ethiopian, and\n\n2822 As evidenced by the following LCA sales campaigns involving the 787 or 777X in competition with\nthe A350XWB occurring between 2007 and 2015: Qatar Airways 2007 and 2013 (European Union's first written\nsubmission, paras. 1410-1429; second written submission, paras. 1306-1320; and response to Panel question\nNo. 169, paras. 212-227, 452, and fn 861); British Airways 2007 and 2013 (European Union's first written\nsubmission, paras. 1430-1441; and second written submission, paras. 1289-1305 and 1321-1331); LAN\nAirlines 2007 (European Union's first written submission, paras. 1450-1462; second written submission,\nparas. 1343-1355; and response to Panel question No. 169, para. 452 and fn 861); ILFC 2007\n(European Union's first written submission, paras. 1463-1476; and second written submission, paras. 1356-\n1369); Virgin Atlantic Airways 2007 (European Union's first written submission, paras. 1477-1484; second\nwritten submission, paras. 1370-1378; and response to Panel question No. 169, para. 452 and fn 861); Etihad\nAirways 2008, 2011 and 2013 (European Union's first written submission, paras. 1485-1498; second written\nsubmission, paras. 1379-1395; and response to Panel question No. 169, paras. 294-317 and 325); United\nAirlines 2010, 2012, and 2013 (European Union's first written submission, paras. 1499-1511; second written\nsubmission, paras. 1260-1273 and 1396-1411; and response to Panel question No. 169, paras. 319-322); Air\nFrance-KLM 2011 (European Union's first written submission, paras. 1512-1531; second written submission,\nparas. 1412-1424; and response to Panel question No. 169, para. 452 and fn 861); Aeromexico 2012\n(European Union's first written submission, paras. 1532-1545; second written submission, paras. 1425-1434;\nand response to Panel question No. 169, para. 452 and fn 861); Singapore Airlines 2013 (European Union's\nsecond written submission, paras. 1274-1288); Emirates 2013 (European Union's response to Panel question\nNo. 169, paras. 193-211); Cathay Pacific 2013 (European Union's response to Panel question No. 169,\nparas. 228-247); Lufthansa 2013 (European Union's response to Panel question No. 169, paras. 248-274); All\nNippon Airlines 2014 and 2015 (European Union's response to Panel question No. 169, paras. 275-293, 323,\nand 324); and Ethiopian Airlines 2015 (European Union's response to Panel question No. 169, paras. 326 and\n327). More generally, see European Union's first written submission, paras. 1311 and 1407-1566; second\nwritten submission, paras. 866, 1159-1203, and 1256-1452; and response to Panel question Nos. 42,\nparas. 255 and 273, and 169, paras. 171-328 and 409-452.\n2823 As evidenced by the United Airlines 2010 sales campaign, alleged to be a significant lost sale of the\nA350XWB (European Union's first written submission, paras. 1586 and 1587; second written submission,\nparas. 1532-1536; and response to Panel question No. 169, paras. 459-461).\n\nJapanese third country markets 2824, and to the Chinese and Indian third country\nmarkets, and threat thereof,.2825\nd. Significant price suppression of the A350XWB, within the meaning of Article 6.3(c) of the\nSCM Agreement, and threat thereof.2826\n9.115. For each of the sales campaigns said to evidence significant lost sales of the A350XWB, the\nEuropean Union alleges that the \"subsidy -enhanced features\" of the 787 and 777X; i.e. both the\ntechnological advancements of the ai rcraft (resulting in lower fuel burn and maintenance costs)\nand its earlier delivery availability, as well as the \"subsidy -enabled aggressive pricing conditions\nBoeing offered\" were a genuine and substantial cause of the customer's decision to order the 78 7\nor 777X, as the case may be, over the competing model of A350XWB. 2827 The European Union's\nimpedance and significant price suppression claims as described above are also based on the\nassertion that the suppression of A350XWB prices occurred due to a combination of very low prices\nand the \"advanced technology and early availability\" of the 787.2828\n9.116. The Panel adopts a unitary approach to establishing causation, under which prices, sales,\nmarket share, and other indicators of competitive harm are not assessed in i solation, but rather as\npart of an integrated causation analysis. 2829 Our analysis is counterfactual in nature: we ask\nwhether, but for the effects of the various subsidies, Airbus' sales, prices and market share would\nbe higher. We will analyse the effects of the subsidies in two related phases: First, we examine the\neffects, if any, of the relevant category of subsidies on Boeing's product development and pricing\n\n2824 Based on the following sales campaigns, each of which is alleged to be a significant lost sale of the\nA350XWB: LAN 2007 (European Union's first written submission, paras. 1590 and 1591; second written\nsubmission, paras. 1547-1550; and response to Panel question No. 169, paras. 466 and 467); Qatar 2007\n(European Union's first written submission, paras. 1608 and 1609; second written submission,\nparas. 1578-1580; and response to Panel question No. 169, paras. 484 and 485); Etihad 2008, 2011, and\n2013 (European Union's first written submission, paras. 1610 and 1611; second written submission,\nparas. 1581-1584; and response to Panel question No. 169, paras. 486 and 487); Aeromexico 2012\n(European Union's first written submission, paras. 1606 and 1607; second written submission,\nparas. 1574-1577; and response to Panel question No. 169, paras. 482 and 483); Ethiopian 2015\n(European Union's response to Panel question No. 169, paras. 470-472); and All Nippon Airlines 2014 and\n2015 (European Union's response to Panel question No. 169, paras. 478 and 479). On account of Lion Air\nhaving cancelled its 2012 order for 787 aircraft, the European Union no longer argues that U.S. subsidies\ncaused displacement in the Indonesian market for new technology, twin-aisle LCA (see European Union's\nresponse to Panel question No. 169, fn 863).\n2825 Based on evidence that Boeing is projected to make more than 50% of present and future deliveries\nof \"new technology, twin-aisle\" aircraft into these markets. (European Union's first written submission,\nparas. 1592, 1593, 1598, and 1599; second written submission, paras. 1551-1553 and 1560-1563; and\nresponse to Panel question No. 169, paras. 468, 469, 476, and 477).\n2826 As evidenced by aggregate average A350XWB prices between 2007 and 2015 as well as evidence\nfrom sales campaigns from 2007 and 2010-2015 purporting to show that the 787 and 777X, and the\n\"subsidy-enhanced low prices\" of these aircraft forced Airbus to lower its A350XWB prices below what it would\notherwise have been able to achieve (European Union's first written submission, paras. 1277-1328; second\nwritten submission, paras. 1463-1515; and response to Panel question Nos. 170, paras. 546, 548, 550-556,\nand 559-565, and 166, para. 153).\n2827 European Union's first written submission, paras. 1410-1544; second written submission,\nparas. 1260-1434; and response to Panel question No. 169, paras. 182-325. In its discussion of the factors\nthat allegedly led customers to prefer the 787 or 777X over the competing model of A350XWB, the\nEuropean Union addresses, for each sales campaign: (a) \"Availability\", referring to the alleged earlier launch\nand delivery positions for the 787 or 777X, as the case may be, said to be due to the aeronautics R&D\nsubsidies operating through various aspects of a technology causal mechanism; (b) \"Technology\", referring to\nthe innovative technology and related fuel efficiency of the 787 or 777X, as the case may be, again said to be\ndue to the aeronautics R&D subsidies operating through various aspects of a technology causal mechanism;\nand (c) \"Pricing\", referring to Boeing's allegedly aggressive pricing behaviour that was said to be due to the\npost-2006 subsidies operating through a price causal mechanism. See also European Union's first written\nsubmission, paras. 1305-1307 (alleging that the 787's advanced technology and early availability were\ndeciding factors in identified LCA sales campaigns), and paras. 1311-1313 (alleging that certain \"illustrative\ncompetitive sales campaigns, which are largely clustered in two distinct time periods of 2007 and 2010-2012\"\nshow that Boeing's aggressive pricing was a decisive factor in the 787 winning the sale over the A350XWB).\nThe claims concerning threat of impedance and impedance of A350XWB imports and exports are similarly\nbased on Boeing's product development and pricing decisions (in each case, said to be the result of U.S.\nsubsidies to Boeing) which have allegedly resulted in deliveries of the 787 at the expense of deliveries of the\nA350XWB. (European Union's first written submission, para. 1583).\n2828 See e.g. European Union's first written submission, paras. 1291 and 1298.\n2829 See Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1658.\n\nof the 787 and 777X; and second , we examine whether any such effects of the subsidies in\nquestion on Boeing's product development and prices had the alleged impact on A350XWB sales\nand prices in the post -implementation period, such that these subsidies constitute a genuine and\nsubstantial cause of the particular forms of serious prejudice alleged by the European Union with\nrespect to the A350XWB.\n9.117. In commencing our evaluation of the European Union's main serious prejudice case with\nrespect to the A350XWB , we analyse , in Section 9.3.2.1 whether the pre-2007 aeronautics R&D\nsubsidies and certain post-2006 aeronautics R&D subsidies benefiting the 787 and 777X cause\nserious prejudice in respect of the A350XWB in the post -implementation period through a\ntechnology causal mechanism . We then examine, in Section 9.3.2.2, whether certain post -2006\nsubsidies benefiting the 787 and 777X cause s erious prejudice in respect of the A350XWB in the\npost-implementation period through a price causal mechanism.\n9.3.2.1 Whether the pre -2007 aeronautics R&D subsidies and certain post-2006\naeronautics R&D subsidies cause serious prejudice to the interests of the European\nUnion, within the meaning of Articles 5(c) and 6.3, in respect of the A350XWB in the\npost-implementation period, through a technology causal mechanism\n9.118. The European Union argues that the pre-2007 aeronautics R&D subsidies continue to cause\nsignificant competitive harm to the European Union's LCA-related interests following the end of the\nimplementation period through their genuine and substantial contribution to Boeing's development\nof technologies for its current aircraft and the availability of future Boeing LCA. The\nEuropean Union alleges that Boeing benefits from the effects of the pre -2007 aeronautics R&D\nsubsidies in three main ways, which it refers to as t he \"main technology effects\" of these\naeronautics R&D subsidies2830:\na. Original subsidy technology effects : Boeing continues to benefit from 787 technologies\nthat were \"found to be the effect\" of the original pre -2007 aeronautics R&D subsidies,\nwhich impact the market through sales of the 787.2831\nb. Spill-over technology effects : Boeing has benefited from the application of the\n\"subsidized 787 technologies\" to Boeing's more recent 787, 777X (and 737 MAX) LCA\ndevelopments.2832\nc. Sleeper technology effects: Boeing has de veloped new innovative technologies based in\npart on research co nducted under the original aeronautics R&D programmes which it is\nnow beginning to apply to its most recent LCA developments.2833\n9.119. The European Union also argues that certain post-2006 aeronautics R&D subsidies operate\nthrough a further particular \"main technology effect\" of the technology causal mechanism:\na. New subsidy technology effects : Boeing is the beneficiary of new \"post -2006\" NASA,\nDOD and FAA aeronautics R&D subsidies, which have enabled B oeing to develop new\ntechnologies for its 787-10 and 777X LCA models and enabled their early availability.2834\n9.120. The United States disputes that, since the end of the implementation period, the\naeronautics R&D subsidies cause adverse effects through the above -referenced aspects of the\ntechnology causal mechanism alleged by the European Union. The United States considers that the\nEuropean Union's allegations are based on the \"faulty premise\" that the technology effects found\nby the original panel have continued past the compliance deadline. Rather, there is no basis for the\nEuropean Union's presumption that the current market presence of the 787 and the application of\nthe 787 technologies are \"genuinely and substantially\" related to subsidies. 2835 In the original\nproceeding, the European Communities did not argue that Boeing never would have launched the\n787; only that the 787 would have been launched later than it was. The original panel found that,\n\n2830 European Union's first written submission, para. 982.\n2831 European Union's first written submission, para. 983.\n2832 European Union's first written submission, para. 984.\n2833 European Union's first written submission, para. 985.\n2834 European Union's first written submission, para. 986.\n2835 United States' first written submission, para. 703.\n\nabsent the aeronautics R&D subsidies, Boeing \"most likely\" would ha ve launched the 787, but\n\"significantly later\" than 2004. Thus, for the United States, the relevant question is not if Boeing\nwould have launched the 787 without the benefit of the NASA and DOD programmes, but when the\n787 launch would have occurred. The U nited States argues that \"in a counterfactual without the\nWTO-inconsistent R&D subsidies, Boeing would still have developed the technology to make the\n787 available as it currently is, launch the 737 MAX when and as it did, and develop the 777X as it\nis.\"2836 For the United States, this refutes most of the European Union's case concerning the\nalleged operation of pre-2007 aeronautics R&D subsidies through a technology causal mechanism.\n9.121. The United States also disputes that any of the post -2006 aeronautics R&D subsidies\noperate through any aspect of a technology causal mechanism.\n9.122. In Sections 9.3.2.1.1 through 9.3.2.1.4 we examine whether the European U nion has\nestablished that the pre -2007 aeronautics R&D subsidies, and certain post -2006 aeronautics R&D\nsubsidies alleged to operate throug h a technology causal mechanism give rise to the particular\nforms of technology effects in the post -implementation period that the European Union alleges in\nrelation to the 787 and 777X. To the extent that we find that these subsidies have such effects on\nBoeing's product development of the 787 and 777X, we will then assess the consequent impact on\nA350XWB sales and prices in the post -implementation period so as to determin e whether the\nsubsidies in question, through these technology effects, constitute a genuine and substantial cause\nof the particular forms of serious prejudice all eged by the European Union in respect of the\nA350XWB.\n9.3.2.1.1 Original subsidy technology effects of the pre-2007 aeronautics R&D subsidies\n9.123. The European Union has at times framed its \"technology effects\" arguments on the basis\nthat the effects of the pre -2007 aeronautics R&D subsidies that are said to continue into the post -\nimplementation period are the 787 technologies themselves. 2837 The United States disputes such\nan interpretation of the original panel and Appellate Body findings. It argues that the panel and the\nAppellate Body found only that the aeronautics R&D subsidies accelerated Boeing's development of\n787 technologies and thereby enabled it to launch the 787 earlier than would otherwise have been\nthe case. We therefore begin our evaluation of the European Union's arguments that the original\ntechnology effects of the pre -2007 aeronautics R&D subsidi es on the 787 continue into the\npost-implementation period by clarifying the precise finding s regarding the effects of the\naeronautics R&D subsidies in the original proceeding.\n9.124. In the original proceeding, the European Communities argued that the aeronauti cs R&D\nsubsidies accelerated Boeing's development of new, advanced technologies for the 787 and\nthereby caused serious prejudice to its interests in respect of competing Airbus aircraft in the\n200-300 seat LCA product market.2838 According to the European Com munities, but for Boeing's\nparticipation in the NASA and DOD aeronautics R&D programmes at issue, Boeing would not have\nbeen able to launch a technologically advanced aircraft like the 787 in 2004, with promised\ndeliveries in 2008. 2839 In evaluating the effec ts of the pre -2007 aeronautics R&D subsidies on\nBoeing's development of advanced LCA technologies, the original panel considered that Boeing\n\"most likely\" would have either: (a) developed a 767 -replacement that incorporated all of the\n\n2836 United States' first written submission, para. 708. The United States submits a statement by Boeing\nengineers to the effect that, absent the R&D subsidies Boeing would have launched the 787 most likely no later\nthan 2006, in any case well before September 2012, leaving ample time for Boeing to adapt 787 technologies\nto the 777X and 737 MAX.\n2837 There are several places throughout the European Union's submissions where the ordinary meaning\nof the language chosen by the European Union to express its argument indicates that the European Union\nconsiders that the effects of the pre-2007 aeronautics R&D subsidies on the 787 continue into the\npost-implementation as the 787 technologies themselves. Such arguments can only be based on an\nassumption that the original panel found that the 787 technologies themselves were the effect of the\naeronautics R&D subsidies. See e.g. European Union's first written submission, paras. 979 and 983; comments\non the United States' response to Panel question No. 156, para. 58.\n2838 Panel Report, US – Large Civil Aircraft (2nd complaint), paras. 7.1601-7.1604. Specifically, the\nEuropean Communities argued that the challenged subsidies \"accelerated Boeing's development of new and\nadvanced LCA technologies, as well as design and manufacturing processes, thereby enabling Boeing to bring\nthe 787 to market much sooner than it could have on its own\", \"limited and delayed Airbus' access to\ninnovative R&D technologies\", \"increased the marketability of the 787\", and \"allowed a rapid ramp-up of 787\ndeliveries\". (Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1601).\n2839 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1774.\n\ntechnologies that are featured on the 787, but its launch would have occurred \"significantly later\"\nthan 2004 and Boeing would not have been able to promise deliveries for 2008; or (b) launched a\n767-replacement in 2004 that, while technologically superior to the 767, was not as technologically\ninnovative as the 787 that actually launched. 2840 The panel ultimately reasoned that it was not\nnecessary to determine which outcome would have occurred. It explained:\nWhat is clear to us is that, absent the aeronautics R&D subsidies, Boein g would not\nhave been able to launch an aircraft incorporating all of the technologies that are\nincorporated on the 787 in 2004, with promised deliveries commencing in 2008.2841\n9.125. This conclusion was supported by the panel's earlier findings that the aeronautic s R&D\nsubsidies complemented Boeing's internal product development efforts, and were focused on areas\nthat \"carry the greatest prospect of creating significant competitive advantage\" and otherwise\nhelped Boeing \"reduce the time to market\". 2842 The panel did n ot consider, however, that the\ntechnologies applied to the 787 were exclusively attributable to work conducted under the\nchallenged NASA and DOD aeronautics R&D programmes. Instead, the panel recognized that\nBoeing's technology developments were \"clearly t he product of a variety of factors\". 2843 The panel\nexplained that it would be reasonable to assume that, at some point in time, it would no longer be\npossible to characterize the research conducted under the aeronautics R&D programmes at issue\nas having contr ibuted in a genuine and substantial way to the technologies applied on a given\nproduct, including the 787. 2844 The panel did not consider that this point had been reached in\n2004, however.2845\n9.126. The Appellate Body affirmed the panel's overall conclusions regarding the effects of the\naeronautics R&D subsidies at issue, explaining that \"{t}he Panel's finding must be understood to\nmean that the NASA aeronautics R&D subsidies accelerated the technology development process\nby some amount of time, and, therefore gave Boe ing an advantage in bringing its technologies to\nmarket\".2846 Elsewhere, the Appellate Body described the aeronautics R&D subsidies as having\nprovided Boeing with a \"boost\" 2847 to the development of technologies \"at the earliest, most\nfundamental, stages of rese arch\".2848 We therefore consider that the original panel and the\nAppellate Body found that the aeronautics R&D subsidies accelerated Boeing's development of\ntechnologies for the 787, which in turn enabled Boeing to launch the 787 earlier than otherwise\nwould have been possible, thereby reducing Boeing's time to market with the 787.\n9.127. It is clear from the foregoing that neither the panel nor the Appellate Body considered that\nthe 787 technologies were themselves the effect s of the aeronautics R&D subsidies . The\naeronautics R&D subsidies were not found to have brought into existence any technology or\nproduct that would not otherwise exist. Rather, they accelerated Boeing's development of various\ntechnologies and reduced the time to market of a technologically -advanced product that would\n\n2840 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1775.\n2841 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1775.\n2842 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1742.\n2843 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1758. The panel referred, for\ninstance, to the significant investments that Boeing and its suppliers had made from 2000 onwards in R&D for\nthe development of the Sonic Cruiser, the expertise developed by Boeing and certain of its 787 suppliers in the\nuse of composites in primary and secondary structures, as well as knowledge and experience that Boeing\nderived from development of the 777 and 737NG LCA programmes. (Panel Report, US – Large Civil Aircraft (2nd\ncomplaint), para. 7.1757).\n2844 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1758. The panel explained as follows:\nBoeing's technology developments are clearly the product of a variety of factors.\nIndeed, it is reasonable to assume that at some point in time, the contribution of\nthe NASA -funded re search will diminish in relation to other, more recent or\nrevolutionary technological developments that are attributable to other factors, and\nthat it will no longer be possible to characterize the NASA research conducted in\nthe 1990s as having contributed in a genuine and substantial way to new\ntechnologies applied to future Boeing LCA.\n2845 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1758.\n2846 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 980 (italics original,\nunderlining added).\n2847 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 986.\n2848 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 986.\n\notherwise have taken Boeing longer to develop and place on the market. 2849 The issue for our\nanalysis under Article 7.8 of whether the United States has taken appropriate steps to remove the\nadverse effects is whether this acceleration of Boeing's development of advanced LCA technologies\nthat the aeronautics R&D subsidies were found to have in the original proceeding is still evident or\nwhether it has ended by the end of the implementation period.\n9.128. Given that the effect s of the aeronauti cs R&D subsidies found in the original proceeding\nwere to accelerate Boeing's development of advanced LCA technologies, leading to an earlier than\notherwise launch of the 787, the mere existence of 787 technologies (as applied to the 787, or as\nadapted through technological spill -over to the 777X and other newer Boeing LCA) in the post -\nimplementation period does not demonstrate that this effect continues . Rather, an assessment of\nwhether this acceleration effect continues to exist in the post -implementation period logically\ninvolves a counterfactual analysis of whether Boeing likely would have been in a different situation\nwith respect to the timing of its 787 -related technology development absent these aeronautics\nR&D subsidies.2850 Specifically, the question is whether it is likely that, absent these subsidies, the\n787 technologies would still not have been developed by the end of the implementation period and\nthus the 787 would not have been present in the market by that time. It is logical to ask in this\nconnection how much additional time Boeing would have required to develop the 787 absent these\nsubsidies because this would indicate whether it is likely that Boeing would have been in the\nmarket with an unsubsidized 787 prior to the expiration of the impleme ntation period, in which\ncase the pre -2007 aeronautics R&D subsidies can no longer be characterized as contributing in a\ngenuine and substantial way to Boeing's 787-related technology development.\n9.129. With these considerations in mind, the Panel now turns to the arguments and evidence\nprovided by the parties in support of their estimates of the additional time that it would have taken\nBoeing to develop the 787 absent the pre-2007 aeronautics R&D subsidies.2851\n\n2849 The findings of the panel in the original proceeding regarding the nature and effects of the\naeronautics R&D subsidies (i.e. an acceleration effect providing a time to market advantage) can be contrasted\nwith certain of the findings in EC and certain member States – Large Civil Aircraft regarding the nature and\neffects of certain of the subsidies at issue in that dispute. In EC and certain member States – Large Civil\nAircraft, the panel concluded, among other things, that Airbus would have been unable to bring to market the\nLCA that it launched but for certain of the subsidies in question. In other words, certain of the subsidies in\nquestion in that dispute enabled the creation and market presence of products that would not otherwise exist.\n(See Panel Report, EC and certain member States – Large Civil Aircraft, paras. 7.1949 and 7.1984; and\nAppellate Body Report, EC and certain member States – Large Civil Aircraft, paras. 1261, 1264-1270, and\n1300). See also Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),\nparas. 6.1464-6.1477.\n2850 The use of a counterfactual analysis in this context is consistent with our general approach in this\nSection of the Report, in which we consistently assess the effects of subsidies through counterfactual analysis.\n2851 We note that the arguments of both the European Union and the United States are premised on the\nidea that the proper counterfactual analysis of whether the acceleration effect of the pre-2007 aeronautics R&D\nsubsidies on Boeing's technology development continues involves an analysis of what the situation would have\nbeen if Boeing had not received these subsidies. This presupposes that the situation that would exist \"absent\nthe subsidies\" is the situation that would exist if the subsidies had never been granted. Canada, a third party in\nthis proceeding, argues that Article 7.8 does not require this approach to the counterfactual analysis. According\nto Canada, a Member satisfies its obligation under Article 7.8 if it withdraws subsidies by the end of the\nimplementation period. For Canada, this means that the appropriate counterfactual analysis to assess the\nimpact of non-withdrawn subsidies is to consider what the situation would be if the subsidies had been\nwithdrawn by the end of the implementation period and that a compliance panel is not required to conduct an\nanalysis of what the situation would be if the subsidies had never been granted in the first place. (Canada's\nthird-party statement, paras. 30-37; third-party submission, paras. 37 and 44-46). Canada thus considers that\na proper counterfactual analysis of the effects of the pre-2007 aeronautics R&D subsidies in the\npost-implementation period requires the identification of the situation that would prevail if these subsidies had\nbeen withdrawn at the end of the implementation period. Canada submits that if the European Union has failed\nto demonstrate that the situation regarding sales volume and prices of Boeing aircraft and the resulting impact\non the sales volume and prices of competing Airbus aircraft would be any different if the R&D subsidies had\nbeen withdrawn at the end of the implementation period, the Panel cannot find that the R&D subsidies cause\nadverse effects in the post-implementation period. We note, however, that Canada appears to acknowledge\nthat demonstrating that Boeing's technology developments would not be materially different if it had never\nreceived the subsidies implicitly also demonstrates that Boeing's technology developments would not be\nmaterially different if the subsidies had been withdrawn by the end of the implementation period. (Canada's\nthird-party submission, para. 45). Therefore, the issue raised by Canada appears to be of limited practical\nimport in this proceeding and we proceed on the basis of the counterfactual analysis as framed by the parties,\n\n9.130. In its first written submission, the United States s eeks to demonstrate that, absent the\npre-2007 aeronautics R&D subsidies, Boeing would have launched the 787 most likely no later\nthan 2006, leaving ample time for Boeing to adapt 787 technologies to the 777X and 737 MAX. 2852\nIn response to the United States' first written submission, the European Union argues that it is not\nplausible that Boeing, with its own funding, could have \"replicated\" in less than two years the\n\"decades of US Government -supported R&D that enabled the development and launch of the\n787\".2853 The European Union argues that it would have taken Boeing \"at least 10 years to develop\nonly a number of select LCA technologies and design tools necessary for the 787\", and in addition\nto the ten years, Boeing would further \"require considerable time to develop the knowledge it has\nacquired through its decades of experience participating in the US Government -supported R&D\nprogrammes\".2854 This time-frame would still be inadequate, as it pertains to the development of\nindividual technologies, and in reality, it would take even longer to \"develop, mature, produce and\ncertify a package of new innovative technologies and the time required to find the design solution\nto make them interact optimally\".2855\n9.131. We evaluate the merits of these two estimates below. We begin b y explaining the\nEuropean Union's \"additional 10 years plus\" estimate, and the United States' criticisms, and the\nUnited States' \"counterfactual launch no later than end of 2006\" estimate and the\nEuropean Union's criticisms.\nThe European Union's \"additiona l 10 years plus\" estimate of the time it would have taken Boeing\nto develop the 787 absent the pre-2007 aeronautics R&D subsidies\n9.132. The European Union relies on a statement by Airbus engineers to support its estimate that\nBoeing would have needed more than ten years to develop the technologies and design tools\nacquired from its participation in the relevant aeronautics R&D programmes to be in a position to\ndevelop and launch the 787 absent the pre -2007 aeronautics R&D subsidies (the Airbus\nEngineers' Response).2856 The Airbus Engineers' Response was submitted as a response to , and\ncritique of, a statement of Boeing engineers that supports the United States' estimate.\n9.133. The Airbus Engineers Response refers to a number of timeframes in relation to the\ndevelopment of an LCA, including the time to develop individual LCA technologies and design tools,\nand the time to integrate technologies into a final design solution. This includes a ten-year\nincubation period, to allow for necessary certification, quality testing and material proofs. The\nAirbus engineers explain that it takes at least [***] to develop the requisite composite design and\nmanufacturing tools, in particular with respect to tolerance specifications .2857 They also describe a\n\"building block\" approach for developing new technologies, which starts from an early study phase,\nand continues through design, procurement, production, certification and delivery and inherently\ninvolves trial and error. Finally, they conclude that, were Airbus to undertake development of a\ncomposite 360° barrel design, based on Airbus' knowledge of composites at the time the 787 was\nlaunched in 2004 , it would have taken Airbus [[HSBI]] to develop, mature, produce and certify\n\ni.e. as an analysis of the situation that would likely exist if the aeronautics R&D subsidies had never been\ngranted to Boeing.\n2852 United States' first written submission, para. 709. The United States asserts that it is making this\ndemonstration to assist the Panel, even though as a legal matter, it has met its burden of rebuttal by showing\nthat the European Union has failed to address the relevant question in conducting a counterfactual analysis of\nthe alleged technology effects on the 787, including any \"spill-over\" effects. (United States' first written\nsubmission, paras. 706 and 707).\n2853 Response by B. Domke, P. A. Brown, J. Kumpfert, and I. Whitehouse to the June 2013 Statement of\nBoeing Engineers, 19 July 2013 (Airbus Engineers' Response), (Exhibit EU-1014) (BCI), para. 3. The\nEuropean Union does not provide an estimate of the length of time it would have taken Boeing to develop the\n787 absent the pre-2007 aeronautics R&D subsidies in its first written submission.\n2854 European Union's second written submission, para. 975. See also European Union's second written\nsubmission, paras. 975, 1012, and 1031-1041; Airbus Engineers' Response, (Exhibit EU-1014) (BCI), paras. 55\nand 63; European Union's response to Panel question Nos. 45 and 154; and European Union's comments on\nUnited States' response to Panel question Nos. 45 and 47.\n2855 European Union's second written submission, para. 1031 (emphasis original). The European Union\nalso criticizes the Boeing engineers' specific estimates of the time it would have taken to complete certain R&D\ntasks, and any comparison the Boeing engineers draw to the time it actually took to design and develop the\nA350XWB. (Airbus Engineers' Response, (Exhibit EU-1014) (BCI), paras. 48-63 and 67-87).\n2856 Airbus Engineers' Response, (Exhibit EU-1014) (BCI).\n2857 Airbus Engineers' Response, (Exhibit EU-1014) (BCI), para. 43.\n\nthe composite 360° barrel sections for use on the A350XWB. 2858 Based on the Airbus Engineers'\nResponse, the European Union asserts that it would have taken Boeing \"at least [[HSBI]] longer\nto deliver the 787, with the launch delayed by a similar amount of time\".2859\n9.134. The United States argues that the European Union's position that it would have taken\nBoeing an unspecified period in excess of ten years to develop technologies and an unspecified\nperiod to actually launch the 787 is unsupported by the evidence. The United States considers\nthat, a part from being both \"highly gener alized\" and \"unsupported by reference to real -world\nexperience in the specific technologies at issue\" 2860, the European Union's estimate improperly\nassumes that Boeing would need to take additional time for work not performed under the R&D\nprogrammes. The Uni ted States argues that the proper counterfactual estimate should only take\ninto account the additional time required to attain the increased knowledge and experience to\nundertake the subsidized aspects of the technology development process of the 787 in or der to fill\nthe gap in knowledge and experience. By accounting for the entirety of development, maturation,\nproduction, and certification of technologies actually used on the 787, the European Union\nattributes to the subsidies all non -subsidized developmen t. By doing so, the European Union\ninappropriately double counts the time that it would have taken Boeing to develop the 787 with its\nparticular technologies, absent the aeronautics R&D subsidies.\n9.135. The United States also contends that the European Union ha s never indicated in this\nproceeding when it considers the 787 would have launched absent the subsidies, and by extension\nhas failed to establish that the 787's counterfactual launch would have occurred after the end of\nthe implementation period.2861 The United States contrasts this ambiguity with the more definitive\nposition that the European Communities took in the original panel proceeding as to how long it\nwould have taken Boeing to launch the 787 absent the subsidies: \"The European Communities\nargues that, had Boeing needed to develop the 787 using its own resources, the 787 would likely\nnot have been launched any earlier than mid-2006 …\".2862\nThe United States' estimate that, absent the pre -2007 aeronautics R&D subsidies, Boeing would\nhave launched the 787 no later than 2006\n9.136. As support for its estimate that absent the pre -2007 aeronautics R&D subsidies, Boeing\nwould have launched the 787 no later than 2006, the United States relies on a statement by eight\nBoeing engineers who worked on the development of the 787, 777X, and/or 737 MAX (the Boeing\nEngineers' Statement).2863 The Boeing engineers purport to estimate the extent of the timing\nadvantage that the pre -2007 aeronautics R&D subsidies could \"maximally\" have provided Boeing,\nbased on the assumption for purpos es of their statement that Boeing did in fact enjoy such a\ntiming advantage. 2864 They assume that: (a) Boeing (including McDonnell Douglas) had not\nparticipated in the relevant NASA and DOD aeronautics R&D programmes; and (b) aside from that\nlack of participa tion by Boeing, the degree of knowledge and technology that Boeing attained\nthrough its independent R&D activities, its suppliers and the broader aeronautics community\nremains the same.2865\n9.137. The Boeing engineers first discuss Boeing's incentives to conduct ea rly-stage research in\nthe early 2000s, when Boeing was undertaking intensive pre -launch product development for the\nSonic Cruiser, and then the 7E7, which later became the 787. They then consider the seven\nspecific 7E7/787 technology areas considered by th e original panel and purport to assess the\n\"additional time required to replicate the work done by Boeing under the NASA and DOD programs\n\n2858 Airbus Engineers' Response, (Exhibit EU-1014) (BCI), para. 40.\n2859 European Union's comments on United States' response to Panel question No. 153, paras. 19 and\n42. (emphasis original)\n2860 United States' second written submission, para. 782.\n2861 United States' comments on European Union's response to Panel question No. 153, paras. 16 and\n22, and fn 20.\n2862 United States' comments on European Union's response to Panel question No. 153, para. 16\n(referring to Panel Report, US – Large Civil Aircraft (2nd complaint), para. 4.280).\n2863 Statement of Boeing Engineers Regarding the Technologies and Development of the 787, 737 MAX,\nand 777X, June 2013 (Boeing Engineers' Statement), (Exhibit USA-283) (BCI).\n2864 The Boeing engineers explain that they disagree with the panel's findings concerning the links\nbetween the pre-2007 aeronautics R&D subsidies and the 787, but assume those findings to be correct for\npurposes of their analysis. (Boeing Engineers' Statement, (Exhibit USA-283) (BCI), para. 4).\n2865 Boeing Engineers' Statement, (Exhibit USA-283) (BCI), para. 5.\n\nusing the internal resources of Boeing and its suppliers \".2866 The engineers explain that \"{t}his\nassessment is based on examples of the time and effort taken by Boeing and its suppliers to\naddress early-stage R&D challenges that were either comparable to, or more demanding than, the\ntypes of activities conducted under the NASA and DOD programs\" .2867 Finally, the Boeing\nengineers discuss the pattern and pace of Airbus' development of the A350XWB, on the basis that\nAirbus' ability to announce orders for the A350XWB in July 2006, followed by formal launch that\nDecember, even though it did not have access to the benefits from the p re-2007 aeronautics R&D\nsubsidies, is a \"useful reference point\" for analysing the counterfactual timing of the 787\nlaunch.2868\n9.138. The Boeing engineers express the view that, even though commercial enterprises may\ngenerally face disincentives to invest in early -stage aeronautics research where the commercial\npayoff is highly uncertain, distant or difficult to capture, \"such disincentives diminish significantly\nwhere an aircraft manufacturer identifies a compelling need to develop a new product requiring\nspecific attributes that are difficult or impossible to offer using existing technology \".2869 According\nto the Boeing engineers, Boeing faced precisely that situation in the early 2000s when it\ndetermined that a critical priority was to develop a new, highly -efficient mid -sized twin -aisle\naircraft to replace the 767 and serve anticipated demand for point -to-point long-haul travel, while\ncustomers were at the same time demanding significant breakthroughs in efficiency but were\nreluctant to pay more than the acquisition cost of the 767 and A330. The Boeing engineers state\nthat under those circumstances, \"Boeing had ample incentive to, and would, undertake whatever\nadditional early-stage research necessary to augment its ongoing R&D for the 787.\" 2870 This was\nevident from th e risky, early -stage R&D that Boeing actually conducted on a number of\ntechnologies during the 787 development program.2871\n9.139. With those considerations in mind, the Boeing engineers provide specific estimates of the\ntime that would have been required to replica te the work done by Boeing under the pre -2007\nNASA and DOD aeronautics R&D programmes found to involve subsidies using the internal\nresources of Boeing and its suppliers.2872 Their conclusions are summarized as follows:\na. Composite fuselage: Boeing could have replicated in less than two years the particular\ntasks that were accomplished under NASA's Advanced Technology Composite Aircraft\nStructures (ATCAS) program, given the scope, scale and complexity of the work and\ntechnical challenges involved, when compared to Boeing's work developing a one -piece\ncomposite barrel design concept for incorporation into the 7E7 baseline design, its\ncompletion of a full -scale demonstration barrel fuselage section and development of\ndesign, tooling and production concepts. 2873 Specifically, it would have taken\napproximately 18 months to build and study the ATCAS panelized composite fuselage\nsection, given that Boeing took [***].2874 It would have taken Boeing [***] if\nconducted during the 7E7 development program, given that it took [***] to conclude\n\"much more exacting and complex costing studies of the barrel fuselage design adopted\nfor the 787\".2875\nb. Composite wings: Boeing could have completed construction and testing of a semi -span\ncomposite wing box demonstrator using a stitched/resin filled infusion technology that\n\n2866 Boeing Engineers' Statement, (Exhibit USA-283) (BCI), para. 7. These technology areas are: (a)\ncomposite fuselage; (b) composite wings; (c) aerodynamics and structural design; (d) more-electric\narchitecture; (e) open systems architecture; (f) health management systems; and (g) noise reduction\ntechnologies.\n2867 Boeing Engineers' Statement, (Exhibit USA-283) (BCI), para. 7.\n2868 Boeing Engineers' Statement, (Exhibit USA-283) (BCI), para. 8.\n2869 Boeing Engineers' Statement, (Exhibit USA-283) (BCI), para. 9.\n2870 Boeing Engineers' Statement, (Exhibit USA-283) (BCI), para. 10.\n2871 The Boeing engineers also argue that the time required to advance research from technology\nreadiness levels is significantly reduced when that research occurs in the context of a high-priority aircraft\ndevelopment program (Boeing Engineers' Statement, (Exhibit USA-283) (BCI), para. 12: \"{o}n such a\nprogram, Boeing pre- and post-launch R&D activity proceeds at a much faster pace than NASA R&D\naeronautics programmes because it is subject to tight deadlines and given much greater engineering and\nbudgetary resources to meet those deadlines\").\n2872 Boeing Engineers' Statement, (Exhibit USA-283) (BCI), paras. 13-40.\n2873 Boeing Engineers' Statement, (Exhibit USA-283) (BCI), para. 23.\n2874 Boeing Engineers' Statement, (Exhibit USA-283) (BCI), para. 21.\n2875 Boeing Engineers' Statement, (Exhibit USA-283) (BCI), para. 22.\n\nwas developed under the NASA's Advanced Subsonic Technology (AST) Program in\napproximately 18 months as compared to the [***].2876 Boeing participated in the\ncomposite wing element of the NASA AST Program for a period of five years.2877\nc. Aerodynamics and structural design : Boeing could have developed enhanced TRANAIR\nand OVERFLOW computational fluid dynamics (CFD) codes in approximately six months\nusing the level of resources that were available under the 7E7 programme, had Boeing\ndone the work on its own rather than under the NASA's AST Program. According to the\nBoeing engineers, \"one Boeing employee worked part -time for 3 years to assess the\nTRANAIR and OVERFLOW generic (publicly available) codes\".2878\nd. More-electric system architecture: Between [***], Boeing made rapid progress [***].\nThis was because \"Boeing was serious about bringing a new aircraft to market\" and also\nbecause Boeing took the decision to deploy [***]. In light of the advances made in such\na short time, \"it would have taken Boeing even less time to conduct much less ambitious\nresearch, such as that done by McDonnel Douglas on the power -by-wire/fly-by-light\nsubtask of NASA's AST programme\".2879\ne. Open systems architecture : Boeing could have developed defined generic open\narchitecture specifications and component interfaces related to the 787 open systems\narchitecture in approximately one year (rather than the three years spent by McDonnell\nDouglas under the DOD Vehicle Management Systems Integrated Technology for\nAffordable Lifecycle Cost (VITAL) Program), given that Boeing [***].2880\nf. Health management systems : The 787's health management system is only an\nenhanced version of the health management technology used on the 777, and \"there\nwas no need for significant early -stage R&D , and no need for learning or technology\nfrom U.S. Government R&D programs\".2881\ng. Noise reduction: The technological challenges that Boeing overcame in the [***] during\nwhich it matured and tested the noise reduction technologies for the 787 are comparable\nto or greater than those posed by the noise reduction technologies that Boeing had\nworked on under the NASA aeronautics R&D programmes.2882\n9.140. As regards the estimate for the composite fuselage, the Boeing engineers make two\nadditional observations. First, they not e that prior to starting work on developing the aircraft that\nbecame the 787, Boeing already had decades of composites experience, from its use of composites\non the 757 and 767 in the late 1970s, to the 737 Classics in the mid -1980s and most importantly,\nthe 777 in the late -1980s and early 1990s. 2883 Second, they consider that their conclusion that,\nstarting in late 2002, Boeing could have replicated its work under the ATCAS Program within two\nyears is confirmed by how quickly Airbus was able to launch the \"pr edominantly composite\"\nA350XWB.2884 Like Boeing, Airbus developed composites expertise over decades, generally\nincreasing its application of composites with each successive aircraft program me. Similarly, Airbus\nleveraged the composites experience of its suppl iers, and did not purs ue the A350XWB until the\ncommercial imperative arose. 2885 The Boeing engineers note that Airbus was able to announce\norders for the A350XWB in July 2006, a little over two years after Boeing launched the 787, and\n\n2876 Boeing Engineers' Statement, (Exhibit USA-283) (BCI), para. 27. The Boeing engineers submit that\nthe demonstrator developed under the NASA AST Program [***]. (Boeing Engineers' Statement, (Exhibit USA-\n283) (BCI), para. 27).\n2877 Boeing Engineers' Statement, (Exhibit USA-283) (BCI), para. 27.\n2878 Boeing Engineers' Statement, (Exhibit USA-283) (BCI), para. 30.\n2879 Boeing Engineers' Statement, (Exhibit USA-283) (BCI), paras. 33-35.\n2880 Boeing Engineers' Statement, (Exhibit USA-283) (BCI), para. 36.\n2881 Boeing Engineers' Statement, (Exhibit USA-283) (BCI), para. 37.\n2882 Boeing Engineers' Statement, (Exhibit USA-283) (BCI), para. 40.\n2883 Boeing Engineers' Statement, (Exhibit USA-283) (BCI), para. 14.\n2884 Boeing Engineers' Statement, (Exhibit USA-283) (BCI), para. 24.\n2885 According to the Boeing engineers, Airbus needed to develop an aircraft to compete more effectively\nwith the 787 and 777. (Boeing Engineers' Statement, (Exhibit USA-283) (BCI), para. 24).\n\nonly months after Airbus had accepted firm orders for its earlier A350 design. 2886 The Boeing\nengineers conclude:\nIn our view, Airbus' ability to offer the A350 XWB as quickly as it did shows that, with\nthe right incentives, either of the existing large commercial aircraft manufactu rers can\nundertake development of an aircraft with a composite fuselage and then offer that\naircraft to customers in a relatively short period of time.2887\n9.141. The European Union makes a number of criticisms of the Boeing engineers' estimate of the\ncounterfactual launch date of the 787 absent the pre -2007 aeronautics R&D subsidies. First, the\nEuropean Union argues that the Boeing engineers' counterfactual estimate, while focused on the\ntechnical feasibility of developing and producing the 787, fails to take into account whether absent\nthe subsidies it would have been feasible for Boeing to proceed with the launch of the 787 from an\neconomic or commercial point of view. Second, t he European Union considers that the Boeing\nengineers' estimate of the technical feasibi lity of developing the 787 without the assistance of the\npre-2007 aeronautics R&D subsidies is flawed on a number of grounds.2888\n9.142. With regard to the economic feasibility of launching the 787 absent the subsidies, the\nEuropean Union argues that the Boeing engi neers' counterfactual estimate ignores the question of\nwhether Boeing would have considered it economically rational to proceed with the 787's launch,\nconsidering the original panel's findings that there are large disincentives inherent in conducting\nlong-term, high-risk aeronautics R&D, and its overall finding that the 787 would have launched\n\"significantly later\" than 2004 absent Boeing's participation in the NASA and DOD programmes.2889\n9.143. The European Union argues that it is for the United States to establish that Boeing would\nhave invested all of the necessary funds to conclude all of the necessary pre -launch development\nabsent the pre-2007 aeronautics R&D subsidies. 2890 In particular, the European Union argues that\nundertaking the fundamental R&D that was the s ubject of the pre-2007 aeronautics R&D subsidies\n\"would have increased the uncertainty regarding Boeing's ability to deliver the aircraft as\npromised, both in terms of its timing and performance\". 2891 The European Union considers that\nearly-stage R&D will onl y be undertaken where it is economically rational to do so, specifically\nwhere the risk -adjusted return from the R&D is anticipated to exceed a company's investment\nhurdle rate or weighted average cost of capital. Any delay in the ability to deliver the 78 7 would\ngive rise to negative effects in the form of additional costs, deferred revenues and additional risk,\nall of which would affect the risk -adjusted anticipated return and Boeing's \"business case\" for\nlaunching and bringing the 787 to market. 2892 The European Union asserts that these additional\ncosts, deferred revenues and additional risk \"would have reduced, or even undermined, the\nviability of the 787\".2893\n9.144. The European Union also makes a number of criticisms of the Boeing engineers' estimate,\nbased on the technical feasibility of Boeing concluding the necessary R&D to be able to launch a\ntechnologically-comparable aircraft to the 787 absent the pre-2007 aeronautics R&D subsidies. The\nEuropean Union seeks to support its criticisms of the Boeing engineers' s tatement by reference to\n\n2886 Boeing Engineers' Statement, (Exhibit USA-283) (BCI), para. 24. See also United States' first\nwritten submission, paras. 785-788; and second written submission, paras. 799-811.\n2887 Boeing Engineers' Statement, (Exhibit USA-283) (BCI), para. 24.\n2888 The European Union argues that the United States simply repackages many of the same arguments\nthat it made in the original proceeding regarding the relevance of Boeing's non-subsidized capabilities and\nthose of it suppliers, as well as the relevance of the availability of Boeing's internal funds. (See\nEuropean Union's second written submission, paras. 956, 957, 964, 967, 973-975, 977-997, 999-1010,\n1014-1019, and 1022-1024; response to Panel question No. 45, paras. 297-317; and Airbus Engineers'\nResponse, (Exhibit EU-1014) (BCI), paras. 7-63 and 67-87).\n2889 See European Union's second written submission, paras. 977-997 and 1014-1019; and response to\nPanel question No. 45, paras. 297-317.\n2890 European Union's response to Panel question No. 45, paras. 303-306 and 311.\n2891 European Union's response to Panel question No. 45, para. 316. The European Union questions the\nnotion that long-term and uncertain research may become \"short term and capable of execution\" based on\ncommercial imperative in the pre-launch phase combined with a [***] to complete the research.\n(European Union's second written submission, para. 1018).\n2892 See e.g. European Union's response to Panel question Nos. 45, paras. 313-317, and 154, paras. 30\nand 34-38.\n2893 European Union's response to Panel question No. 45, paras. 313-317.\n\nthe Airbus Engineers' Response which responds specifically to the assertions made by the Boeing\nengineers in the Boeing Engineers' Statement.2894\n9.145. First, according to the European Union, the Boeing engineers address the wrong\ncounterfactual by estimating the time to replicate certain work. Asking whether Boeing could have\nreplicated certain work absent the R&D subsidies assumes that the Boeing engineers already knew\nthat the technology existed or was feasible. The European Union conten ds that Boeing engineers\nwould not have known which technologies were technically feasible and necessary or desirable had\nBoeing not participated for decades in government-supported R&D programmes. It would not have\nmade sense for Boeing to proceed with th e decision to launch the 787 had it not known it w as\npossible to develop the composite fuselage with the desired characteristics and cost benefits, for\ninstance. Thus the relevant question is \"how many years it would have taken Boeing to develop,\nmature, produce and certify novel technologies its engineers did not know existed, or were even\nfeasible\".2895 In addition, the European Union argues that Boeing engineers' estimate fails to take\ninto account the fact that there is a great deal of trial and error involved in aeronautics R&D.2896\n9.146. Second, the European Union argues that , even assuming Boeing knew which technologies\nhad to be researched, the Boeing engineers' estimate of two additional years of time is an\nunrealistically low estimate from an engineering stan dpoint. According to the European Union, the\nproper counterfactual must take into account the necessary time that would have been required to\ncomplete the \"design, procurement, production, certification and delivery\" of 787 technologies,\nwhich the Boeing e ngineers' estimate fails to do. 2897 In support of this, the Airbus engineers refer\nto the time that it typically takes to develop new materials, build and test complex structural\nelements, build full scale test models, conduct flight testing, certify the airw orthiness, safety, and\nreparability of materials, and integrate new technologies into the final design. 2898 The\nEuropean Union also criticizes Boeing engineers f or failing to factor in that basic aeronautics R&D\nproceeds at a \"slower pace\" due to inherent unc ertainty in the effort and the need to minimize\nwasting research.2899\n9.147. Third, the European Union considers that the Boeing engineers' estimate is not based on a\n\"comprehensive, component-by-component timeline\"2900 of all of the tasks that Boeing would have\nhad to complete in relation to \"the millions of components that Boeing developed for the 787\" .2901\nInstead, the estimate focuses on a limited set of R&D tasks and technologies undertaken pursuant\nto a sub-set of NASA and DOD programmes, and ignores entirely work performed under dual-use\nmilitary RDT&E program elements.2902\n9.148. Fourth, the European Union argues that statements made by Boeing outside the context of\nlitigation contradict the plausibility of the Boeing engineers' estimate. The European Union refers\nto a pres entation by Boeing engineers Craig Wilsey and Robert Stoker, from Boeing Commercial\nAirplanes Engineering, Operations & Technology Department. 2903 In discussing \"{t}echnology\n{m}aturity {l}evels\" in relation to technology readiness levels (TRLs), their presentation indicated\nthat it takes \"{u}p to 10 years for major technologies\" to reach a TRL 6 and an additional \"3 to 6\n\n2894 Airbus Engineers' Response, (Exhibit EU-1014) (BCI).\n2895 Airbus Engineers' Response, (Exhibit EU-1014) (BCI), para. 13\n2896 Airbus Engineers' Response, (Exhibit EU-1014) (BCI), para. 13; and European Union's second\nwritten submission, paras. 974, 975, 989-999, 1003, 1008, and 1023-1030.\n2897 Airbus Engineers' Response, (Exhibit EU-1014) (BCI), para. 28.\n2898 Airbus Engineers' Response, (Exhibit EU-1014) (BCI), paras. 27-38.\n2899 European Union's second written submission, paras. 1028 and 1029; and Airbus\nEngineers' Response, (Exhibit EU-1014) (BCI), para. 14.\n2900 European Union's comments on United States' response to panel question No. 46, para. 307. See\nalso European Union's second written submission, paras. 1042-1047.\n2901 European Union's comments on United States' response to panel question No. 46, para. 307. See\nalso European Union's second written submission, paras. 1042-1047. For instance, Airbus engineers fault the\nBoeing engineers for failing to refer to the \"many US government-supported programmes that followed ATCAS\"\nthat contributed to the full barrel structure that Boeing now uses for the 787 composite fuselage. (Airbus\nEngineers' Response, (Exhibit EU-1014) (BCI), para. 69).\n2902 European Union's second written submission, paras. 1042-1047.\n2903 C. Wilsey, R. Stoker, \"Continuous Lower Energy, Emissions and Noise (CLEEN) Technologies\nDevelopment – Boeing Program Overview\", Presentation at the CLEEN Consortium Public Session,\n27 October 2010, (Exhibit EU-665), p. 4.\n\nyears\" before the LCA is ready for entry into service and first delivery. 2904 The European Union\nasserts that \"this timeframe is also corrobora ted by Boeing's Chief Technologist in stating that\n'R&D programs … provide little-to-no return for 15-20 years {because,} in the aviation industry, it\ncan take that long, if not longer, for a technology to move from discovery to maturation to\ncommercialization and implementation on a product'\".2905\n9.149. Fifth, the European Union argues that the Boeing engineers' estimate is also contradicted\nby the difficulties encountered by Boeing engineers in resolving the problems relating to the final\ndevelopment of the 787, w hich resulted in the delay s of the first delivery of the 787 by nearly\nthree and a half years .2906 According to the European Union, the delays of the 787's entry into\nservice contradict the proposition that Boeing could have researched the fundamental technol ogies\ndeveloped under the NASA and DOD aeronautics R&D programmes in less than two years. 2907 The\nAirbus engineers assert that Boeing's handling of the 787 production delays serves as \"real-life\"2908\nexperience demonstrating Boeing's inability to resolve \"even t hese more concrete, defined\nproblems\"2909, contradicting the notion that \"solving engineering problems is merely a question of\ndedicating enough engineering resources and money, and less a question of taking the time to\ncarefully resolve the engineering probl ems encountered\". 2910 The European Union submits a\nstatement by an Airbus engineer which contains a lengthy discussion of what he considers are the\nreasons for the delays in the entry into service of the 787; including the selection of a green field\nsite, \"in adequate supplier selection\", and \"inadequate supply chain coordination and\nsupervision\".2911\n9.150. Sixth, the European Union rejects the suggestion that Airbus' experience developing the\nA350XWB serves as a benchmark that confirms the Boeing engineers' estimate of the amount of\nadditional time it would have taken Boeing to develop the technologies in order to launch the 787.\nThe European Union contends that the attempt by the Boeing engineers to confirm their estimate\nby reference to Airbus' experience with the A35 0XWB \"compares apples with oranges\" 2912, since\nthe composite technology solutions on the two LCA differ significantly and the A350XWB does not\nincorporate a \"more -electric\" systems architecture. Hence, the Panel would need to add\nsignificantly to the A350XWB development time to account for these technological differences\nbefore making any comparison, as the composite technology solutions and \"more-electric\" systems\narchitecture would take additional time to develop . The European Union also argues that, even\nwithout factoring in additional time to account for the technological differences between the\nA350XWB and 787, the Boeing engineers' estimate is wrong, as it has actually taken Airbus almost\n[[HSBI]] to develop the A350XWB without a full barrel composite fus elage or \"more -electric\"\nsystems architecture, as compared to the 787 development time.2913\n\n2904 C. Wilsey, R. Stoker, \"Continuous Lower Energy, Emissions and Noise (CLEEN) Technologies\nDevelopment – Boeing Program Overview\", Presentation at the CLEEN Consortium Public Session,\n27 October 2010, (Exhibit EU-665), p. 4. The European Union refers to a presentation slide by Boeing\nengineers that indicates that 8-10 years is the \"reality\" for the time it takes to identify materials until they are\nproduction ready. (See European Union's comments on United States' response to Panel question No. 153,\npara. 22 (referring to G. Young, Director Materials & Fabrication Technology, \"The Challenge of New Materials\nIn the Aerospace Industry\", Presentation at Georgia Institute of Technology, 15 May 2013, (Exhibit EU-1663),\nslide 8)).\n2905 European Union's comments on United States' response to Panel question No. 153, para. 22\n(referring to Statement of Dr J. Tracy, Boeing Chief Technologist, before the U.S. Senate Committee on\nCommerce, Subcommittee on Aviation Operations, Safety, and Security, Hearing on \"Threats to U.S.\nCompetitiveness in Aviation\", 18 July 2012, (Exhibit EU-82) (emphasis added by the European Union)).\n2906 At the time of launch in April 2004, Boeing committed to deliver the 787 to launch customers\nbeginning in May 2008. However, entry into service was delayed until 26 October 2011. (See \"Boeing 787 Hits\nAnother Snag, Dreamliner's Timeline of Pain (BA)\", 247wallst.com, 10 November 2010, (Exhibit EU-1161); and\nT. Kelly, \"Dreamliner carries its first passengers and Boeing's hopes\", Reuters, 26 October 2011, (Exhibit\nEU-1181)).\n2907 European Union's second written submission, paras. 1009 and 1010; and Airbus\nEngineers' Response, (Exhibit EU-1014) (BCI), para. 10.\n2908 Airbus Engineers' Response, (Exhibit EU-1014) (BCI), para. 8.\n2909 Airbus Engineers' Response, (Exhibit EU-1014) (BCI), para. 10. (emphasis original)\n2910 Airbus Engineers' Response, (Exhibit EU-1014) (BCI), para. 3.\n2911 Statement of B. Domke on the engineering-related aspects of the Panel's first set of questions,\n4 December 2013, (Exhibit EU-1268) (BCI), paras. 5-22.\n2912 Airbus Engineers' Response, (Exhibit EU-1014) (BCI), para. 3.\n2913 European Union's second written submission, paras. 1011-1013; response to panel question No. 45,\nparas. 318-330; and Airbus Engineers' Response, (Exhibit EU-1014) (BCI), paras. 3, 14, and 47-62. Airbus\n\nThe Panel's evaluation of the two estimates\n9.151. We begin by considering the arguments presented by the European Union that it would\nhave taken Boeing at least an additional ten years or more to develop an aircraft equivalent to the\n787 absent the pre -2007 aeronautics R&D subsidies. We then consider the merits of the estimate\nprovided by the United States based on the Boeing Engineers' Statement, addressing the economic\nfeasibility of launching the 787 without the pre -2007 aeronautics R&D subsidies, as well as the\nEuropean Union's criticisms of the methodology employed by the Boeing engineers and the\ntechnical feasibility of their estimate. Finally, w e consider whether Airbus' experience with the\nlaunch of the A350XWB is relevant to assessing the plausibility of the counterfactual a nalyses of\nwhether, absent the pre -2007 aeronautics R&D subsidies , Boeing likely would have launched the\n787 before or after the end of the implementation period.\n9.152. In our evaluation of the arguments of the parties with regard to how the timing of Boeing's\ntechnology development in respect of the 787 would have been different absent the pre -2007\naeronautics R&D subsidies, an important issue is whether these arguments are consistent with the\nfindings of the panel and the Appellate Body in the original proceeding as to the precise role of\nthese subsidies in accelerating Boeing's technology development with respect to the 787. T he\nEuropean Union's affirma tive case regarding the amount of additional time that it would have\ntaken Boeing to develop and launch the 787 proceeds on the basis that the relevant counterfactual\nquestion concerns the amount of additional time that it would have taken an LCA manufactu rer\nlike Boeing to research, develop, produce, certify, and deliver the 787. If we were to formulate the\ncounterfactual question in the terms proposed by the European Union, the estimate of the time we\narrive at would also include time to undertake activit ies (internal R&D conducted by Boeing and its\nsuppliers, production, certification and delivery) that were not found to have been effects of the\npre-2007 aeronautics R&D subsidies in the original proceeding. The original panel did not consider\nthat Boeing' s technology development in relation to the 787 was solely the result of Boein g's\nsubsidized participation in NASA and DOD aeronautics R&D programmes. Nor did it consider that\nthe acceleration effect of the aeronautics R&D subsidies encompassed phases in t he development\nof the 787 beyond its launch. Therefore, by formulating the counterfactual question in terms of the\namount of additional time it would have taken Boeing to research, develop, produce , certify and\ndeliver the 787 absent the subsidies, the European Union's estimate erroneously attributes to the\npre-2007 aeronautics R&D subsidies aspects of the 787's development that were not found to have\nbeen accelerated by Boeing's participation in the relevant NASA and DOD aeronautics R&D\nprogrammes.2914\n9.153. A furt her difficulty with respect to the European Union's argument s is that the\nEuropean Union has not provided a clear statement on its behalf, or supporting evidence, that the\n787 would not have launched until after the end of the implementation period. Its af firmative case\ninstead has referred to an estimate of the amount of time required to develop technologies and\ndesign tools (more than ten years), an estimate of the extent of the delay in delivering the 787\n([[HSBI]]), and a statement that the launch would have been delayed \"by a similar amount of\ntime\". The Panel is uncertain whether it should infer from the foregoing that it is the\nEuropean Union's position that Boeing, absent the aeronautics R&D subsidies, would not have been\nable to launch the 787 before September 2012.2915\n9.154. Turning to the United States' estimate, we first address the European Union's criticism that\nthe United States has failed to address whether Boeing would have considered it economically\nrational and commercially feasible to have proceed ed with the launch of the 787 at a point later\nthan 2004 absent the pre-2007 aeronautics R&D subsidies. The European Union's criticism appears\nto rely in great part on statements by the original panel to the effect that there are large\n\nengineers assert that the four panel fuselage section is considered \"lower risk\" compared to the 787's 360°\nbarrel composite design (R. Wall and A. Rothman, \"Airbus Says A350 Design Is 'Lower Risk' than Troubled\n787\", Bloomberg, 17 January 2013, (Exhibit EU-1168)). See also Statement of P. Gavin, T. Sommer,\nB. Domke, and D. Wacht, 8 November 2007, (Exhibit EU-33) (HSBI), para. 13.\n2914 See e.g. European Union's second written submission, paras. 975 and 1031-141; response to panel\nQuestion No. 45, paras. 320 and 330; and comments on United States' response to Panel question No. 47,\npara. 312.\n2915 See also European Union's comments on United States' response to Panel Question No. 47,\npara. 320 and fn 552.\n\ndisincentives inherent in conducting long -term, high-risk aeronautics R&D. 2916 The United States\nresponds that the Boeing engineers' estimate is fully consistent with the panel's findings in the\noriginal proceeding. The United States argues that the original panel findings estab lish that the\npre-2007 aeronautics R&D subsidies provided foundational knowledge relevant to Boeing's\npre-launch R&D, which accelerated the launch of the 787.2917 While noting the panel's finding that\nthere are disincentives to undertake early -stage R&D, the United States maintains that those\ndisincentives diminish over time, particularly as near -term commerci al priorities arise. The\nUnited States further rejects the assertion that additional research undertaken absent the\npre-2007 aeronautics R&D subsidies wo uld have any impact on the 787 business case, as any\npre-launch R&D projects would have been funded through Boeing's Independent R&D budget for\ncommercial aircraft, and would have been treated as [***].2918\n9.155. While we agree with the original panel's general obs ervations regarding disincentives\ninherent in conducting long-term, high-risk aeronautics R&D, we are also inclined to agree with the\nUnited States that those disincentives diminish as a practical matter as near -term commercial\npriorities arise. We are sat isfied on the basis of the evidence before us and in light of the findings\nof the original panel that the commercial imperatives in the early 2000s were such that a critical\ncommercial priority for Boeing was to develop a new, highly -efficient mid-sized, twin-aisle aircraft\nto replace the 767.2919\n9.156. In this regard, we note that the original panel did not consider that Boeing was not\ncapable, based on its engineering and technological capabilities unrelated to the pre -2007\naeronautics R&D subsidies, and those of its suppliers, of developing such an aircraft. Consistent\nwith these considerations, t he European Union itself does not argue that the 787 technologies in\nquestion \"would never have existed\" absent the pre -2007 aeronautics R&D subsidies. 2920 Indeed,\nwe would emphasize that in the original proceeding, the European Communities argued that in the\nabsence of the aeronautics R&D subsidies at issue, Boeing would not have been able to launch the\n787 or a comparable aircraft until mid-2006.2921\n9.157. As we have explained abov e, we are attempting to reach a reasonable estimate of how\nlong it would have taken Boeing to undertake the subsidized R&D activities absent the pre -2007\naeronautics R&D subsidies and therefore, when the 787 would have launched absent those\nsubsidies. There is no evidence before us, and no support in the findings in the original proceeding,\nthat suggests the possibility that Boeing would have taken a commercial decision not to proceed\nwith the development of the 787 with all of the technologies, absent the pre-2007 aeronautics R&D\nsubsidies. To the extent that this is what the European Union means when it argues that additional\ncosts, deferred revenues and additional risk arising from a delay in the launch of the 787 \"would\nhave reduced, or even undermined, the viability of the 787\", we are unable to agree.\n9.158. The European Union argues that it is for the United States to demonstrate that Boeing\nwould have invested all of the necessary funds to conduct the necessary pre -launch R&D. We\ndisagree, as we do not cons ider there is sufficient evidentiary support for the proposition that\nBoeing would not have proceeded to develop the 787 at all absent the pre -2007 aeronautics R&D\n\n2916 See European Union's second written submission, paras. 1014-1022 (referring to Appellate Body\nReport, US – Large Civil Aircraft (2nd complaint), paras. 980 and 1009; and Panel Report, US – Large Civil\nAircraft (2nd complaint), paras. 7.1747 and 7.1760).\n2917 United States comments on European Union's response to Panel question No. 45, para. 293.\n2918 Boeing engineers submit that Boeing's independent R&D budget for commercial aircraft is [***]\n(See Boeing, Reply of Boeing engineers to EU and Airbus statements regarding the technologies and\ndevelopment of the 787, 737 MAX, and 77X, August 2013 (Boeing Engineers' Reply), (Exhibit USA-359) (BCI),\nparas. 10-12).\n2919 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1747. The panel indicated that it was\nsatisfied based on the evidence that Boeing would have developed an LCA to replace the 767 and noted that\nthe European Union did not object to this as it did not argue that Boeing would not have launched a new\naircraft in the 200-300 seat LCA product market. (Panel Report, US – Large Civil Aircraft (2nd complaint),\npara. 7.1774 and fn 3704). See also Boeing Engineers' Statement, (Exhibit USA-283) (BCI), paras. 9 and 10.\n2920 European Union's comments on United States' response to Panel question Nos. 153, para. 18, and\n156, para. 70. (emphasis original)\n2921 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 4.280 (\"{t}he European Communities\nargues that, had Boeing needed to develop the 787 using its own resources, the 787 would likely not have\nbeen launched any earlier than mid-2006, by which time Airbus would have been ready to compete with the\nA350XWB-800. Moreover, a non-subsidized 787, like the A350XWB-800, would have required a longer period\nbefore it could be delivered.\")\n\nsubsidies. We note that, beyond generalized assertions, the European Union has not itself\npresented specific evidence of the additional costs or risks, or the amount of deferred revenues\nthat would have resulted had Boeing not benefited from its participation in the NASA and DOD\naeronautics R&D programmes. Nor is there any evidence before us conc erning the 787 business\ncase that would enable the Panel to undertake the type of financial assessment to determine the\nviability of the Boeing engineers' estimate. 2922 We note that t he original panel did not accept\narguments that Boeing lacked the financial resources to engage in the same commercial behaviour\n(including its product development behaviour) absent the subsidies at issue in the original\nproceeding, and the European Union in this proceeding does not attempt to substantiate any\nargument that Boeing would have lacked the financial resources to develop 787 absent the\npre-2007 aeronautics R&D subsidies.\n9.159. We next evaluate the European Union's argument that the United States has failed to\ndemonstrate that it would have been technically feasible to launch the 787 in 2006 (rather than\nthe actual launch in 2004) absent the pre -2007 aeronautics R&D subsidies, as the Boeing\nengineers conclude in the Boeing Engineers' Statement.\n9.160. The European Union's argument involves criticisms of the Boeing engineers' estimate and\nis generally directed at: (a) the Boeing engineers' methodological approach (e.g. the Boeing\nengineers improperly estimate the time to replicate research even though Boeing would not have\nknown which technologies were technically feasible, fail to acc ount for the time to design, procure,\nproduce, certify, and deliver the 787 and fail to account for Boeing's participation in all of the\nrelevant NASA and DOD aeronautics R&D programmes); (b) the implausibility of the Boeing\nengineers' estimate in light of statements made by Boeing engineers outside the context of this\ndispute and nearly 3.5 years of delays faced by Boeing following the launch in 2004; and (c ) the\nirrelevance of the United States' reference to the development of the A350XWB as a benchmark t o\nconfirm the Boeing engineers' estimate. 2923 We begin by addressing the European Union's\ncriticisms of the Boeing engineers' methodology before turning to the relevance of statements by\nBoeing engineers and delays following the 787's launch, and the parties' disagreement regarding\nthe relevance of the development of the A350XWB to our assessment.\n9.161. We have already addressed above the flaw inherent in the European Union's argument that\nthe counterfactual assessment of Boeing's technology development in relation to the 787 absent\nthe pre-2007 aeronautics R&D subsidies should consider the entire development period of the 787\nbeyond its launch (including the time it would have taken Boeing to develop, mature, produce, and\ncertify 787 technologies, and the time to in tegrate those components into a single aircraft, as the\nEuropean Union argues), which approach we consider is inconsistent with the findings in the\noriginal proceeding and would risk attributing unsubsidized aspects of the 787's development to\nthe effects of the subsidies.\n9.162. The European Union's criticism of the Boeing engineers' methodology is otherwise highly-\ngeneralized in nature, and ultimately unpersuasive. The Boeing engineers s eek to identify tasks\nthat Boeing conducted under the challenged NASA and DO D aeronautics R&D programmes and\nthen to assess the additional time that Boeing would have required to conduct that work using the\ninternal resources of Boeing and its suppliers, i.e. they evaluate the time Boeing would have\nneeded to conduct the tasks had Boeing not participated in the relevant aeronautics R&D\nprogrammes.2924 The Boeing engineers identify aspects of the development of key technological\nareas of the 787, including tasks related to material choice and design for the fuselage, the\nconstruction o f early wing box designs necessary to develop the 787 composite wing, the\ndevelopment of CFD design tools, and of prototypes of generators and motor controllers for the\n787 more-electric system architecture. 2925 They derive their estimates by first identifyin g other,\nspecific unsubsidized early -stage R&D activities in the pre -launch development phase for the\n7E7/787 that they consider were either \"comparable to, or more demanding\" than, the type of\ntasks that Boeing conducted under the relevant aeronautics R&D programmes, and note the time\nthat was required to conduct those unsubsidized R&D tasks. The Boeing engineers use the time\n\n2922 Having rejected the European Union's argument for these reasons, we do not consider it necessary\nto address further the manner in which Boeing allocates Independent R&D budget funds for pre-launch R&D\nprojects.\n2923 European Union's response to Panel question No. 45, paras. 324-330 and 331-341.\n2924 See para. 9.136 above.\n2925 See Boeing Engineers' Statement, (Exhibit USA-283) (BCI), paras. 22-23, 30, and 32-34.\n\nthat was required to conduct those unsubsidized tasks as a proxy to estimate the time that Boeing\nwould have needed in the counterfa ctual scenario to conduct the early -stage research that it\nactually conducted under the aeronautics R&D programmes. Under this counterfactual, the Boeing\nengineers estimate that Boeing would have undertaken the necessary R&D work , especially\nconsidering th at Boeing was under commercial pressure to develop a highly -efficient, mid-sized\ntwin-aisle aircraft to replace the 767.2926\n9.163. The methodological approach of the Boeing engineers is in certain respects similar to the\napproach taken by the panel in the original proceeding. The original panel considered the ways and\ndegree to which the NASA and DOD aeronautics R&D subsidies contributed to the development of\nparticular 787 technologies in its evaluation of whether and the extent to which the aeronautics\nR&D subsidies contributed to the development and launch of the 787. The panel's findings do not\nreflect every aspect of the 787 development process. 2927 The panel stopped short of reaching\nconclusions as to how much of a competitive advantage the subsidies provided Boei ng in the form\nof an accelerated launch, reasoning that it only needed to establish that Boeing would not have\nbeen able to launch the 787 as early as it did in 2004 absent the subsidies.\n9.164. The European Union faults the Boeing engineers generally for failing to account for the\nslow pace of developmental research, and for otherwise overlooking the time required to learn\nfrom trial and error. In doing so, the European Union argues that the Boeing engineers' estimate\nfails to properly account for the additional upfront time to acquire knowledge and experience\nsufficient to determine which technologies it is feasible to research before measuring the time to\nconduct that research. 2928 Similarly, the European Union alleges that the Boeing engineers fail to\nprecisely identify \"the millions of components that Boeing developed for the 787\" 2929, and provide\na \"comprehensive, component -by-component timeline\" 2930 of all of the tasks that Boeing would\nhave had to complete under every challenged NASA and DOD aeronautics R&D programme .\nDespite these criticisms, the European Union does not itself enumerate the specific additional tasks\nthat Boeing should have reflected in its assessment, and importantly, the European Union does not\nprovide evidence of how long Boeing would have needed t o conduct any of the R&D tasks that\nwere actually performed under the NASA and DOD aeronautics R&D programmes. 2931 The\nEuropean Union has also failed to provide specific evidence to rebut the timing estimates that the\nBoeing engineers provide for the specific R&D tasks discussed in their statement.\n\n2926 Boeing Engineers' Statement, (Exhibit USA-283) (BCI), para. 7.\n2927 The panel's findings on the operation of the aeronautics R&D subsidies, in particular, refer to the\nimportance of the design, building, and testing of a four-panel fuselage design, which Boeing performed under\ncertain NASA aeronautics R&D programmes, to the development of the 787's 360° barrel fuselage design; and\nof Boeing's work designing, fabricating, testing, and demonstrating power management and distribution\narchitectures, electrical actuators and starter/generators to Boeing's design and development of the\nmore-electric architecture of the 787. (See Panel Report, US – Large Civil Aircraft (2nd complaint),\nparas. 7.1751 and 7.1752).\n2928 For instance, the European Union refers to the \"slower pace\" of early-stage R&D, the need to\naccount for trials and errors and the fact that unsuccessful research is valuable, and general references by\nAirbus engineers to the time it takes to introduce new materials and structural design solutions in LCA through\na \"building block approach\". (Airbus Engineers' Response, (Exhibit EU-1014) (BCI), paras. 68-87).\n2929 European Union's comments on United States' response to panel question No. 46, para. 307 (fn\nomitted). See also European Union's second written submission, paras. 1042-1047. For instance, Airbus\nengineers fault the Boeing engineers for failing to refer to the \"many US government-supported programmes\nthat followed ATCAS\" that contributed to the full barrel structure that Boeing now uses for the 787 composite\nfuselage. (Airbus Engineers' Response, (Exhibit EU-1014) (BCI), para. 69).\n2930 European Union's comments on United States' response to panel question No. 46, para. 307. See\nalso European Union's second written submission, paras. 1042-1047.\n2931 Rather than identify discrete tasks that were conducted under the NASA and DOD aeronautics R&D\nprogrammes, the European Union argues in this proceeding that the Boeing engineers omit many U.S.\ngovernment-supported programmes, and otherwise fail to acknowledge the inter-dependence and\ncomplementarity of NASA programmes and the value of knowledge and experience that Boeing acquired\nthrough its participation. (Airbus Engineers' Response, (Exhibit EU-1014) (BCI), paras. 68-87). The\nEuropean Union has also resubmitted certain exhibits in this proceeding that were originally provided in the\noriginal proceeding. These include the statement by Airbus Engineer Dominik Wacht entitled \"An Analysis of\nSelected NASA Research Programs and Their Impact on Boeing's Civil Aircraft Programs\" in this proceeding.\n(See Statement of D. Wacht, Boeing, An Analysis of Selected NASA Research Programs and Their Impact on\nBoeing's Civil Aircraft Programs, November 2006, (Exhibit EU-32) (BCI)). The European Union has also\nsubmitted Exhibit EU-1664, which recapitulates the contribution of NASA and DOD aeronautics R&D\nprogrammes to the development process of the 787. These statements do not provide estimates of the time to\nundertake the specific R&D tasks that were alleged to have been performed under the NASA and DOD\naeronautics R&D programmes.\n\n9.165. It is the European Union's burden to establish that the pre-2007 aeronautics R&D subsidies\ncontinue to cause any of the alleged serious prejudice market phenomena in the\npost-implementation period. There are undoubtedly many complex steps and interactions involved\nin the launch of an LCA, especially one as technologically innovative and complex as the 787. The\npanel was clear in the original proceeding that it did not consider the technologies developed and\napplied to the 787 were solely attributable to the aeronautics R&D subsidies. Given this, there is\nno reason why this Panel should include in its estimate the development time in relation to tasks\nthat were not attributable to the subsidies. It is difficult to acce pt the European Union's\ngeneralized criticisms of the United States' estimate in the absence of any clear estimate from the\nEuropean Union as to how much additional time Boeing would have needed to conduct any of the\nR&D tasks that were actually performed under the NASA and DOD aeronautics R&D programmes.\n9.166. For similar reasons, we are not persuaded by the European Union's argument that the\nBoeing engineers' estimate is contradicted by statements made outside the context of litigation\nand by the delays faced in the later stages of the 787's development. Statements made by Boeing\nengineers that the European Union has cited regarding the time that is required to develop and\nmature technologies are also highly generalized and do not speak to the contribution of th e\nchallenged aeronautics R&D subsidies in respect of Boeing's overall development of the 787. 2932\nWe similarly fail to see the relevance of approximately 3.5 years in delays following the launch of\nthe 787 programme to our assessment of the additional time it would have taken Boeing to launch\nthe 787 absent the subsidies. The fact that, in the real world, Boeing underestimated the nature of\nthe technological challenges that would arise following the launch of the 787 does not speak to the\nadditional time that Boeing would have needed to conclude the type of early -stage R&D tasks that\nwere conducted under the challenged NASA and DOD aeronautics R&D programmes in order to\nhave the confidence to proceed with the launch of the 787.2933\n9.167. Finally, we address the question of whether Airbus' experience in developing the A350XWB\nis relevant to our analysis of the credibility of the Boeing engineers' estimate of the additional\namount of time it would have taken Boeing to launch an aircraft that would have been\ntechnologically comparable to the 787 absent the pre-2007 aeronautics R&D subsidies.\n9.168. According to the Airbus engineers 2934, the development time for the A350XWB should\nactually be understood as having begun in December 2004, at the time Airbus began development\nof the comp osite wing for the Original A350 family LCA model, which was itself based on the\naluminium fuselage design of the A330. The Airbus engineers explain that the Original A350 was\nlaunched at that time in an attempt to compete with the newly -launched 787. Owin g to the\nnegative market reaction to the Original A350, Airbus undertook a \"clean sheet\" design of a\ncompletely new aircraft, the A350XWB, which retained the composite wing design that had been\ndeveloped for the Original A350, but otherwise incorporated a four-panel carbon fibre reinforced\nplastic (CFRP) fuselage.2935\n9.169. The A350XWB was launched in December 2006. According to the Airbus engineers, Airbus\nundertook a front -load design and product development process called DARE (Develop and\n\n2932 In its discussion of a 1999 NASA study of the average time taken for technologies to mature from\ninitial concept to marketable product, based on NASA's defined technology readiness levels (the Peisen Study),\nthe original panel noted the \"considerable variability in the time it takes for technologies to mature, with\naverage maturation times varying by technology type, by the technology's primary benefit or goal, and to a\nlesser extent, by the need for additional technologies or NASA testing for the successful maturation of the\ntechnology\". (Panel Report, US – Large Civil Aircraft (2nd complaint), fn 3668). The European Union in this\nproceeding \"recalls the agreement between the Parties, at the Panel meeting, that the precise timeframes set\nout in the {Peisen}study are of lesser relevance to the compliance Panel's assessment, because, as the original\npanel and the Appellate Body have themselves found, the study was based on a variety of different aircraft\ntechnologies with widely varying maturation times\". (European Union's response to panel question No. 46,\npara. 362 (emphasis original)).\n2933 Other than a generalized notion that complex technical issues can take time to resolve, the\nEuropean Union has not explained how difficulties arising from supplier outsourcing and supply chain issues are\ncomparable to those arising in relation to the type of early-stage R&D that Boeing conducted pursuant to its\nparticipation in the NASA and R&D programmes.\n2934 See Airbus Engineers' Response, (Exhibit EU-1014) (BCI), paras. 49-56.\n2935 Airbus engineers explain that the A350XWB airframe incorporates 53% of composite structures in\naddition to the use of titanium and advanced aluminium alloys, constituting \"{o}ver 70 percent of the\nA350XWB's weight-efficient airframe\". (Airbus Engineers' Response, (Exhibit EU-1014) (BCI), para. 51).\n\nRamp-up Excellence)2936, which involved [[HSBI]] of pre-launch research between [[HSBI]] in\nwhich Airbus assessed the feasibility of design options taking into account aircraft design maturity,\nramp-up time, and fulfilment of contractual commitments to customers. 2937 Pursuant to this new\ndevelopment approach, Airbus undertook the development, maturation, production, and\ncertification of the A350XWB up to its date of first flight in June 2013. Thus, the Airbus engineers\nassert that the period of time from launch until entry to service in 2014 is [[HSBI]].2938 The\nAirbus engineers assert that the full development time of the A350XWB is [[HSBI]], taking into\naccount the time from early stages of development of its composite wing (originally designed for\nthe cancelled Original A350 family LCA model) through research, development , and production\nphases until the date of first flight and certification. The Airbus engineers state that the \"nine\nyears, from 2004-2013, to research, develop, produce and test the {composite} wing, which is yet\nto be certified. … stands in stark contrast to the 18 months Boeing engineers allege it would have\ntaken them to 'develop a composite wing for the 787'\".2939\n9.170. As we have explained previously, what is relevant to our assessment is the additional time\nthat Boeing woul d have required to conclude the relevant R&D tasks that were completed under\nthe NASA and DOD aeronautics R&D subsidies, to allow Boeing to proceed with the launch of the\n787 (and announcement of promised deliveries) had Boeing not participated in the NASA and DOD\naeronautics R&D programmes. Therefore, to the extent an analysis of the development of the\nA350XWB is to provide a benchmark to determine the reasonableness of the United\nStates' two-year estimate, our comparison should focus on the time required to conclude the\npre-launch development of the two aircraft. This is consistent with the findings in the original\nproceeding, and avoids attributing to the subsidies aspects of the development that were not\naccelerated by Boeing's participation in the relevant NASA and DOD aeronautics R&D programmes.\n9.171. The Boeing engineers have indicated that certain systems developed for the 787 were\ncarried over from the Sonic Cruiser development programme. 2940 Aside from this, the Boeing\nengineers state that Boeing began inten sive pre -launch R&D specifically related to the 787 in\n[***].2941 Boeing formally launched the 787 on 26 April 2004. The time from the start of intensive\npre-launch R&D on the 787 ( [***]) until formal launch (April 2004) was approximately [***]. In\naddition, the Boeing engineers assert that Boeing could have conducted all the necessary research\nto launch the 787 before the end of April 2006 (with promised deliveries in 2010) absent the pre -\n2007 aeronautics R&D subsidies. If we accept the Boeing engineers' esti mate, the time from the\nstart of intensive pre -launch R&D on the 787 (November 2002) until a counterfactual -adjusted,\nnon-subsidized launch of the 787 (April 2006), would be approximately [***].\n9.172. Turning to the pre -launch development period for the A350XWB, the Airbus engineers\nstate that Airbus began work on the composite wing design of the A350XWB (which originally\nformed part of the Original A350 design) in December 2004. According to the United States, Airbus\nbegan entering into customers commitments in July 20062942, although formal launch took place in\nDecember 2006.2943 If we treat the starting point of pre -launch R&D for the A350XWB as the date\nwhen work began on the composite wing design for the A350XWB until its official launch in\n\n2936 Airbus engineers explain that DARE begins at early study phase and continues through design,\nprocurement production, certification, delivery, in-service operation, and support. (Airbus Engineers' Response,\n(Exhibit EU-1014) (BCI), para. 53 and accompanying slides).\n2937 Airbus Engineers' Response, (Exhibit EU-1014) (BCI), paras. 52 and 53.\n2938 Airbus Engineers' Response, (Exhibit EU-1014) (BCI), para. 55.\n2939 Airbus Engineers' Response, (Exhibit EU-1014) (BCI), para. 56 (referring to Boeing\nEngineers' Statement, (Exhibit USA-283) (BCI), para. 27). (emphasis original)\n2940 United States' second written submission, para. 805; and Boeing Engineers' Statement, (Exhibit\nUSA-283) (BCI), paras. 30 and 33 (referring to in-house work on generic TRANAIR and OVERFLOW CFD codes\nand preliminary work on a \"more-electric\" system architecture).\n2941 United States' second written submission, para. 805; and Boeing Engineers' Statement, (Exhibit\nUSA-283) (BCI), para. 15 (\"{i}n 2000, Boeing made the decision to undertake a new aircraft development\nprogram. While studying three concepts in parallel (i.e., the 747-X, Sonic Cruiser, and 7E7), we focused efforts\non the Sonic Cruiser … In [***] Boeing decided to shift its new product development efforts away from the\nSonic Cruiser to the 7E7 …\").\n2942 United States' second written submission, paras. 801 and 806 (referring to \"Singapore Airlines\nOrders 20 Airbus A350 XWB-900s and 9 Airbus A380s\", Business Wire, 21 July 2006, (Exhibit USA-291)).\n2943 Airbus Engineers' Response, (Exhibit EU-1014) (BCI), para. 51.\n\nDecember 2006, Airbus sp ent approximately [***] on pre-launch R&D before formally offering\nthe A350XWB to customers.2944\n9.173. Therefore, the United States' estimate that the launch and delivery of the 787 would have\nbeen delayed by approximately two years absent the pre -2007 aeronautics R&D subsidies in fact\nresults in a longer pre -launch development period for the 787 than the equivalent pre -launch\ndevelopment time -frame for the A350XWB. Adding two additional years for the counterfactual\nlaunch of an unsubsidized 787 in 2006, Boeing woul d have spent nearly [***] undertaking\npre-launch R&D before launching the 787, compared to Airbus, which spent approximately [***]\nundertaking pre-launch R&D for the A350XWB.\n9.174. In addition to its argument that the entire development period to the point of first delivery,\nand not just the pre -launch R&D period, is relevant to the counterfactual, the European Union\noffers a number of reasons why we should not rely on Airbus' experience in developing the\nA350XWB to evaluate the reasonableness of the United Stat es' two-year estimate. The\nEuropean Union argues that a direct comparison between the development times for the two\naircraft cannot be made without adjustments, as the 787 and A350XWB have different composite\nfuselage designs, and the A350XWB does not employ a \"more electric\" system architecture like the\n787 does.2945\n9.175. We recognize that the 787 and A350XWB are two different aircraft in terms of their design\nand technical solutions. Indeed, the parties agree that the 787 and A350XWB are not identical. 2946\nAccordingly, the development time for one aircraft is not perfectly indicative of the development\ntime for the other. Nevertheless, despite the differences in their design and technical solutions, the\nfact that Airbus was able to proceed from a \"clean sheet\" desig n of the A350XWB to a point where\nit had sufficient confidence to undertake the formal launch of the A350XWB in a period of roughly\n[***], having never previously produced an Airbus aircraft with a composite fuselage provides, \"a\ngeneral sense of what rang e of estimates is reasonable\". To the extent that the 787's barrel\ncomposite fuselage design and \"more electric\" system architecture would have implications for the\nlength of the aircraft development cycle, and in particular, the pre -launch development tim e, the\nUnited States' counterfactual allows for two additional years of pre -launch development, which\n\n2944 If we treated the point at which Airbus offered the A350XWB to Singapore Airlines in July 2006, the\ntime between pre-launch R&D and offering would be shorter, approximately 1.5 years.\n2945 In addition, the European Union argues that the United States must account for any alleged effects\nof alleged subsidies on the A350XWB's development process, as the United States has characterized the\ndevelopment process of the A350XWB as subsidized in another dispute. (See European Union's response to\nPanel question No. 45, fn 407). The United States responds that EC and certain member States – Large Civil\nAircraft is a separate and distinct dispute. Notwithstanding, it argues that the findings in that dispute were\nthat, absent launch aid/member State financing subsidies, Airbus most likely would not have existed, there\nwould be no Airbus aircraft on the market, and none of the sales that the subsidized Airbus made would have\noccurred. Therefore, the United States submits that, if it accounted for subsidies to the A350XWB, there would\nbe no A350XWB timeline at all. (United States comments on European Union's response to Panel question No.\n45, fn 474 (referring to Appellate Body Report, EC and certain member States – Large Civil Aircraft,\npara. 1264)).\n2946 European Union's second written submission, paras. 1011-1013; response to panel question No. 45,\nparas. 318-330; Airbus Engineers' Response, (Exhibit EU-1014) (BCI), paras. 3, 14, and 47-62; United States'\nsecond written submission, para. 804. The European Communities in the original proceeding asserted that the\nA350XWB \"offer{s} customers comparable, if not better, performance and operating characteristics as Boeing's\n787\". (EC response to panel question No. 87 of the panel questions in the original proceeding, para. 404,\n(Exhibit USA-290) (HSBI)). The European Union has also not demonstrated on the evidence that the 787's\nbarrel composite fuselage or \"more electric\" systems architecture design has materially increased the 787's\ncompetitive appeal over the A350XWB. In addition, the performance of the A350XWB in the market is also\nconsistent with the view that LCA customers consider the A350XWB to be in the same league as the 787 in\nrespect of its mission capabilities, performance, efficiency, and price. We note that during the 2007-2015 time-\nperiod, Airbus obtained more orders of the A350XWB (780) than Boeing obtained for the 787 (749). (Ascend\ndata base, Orders, data request as of 29 September 2015, (Exhibit EU-1658)). Setting aside 767 and A330\norders by customers, since its launch in 2004, Boeing has obtained 1097 orders of the 787 through 2015, while\nAirbus has obtained 781 orders of the A350XWB during the same period. This constitutes a difference of 316\ntotal orders in Boeing's favour. For purposes of comparison, Boeing captured 348 orders of the 787 during the\n2004-2006 time-period before Airbus launched the A350XWB.\n\nmeans that the 787 pre -launch development period would exceed the A350XWB pre-launch\ndevelopment period by [***].2947\n9.176. The Panel has carefully evaluated the arguments of the parties and the evidence before it,\nincluding assessing the relevance and probity of the evidence. We have concluded that it is simply\nnot plausible, and the European Union has failed to establish that, absent the aeronautics R&D\nsubsidies, Boeing would not have launched the 787 by the end of the implementation period in\nSeptember 2012. Although it is more difficult for us to confidently predict exactly when Boeing\nwould have been able to launch the 787 absent the pre -2007 aeronautics R&D subsidies, we have\nconcluded that it would be well before (i.e. at least several years before) the end of the\nimplementation period.\n9.177. In light of the foregoing , we conclude that the European Union has failed to demonstrate\nthat the acceleration effect of the pre -2007 aeronauti cs R&D subsidies in relation to Boeing's\ntechnology development for the 7872948, has continued into the post -implementation period. The\nEuropean Union has therefore failed to demonstrate the existence of original subsidy technology\neffects of the pre-2007 aeronautics R&D subsidies in the post-implementation period.\n9.3.2.1.2 Spill-over technology effects of the pre-2007 aeronautics R&D subsidies\n9.178. In the preceding Section in this Report we evaluate the European Union's arguments that\nthe original technology effects of the pre-2007 aeronautics R&D subsidies on Boeing's development\nof the LCA technologies applied to the 787 continue into the post -implementation period. In this\nSection, we address the European Union's arguments that the pre-2007 aeronautics R&D subsidies\nthrough their effects on Boeing's development of 787 technologies that have subsequently been\nadapted and applied to the more recently launched 787 -9/10 and 777X mode ls, giver rise to\n\"spill-over technology effects\" in respect of those aircraft in the post-implementation period.\n9.179. Regarding the technological spill -over to the 787 -9/10, the European Union argues that\nBoeing was able to \"simply stretch\" the 787 -8 baseline model it launched in 2004 to develop the\nlarger variants of the 787 -family of LCA; the 787 -9 and 787-10X models, based on the spill -over\nof knowledge and experience acquired through participation in the original NASA and DOD\naeronautics R&D programmes. 2949 As regards the spill -over technology effects on the 777X, the\nEuropean Union argues that Boeing's experience developing the CFRP composite wing of the 787\nunder the original NASA and DOD aeronautics R&D programmes enabled it to incorporate a next\ngeneration, scaled-up composite wing design on the 777X -family models. This wing con figuration\nwill allegedly use [[HSBI]]2950 and will use close -coupling of the engine nacelles to the wing as\nderived from the 787 to attach larger -diameter engines, which contributes to a 10% fuel burn\nadvantage over the 777-300ER while maintaining the necess ary ground clearance.2951 In addition,\n\n2947 The European Union additionally argues that the Boeing engineers' conclusion that Boeing would\nhave launched the 787 before the end of April 2006 is further contradicted by the fact that Boeing required\nfour years in the pre-launch phase to develop and test the relevant materials for the 777X, which involves\nsimilar design and development work for the 787. The European Union argues that, under the Boeing\nengineers' counterfactual, Boeing would have spent half as long to do similar design and development work for\nthe 787. Moreover, the European Union contends that its estimate that the 777X pre-launch development\nphase was four years is \"conservative\" as it does not account for additional time Boeing spent on composites\ndevelopment for the 787, which is relevant to the 777X testing and design. (See Statement of B. Domke on the\nengineering-related aspects of the Panel's first set of questions, 4 December 2013, (Exhibit EU-1268) (BCI),\nparas. 18 and 19). The Panel disagrees that a simple comparison of the time spent on pre-launch R&D for the\n787 and 777X programmes undermines the Boeing engineers' counterfactual estimate that, absent the\naeronautics R&D subsidies, Boeing would have launched the 787 by April 2006. Commercial priorities differ\nbetween different aircraft programmes and these differing priorities can influence the point in time at which an\naircraft manufacturer decides to launch an aircraft programme. Based on the European Union's estimate that it\nwill take Boeing approximately ten years to move from the pre-launch phase for the 777X in 2010 until\nestimated first delivery in 2020, the overall development time for the 777X is comparable to that of the 787.\n(Statement of B. Domke on the engineering-related aspects of the Panel's first set of questions,\n2948 See paras. 9.126-9.128 above.\n2949 European Union's first written submission, paras. 995 and 1031-1037.\n2950 European Union's response to Panel question No. 165, para. 130 (referring to Boeing Presentation\n#23, (Exhibit EU-1674) (HSBI), slides 2 and 3).\n2951 European Union's response to Panel question No. 165, para. 131-136 (referring to Boeing\nPresentation #19, (Exhibit EU-1676) (HSBI)).\n\nthe European Union submits that [[HSBI]] have also \"spilled -over\" from the 787's development\nand will be incorporated on the 777X.2952\n9.180. The United States argues that, as Boeing would have been able to develop the\ntechnologies to launch the 787 in 2006 and make it available as it currently is, even absent the\npre-2007 aeronautics R&D subsidies, Boeing would have had ample time to leverage learning and\ndevelopments from the 787 programme to incorporate those technologies onto o ther newer LCA\ndevelopments, including the newer models of the 787 and the 777X. The United States maintains\nthat the effect of the pre -2007 aeronautics R&D subsidies was to accelerate Boeing's development\nof technologies for the 787 in the early 2000s, no t to create those technologies themselves such\nthat, absent the pre -2007 aeronautics R&D subsidies, the 787 technologies would never have\nexisted. Accordingly, the United States considers that there can be no spill -over technology\neffects.2953\n9.181. The European U nion's spill -over technology effects theory raises two issues. The first is\nwhether, conceptually, the original technology effects of the pre -2007 aeronautics R&D subsidies\ncould have \"spilled-over\" to other aircraft , bearing in mind that these effects per tain to the\nacceleration of Boeing's development of 787 -related technologies and not to their existence as\nsuch. If so, t he second issue is whether any of the alleged technologies identified by the\nEuropean Union in relation to the 787 -9/10 and 777X are su fficiently related or linked to the 787\ntechnologies such that the latter bear a meaningful technological connection to the former.\n9.182. As we explain in Section 9.3.2.1.1 above, the European Union has at times fram ed its\ntechnology effects arguments on the understanding that the effects of the pre -2007 aeronautics\nR&D subsidies that are said to continue into the post -implementation period are t he 787\ntechnologies themselves. These 787 technologies themselves spill-over into other technologies\nthat are applied to newer Boeing LCA. To the extent that the European Union's spill -over\ntechnology effects arguments reflect this understanding of the effects of the pre -2007 aeronautics\nR&D subsidies, they are based on an inco rrect understanding of the findings of the original panel\nand Appellate Body regarding the effects of the pre -2007 aeronautics R&D subsidies. The\ncausation finding in the original proceeding was that the pre -2007 aeronautics R&D subsidies\naccelerated the development by Boeing of the 787 technologies. Therefore, the relevant question\nbefore us is whether, owing to that acceleration, any alleged so -called spill -over technologies\napplied to the 787 -9/10 and 777X also came into existence earlier than would othe rwise be the\ncase, enabling an earlier than otherwise launch of these aircraft.\n9.183. The United States argues that the acceleration effect of the pre -2007 aeronautics R&D\nsubsidies was relatively short -lived, and to the extent that there is any technological c ontinuity\nleading to spill-over onto newer Boeing LCA, the launch of the 787 in 2006 would have left ample\ntime for Boeing to adapt technologies to the newer iterations of the 787, as well as the 777X LCA,\nahead of their respective actual launches.2954\n9.184. We conclude in Section 9.3.2.1.1 above that the European Union has failed to establish\nthat, absent the pre -2007 aeronautics R&D subsidies, Boeing would have launched the 787 after\nthe end of the implementation period in September 20 12. The end of the implementation period is\nmore than eight years after Boeing actually launched the 787 in 2004, and is ten or more years\nafter Boeing began pre -launch R&D for the development of the 787 , following its decision to\ndevelop a replacement for the 767. Regardless of w hether Boeing would have launched the 787\nbefore the end of 2006 or somewhat later, we consider that an unsubsidized launch of the 787\nwould nevertheless have occurred multiple years in advance of the la unch of the 787 -10 (in\nJune 2013) or the 777X (in November 2013).\n\n2952 European Union's first written submission, paras. 994 and 1061-1073; response to Panel question\nNo. 165, paras. 128 and 129 (referring to Boeing Presentation #20, (Exhibit EU-1671) (HSBI), slides 3-5;\nBoeing Presentation #21, (Exhibit EU-1672) (HSBI), slide 5; and Boeing Presentation #22, (Exhibit EU-1673)\n(HSBI), slide 2). See also Statement of B. Domke, Airbus, Impact of Selected NASA/DOD-supported 787\nTechnologies and Recent U.S. R&D Programmes on Boeing's Post-2007 LCA Developments, March 2013 (Airbus\nEngineer's Statement), (Exhibit EU-31) (BCI), paras. 67 and 72-75.\n2953 See United States' first written submission, para. 708; and second written submission, para. 739.\n2954 See United States' first written submission, paras. 3, 682, 703-711, 735-738, and 782-799; second\nwritten submission, paras. 732-739, 743-849, 881-904, and 1187-1204; response to Panel question Nos. 45,\n46, 47, 151, 152, 153, 156, 157, and 165; and comments on European Union's responses on Panel question\nNos. 45, 46, 47, 151, 152, 153, 156, 157, and 165.\n\n9.185. At the point in time of an unsubsidized 787 launch, Boeing would have undertaken all of\nthe R&D necessary to launch 787 that the pre -2007 aeronautics R&D subsidies had enabled it to\nundertake. The question remains whe ther Boeing would have had sufficient time following the\nunsubsidized launch of the 787 to leverage its knowledge and experience to proceed with the\nrespective launches of the 787 -9/10 and 777X models. The onus is on the European Union to\ndemonstrate that there would not have been sufficient time. However, the European Union has not\nprovided credible evidence that the 787 technologies that Boeing would have developed absent the\naeronautics R&D subsidies could not have been adapted and developed into spill -over technologies\nfor the 787-9/10 or 777X in sufficient time to enable their respective launches in 2013.2955\n9.186. Accordingly, we conclude that the European Union has failed to demonstrate th e existence\nof so-called spill-over technology effects of the pre -2007 aeronautics R&D subsidies in respect of\nthe 787-9/10 or 777X in the post-implementation period.2956\n9.3.2.1.3 Sleeper technology effects of the pre-2007 aeronautics R&D subsidies\n9.187. The European Union argues that Boeing is now applying certain other technologies to its\nnewly developed LCA which were researched under the pre -2007 aeronautics R&D programmes.\nThe European Union's sleeper technology 2957 allegations concern: (a) the application of Hybrid\nLaminar Flow Control (HLFC) technology on the 787 -9/10X and 777X [[HSBI]] to increase fuel\nburn savings2958; (b) the use of Radio Frequency Identification (RFID) tagging to enhance the 787\nAirplane Health Management system, including retrofitting RFID tagging on existing 787s, and\ninstallation on new 787 -9/10X models2959 and the 777X2960; and (c) the incorporation of a folding\nwing tip design on the 777X.2961\n9.188. The European Union alleges that R&D conducted by Boeing under the NASA R&T Base and\nAviation Safety programmes, as well as the DOD Aerospace Flight Dynamics/Vehicle Systems,\nAerospace Avionics/Sensors, and Dual-Use Science and Technology RDT&E program elements, has\nenabled Boeing to develop HLFC technology for use on the 787 -9 and 787-10X to reduce drag and\nincrease fuel burn savings and payload range capability. 2962 It also contends that RFID tags to\nenhance the 787's Airplane Health Management systems, which were developed under NASA's R&T\nBase Program and a number of DOD RDT&E program elements will be used to store information\nsuch as parts maintenance logs to facilitate maintenance operatio ns and enable paperless\nmaintenance, which can result in [[HSBI]] and will \"further increase the attractiveness,\nmarketability and operating cost savings of the 787 LCA family\". 2963 This particular sleeper\ntechnology will also be retrofitted on existing 787 m odels that have been delivered to\ncustomers.2964\n\n2955 As we explain in para. 9.182 above, this is because the European Union misconstrues the findings\nfrom the original proceeding as to the effects of the pre-2007 aeronautics R&D subsidies.\n2956 In light of this conclusion, we need not address the question whether any of the alleged technologies\nidentified by the European Union in relation to the 787-10 and 777X are in some way related or linked to those\non the 787.\n2957 These so-called sleeper technologies are described as \"promising technologies … that {Boeing}\nchose not to apply to its LCA developments prior to 2007, including its 787, because the technologies did not\nyet display the necessary technology readiness or maturity\". (European Union's first written submission,\nparas. 985, 993-995, 1025, and 1074). See also Airbus Engineer's Statement, (Exhibit EU-31) (BCI),\nsection III.\n2958 European Union's first written submission, paras. 1079-1081; and Airbus Engineer's Statement,\n(Exhibit EU-31) (BCI), paras. 85-91.\n2959 European Union's first written submission, paras. 1085 and 1208; and Airbus Engineer's Statement,\n(Exhibit EU-31) (BCI), paras. 98-109.\n2960 European Union's response to Panel question No. 165, para. 126.\n2961 European Union's first written submission, paras. 1075-1078; and Airbus Engineer's Statement,\n(Exhibit EU-31) (BCI), paras. 92-97. We address in Section 9.3.2.1.4 the European Union's additional\nallegation that certain post-2006 aeronautics R&D subsidies have contributed to the development, maturation,\nvalidation or testing of technologies, including certain of the alleged sleeper technologies discussed herein.\n(See e.g. European Union's first written submission, paras. 1081, 1086, and 1087).\n2962 Airbus Engineer's Statement, (Exhibit EU-31) (BCI), paras. 88-91.\n2963 European Union's first written submission, para. 1208; and Airbus Engineer's Statement, (Exhibit\nEU-31) (BCI), paras. 99 and 103.\n2964 European Union's first written submission, para. 1085; and Airbus Engineer's Statement, (Exhibit\nEU-31) (BCI), paras. 98-109. The European Union submits that Boeing is also validating RFID technology\n\n9.189. The European Union argues that the HLFC and RFID sleeper technologies developed\nthrough the pre-2007 aeronautics R&D subsidies will also impact the 777X, citing recent evidence\nsuggesting that Boeing plans to apply RFID to \"all {s}erialized parts\" of the 777X including aircraft\nstructures2965 and that Boeing is leveraging knowledge and experi ence acquired under the NASA\nResearch and Technology Base (R&T Base) Program to develop and incorporate the drag reduction\ntechnology, HLFC, for the 777X's [[HSBI]] to achieve fuel -burn savings. 2966 Overall, the\nEuropean Union contends that these technologies will contribute to \"a promised 21 per cent\nimprovement in per-seat fuel burn and a 16 per cent improvement in cash operating cost per-seat\nover today's 777 -300ER\"2967 and will enable Boeing to launch and deliver the 777X \"earlier than\nwould otherwise have been possible\".2968 The European Union also contends that Boeing leveraged\nexperience from its participation in DOD RDT&E program elements, including the Northrop\nGrumman A-6E Intruder fighter aircraft and A -6 Squadrons RDT&E program elements, to develop\na folding wing tip for the 777X. This will allow the aircraft to achieve the same airport compatibility\n(International Civil Aviation Organization (ICAO) Code E category) as the current generation 777 -\n300ER despite having the largest wingspan of all Boeing aircraft.2969\n9.190. The United States disputes that the pre -2007 aeronautics R&D subsidies were the\ninspiration for, or assisted in integr ating, the alleged technologies on new 787 -9/10 and 777X\nmodels. It argues that Boeing would have had time to further develop any alleged sleeper\ntechnologies.2970\n9.191. The United States responds that the use of HLFC on the 787-9 is \"unrelated to NASA's R&T\nBase program\" as Boeing did not rely on the Boeing/NASA 8 -ft Cross Flow Suction experiment test\nresults or FAA CLEEN testing when designing the 787 HLFC Tail System. 2971 As for the\nEuropean Union's allegations regarding the use of RFID tags, the United States asserts that Boeing\n[***] RFID devices [***]. Notwithstanding the limited scope of deployment, the United States\nargues that Boeing developed this solution through work with its suppliers. Beyond application to\npassenger and crew safety equipment, [***].2972 It a sserts that Boeing has opted not to\nincorporate HLFC on the 777X configuration. 2973 The United States says the 777X will not\nincorporate HLFC in its [[HSBI]], as reflected in the firm 777X configuration. Instead, the 777X\nwill feature a passive suction system , as well as a structural integration method that are both\n\nunder the 2012 ecoDemonstrator programme. (European Union's first written submission, paras. 1086 and\n1087).\n2965 European Union's response to Panel question No. 165, para. 126 (citing A. Kumar, Associate\nTechnical Fellow Boeing, \"Boeing Plans on RFID Implementation\", presentation, (Exhibit EU-1670), p. 2).\n2966 HLFC is a drag reduction technique that permits extending turbulent boundary layer flow in flow\nconditions that would otherwise result in turbulent flow. (See European Union's first written submission,\nparas. 1079-1081; and Airbus Engineer's Statement, (Exhibit EU-31) (BCI), paras. 85-91). The\nEuropean Union submits that Boeing has also tested and validated HLFC as part of its work under the FAA\nCLEEN Program, demonstrating the \"complementarity\" and \"cumulative effect\" of Boeing's participation in\nNASA and DOD aeronautics R&D programmes. (European Union's first written submission, para. 1081).\n2967 European Union's first written submission, para. 1214. This also includes [[HSBI]].\n(European Union's response to Panel question No. 165, para. 129)\n2968 European Union's first written submission, para. 1218.\n2969 European Union's first written submission, paras. 1075-1078; and Airbus Engineer's Statement,\n(Exhibit EU-31) (BCI), paras. 92-97.\n2970 United States' first written submission, paras. 708, 709, 782-784, and 804-811; second written\nsubmission, paras. 739 and 882-896; opening statement at the meeting with the Panel, para. 129; response to\nPanel question No. 165, para. 84; comments on European Union's response to Panel question No. 165,\npara. 166; Boeing Engineers' Statement, (Exhibit USA-283) (BCI), para. 76; Boeing Website, \"737 Family –\nThe New Boeing 737 MAX Family – Efficiency, Reliability, Passenger Appeal\", available at\n<http://www.boeing.ch/commercial/737 MAX>, accessed 3 August 2016, (Exhibit EU-617); and Boeing Press\nRelease, \"Boeing Launches 777X with Record-Breaking Orders and Commitments\", 17 November 2013, (Exhibit\nUSA-392).\n2971 United States' comments on European Union's response to Panel question No. 165, para. 170\n(referring to Boeing Engineers' Statement, (Exhibit USA-283) (BCI), para. 31).\n2972 United States' first written submission, para. 801; and Boeing Engineers' Statement, (Exhibit\nUSA-283) (BCI), para. 39. The United States additionally contends that Boeing's testing of RFID on the\necoDemonstrator 737-800 test bed was not under a CLEEN contract, and was not enabled by any other U.S.\nR&D programmes.\n2973 United States' response to Panel question No. 165, para. 83; and comments on European Union's\nresponse to Panel question No. 165, para. 170.\n\nBoeing's own internally-funded inventions.2974 Regardless, the United States contends that Boeing\ndeveloped the 787 HLFC Tail System technology using internal funding and publicly available\nmaterial t hat was simultaneously available to Airbus, including the publicly -disclosed results of\nU.S. Government-funded tests and projects. This does not involve Boeing/NASA 8 -ft Cross Flow\nSuction experiment or testing under the FAA CLEEN Program.2975\n9.192. The United Sta tes argues that RFID tagging was not enabled by the original NASA and\nDOD aeronautics R&D programmes, and in any event, will have limited application on the 787\npassenger and crew safety equipment and will not be used on aircraft structural parts for the\n787.2976 The United States argues that any development of RFID technology that will be deployed\non the 777X was not enabled by the original NASA and DOD aeronautics R&D programmes.2977\n9.193. Finally, the United States rejects the allegations that the 777X folding wing tip design is\nsimilar in material respects to the folding wing used under A-6E Intruder fighter aircraft design.2978\nThe United States argues that the European Union fails to show that eff ects from the NASA ACT,\nAST, High Speed Research (HSR) and Aviation Safety programmes, and DOD F-22, A-6, B-2, and\nJoint Strike Fighter RDT&E program elements, have enabled or contributed to Boeing's\ndevelopment of the 777X's composite wings, or hardware and software that is being implemented\non the 777X. 2979 The United States contends that the 777X design is different from the A -6E\nfolding wing in all material respects. This includes: [***] Moreover, the 777X folding wing tip\ndesign is asserted to differ markedly from that referred to as an initial design reference point, the\n777-200.2980 The 777X folding wing tip and A -6E folding wing share \"overall design principles\" to\nthe same extent as all aircraft with a wing that fold upwards, such as the Hawker Sea Fury\n(introduced in 1945), Douglas Skyraider (introduced in 1946), de Havill and Sea Vixen (introduced\nin 1959), Blackburn Buccaneer (introduced in 1962), and the Russian Sukhoi SU -33 naval fighter\naircraft.2981\n9.194. With respect to the allegations regarding the application of HLFC on the 787-9/10X and the\nuse of RFID tagging on the 787 and 777X, we note that the European Union cites advances Boeing\nmade on health management technologies under NASA R&T Base Program and Aviation Safety\nProgram dating back to 2000, and work under two contracts dating back to 1999 and 2000, and\nfinally, work under a number of DOD RDT&E program elements.2982 Similarly, the European Union\nrefers to Boeing's study of HLFC while participating in NASA's R&T Base Program between 1992\n\n2974 United States' response to Panel question No. 165, para. 83 (referring to S. Trimble, \"State Permit\nReveals Boeing Plan to Hike 777X Output 25%\", Flightglobal, 22 June 2015 (Exhibit USA-597)); comments on\nEuropean Union's response to Panel question No. 165, para. 813.\n2975 United States' first written submission, paras. 802 and 813; Boeing Engineers' Statement, (Exhibit\nUSA-283) (BCI), paras. 31 and 83; and comments on European Union's response to Panel question No. 165,\npara. 170.\n2976 United States' first written submission, para. 801; and Boeing Engineers' Statement, (Exhibit\nUSA-283) (BCI), para. 39. See also United States' comments on European Union's response to Panel question\nNo. 165, para. 172.\n2977 United States' comments on European Union's response to Panel question No. 165, para. 172.\n2978 United States' first written submission, para. 812; second written submission, paras. 793, 900, and\n901; Boeing Engineers' Statement, (Exhibit USA-283) (BCI), paras. 80 and 81; and Boeing Engineers' Reply,\n(Exhibit USA-359) (BCI), paras. 41 and 42.\n2979 United States' first written submission, para. 809. In particular, in respect of DOD RDT&E program\nelements, the United States argues that the European Union has not demonstrated that the effects derive from\nassistance instruments that were the subject of the panel's findings, as opposed to procurement contracts. In\nany event, it contends that the F-22, A-6, B-2, and Joint Strike Fighter RDT&E program elements are \"quite\nold\". (United States' first written submission, para. 810; and second written submission, para. 898).\n2980 United States' first written submission, para. 812; second written submission, paras. 793 and 901;\nBoeing Engineers' Statement, (Exhibit USA-283) (BCI), paras. 80 and 81; and Boeing Engineers' Reply,\n(Exhibit USA-359) (BCI), para. 42 (quoting Airbus Engineer's Statement, (Exhibit EU-31) (BCI), para. 121).\n2981 United States' second written submission, para. 900; and Boeing Engineers' Reply, (Exhibit\nUSA-359) (BCI), para. 41 (quoting Airbus Engineer's Statement, (Exhibit EU-31) (BCI), para. 121).\n2982 Airbus Engineer's Statement, (Exhibit EU-31) (BCI), paras. 106-109 (referring to Statement of D.\nWacht, Boeing, An Analysis of Selected NASA Research Programs and Their Impact on Boeing's Civil Aircraft\nPrograms, November 2006, (Exhibit EU-32) (BCI), p. 131; NASA Aviation Safety Budget Estimates,\nFY 2000-2007, (Exhibit EU-655), FY 2000, SAT 4.1-51; NASA Contract NAS1-00106 with The Boeing Company\nregarding Flight Critical Systems Research (2000), (Exhibit EU-656), section C.1, article 2.3; and NASA\nContract NAS1-99070 with Boeing Commercial Airplane Group regarding Structures and Materials Technology\nfor Aerospace Vehicles (25 January 1999), (Exhibit EU-657), at pp. 2-5).\n\nand 1999.2983 The limited references to the development and implementation of health monit oring\ntechnologies, on the one hand, and advances in the use of HLFC, on the other hand, in the\nmaterials cited by the European Union indicate that these technology areas were studied.\n9.195. However, while Boeing may have studied these technologies under the id entified projects,\nthe European Union has failed to provide evidence showing how, or otherwise qualify the extent to\nwhich, these experiences contributed to Boeing's development of the ultimate technologies, or the\nextent to which the particular pre-2007 aeronautics R&D subsidies enabled an earlier launch of the\nrelevant aircraft or a launch that would otherwise not have been possible. The evidence presented\nis not sufficient to enable us to assess the significance of the pre -2007 aeronautics R&D subsidies\nto the ultimate development of these technologies.2984 We note, in addition, that the United States\nhas argued that RFID will feature on the 787 in a limited capacity, and will not appear in the final\ndesign of the 777X, further calling into question the extent to which the pre-2007 aeronautics R&D\nsubsidies can be said to have any impact on the technological development of these aircraft based\non the so-called sleeper technologies theory.\n9.196. With respect to the sleeper technologies emanating from various RDT&E program elements\nthat allegedly facilitated Boeing's development of a folding wing tip for the 777X, we note that the\nEuropean Union's arguments relate generally to work conducted under a number of DOD RDT&E\nprogram elements, particularly a DOD procurement contract under which Boeing allegedly\nconducted R&D work to improve the Northrop Grumman A -6E Intruder attack aircraft. 2985 There\nwere no findings in the original proceeding that the payments and access to DOD facilities provided\nthrough procurement contracts funded under the original 23 RDT&E program elements involved\nspecific subsidies to Boeing, nor are there any such findings in this proceeding. Accordingly, even\nassuming arguendo that the work that Boeing performed under that procurement contract\nprovided the technological foundations for Boeing's subsequent development of the folding wing tip\non the 777X (an e videntiary issue on which we express no view), the European Union's argument\nwould in any case fail because it has not established an adequate link between that R&D and the\npre-2007 aeronautics R&D subsidies.\n9.197. Accordingly, we conclude that the European Union has failed to demonstrate th e existence\nof sleeper technology effects of the pre-2007 aeronautics R&D subsidies in respect of the 787-9/10\nor 777X in the post-implementation period.\n9.3.2.1.4 New technology effects of certain post-2006 aeronautics R&D subsidies\n9.198. We recall that the European Union argues that the vast majority of the aeronautics R&D\nsubsidies that came into existence after the original proceed ing (the post -2006 aeronautics R&D\nsubsidies), aggregated into one category, provide Boeing with additional cash flow because they\nlower Boeing's costs of licensing intellectual property rights to LCA technology, and of developing\nthat technology, and ther efore operate through a price causal mechanism. 2986 However, the\nEuropean Union also points to a relatively small number of individual post -2006 aeronautics R&D\nsubsidies which it argues operate through a technology causal mechanism (rather than a price\ncausal mechanism) to contribute to Boeing's development of innovative technologies for its current\nLCA as well as the availability of \"innovative future Boeing LCA\". 2987 In this Section of the Report,\nwe evaluate the European Union's arguments regarding this small number of post -2006\naeronautics R&D subsidies that are said to operate through a technology causal mechanism to\naffect the development of technologies for the 787 -9/10 and 777X and thereby cause serious\nprejudice to the European Union's interests in the post-implementation period.\n\n2983 Airbus Engineer's Statement, (Exhibit EU-31) (BCI), paras. 89 and 90 (referring to NASA R&T Base\nBudget Estimates FY 1991-FY 2004, (Exhibit EU-648), FY 1992, 1995, and 1999).\n2984 In this respect, in discussing the contribution of subsidies to Boeing's development of RFID, Airbus\nengineer Burkhard Domke indicates that Boeing's participation in NASA aeronautics R&D Base Program and\nDOD RDT&E program elements \"likely benefit the RFID technology on Boeing's 787\". (See Airbus\nEngineer's Statement, (Exhibit EU-31) (BCI), para. 128).\n2985 Airbus Engineer's Statement, (Exhibit EU-31) (BCI), para. 94: \"{t}he 777X folding wing tip is a\nproduct of Boeing's research and work performed under a DOD contract to improve the Northrop Grumman\nA-6E Intruder attack aircraft.\"\n2986 Section 9.4.3.4.3 below.\n2987 European Union's first written submission, para. 979.\n\n9.199. The European Union argues that Boeing's participation in: NASA's Environmentally\nResponsible Aviation (ERA) Project; the Subsonic Fixed Wing Project and Supersonics Project\nunder NASA's Fundamental Aeronautics Program; and the ec oDemonstrator programme pursuant\nto the Boeing CLEEN Agreement enabled Boeing's development of technologies for the 787 -8/9/10\nand 777X, thereby contributing to serious prejudice caused through those aircraft. 2988 The\nEuropean Union also argues that certain p ost-2006 aeronautics R&D subsidies, including Boeing's\nresearch and testing of technologies not currently applied on Boeing LCA under NASA's Subsonic\nFixed Wing Project and under DOD's RDT&E Air Force Aerospace Flight Dynamics/Aerospace\nVehicle Technologies and Air Force Advanced materials for Weapons Systems program elements,\ncause a threat of serious prejudice in the form of \"future technology effects\".2989\n9.200. The European Union argues that Boeing is conducting further R&D focused on validating\nRFID technology under the 2012 ecoDemonstrator programme for application on the 787, as well\nas additional testing and validation of HLFC under NASA's ERA and Subsonic Fixed Wing\nProjects.2990 The European Union argues that these technologies help reduce overall aircraft fu el\nburn, increase payload range capability and lower maintenance costs. 2991 The European Union\nargues that Boeing is conducting testing and validation of HLFC for use on the 777X under the\necoDemonstrator programme, and NASA ERA and Subsonic Fixed Wing Projec ts to facilitate\npromised delivery in [[HSBI]].2992 The European Union submits that recent evidence\ndemonstrates that Boeing plans to apply RFID to \"all {s}erialized parts\" of the 777X including\naircraft structures. 2993 In addition, the European Union speculates that Boeing is also testing\n[[HSBI]].2994\n9.201. The United States argues that the European Union's allegations regarding the technological\nadvances arising out of Boeing's post-2006 participation in NASA and DOD aeronautics R&D efforts\nand the Boeing CLEEN Agreeme nt are without merit. In the case of post -2006 NASA -funded\nresearch, the United States argues that Boeing did not conduct the work as alleged, the research\neffort is not relevant or did not enable the particular technology as alleged. With respect to fligh t\ntesting conducted pursuant to the Boeing CLEEN Agreement, the United States submits that \"most\necoDemonstrator flight tests had no CLEEN involvement whatsoever\" 2995 and thus any testing was\nnot funded under the Boeing CLEEN Agreement per se. In situations where a particular technology\nmay have been evaluated on flights that were partially funded by the FAA CLEEN Program, the\nUnited States considers the role of the FAA CLEEN Program was, at most, to contribute a portion of\nthe fuel cost incurred on the test f light, which is not a \"technology effect\" pursuant to the\nEuropean Union's own theory. The United States considers that the European Union's position that\ntests on the ecoDemonstrator test bed would not exist absent the FAA's funding cannot be\nsupported.2996 The United States requests the Panel to reject the European Union's argument\n\n2988 The European Union argues that, should the Panel disagree that any of these alleged post-2006\naeronautics R&D subsidies operate, at present, through a technology causal pathway, they should in the\nalternative be understood to operate through a price causal pathway. (See European Union's response to Panel\nquestion No. 43, fn 352).\n2989 European Union's second written submission, paras. 1051-1056. (emphasis original)\n2990 European Union's first written submission, para. 1103. See also Airbus Engineer's Statement,\n(Exhibit EU-31) (BCI), section IV.B.2; A. Washburn, Chief Technologist, NASA Environmentally Responsible\nAviation Integrated Systems Research Program, \"Drag Reduction Status and Plans – Laminar Flow and AFC\",\nPresentation at AIAA Aero Sciences Meeting, 4-7 January 2011, (Exhibit EU-668), p. 10; J. Eppink and R.\nWlezien, \"Data Analysis for the NASA/Boeing Hybrid Laminar Flow Control Crossflow Experiment\", Paper\nprepared for 41st AIAA Fluid Dynamicy Conference and Exhibit, Honolulu, 27-30 June 2011, (Exhibit EU-667);\nG. Norris, \"787-9 Technology Revealed?\", Aviation Week, Blog Things with Wings, 2 June 2011, (Exhibit\nEU-647); and G. Norris, \"Boeing Ditches Drag Reduction System for 777X\", Aviation Week, 10 May 2015,\n(Exhibit EU-1679).\n2991 European Union's response to Panel question No. 165, para. 137.\n2992 European Union's first written submission, paras. 1100-1102.\n2993 European Union's response to Panel question No. 165, para. 126 (citing A. Kumar, Associate\nTechnical Fellow Boeing, \"Boeing Plans on RFID Implementation\", presentation, (Exhibit EU-1670), p. 2).\n2994 European Union's first written submission, para. 1101.\n2995 United States' second written submission, para. 892. According to the United States, the\necoDemonstrator test bed aircraft itself is a Boeing 737-800 that was not funded by the CLEEN Contract, most\necoDemonstrator flight tests had no CLEEN involvement whatsoever, and Boeing uses its own aircraft as flying\ntest beds as a matter of course outside of U.S. Government R&D programmes. (Boeing Engineers' Reply,\n(Exhibit USA-359) (BCI), paras. 44-47).\n2996 United States' first written submission, paras. 800-808, 813, 975-978, 986-988, 989, and 990;\nsecond written submission, paras. 740, 792-794, 892, 897-903, 1194-1196, and 1201-1204.\n\nregarding threat of future technology effects , as Articles 5 and 6 of the SCM Agreement do not\npermit a challenge to subsidies that are merely alleged to have effects in the future.2997\n9.202. The United States argues that Boeing's development of HLFC for the 787-10 is unrelated to\nNASA's R&T Base Program, but instead, resulted from Boeing's use of \"internal funding and\npublicly available material that was simultaneously available to Airbus , including the publicly\ndisclosed results of U.S. Government-funded tests and projects\".2998 The United States argues that\nRFID technology that will feature on upcoming 787 and 777X models was not developed or\notherwise tested pursuant to a Boeing CLEEN Agreement2999 As discussed in paragraph 9.191, the\nUnited States has also indicated that the 777X will not incorporate HLFC in its design.\n\"Existing\" new technology effects\n9.203. We first address the European Union's argument that Boeing ha s received post -2006\nsupport to continue research into HLFC through work conducted under NASA's Subsonic Fixed\nWing Project and Supersonics Project, as well as under NASA's ERA Project. According to evidence\non record, Boeing received funding of USD 572,39 0 at the end of 2007 to research laminar flow\ntechnology to develop a design for Supersonic Transport Aircraft through the use of CFD\nanalysis.3000 While asserting that the 777X will not incorporate HLFC in its design, the\nUnited States has not denied that HL FC technology has been incorporated on the 787 -9, and\npotentially the 787 -10X. Boeing's website indicates that HLFC is a feature of the 787 -9.3001\nHowever, the European Union has provided no evidence as to the contribution of th e research into\nHLFC conducted under NASA's Subsonic Fixed Wing Project, Supersonics Project or ERA Project to\nBoeing's overall decision to incorporate the HLFC technologies on the 787-9 and 787-10X, or the\nextent to which such research enabled an earlier launch of the 787 -10X incorpora ting this\ntechnology, or a launch that would otherwise not have been possible. Finally, we turn to the\nEuropean Union's allegations concerning Boeing's participation in the FAA CLEEN Program through\nthe Boeing CLEEN Agreement in respect of the development of RFID technology and HLFC for use\non the 787 and 777X.3002 The European Union submits that \"{a} major component of the CLEEN\nProgram is flight testing … under the ecoDemonstrator Program\" 3003, including tes ting that was\ndone under a 2012 737 -800 test bed and a 2013 787 test bed. 3004 The European Union describes\ntesting on the ecoDemonstrator as \"more generic\" as it submits that \"{a} technology tested on the\necoDemonstrator is … tested in a way that the results can be applied to many different LCA\nplatforms\".3005 While noting this is a departure from Boeing's past practice of testing technologies\n\n2997 United States' second written submission, para. 850.\n2998 Boeing Engineers' Statement, (Exhibit USA-283) (BCI), para. 31. See also United States' comments\non European Union's response to Panel question No. 165, para. 170.\n2999 United States' comments on European Union's response to Panel question No. 165, paras. 170-172\n(referring to Boeing Engineers' Statement, (Exhibit USA-283) (BCI), para. 39). See also Boeing\nEngineers' Reply, (Exhibit USA-359) (BCI), paras. 44-47.\n3000 NASA, Research Opportunities in Aeronautics – 2006, Supersonics Project 3 award announcement,\n(Exhibit EU-143), pp. 13 and 14; NASA task order NNL08AA36T, (Exhibit EU-151).\n3001 See <http://www.boeing.com/commercial/787/frontiers-787-9-october-2013>, accessed\n3 August 2016.\n3002 We recall that the FAA launched the FAA CLEEN Program in 2010, awarding USD 125 million in\nfive-year R&D agreements to Boeing, General Electric, Honeywell, Pratt & Whitney, and Rolls-Royce North\nAmerica, on a 50% cost-sharing basis. Under its agreement with Boeing, the FAA CLEEN Program funds\nresearch to mature specified technologies, as well as testing and assessment of technologies through Boeing's\necoDemonstrator programme. See Airbus Engineer's Statement, (Exhibit EU-31) (BCI), para. 111; FAA Fact\nSheet, \"Continuous Lower Energy, Emissions, and Noise (CLEEN) Program\", 24 June 2010, (Exhibit EU-257);\nBoeing, Backgrounder, 2012 ecoDemonstrator Program Shows Boeing's Long Commitment to Environmentally\nProgressive Technology, (June 2012), (Exhibit EU-261), pp. 1 and 2.\n3003 Airbus Engineer's Statement, (Exhibit EU-31) (BCI), para. 113 (referring to Boeing, Backgrounder,\n2012 ecoDemonstrator Program Shows Boeing's Long Commitment to Environmentally Progressive Technology,\n(June 2012), (Exhibit EU-261), p. 2).\n3004 Airbus Engineer's Statement, (Exhibit EU-31) (BCI), paras. 114 and 118 (referring to FAA Fact\nSheet, \"Continuous Lower Energy, Emissions, and Noise (CLEEN) Program\", 18 September 2012, (Exhibit\nEU-18)). As part of the 2012 series of tests on the 737-800 test bed, the European Union submits that Boeing\nflight tested the following technologies: (a) a variable area fan nozzle; (b) adaptive trailing edges; (c)\n\"real-time, iPad based flight trajectory optimization and information management systems\"; and (d) a method\nof electronically testing emergency equipment using RFID devices. (See Airbus Engineer's Statement, (Exhibit\nEU-31) (BCI), para. 116 (referring to Boeing, Fact Sheet, \"The Suit of Technologies on the eco Demonstrator\nTests New Ways to Reduce Fuel Consumption and Community Noise\", June 2012, (Exhibit EU-263))).\n3005 Airbus Engineer's Statement, (Exhibit EU-31) (BCI), para. 115.\n\non a platform -specific basis, the European Union acknowledges that the ecoDemonstrator\nprogramme operates adjunct to Boeing's continuing flight testing on a platform -specific basis.3006\nThe Airbus engineers contend that Boeing conducted further testing and \"refining\" of HLFC3007, and\ntesting and \"validat{ion}\" of RFID technology.3008\n9.204. Central to the original panel's finding that the NASA and DOD aeronautics R&D\nprogrammes before it cause d serious prejudice was the conclusion that Boeing would not have\nbeen able to launch the 787 with the technologies it had and promise deliveries in the same time -\nframe, absent the contribution of the pre -2007 aeronautics R&D subsidies. 3009 In reaching this\nconclusion, the panel ob served that the aeronautics R&D programmes before it were aimed at\nhelping Boeing overcome large disincentives inherent in \"long term, high risk\" aeronautics R&D.3010\nAbsent the contribution of the pre -2007 aeronautics R&D subsidies, th e panel considered that\nBoeing would not have achieved the same gains \"within the time frame and/or at the lower cost to\nitself that were the product of the aeronautics R&D subsidies\".3011\n9.205. We see an important difference between the type of early -stage, high risk R&D at issue in\nthe original proceeding and the testing and assessment that takes place under Boeing's\necoDemonstrator programme , which receives funding under the FAA CLEEN Program. The\nEuropean Union acknowledges that Boeing's work under the FAA CLEEN Program is primarily\nfocused on flight testing, validation and refinement of technologies already in a late stage of\ndevelopment. It is not clear to us that Boeing would not have undertaken this work on its own.\nThe European Union has , for instance, recognized that flight testing under the ecoDemonstrator\ntest beds is supplemental to Boeing's testing. Finally, the European Union has not alleged that\nBoeing could not have funded this testing, absent the 50% cost contribution from the FAA CLEEN\nProgram. Inde ed, we would have difficulty accepting such an argument, given that the total\namount of FAA funding to Boeing under the Boeing CLEEN Agreement accounts for only\nUSD 27,986,056 during the 2010-2014 period.3012\n9.206. Thus, we are not persuaded that Boeing's particip ation in the FAA CLEEN Program through\nthe Boeing CLEEN Agreement materially helped Boeing to undertake R&D that it would not\notherwise have undertaken, or to achieve the same gains that it would not otherwise have\nachieved within essentially the same time -frame. Rather, if anything, Boeing's participation in a\ncost-sharing arrangement such as the Boeing CLEEN Agreement merely lowered the cost at which\nBoeing was able to undertake research that it would have undertaken in any case. We therefore\nconclude that the European Union has failed to demonstrate that Boeing's participation in the FAA\nCLEEN Program, through the Boeing CLEEN Agreement, created or accelerated the development\nand creation of the RFID technolog y or HLFC technologies that are alleged to fea ture on the 787 -\n9/10 and 777X models.3013\n9.207. The European Union has therefore failed to demonstrate the existence of so -called new\ntechnology effects of the particular post -2006 aeronautics R&D subsidies in respect of the 787 -\n9/10 or 777X in the post-implementation period.\n\n3006 Airbus Engineer's Statement, (Exhibit EU-31) (BCI), para. 115 (referring to G. Norris,\n\"EcoDemonstrator Paves Technology Pathway To Future\", Aviation Week & Space Technology, 8 October 2012,\n(Exhibit EU-662)).\n3007 Airbus Engineer's Statement, (Exhibit EU-31) (BCI), para. 124.\n3008 Airbus Engineer's Statement, (Exhibit EU-31) (BCI), para. 130.\n3009 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1775.\n3010 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1747.\n3011 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1759.\n3012 Specific contributions are listed in the Boeing CLEEN Agreement as USD 6,736,692 (2010),\nUSD 6,511,448 (2011), USD 7,960,050 (2012), USD 6,494,751 (2013), and USD 283,115 (2014). These\namounts are then adjusted to account for the actual funding provided by the FAA to Boeing based on\nmodifications appended to the Boeing CLEEN Agreement. See Boeing CLEEN Agreement, (Exhibit EU-17), p. 3,\nmodification 2 (providing USD 6,310,150 in 2011), modification 3 (providing an additional USD 201,298 in\n2011), and modification 4 (providing USD 7,960,050 in 2012).\n3013 We recall, in the event we were to reject the European Union's argument that post-2006 R&D\nsubsidies presently have technology effects, the European Union requests the Panel to find in the alternative,\nthat the subsidies operate through a \"price effects\" causal pathway. (See European Union's response to Panel\nquestion No. 43, fn 352). We address whether the post-2006 funding and support provided to Boeing under\nthe Boeing CLEEN Agreement alternatively operates through a price causal mechanism in Section 9.3.2.2.3\nbelow.\n\n\"Future\" new technology effects\n9.208. The European Union separately argues that certain post -2006 aeronautics R&D subsidies\ncause a threat of serious prejudice in the form of \" future technology effects\".3014 The European\nUnion identifies the following research that Boeing is currently carrying out through the post -2006\naeronautics R&D subsidies which it considers will lead to the development of technologies for\napplication on future generations of Boeing LCA, including possibly future twin-aisle aircraft:\na. NASA's Subsonic Fixed Wing Project related to the development of pultruded rod stitched\nefficient unitized structure (PRSEUS) composite materials that will have \"significant\nimplications for how future aircraft will be designed and repaired\"3015;\nb. Boeing's research and testing of variable area fan nozzle (VAFN), RFID devices, adaptive\ntrailing wing edge technology and a modified winglet, on the ecoDemonstrator testing\ncomponent of the FAA CLEEN Program, to the extent not currently applied on the\n737 MAX or other LCA models, nevertheless \"generates important knowledge and\nexperience that is applied to subsequent technology developments\".3016\n9.209. The United States argues that Articles 5 and 6 of the SCM Agreement do not permit a\nchallenge to subsidies that are al leged to involve a threat of future technology effects and\ntherefore requests the Panel to reject the European Union's argument in its entirety. Under\nArticle 5 of the SCM Agreement, the United States argues that causation must be presently\noccurring even if the form of adverse effects is imminent or threatened rather than current serious\nprejudice. Hence, it submits that Article 5 uses the term \"cause\" in the present t ense. According to\nthe European Union's own argument, the causal mechanism is not present ly operating, but is\nalleged to do so in the future. Otherwise, Article 5 would refer to subsidies that \"cause or threaten\nto cause\", which is not the case.3017\n9.210. Article 5 of the SCM Agreement provides that \"{n}o Member should cause … serious\nprejudice to the interests of another Member\". Pursuant to footnote 13, the term \"serious\nprejudice\" should also be understood to include \"threat of serious prejudice\". Article 5, when read\ntogether with Articles 6.3(a) through (d), sets out the particular situations in wh ich serious\nprejudice may arise; i.e. through displacement or impedance of imports, significant price\nundercutting, significant price suppression, significant price depression or significant lost sales, or\nan increase in the world market share of a particular subsidized primary product or commodity.\n9.211. Articles 5 and 6 when read together allow for a finding of serious prejudice where a given\nsubsidy is shown to presently cause a threat of (for example) significant lost sales or significant\nprice suppression. In articulating a standard for determining the existence of a threat of serious\nprejudice under Article 6.3(c), the Appellate Body has explained that, \"as with a determination of\nthreat of material injury … it is reasonable to require that a determination of threat of serious\nprejudice 'be based on facts and not merely on allegation, conjecture or remote possibility'\". 3018\nImportantly, the threat of serious prejudice that results in a \"'change in circumstances' … 'must be\nclearly foreseen and imminent'\".3019\n\n3014 European Union's second written submission, paras. 1051-1056. (emphasis original)\n3015 European Union's second written submission, para. 1052. See also Airbus Engineer's Statement,\n(Exhibit EU-31) (BCI), paras. 141-159.\n3016 European Union's second written submission, para. 1055. The European Union has also referred to\nBoeing's \"research into nonlinear modelling and non-destructive inspection for composite aircraft structures\"\nunder DOD RDT&E Air Force Aerospace Flight Dynamics/Aerospace Vehicle Technologies and Air Force\nAdvanced materials for Weapons Systems program elements, related to the development of nonlinear\nmodelling and non-destructive evaluation, which allow better methods to design fatigue-resistant structures\nand inspection of ageing aircraft structures. (See European Union's first written submission, paras. 1089 and\n1104-1110; and Airbus Engineer's Statement, (Exhibit EU-31) (BCI), paras. 165-175).These have been found\nto be outside the scope of this proceeding.\n3017 United States' second written submission, para. 850.\n3018 Appellate Body Report, EC and certain member States – Large Civil Aircraft, para. 1171 (citing\nArticle 15.7 of the SCM Agreement).\n3019 Appellate Body Report, EC and certain member States – Large Civil Aircraft, para. 1171 (citing\nArticle 15.7 of the SCM Agreement).\n\n9.212. We note that the European Union has raised a number of threat claims in this proceeding,\nincluding allegations of threats of significant price suppression, of significant lost sales, and of\ndisplacement and/or impedance. 3020 The European Union's claims in those c ontexts are based ,\ninter alia , on facts related to Boeing's plans to bring specific Boeing aircraft to market (for\ninstance, the 787 -10X, 737 MAX , and 777X), and the threat of serious prejudice to competing\nAirbus LCA posed by the imminent launch of the pa rticular Boeing aircraft, which has benefited\nfrom advanced technology that was allegedly enabled by the aeronautics R&D subsidies. The\ncompetitive harm is alleged to be clearly foreseen and imminent due to the technological advances\nand the anticipated arrival of the aircraft in the market.3021\n9.213. We see significant differences between those allegations and the European Union's\narguments concerning the alleged \"future technology effects\" of certain of the post -2006\naeronautics R&D subsidies. None of the relevan t technologies that are the focus of the \"future\ntechnology effects\" allegations are alleged to have been applied to twin-aisle or other Boeing LCA\nto date.3022 At most, the European Union alleges that there are \"encouraging findings\" 3023 that a\ntechnology such as PRSEUS could be employed on LCA in the future.\n9.214. In our view, the prospect for potential application of technologies to future but as yet\nnon-existent LCA models is too remote and speculative to constitute a threat of serious prejudice ,\nwithin the meanin g of Article 5(c) and footnote 13 and Article 6.3 of the SCM Agreement. The\npossibility alone is inconclusive as to whether competitive harm to the European Union's interests\nis imminent, as it is contingent on whether the technologies will ultimately be a pplied to LCA that\nmay ultimately be launched at some future point in time. Accordingly, we are not persuaded that\nthe European Union has demonstrated that certain post -2006 aeronautics R&D subsidies enable\nBoeing to develop technologies that will be applied to future generations of Boeing LCA and in that\nsense, give rise to a threat of serious prejudice in the form of \"future technology effects\".\nConclusion\n9.215. In sum, we conclude that the European Union has failed to demonstrate that:\na. research conducted on H LFC under the Fundamental Aeronautics Supersonics Project\nand Subsonic Fixed Wing Project and NASA's ERA Project contributed to Boeing's overall\ndevelopment of technologies, or otherwise enabled an earlier launch of the 787-9/10; or\nthat\nb. Boeing's participation in the FAA CLEEN Program, through the Boeing CLEEN Agreement,\ncreated or a ccelerated the creation of HLFC or RFID technologies relevant to the\n787-9/10X, or 777X.\n9.216. We therefore find that the European Union has failed to demonstrate the existence of so-\ncalled new technology effects of the particular post -2006 aeronautics R&D subsidies in respect of\nthe 787-9/10 and 777X in the post-implementation period.3024\n9.217. We also reject the European Union's argument that research Boeing conducted under\nNASA's Subsonic Fixed Wing Project related to the development of PRSEUS composite materials or\nBoeing's research and testi ng of VAFN, RFID devices, adaptive t railing wing edge technology or a\nmodified winglet can give rise to \"future technology effects\" that could constit ute a threat of\nserious prejudice, within the meaning of Article 5(c) and footnote 13 and Article 6.3 of the SCM\nAgreement.\n\n3020 Sections 9.3 and 9.4 below.\n3021 See e.g. European Union's first written submission, paras. 1316 and 1328.\n3022 European Union's first written submission, para. 1105; and Airbus Engineer's Statement, (Exhibit\nEU-31) (BCI), paras. 144, 167, and 174.\n3023 European Union's second written submission, para. 1052.\n3024 Given the European Union's request that if we reject its arguments that the particular, identified\npost-2006 aeronautics R&D subsidies operate through a technology causal mechanism, we consider in the\nalternative whether they should be analysed as operating through a price causal mechanism, we will address\nwhether these particular, identified post-2006 aeronautics R&D subsidies operate through a price causal\nmechanism in Section 9.3.2.2.3 below.\n\n9.3.2.1.5 Summary of conclusions on whether the pre-2007 aeronautics R&D subsidies\nand certain post-2006 aeronautics R&D subsidies cause seri ous prejudice to the\ninterests of the European Union, within the meaning of Articles 5(c) and 6.3, in respect\nof the A350XWB in the post -implementation period , through a technology causal\nmechanism\n9.218. Based on the foregoing analysis, the Panel concludes as follows:\na. The European Union has failed to demonstrate the existence of original subsidy\ntechnology effects of the pre -2007 aeronautics R&D subsidies in the post -\nimplementation period.\nb. The European Union has failed to demonstrate the existence of spill -over technology\neffects of the pre-2007 aeronautics R&D subsidies in respect of the 787-9/10 or 777X in\nthe post-implementation period.\nc. The European Union has failed to demonstrate the existence of sleeper technology\neffects of the pre-2007 aeronautics R&D subsidies in respect of the 787 -9/10 or 777X in\nthe post-implementation period.\nd. The European Union has failed to demonstrate the existence of new technology effects of\nthe particular post -2006 aeronautics R&D subsidie s in respect of the 787 -9/10 or 777X\nin the post-implementation period.\n9.219. Because the European Union has failed to demonstrate any effect of the pre-2007\naeronautics R&D subsidies, or of the particular, identified post-2006 aeronautics R&D subsidies, on\nBoeing's product devel opment in respect of t he 787 or 777X in the post -implementation period,\nthe possibility of any consequent impact of those subsidies on sales and prices of the A350XWB\ndoes not arise.3025 Accordingly, there is no basis on which the pre -2007 aeronautics R&D subsidies\nor the particular, identified post-2006 aeronautics R&D subsidies can be found to be a genuine and\nsubstantial cause of any of the forms of serious prejudice alleged in respect of the A350XWB in the\npost-implementation period, through a technology causal mechanism.\n9.220. The Panel therefore finds that the European Union has failed to establish that the\npre-2007 aeronautics R&D subsidies and certain post -2006 aeronautics R&D subsidies\nare a genuine and substantial cause of any of the forms of serious prejudice alleged in\nrespect of the A350XWB in the post-implementation period, through a technology causal\nmechanism.\n9.3.2.1.6 The A350XWB as a competitive response to the 787\n9.221. One further issue of potential relevance to the issue of the effects of the pre-2007\naeronautics R&D subsidies on sales and prices of the A350XWB concerns the notion that Airbus\nwould only have launched the A350XWB as a response to Boeing's launch of the 787 , meaning\nthat the subsidies in question would logically not have affected the terms of competition between\nthe 787 and A350XWB . In its third set of questions to the parties, the Panel asked both parties\nwhether they agreed that, had Boeing not launched the 787 in 2004, Airbus would not have sought\nto develop the Original A350 versions and launched the A350XWB when it did, and how (if at all)\nsuch factors should be taken into account in any counterfactual analysis of the hypothetical\nposition that would have existed in the post-implementation period , absent the pre -2007\naeronautics R&D subsidies.3026\n9.222. The European Union re sponded that, had Boeing not launched the 787 in 2004, Airbus\nwould not have sought to develop the Original A350 versions, and Airbus would have continued to\nenjoy the market leadership of its A330.3027 The European Union also responded that the timing of\nthe launch of the A350XWB, in the scenario in which Boeing had not launched the 787 by 2004,\n\n3025 See paras. 9.116 and 9.122 above.\n3026 Panel question No. 152 to the parties.\n3027 European Union's response to Panel question No. 152, para. 9; comments on the United States'\nresponse to Panel question No. 152, para. 10.\n\n\"would have depended, in large part, on the timing of a counterfactual launch of the 787 \".3028 The\nEuropean Union says that it is \"possible\" that, with a significantly d elayed launch of the 787,\nAirbus would have launched the A350XWB in response to demands from airlines for significantly\nmore fuel-efficient aircraft, and would have done so irrespective of whether Boeing had already\nlaunched the 787 or was close to launching it.3029\n9.223. The European Union argues that these considerations are not, however, particularly\nrelevant to the Panel's assessment of the existence of adverse effects in the post -implementation\nperiod. Absent the pre-2007 aeronautics R&D subsidies and their imp act on Boeing's launch of the\n787, Airbus would have continued to enjoy the market leade rship of the A330. The\nEuropean Union submits that, alternatively, \"in a counterfactual in which Airbus had decided to\nlaunch the A350XWB by 24 September 2012, the pre -2007 aeronautics R&D subsidies would also\nbe a genuine and substantial cause of significantly lower EU LCA sales and prices – in this case, of\nthe A350XWB.\"3030 Moreover, even under a counterfactual in which the launch of the A350XWB\nwas only ever a competiti ve response to the launch of the 787, the terms of competition between\nthe 787 and A350XWB in this counterfactual scenario \"would be altered by the fact that the portion\nof the 787's order book that the European Union did not challenge as 'lost sales' would still need to\nbe produced, pushing out further the delivery positions that Boeing could offer in competitive sales\ncampaigns against the A350XWB.\"3031\n9.224. The United States responded to the Panel's question by agreeing with the European Union\nthat, had Boeing not launched the 787 in 2004, Airbus would not have sought to develop the\nOriginal A350 versions when it did. However, the United States additionally considers that Airbus\nwould not have developed the A350XWB when it did. 3032 The United States argues that the\nunderlying findings of the original panel and evidence available demonstrate that the A350XWB\nwas developed as a reaction to the 787, and therefore, would not have been launched when it was\nin 2006 if Boeing had not launched the 787 in 2004. 3033 The United S tates considers that\nAirbus' focus on developing and devoting resources to the A380, and the market dominance of the\nA330 in the period prior to the launch of the 787 in 2004, \"each independently meant that the\nA350XWB would only have been launched in response to the 787\".3034\n9.225. For the United States, the fact that the A350XWB was a \"reaction to, and contingent upon\"\nthe launch of the 787 must be considered in the appropriate counterfactual. 3035 According to the\nUnited States, if the 787 had launched in 2006 (inste ad of 2004), the delay in the 787's launch\nwould have caused a delay in the launch of the A350XWB. Although the pre -2007 aeronautics R&D\nsubsidies accelerated the launch of the 787, they did not alter the terms of competition between\nthe 787 and the A350XW B after launch. Any acceleration effect of the pre -2007 aeronautics R&D\nsubsidies would have no effect on competition between the 787 and A350XWB.3036 This means that\nthere is no basis to find a genuine and substantial causal link with respect to the pre -2007\naeronautics R&D subsidies, or the portions of the post-2006 aeronautics R&D subsidies erroneously\nalleged to have technology effects.3037\n9.226. The original panel was satisfied that the technological and operating cost advantages of\nthe 787 over the A330 and Origi nal A350, as well as its scheduled delivery dates commencing in\n2008, caused Airbus to lose significant sales of the A330 and Original A350 between 2004 and\n\n3028 European Union's response to Panel question No. 152, para. 9; comments on the United States'\nresponse to Panel question No. 152, para. 12.\n3029 European Union's comments on the United States' response to Panel question No. 152, para. 12.\n3030 European Union's response to Panel question No. 152, para. 10.\n3031 European Union's comments on the United States' response to Panel question No. 152, para. 14.\n3032 United States' response to Panel question No. 152, para. 9.\n3033 United States' response to Panel question No. 152, para. 10. \"Airbus had no plans, and no reason,\nto launch an aircraft like the A350XWB absent the market entry of the 787 because the A330 held a dominant\nmarket position and because Airbus had dedicated its focus and resources to its priority of launching the\ntechnologically innovative and extraordinarily complex A380.\" The United States refers to Panel Report, US –\nLarge Civil Aircraft (2nd complaint), paras. 4.334 and 7.1777, and Appellate Body Report, US – Large Civil\nAircraft (2nd complaint), para. 1024, in support of its position.\n3034 United States' response to Panel question No. 152, para. 13. \"{t}he A350XWB would never have\nentered a market in which its sales and prices were not affected by the market presence of the 787.\"\n(United States' comments in the European Union's response to Panel question No. 152, paras. 8 and 14).\n3035 United States' response to Panel question No. 152, para. 14.\n3036 United States' comments in the European Union's response to Panel question No. 152, para. 14.\n3037 United States' response to Panel question No. 152, para. 14.\n\n2006, and significantly suppressed the prices of those aircraft during that period. 3038 We note that\nAirbus' Christian Scherer, in a statement in the original proceeding which is referred to by the\npanel, said that at the beginning of 2004, Airbus had expected that the A330 would remain the\nstandard for the 200-300 seat LCA product market for at least another ten years of deliveries.3039\nThis statement is consistent with evidence before the Panel that in early 2004 Airbus was focused\non developing the A380 and did not anticipate a major updating of the A330 for several years.3040\n9.227. The United States' point is that, this being the case, the A350XWB would only ever have\nbeen launched as a competitive response to the 787. This means that, absent the pre -2007\naeronautics R&D subsidies, Boeing would have launched the 787 at a later date, the A350XWB\nwould have been launc hed in response, and the competitive dynamics between the 787 and\nA350XW would be essentially no different than they currently are, only with a delay. In other\nwords, only the sales and prices of the A330 and Original A350 are logically capable of being\nadversely affected by the pre-2007 aeronautics R&D subsidies. The European Union concedes that\nthe timing of the counterfactual launch of the A350XWB does depend \"in part\" on the timing of the\ncounterfactual launch of the 787. 3041 This seems to be because it co nsiders that, had the\ncounterfactual launch of the 787 been sufficiently delayed, Airbus would in any event have\nresponded to market demand from airlines for more fuel -efficient aircraft, irrespective of whether\nBoeing had launched the 787, or was close to launching it.3042\n9.228. We conclude in Sections 9.3.2.1.1 through 9.3.2.1.5 above that the European Union has\nfailed to demonstrate that the pre -2007 aeronautics R&D subsidies, operating through a\ntechnology causal mechanism, affect Boeing's development of technologies for the 787 and 777X\nin the post-implementation period. It is therefore not necessary that we evaluate whether, in any\ncase, technology effects of the pre -2007 aeronautics R&D subsidies could logically have impacted\nonly the A330 and Original A350 because, as a factual matter, the launch of the A350XWB was a\ncompetitive response to the launch of the 787. However, we consider that if it were necessary for\nthe Panel to address this issue, the Eu ropean Union would have needed to demonstrate that,\nabsent the pre -2007 aeronautics R&D subsidies, Boeing would not have been able to launch the\n787 until after Airbus had independently decided to launch a new wide -body aircraft such as the\nA350XWB in resp onse to customer demand for more fuel efficient aircraft. We find this scenario\nunlikely on the basis of the evidence before us. We note that in 2004, 14 years had already lapsed\nsince Boeing's launch of a new, wide -body LCA (its newest wide -body LCA model until that time\nwas the 777, which had been launched in 19 90).3043 Moreover, Airbus would likely have been\noccupied with flight testing and first deliveries of the A380 until at least mid -20073044 and Airbus\nhad anticipated in 2004 that the A330 -200 would be th e market leader for at least another ten\nyears of deliveries.\n9.3.2.2 Whether the post -2006 subsidies benefiting the 787 and 777X cause serious\nprejudice to the interests of the European Union, within the meaning of Articles 5(c) and\n6.3, in respect of the A350XWB in the post -implementation period , through a price\ncausal mechanism\n9.229. As stated in paragraph 9.114 above, the European Union argues that certain unwithdrawn\nsubsidies that the United States grants and maintains since the end of the reference period in the\noriginal proceeding (the post -2006 subsidies), through their effects on Boeing's pricing of the 787\nand 777X, considered collectively with the effects of certain aeronautics R&D subsidies on Boeing's\ntechnology developments for the 787 and 777X, cause various forms of serious prejudice with\nrespect to the A350XWB in the post-implementation period.\n9.230. In Section 9.3.2.1 above, however, the Panel concludes that the European Union has failed\nto demonstrate the existence of the various forms of technology effects of the aeronautics R&D\n\n3038 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1780.\n3039 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1777.\n3040 M. Pilling, \"Dream Date\", Airline Business, 1 April 2004, (Exhibit USA-579), p. 6.\n3041 European Union's comments on the United States' response to Panel question No. 152, para. 12.\n3042 European Union's comments on the United States' response to Panel question No. 152, para. 12.\n3043 M. Pilling, \"Dream Date\", Airline Business, 1 April 2004, (Exhibit USA-579), p. 6.\n3044 Airbus had planned flight tests of the A380 in 2005 with first entry into service in 2006, however, it\ndid not make its first A380 delivery until October 2007. C. Daily, \"Boeing Commits to Building 7E7 After ANA\nOrder\", Global News Wire, 27 April, 2004, (Exhibit USA-578); and T. Enders, \"Je n'exclus aucun recours en\n\nsubsidies in question in respect of the 787 and 777X in the post -implementation period . The\nconsequence of this conclusion is that the technological advancements (including the timing of\ndelivery) of the 787 and 777X in the post -implementation period cannot be considered to be an\neffect of the aeronautics R&D subsidies operating through a technology causal mechanism . This\nmeans that the remaining aspect of the European Union's main serious prejudice case regarding\nthe A350XWB that the Panel must evaluate is whether the post -2006 subsidies that are said to\noperate through a price causal mechanism cause the alleged forms of serious prejudice in respect\nof the A350XWB in the post-implementation period.\n9.231. In this Section, we therefore consider whether the post -2006 subsidies, through their\neffects on Boeing's prices of the 787 and 777X, are a genuine and substantial cause of significant\nlost sales of the A350XWB (as well as a threat of significant lost sales), impedance and a threat of\nimpedance of A350XWB imports (to the United States) and of exports (to certain third country\nmarkets), and significant price suppression of the A350XWB (as well as a threat of significant price\nsuppression) in the post-implementation period.\n9.232. In Section 9.2.2, we explain that we w ill conduct our analysis of the effects of the post -\n2006 subsidies that operate through a price causal mechanism by aggregating them into one of\nthree categories: (a) tied tax subsidies, comprising the Washington State and City of Everett B&O\ntax rate reductions, the receipt of which is contingent on the sale of particular Boein g LCA on a\nper-unit basis; (b) state and local cash flow subsidies, comprising incentives provided by state and\nmunicipal authorities in Washington and South Carolina related to Boeing's LCA production\nactivities in those jurisdictions, but which are not related to LCA production or sale on a per -unit\nbasis; and (c) post -2006 aero nautics R&D subsidies, which the European Union argues enable\nBoeing to use intellectual property to continue developing technologies for future LCA without\nhaving to pay licence fees.\n9.233. We therefore begin our analysis of the effects of the post -2006 subsid ies by asking\nwhether the European U nion has demonstrated that the tied tax category of subsidies affected\nBoeing's 787 and 777X pricing and thereby affected A350XWB sales and prices in the\npost-implementation period, such that these subsidies are a genuin e and substantial cause of any\nof the serious prejudice phenomena alleged by the European Union with respect to the A350XWB\nin the post -implementation period. We then undertake the same analysis for the state and local\ncash flow subsidies, and for the post-2006 aeronautics R&D subsidies.\n9.3.2.2.1 The tied tax subsidies\n9.234. The tied tax subsidies alleged to benefit the 787 (in respect of 787s produ ced in the State\nof Washington) 3045 and 777X are the Washington State and City of Everett B&O tax rate\nreductions. These B&O ta x rate reductions re duce the B&O taxes in respect of revenues earned\nfrom the sale s of LCA attributable to Washington State (or the City of Everett, as the case may\nbe), lowering Boeing's taxes and thereby increasing Boeing's after-tax profits.3046\n9.235. According to the European Union, the structure, desig n, and operation of the tied tax\nsubsidies impact Boeing's LCA prices by lowering the taxes and fees paid by Boeing on the\nproduction and sale of each individual LCA, thus directly reducing the marginal unit cost of each\nLCA by an amount equal to the subsidy. 3047 The causal link between the subsidies and adverse\neffects is \"confirmed and amplified\" by the magnitude of the subsidies which, when taken\ncollectively, is \"large by any reasonable measure\". 3048 The European Un ion emphasizes that the\nAppellate Body in the original proceeding considered that the tied tax subsidies were a genuine\nand substantial cause of adverse effects on the basis of their close nexus to the subsidized Boeing\nLCA, their design, structure and ope ration, their magnitude3049, and the conditions of competition\n\n3045 We recall that Boeing also produces 787s in the State of South Carolina; accordingly, revenues\nassociated with sales of 787s produced in South Carolina are not subject to B&O taxes in the State of\nWashington.\n3046 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1807.\n3047 European Union's first written submission, paras. 1136-1146.\n3048 European Union's first written submission, paras. 1147 and 1173; second written submission,\npara. 1077.\n3049 The European Union uses the term \"magnitude\" differently from the way the European Communities\nused this term in the original proceeding. In the original proceeding, the European Communities used\n\"magnitude\" to refer to the total subsidy amounts that it alleged Boeing had received between 1989 and 2006:\n\nin the LCA industry. 3050 The European Union argues that nothing has occurred since the original\nproceeding to alter the Appellate Body's reasoning and conclusion.3051\n9.236. The European Union argues generally that the impact of the U.S. subsidies on Boeing's LCA\nprices (including the tied tax subsidies) is concentrated on LCA sales campaigns in which the\ncompetition is very intense. 3052 According to the European Union, Airbus and Boeing, as \"two\nrational and pro fit-maximising LCA manufacturers\", have \"no incentive to offer price concessions\nthat go beyond what is necessary to win a deal\".3053\n9.237. The United States does not d ispute that subsidies that are tied to the production and sale\nof particular LCA are capable of a ffecting Boeing's pricing behaviour. 3054 Rather, its primary\nargument with respect to the tied tax subsidies is that their magnitude is too small to cause\nadverse effects.3055 The United States notes that the adverse effects finding s with respect to the\ntied tax subsidies in the original proceeding included the FSC/ETI subsidies, which have since been\nwithdrawn. The original panel's finding that the Washington State and City of Everett B&O tax rate\nreductions were not large enough on their own to cause adverse ef fects still stands, and the\nEuropean Union has not demonstrated otherwise in this proceeding.\n9.238. Both parties appear to accept that , as per -unit subsidies, the tied tax subsidies by their\nnature, are capable of affecting Boeing's pricing behaviour.3056 The United States describes the tied\ntax subsidies at issue in the original proceeding (and therefore also in this proceeding) as subsidies\n\"that did affect Boeing's marginal cost of producing current LCA alleged to be subsidized\". 3057 It\ndistinguishes the effects on pricing of tied tax subsidies from the effects on pricing of untied,\nnon-recurring subsidies on the basis that tied tax subsidies correspond directly with sales, such\nthat fluctuations in total sales volumes do not affect the calculus regarding the profita bility of a\nparticular sale:\n{I}n terms of effects on pricing behaviour, the more of a specific LCA a manufacturer\nproduces, the less significant an untied non -recurring subsidy generally is on a per -\naircraft basis. The significance (if any) of a tied tax subsidy does not become diluted in\nthe same way when production volumes increase.3058\n9.239. This is also broadly consistent with the positions of the parties in the original proceeding\nand the conclusion of the panel that the FSC/ETI subsidies and the B&O tax subsi dies, by lowering\nthe taxes incurred in connection with sales of LCA, have a far more direct and immediate\nrelationship to aircraft prices and sales than other subsidies at issue in the dispute. 3059 The\nAppellate Body also emphasi zed the nature of the tied ta x subsidies as tied to the production and\nsale of LCA on a per -unit basis in reaching the conclusion that subsidies of this nature were\n\n(a) allocated over time (with the addition of an \"opportunity benefit\" reflecting the time value of the funds to\nBoeing); and (b) allocated across the various models of Boeing LCA. In this proceeding, the European Union\nrefers to \"magnitude\" as meaning simply the \"amount\" of the subsidies.\n3050 European Union's first written submission, paras. 1123-1153.\n3051 European Union's first written submission, paras. 1141-1146.\n3052 See e.g. European Union's response to Panel question No. 164, paras. 116 and 117: \"{i}n this\ncontext, the European Union also recalls that the price-sensitive nature of sales involving closely competing\nproducts, the existence of large economies of scale, the role of switching cost and incumbency, as well as\nBoeing's exercise of market power each facilitate Boeing's targeted use of its subsidies in highly competitive\nsales to charge lower prices for its LCA than it would otherwise have charged.\" (emphasis added)\n3053 European Union's response to Panel question No. 164, para. 111. The European Union's argument\nposits that the tied tax subsidies do not affect Boeing's prices in a generalized manner, e.g. by affecting the\ncalculus of the pricing floor below which Boeing cannot sell an aircraft without affecting the overall profitability\nof the LCA programme, but are accumulated for strategic use in highly price-sensitive sales campaigns.\n3054 United States' first written submission, paras. 727 and 728.\n3055 United States' first written submission, paras. 719-721; second written submission, paras. 863-865.\n3056 We note that Korea, in contrast, argues that the fact that a subsidy is ostensibly \"tied\" to a\nparticular investment does not necessarily mean that the subsidy actually caused an investment that would not\notherwise have occurred. Korea notes that money is fungible. In order to overcome the \"presumption that\nmoney is fungible\", a complaining party would need to produce extensive evidence of the recipient's financial\ncapabilities and investment plans in the absence of the alleged subsidies that demonstrates that the\ninvestments would not otherwise have occurred. (Korea's third-party submission, paras. 26-28).\n3057 United States' comments on the European Union's response to Panel question No. 169, para. 27.\n3058 United States' first written submission, para. 728.\n3059 Panel Report, US – Large Civil Aircraft (2nd complaint), paras. 7.1806 and 7.1807.\n\ncapable of affecting Boeing's pricing decisions with respect to the relevant LCA. 3060 As the\nAppellate Body explained:\nAll other things being equal, a firm provided with a subsidy that is tied to production\nor sale enjoys the ability to lower its price while nevertheless achieving the same\nprofit margin. In effect, the subsidy enhances the firm's ability to lower its prices in\norder to obtain a sale, notwithstanding that the outcome of any given sale, and the\nimportance of price to that outcome, will still be dictated by the prevailing competitive\nconditions, including the market power and the pricing strategies of the particip ants,\nin a particular market.3061\n9.240. However, the Appellate Body also appeared to consider that, while the tied tax subsidies\nprovided Boeing with the ability and incentive to lower its LCA prices, the competitive dynamics of\nthe LCA markets are such that it wo uld not actually do so unless it faced the commercial\nimperative, in the particular circumstances of the sales campaign. That imperative would arise only\nwhere the LCA sales campaigns we re particularly price -sensitive, in the sense that Boeing was\nunder pressure to reduce its prices, and there we re no other non -price factors that explain the\noutcome of the sales campaign:\nIn this dispute, we consider that, given the nature of the tied tax subsidies, their\noperation over time, their magnitude, and the compe titive conditions in the LCA\nmarket, Boeing had both the ability and incentive to use the tied tax subsidies to\nlower prices, and that there was a substantial likelihood that this occurred in sales\ncampaigns that were particularly competitive and sensitive in terms of price. On that\nbasis, where it can be established that Boeing was under particular pressure to reduce\nits prices in order to secure LCA sales in particular sales campaigns, and there are no\nother non -price factors that explain Boeing's success in obtaining the sale or\nsuppressing Airbus' pricing , we can conclude that the subsidies contributed in a\ngenuine and substantial way to the lowering of Boeing's prices.3062\n9.241. The Appellate Body therefore considered that it would only be possible to reach a\nconclusion regarding the causal connection between the tied tax subsidies and Boeing's LCA pricing\nby examining the sales campaign evidence to determine whether, in each sales campaign, Boeing\nwas under particular pressure to reduce its prices in order to se cure the LCA sale and there were\nno other non-price factors that explained Boeing's success in obtaining the sale.3063\n9.242. As this is a compliance proceeding, we consider it appropriate to follow the same approach\nto analysing the effects of the tied tax subsidi es on Boeing's LCA pricing as taken by the Appellate\nBody in the original proceeding. We therefore evaluate the sales campaign evidence submitted in\nrelation to sales campaigns won by Boeing with the 787 and/or 777X at the expense of the\nA350XWB, and which the European Union argues are evidence of significant lost sales of the\nA350XWB, as well as of impedance of A350XWB imports and exports, and significant price\nsuppression of the A350XWB, in each case an effect of the U.S. subsidies. In doing so, we\ndetermine whether the campaigns are \"price -sensitive\", in the sense that Boeing appeared to be\nunder particular pressure to reduce its prices in order to secure the sales, and there are no non-\nprice factors that explain Boeing's success in obtaining the sale ; e.g. Boeing's incumbency and a\n\n3060 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), paras. 1252-1260.\n3061 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 1260. (emphasis added)\n3062 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 1260. (emphasis added) This\nis confirmed by the Appellate Body's reiteration of this aspect of its reasoning regarding the effects of the tied\ntax subsidies on Boeing's prices, somewhat later in the Report:\nWe have explained that, due to the nature of the tied tax subsidies, their operation\nover time, their magnitude, and the competitive conditions in the LCA market,\nBoeing had both the ability and the incentive to use the tied tax subsidi es to lower\nprices, and that there was a substantial likelihood that this occurred in sales\ncampaigns that were particularly competitive and sensitive in terms of price. We\nhave also explained that, where it can be established that Boeing was under\nparticular pressure to reduce its prices in order to win an LCA sale in a particular\nsales campaign, and there were no other non -price factors that explain Boeing's\nsuccess in obtaining the sale, we can conclude that the subsidies contributed in a\ngenuine and substantial way to the lowering of Boeing's prices.\n(Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 1271 (emphasis added))\n3063 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), paras. 1261-1265.\n\nconsequent switching cost advantage, the suitability of the aircraft for the particular customer's\nrequirements (in terms of range, capacity and delivery availability).\n9.243. Where Boeing appeared to be under particular pressure to reduce its pri ces in order to\nsecure the sale, and there are no non -price factors that explain Boeing's success in obtaining the\nsale, we will conclude that the tied tax subsidies contributed in a genuine and substantial way to\nthe lowering of Boeing's LCA prices. As a second step in the analysis, we will then address the\nUnited States' argument concerning the relative insignificance of the magnitudes of the tied tax\nsubsidies by determining whether, on the basis of the evidence before us, the magnitudes we re\nenough to \"cover the margin of victory between the final net prices of Boeing and Airbus\" 3064 such\nthat the tied tax subsidies, through their effects on Boeing's prices, are a genuine and substantial\ncause of lost sales of the A350XWB.\nThe sales campaigns involving competition between the 787 and 777X and A350XWB\n9.244. The European Union submits evidence for certain LCA sales campaigns involving the 787\nand/or 777X and the A350XWB that occurred between 2007 and 2015, and were won, in whole or\nin part, by Boeing. It argues that these LCA sales campaigns are highly competitive, and instances\nwhere Boeing did in fact act on its incentive, enabled by its receipt of subsidies, to offer pricing\nconcessions that enabled it to secure the sale at the expense of Airbus. 3065 The basic details\nconcerning the outcomes of these sales campaigns are set forth in Table 9 and Table 10 below:\n\n3064 See Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 1263.\n3065 The European Union must establish the existence of adverse effects in the post-implementation\nperiod (i.e. the period after 23 September 2012), and therefore the only LCA sales campaigns that can be\nevidence of the existence of significant lost sales are those that took place after the end of the implementation\nperiod. Nevertheless, we also examine the evidence related to sales campaigns that took place in the\n2007-2012 period on the basis that we should examine the entirety of the evidence submitted by the parties to\nthe extent that it may be relevant to identifying the particular pricing dynamic between Boeing and Airbus.\n\nTable 9: Alleged lost sales of the A350XWB between 2007-2012 due to the 787\nSales campaigns alleged to demonstrate lost sales of the A350XWB due to subsidies to the 787\nbetween 2007-20123066\nCampaign Number of 787 orders Number (if any) of A350XWB\norders3067\nQatar Airways 2007 30 787-8\n80 A350XWB, consisting of 20\nA350XWB-800 and 40 A350XWB-900,\nconverted from Original A350, and 20\nadditional A350XWB-1000\nBritish Airways 2007\n24 787, consisting of 8 787-8 and 16\n787-9, plus 18 options and 10\npurchase rights\nNone\nLAN Airlines 2007 26 787-8/787-9 None\nILFC 2007 52 787 None\nVirgin Atlantic Airways\n2007\n15 787-9, plus 8 options and 20\npurchase rights None\nEtihad Airways 2008 and\n2011 41 787-9 12 A350XWB\nUnited Airlines 2010\n\n25 787-8, plus 50 options 25 A350XWB-900\nUnited Airlines 2012\n(\"Follow-on\")\n5 787, consisting of 4 787-9 and 1\n787-8 None\nUnited Airlines 2013\n20 787-10, 10 of which were an\nup-conversion of the 2010 order of\n787-8\n35 A350XWB-1000, consisting of\nconversion of 2010 order to 25\nA350XWB-1000 and additional 10\nA350XWB-1000\nAir France-KLM 2011\n 25 787-9 25 A350XWB-900\nAeromexico 2012 6 787-9 None\nThe data in Table 9 above is supported by the following evidence: Qatar Airways Press Release, \"Qatar Airways\nOrders 60 Boeing 787-8 Dreamliners And 32 Boeing 777s\", 11 November 2007, (Exhibit EU -769); Airbus Press\nRelease, \"Qatar Airways confirms order for 80 A350 XWBs and adds three A380s\", 18 June 2007, (Exhibit EU -\n771); Boeing Press Release, \"Boeing and British Airways Finalize Contr act for 24 787 Dreamliners\",\n27 December 2007, (Exhibit EU -782); Boeing Press Release, \"Boeing, LAN Airlines Complete Deal for 32 787s\nand Four 777 Freighters\", 5 November 2007, (Exhibit EU -793); Boeing Press Release, \"Boeing, ILFC Announce\nOrder for 63 Airplanes\" , 19 June 2007, (Exhibit EU -800); Boeing Press Release, \"Boeing and Virgin Atlantic\nAnnounce 787 Order, Environmental Partnership\", 24 April 2007, (Exhibit EU -807); Boeing Press Release,\n\"Boeing, Etihad Airways Announce Twin -Aisle Order\", 14 July 2008, (Ex hibit EU-814); \"Etihad Cancels Orders\nfor Four 787 Dreamliners\", Aviation and Aerospace , 4 March 2011, (Exhibit EU -825); \"Etihad Cuts Dreamliner\nOrder in Swap for Boeing 777s\", Arabian Business , 8 March 2011, (Exhibit EU -826); Boeing Press Release,\n\"Boeing, Etihad Airways Announce Order for 10 787 -9 Dreamliners\", 12 December 2011, (Exhibit EU -831);\n\"Etihad splits massive order between Boeing, Airbus\", USA Today , 15 July 2008, (Exhibit EU -827); Boeing\nPress Release, \"Boeing and United Airlines Finalize 787 O rder\", 25 February 2010, (Exhibit EU -838); Airbus\nPress Release, \"United Signs Firm Order for 25 A350 XWB aircraft\", 10 March 2 010, (Exhibit EU-839); Boeing\nwebsite, Orders and Deliveries – 2012 Orders Detail, available at\n<http://www.boeing.com/commercial/#/orders-deliveries>, last accessed 7 August 2016, (Exhibit EU -1566);\nE. Russell, \"United quietly upped 787 number prior to Paris order\", Flightglobal, 1 July 2013, (Exhibit\nEU-1567); Boeing Press Release, \"Boeing Launches New Commercial Airplane; Highlig hts Innovation, Efficiency\nand Partnerships at 2013 Paris Air Show\", 20 June 2013, (Exhibit EU -1184); Boeing website, Orders and\nDeliveries – 2013 Net Orders, through 9 July 2013, available at\n<http://www.boeing.com/commercial/#/orders-deliveries>, accesse d 7 August 2016, (Exhibit EU -1185);\n\n3066 The European Union had also challenged the Air Berlin 2007 and Lion Air 2012 twin-aisle campaigns,\nbut does not pursue its arguments in relation to these campaigns on account of both airlines having cancelled\ntheir 787 orders. (European Union's response to Panel question No. 169, para. 328).\n3067 Certain of the campaigns cited by the European Union are \"split campaigns\", meaning that the\ncustomer ordered both Airbus and Boeing LCA. In many cases, the split order was a strategic decision by the\nairline that involved maximizing early delivery positions, and maintaining a competitive balance between the\ntwo airframe manufacturers.\n\nUnited Press Release, \"United is North American launch customer for Boeing 787 -10\", 18 June 2013, (Exhibit\nEU-1186); Airbus Press Release, \"Airbus, United Airlines reach agreement for 35 A350 -1000 aircraft\",\n20 June 2013, (Exhibit EU -1187); Boeing Press Release, \"Boeing, Air France -KLM Finalize Order for 25 787s\",\n10 January 2012, (Exhibit EU -850); Airbus Press Release, \"Air France -KLM co nfirms future with A350XWB\",\n19 June 2013, (Exhibit EU -1209); Airbus Press Release, \" Air France -KLM to acquire up to 60 A350 XWBs\",\n16 September 2011, (Exhibit EU-852); and Boeing Press Release, \"Boeing, Aeromexico Finalize 787 Dreamliner\nOrder\", 27 December 2012, (Exhibit EU-872).\n\nTable 10: Alleged lost sales of the A350XWB in the post-implementation period due to\nthe 787 and 777X\nPost-implementation period sales campaigns alleged to demonstrate lost sales of the A350XWB due\nto subsidies to the 787 and 777X3068\nCampaign Number of 787 orders Number of 777 orders Number (if any) of\nA350XWB orders\nSingapore\nAirlines 2013 30 787-10X None 30 A350XWB-900, plus 20\noptions\nBritish Airways\n2013\n12 787-10, plus firming up\noptions for 6 787-8/787-9 None 18 A350XWB-1000\nEmirates 2013 None\n150 777X, consisting of 35\n777-8X and 115 777-9X,\nplus 50 purchase rights\nNone\nQatar Airways\n2013 None 50 777-9X, plus 50\npurchase rights None\nCathay Pacific\n2013 None 21 777-9X None\nLufthansa 2013 None 34 777-9X, plus 30 options 25 A350XWB-900, plus 30\noptions\nEtihad Airways\n2013\n30 787-10, plus 12 options\nand purchase rights\n25 777X, consisting of 17\n777-9X and 8 777-8X, plus\n12 options and purchase\nrights\n50 A350XWB, consisting of\n40 A350XWB-900 and 10\nA350XWB-1000\nANA 2014 14 787-9 20 777-9X None\nANA 2015\n(\"Follow-on\") 3 787-10 None None\nEthiopian\nAirlines 2015 6 787-8 None None\nThe data in Table 10 above is supported by the following evidence: Boeing Press Release, \"Boeing Launches\nNew Commercial Airplane; Highlights Innovation, Effi ciency and Partnersh ips at 2013 Paris Air Show\",\n20 June 2013, (Exhibit EU -1184); Singapore Airlines Press Release, \"SIA To Order US$17 Billion Worth Of\nAircraft From Airbus & Boeing\", 30 May 2013, (Exhibit EU -1195); Airbus Press Release, \"Singapore Airlin es\nfinalises order for up to 50 more A350 XWBs\", 19 June 2013, (Exhibit EU -1196); \"Boeing Launches 787 -10\nwith $30 Billion of Orders\", Reuters, 20 June 2013, (Exhibit EU -1245); \"BA Set to Order 10 Boeing 787 -10s\",\nReuters, 16 June 2013, (Exhibit EU -1246); \"British Airways Confirms Order for 787 -10 Series\", British Airways\nNews, 18 June 2013, (Exhibit EU -1247); \"BA Orders 18 New Airbus A350 Aircraft\", The Independent ,\n23 April 2013, (Exhibit EU -1249); Emirates Press Release, \"Emirates announces l argest-ever aircraft order\",\n17 November 2013, (Exhibit EU -1317); Boeing Press Release, \"Boeing Launches 777X with Record -Breaking\nOrders and Commitments\", 17 November 2013, (Exhibit EU -1299); Qatar Airways Press Release, \"Qatar\nAirways Announces the Purchase of 50 Bo eing 777-9X\", 17 November 2013, (Exhibit EU -1316); Boeing Press\nRelease, \"Boeing Launches 777X with Record -Breaking Orders, Strengthens Partnerships in the Middle East at\nthe 2013 Dubai Airshow\", 20 November 2013, (Exhibit EU -1454); Boeing Press Release, \" Boeing, Qatar\nAirways Finalize Order for 50 777Xs\", 16 July 2014, (Exhibit EU -1469); Boeing Press Release, \"Boeing and\nCathay Pacific Airways Announce Order for 21 777 -9Xs\", 20 December 2013, (Exhibit EU-1443); Cathay Pacific\nPress Release, \"Cathay Pacific places order for 21 Boeing 777 -9X aircraft – Deliveries to commence in 2021\",\n\n3068 The 777X was launched in November 2013, so is only relevant for sales campaigns in the\npost-implementation period.\n\n20 December 2013, (Exhibit EU -1444); M. Steen, \"Lufthansa makes record German investment\", Financial\nTimes, 19 September 2013, (Exhibit EU -1493); Lufthansa Press Release, \"Moder n, quiet and environmentally\nefficient: Lufthansa Group orders 59 ultra -modern wide -body Boeing 777 -9X and Airbus A350 -900 aircraft\",\n19 September 2013, (Exhibit EU -1313); \"Lufthansa Splits $19 Billion Order Between Airbus, Boeing\",\nBloomberg, 19 September 2013, (Exhibit EU -1510); Airbus Press Release, \"Lufthansa, Airbus' biggest airline\ncustomer, commits to up to 55 A350s\", 19 September 2013, (Exhibit EU -1494); Boeing Press Release,\n\"Boeing, Etihad Airways Kick Off Dubai Airshow with 777X, 787 -10 Orders\" , 17 November 2013, (Exhibit\nEU-1314); Etihad Airways Press Release, \"Etihad Airways announces largest ever fleet order to enable\naccelerated growth strategy\", 17 November 2013, (Exhibit EU -1315); Airbus Press Release, \"Etihad Airways\norders 50 A350 XWB, 36 A320neo and one A330 -200F\", 17 November 2013, (Exhibit EU -1548); Boeing Press\nRelease, \"Boeing Statement on ANA Widebody Airplane Selection\", 27 March 2014, (Exhibit EU -1445); ANA\nHoldings News, \"ANA Group to place record 1700 billion yen order for 70 new aircraft\", 27 March 2014, (Exhibit\nEU-1446); Boeing Press Release, \"Boeing Announces ANA 's Commitment to Become Newest 787 -10\nCustomer\", 30 January 2015, (Exhibit EU -1569); and Boeing Press Release, \"Boeing, Ethiopian Airlines\nAnnounce Order for Six 787 Dreamliners\", 17 June 2015, (Exhibit EU-1570).\n\n9.245. The evidence submitted in relation to the above sales campaigns includes information\nconcerning: (a) the aircraft that were offered by Airbus and Boeing, respectively, to customers in\neach sales campaign; (b) t he particular needs of the airline customer in terms of factors such as\nseating capacity, range and routes to be served, efficiency and delivery dates; and (c) the\ndynamics of the pricing interactions between Airbus and Boeing, on the one hand, and the air line\nor leasing company customer on the other, through repeated rounds of negotiations. 3069 This\nevidence allows the Panel to assess with a high degree of confidence the extent to which the sales\ncampaigns were or were not particularly price -sensitive. While some of the sales campaign\nevidence is in the public domain (e.g. the information concerning the terms of the aircraft orders\nultimately placed by the customer), a significant part of it, especially as regards the internal Airbus\ncommunications describing Airbus' sales strategies and evaluating the competing Airbus and\nBoeing offers, is designated as HSBI. Therefore, in the discussion that follows, we provide a\nnon-confidential summary of our conclusions regarding the extent to which the outcomes of the\nindividual sales campaigns appeared to turn on the price of the competing offers. Our detailed\nconfidential analysis of the evidence pertaining to each s ales campaign is set forth in an HSBI\nAppendix to the Report.3070\n9.246. We conclude that there is insufficient evi dence to demonstrate that any of the LCA sales\ncampaigns involving the 787 and/or 777X and the A350XWB set forth in Table 9 and Table 10\nabove were price-sensitive in the s ense used by the Appellate Body (i.e. where Boeing was under\nparticular pressure to reduce its prices in order to secure LCA sales in particular sales campaigns,\nand there were no other non-price factors that explain Boeing's success in obtaining the sale).\n9.247. Indeed, while pricing was discussed in certain of the sales campaigns, other factors\nfeatured more prominently in the airline customers' evaluations of the suitability of the competing\noffers as well as in the evidence on record explaining the reasons w hy the airline customer chose\nto order Boeing aircraft over the competing Airbus offering. In the majority of the LCA sales\ncampaigns, a critical factor was the airline customers' preference for the delivery availability of the\nBoeing aircraft over the com peting Airbus aircraft, in light of the airlines' particular fleet\nreplacement requirements as well as Airbus' delivery delays.3071 The choice of engine manufacturer\n\n3069 The exception is with respect the Ethiopian Airlines 2015 campaign. The European Union argues that\nthis sales campaign constitutes a significant lost sale of the A350XWB (European Union's response to Panel\nquestion No. 169, paras. 326 and 327), but does not submit any evidence regarding the details of this sales\ncampaign. Indeed, the only evidence submitted by the European Union in connection with this sales campaign\nis a Boeing press release announcing the order for six 787s. There is no evidence before the Panel that Airbus\neven participated in a competition to offer alternative Airbus aircraft in this sales campaign. The\nEuropean Union argues that this order \"also\" results in the threat of further significant lost sales having\nmaterialized (European Union's response to Panel question No. 169, para. 326 and fn 592, referring to its first\nwritten submission, para. 1342). This paragraph of the European Union's first written submission is part of the\nEuropean Union's \"parallel\" argument, wherein it describes the threat of significant lost sales arising out of the\n2005 Ethiopian Airlines lost sale of the Original A350 as arising from the possibility that Ethiopian Airlines may\ncontinue to retain options and purchase rights which \"flow\" from the 2005 order. However, there is no evidence\nbefore the Panel that the 2015 Ethiopian Airlines order arose out of an exercise of options or purchase rights\nrelating to its 2005 order.\n3070 See HSBI Appendix (Appendix 2).\n3071 See HSBI Appendix (Appendix 2) paras. 10, 22, 29, 39, 48, 60, 76-79, 89, and 111. In the case of\none \"split order\", the airline customer's needs could not be met by one aircraft manufacturer, meaning that\nneither Airbus nor Boeing would have been awarded the whole order. (See HSBI Appendix (Appendix 2), para.\n89).\n\nwas another major factor in many campaigns .3072 In some cases, the main factors taken into\naccount by the airline customers included performance evaluations of the various aircraft,\nperceived strengths and weaknesses in performance guarantees and/or the level of confidence in\nthe maturity of the aircraft programme. 3073 In other campaigns, the size of th e aircraft, given the\nairlines' planned range and capacity needs, also featured as a decisive factor. 3074 Incumbency was\na vital factor in some cases, with the airline customer either striving for the advantages generated\nby fleet commonality, or being averse to the risks brought on by fleet diversity. 3075 We conclude\nthat in each case there a re factors other than price that explain why Airbus either did not win the\nsale, or in the case of the sales campaigns that involved \"split orders\", i.e. where the customer\nordered a number of Airbus and Boeing aircraft, why there is no basis to conclude that Boeing's\npricing resulted in the customer awarding a greater portion of the order to Boeing (and thus a\nlesser portion to Airbus) than would otherwise have been the case.3076\n9.248. Our review of the sales campaign evidence is also consistent with other evidence\nsuggesting that the competing models of Airbus and Boeing wide -body, twin -aisle LCA are less\nsubstitutable, and therefore that the outcomes of sales campaigns involving the se aircraft will\ndepend to a greater extent on non -price factors. Airlines will generally purchase a particular LCA\nmodel for the purpose of performing a specific route, or mission. A significant factor in determining\nthe outcome of an LCA sales campaign t herefore, is the suitability of the aircraft f or a particular\nroute or routes: the more suitable an aircraft for the routes in question, the lower its direct\noperating costs over time.3077 The suitability of an aircraft to perform a particular route depends on\nits seating, cargo, payload and range capability, which are largely determined by an aircraft's\nnumber of seats, its MTOW and its range when at maximum passenger capacity.3078 The closer the\nsuitability of two aircraft for a particular route or routes, the greater their substitutability. The\nwide-body, twin-aisle models of Boeing (787 and 777X) and Airbus (A330 and A350XWB) display a\nfar greater variance in terms of seating capacity, maximum take -off weight, and range than their\nnarrow-body, single-aisle counterparts (A320neo and A320ceo, and 737 MAX and 737NG).\n9.249. Our conclusion is further supported by the statement of Airbus' Executive Vice President,\nStrategy & Marketing, Kiran Rao, who opines that [[HSBI]].3079 It is also consistent with the\nconclusions drawn b y the Appellate Body in the original proceeding suggesting that sales\ncampaigns involving single -aisle LCA are likely to be more price -sensitive than those involving\nwide-body, twin-aisle LCA:\n{P}rice appears to have been a particularly important consider ation in the 100 -200\nseat LCA market due to the relatively high degree of substitutability between the A320\nand the 737NG, and the fact that many customers within this product market are\nlow-cost carriers, which are particularly price-sensitive.3080\n9.250. On the b asis of the foregoing evaluat ion of the nature of the tied tax subsidies, the\nconditions of competition in the wide-body, twin-aisle LCA markets, and the evidence pertaining to\nsales campaigns involving the 787 and 777X and A350XWB between 2007 and 2015, w e conclude\nthat the European Union has failed to demon strate that these campaigns were price -sensitive, in\nthe sense that Boeing was under particular pressure to reduce its prices in order to secure LCA\nsales in the particular sales campaigns, and there we re no other non -price factors that explain\nBoeing's success in obtaining the sale . While the tied tax subsidies may have given Boeing the\n\n3072 See HSBI Appendix (Appendix 2), paras. 29, 60, 89, 133, 149, and 158.\n3073 See HSBI Appendix (Appendix 2), paras. 10, 22, 76-79, 89, and 111.\n3074 See HSBI Appendix (Appendix 2), paras. 29, 76-79, 141, and 148.\n3075 See HSBI Appendix (Appendix 2), paras. 22, 98, and 157.\n3076 Several of the LCA sales campaigns involved split orders of both Airbus and Boeing aircraft: Qatar\nAirways (2007); Etihad Airways (2008, 2011 and 2013); United Airlines (2010, 2012 and 2013); Air\nFrance-KLM (2011); Singapore Airlines (2013); British Airways (2013); and Lufthansa (2013). In one of these\ncampaigns, the resulting split order was part of a deliberate policy on the part of the airline customer to avoid\nbecoming dependent on one manufacturer for its long-haul needs. (HSBI Appendix (Appendix 2), paras. 140\nand 141).\n3077 Mourey Statement, (Exhibit EU-34) (BCI), paras. 48 and 49.\n3078 Mourey Statement, (Exhibit EU-34) (BCI), paras. 48 and 49.\n3079 Statement of K. Rao, 6 October 2015, (Exhibit EU-1668) (HSBI). It is not affected by the caveats\nexpressed by the United States and Mr Wojick concerning the inherent limitations of NPV analyses as a tool for\ncomparing relevant factors associated with the respective offers of Airbus and Boeing in any LCA sales\ncampaign.\n3080 See Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 1259.\n\nability and incentive to lower its LCA prices without affecting its profitability calculus , the\ncompetitive dynamics of these LCA sales campaigns are such that it did not have the commercial\nimperative to do so in order to win the sales.3081\n9.251. Because the European Union has failed to demonstrate any effect of the tied tax subsidies\non Boeing's 787 or 777X prices in the post -implementation period, the possibility of any\nconsequent impact of those subsidies on sales and prices of the A350XWB does not arise. 3082\nAccordingly, there is no basis on which the tied tax subsidies can be found to be a genuine and\nsubstantial cause of any of the forms of serious prejudice alleged in respect of the A350XWB in the\npost-implementation period, through a price causal mechanism.\n9.252. The Panel therefore finds that the European Union has failed to establish that the\ntied tax subsidies are a genuine and substantial cause of any of the forms of serious\nprejudice alleged in respect of the A350XWB in the post -implementation period, through\na price causal mechanism.\n9.3.2.2.2 The state and local cash flow subsidies\n9.253. This category of post-2006 subsidies comprises:\na. B&O tax credits for Washington State property taxes and leasehold excise taxes in\nconnection with property where the 787 and 777X (as well as 737 families) are\nproduced, and a property tax exemption for LCFs in South Carolina used in transporting\nparts for the 787 production;\nb. B&O tax credits for aerospace preproduction in Washington that are alleged to affect\naircraft in preproduction such as the 787 and 777X (as well as the 737 MAX);\nc. sales and use tax exemptions for construction materials, fuel and computer equipment\nrelated to 787 production in Washington and South Carolina; and\nd. grants related to infrastructure for 787 production facilities in South Carolina.\n9.254. In Section 9.2.3.2 of this Report, we explain t he nature and operatio n of the state and\nlocal cash flow subsidies for purposes of deciding whether and how to aggregate the various\npost-2006 subsidies. In particular, we explain that the receipt of these subsidies is not contingent\nupon per-unit production or sale of LCA.\n9.255. The European Union argues that the state and local cash flow subsidies generally operate\nto liberate funds and thereby reduce costs that Boeing would otherwise have had to incur with its\nown resources. The European Union considers that Boeing is able, and ha s strong incentives, to\nuse the additional cash represented by the state and local cash flow subsidies to lower prices for\nits LCA in competitive sales campaigns without reducing its profits. 3083 The European Union\ntherefore regards the state and local cash f low subsidies as having the same essential cost\nreducing effect as the tied tax (per-unit) subsidies. They should be analysed as operating to\nprovide Boeing with the same ability to lower its LCA prices in particular, price -sensitive LCA sales\ncampaigns, thereby contributing to causing the same effects on Airbus' prices and sales as the tied\ntax subsidies. Moreover, the magnitude of the state and local cash flow subsidies \"confirms and\namplifies\" the existing causal connection already established by the sub sidies' close connection to\nthe production of the particular Boeing aircraft and the conditions of competition in the LCA\nindustry.3084\n9.256. The European Union considers that the untied nature of this aggregated group of subsidies\nis not an obstacle to their bein g found to cause adverse effects, especially in light of the Appellate\nBody's acceptance of the proposition that subsidies that are \"not directly contingent upon\n\n3081 See Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 1260.\n3082 See paras. 9.116 and 9.233 above.\n3083 European Union's first written submission, para. 1156; second written submission, para. 1080.\n3084 European Union's first written submission, paras. 1173-1175.\n\nproduction or sale can nevertheless affect pricing decisions in some circumstances\". 3085 It\nemphasizes that, in the original proceeding, the Appellate Body found a causal link between t he\ntax abatements related to the City of Wichita IRBs and adverse effects, and argues that, since the\nstate and local cash flow subsidies share the same essential featu res as t he tax abatements\nrelated to the City of Wichita IRBs, this finding should \"apply\" equally to the state and local cash\nflow subsidies at issue in this proceeding.3086\n9.257. The European Union notes that the Appellate Body reached its conclusion regarding the tax\nabatements related to the City of Wichita IRBs notwithstanding that they were untied subsidies.3087\nAccording to the European Union, the state and local cash flow subsidies are also closely \"linked\"\nto the research, development or production of particul ar Boeing LCA. This \"close link with\nproduction\", coupled with the \"cash flow -enhancing nature\" and the \"prevailing comp etitive\nconditions\", of the state and local cash flow subsidies, which are essentially the same as those of\nthe tax abatements related to the City of Wichita IRBs, means that the Appellate Body's reasoning\napplies equally to all of the state and local cash flow subsidies in this proceeding.3088\n9.258. The United States arg ues that the European Union has failed to establish a causal\nconnection between any of the state and local cash flow subsidies and the alleged adverse effects.\nWhile the European Union refers to \"aggressive pricing\" by Boeing in LCA sales campaigns, it fails\nto explain how subsidies not tied to Boeing's marginal cost of producing th e relevant aircraft\n(including those alleged to reduce Boeing's early -stage R&D costs) would affect Boeing's pricing.\nAbsent such a showing, any \"aggressive pricing\" reflects normal competition rather than the\neffects of subsidies. 3089 The United States argue s that, g iven that both the European Union and\nUnited States agree that Boeing's offers in LCA sales campaigns reflect the terms that Boeing, as a\nprofit-maximizing firm, views as necessary to win the sales campaign, the relevant question is\nwhether, and to what extent, the alleged subsidies enabled Boeing to price as it did.3090\n9.259. According to the United States, the European Union had two ways to show that alleged\nsubsidies enabled Boeing to provide additional discounts substantial enough to alter the outcome\nof a particular campaign. First, it could have shown that, even though the sales at those prices\nwere profit -maximizing, Boeing would have been unable to make them absent the subsidies.\nSecond, it could have shown that sales at those prices would no longer have been\nprofit-maximizing for Boeing in the absence of the subsidies. 3091 According to the United States,\n\"{t}he notion that a rational, profit-maximizing firm would deviate from optimal pricing strategy to\ngenerate increased revenue (at the expense of pro fits) only makes sense if the firm is\ncapital-constrained and needs short -term revenue to continue operations.\" 3092 The United States\nobserves that the European Union has been very clear that it does n ot allege that Boeing faces\ncapital constraints that force it to deviate from a profit -maximizing strategy. The United States\nfurther notes that the European Communities in the original proceeding had not been able to\nestablish that Boeing was capital constrained.3093\n9.260. Further, the United States notes that the economic model provided by the European\nCommunities in the original proceeding, which purported to demonstrate the effects of untied\nsubsidies on Boeing's LCA pricing behaviour, was also rejected by the original panel.3094 While the\nAppellate Body in the original proceeding expressed the view that untied subsidies \"may\" affect\nBoeing's prices, the United States maintains that the European Union must actually establish that\n\n3085 European Union's second written submission, para. 1085 (citing Appellate Body Report, US – Large\nCivil Aircraft (2nd complaint), para. 1348 (emphasis added)).\n3086 European Union's first written submission, paras. 1169 and 1177; second written submission,\nparas. 1087-1089.\n3087 European Union's second written submission, para. 1087.\n3088 European Union's second written submission, paras. 1088 and 1089.\n3089 United States' comments on the European Union's response to Panel question No. 169, para. 18.\n3090 United States' comments on the European Union's response to Panel question No. 169, paras. 22\nand 23.\n3091 United States' comments on the European Union's response to Panel question No. 169, para. 23.\n3092 United States' comments on the European Union's response to Panel question No. 169, para. 23.\nIndeed, the United States argues that economic theory dictates that where a firm needs to maximize\nshort-term revenue, it would lower its prices, as raising them would have the opposite effect. Therefore, if\nBoeing needed cash in the short-term due to the absence of the alleged subsidies, it would charge lower, not\nhigher, prices.\n3093 United States' first written submission, paras. 723 and 724; second written submission, para. 867.\n3094 United States' first written submission, paras. 723-726; second written submission, para. 867.\n\nthey do so.3095 According to the United States, t he European Union provides no causation analysis\nbeyond the general proposition that money is fungible.3096\n9.261. The United States considers that the Appellate Body's treatment of the effec ts of the tax\nabatements related to the City of Wichita IRBs cannot support the European Union's general\ntheory concerning the operation of untied subsidies such as the state and local cash flow subsidies\nthrough a price causal mechanism.3097\nThe analysis of the effects of untied subsidies on Boeing's LCA pricing in the original proceeding\n9.262. Certain of the state and local cash fl ow subsidies, such as the Washington State B&O tax\ncredits for property taxes and for aerospace preproduction /aerospace product development, were\nalso at issue and analysed in the original proceeding. In the original proceeding, the European\nCommunities al leged that all of the subsi dies, o ther than the FSC/ETI subsidies and the\nWashington State and City of Everett B&O tax rate reductions, similarly operated to \"increase\nBoeing's non -operating cash flow\", thereby providing Boeing with the ability to engage i n\n\"aggressive pricing\" of its LCA in order to win market share from Airbus. 3098 The subsidies in this\ngroup were not \"explicitly targeted to lowering Boeing's costs of production of specific LCA\nmodels\".3099 Rather, they were considered \"fungible\" by the Europea n Communities, and treated\nas the \"functional equivalent of additional cash flow available to Boeings' LCA division\". 3100 The\nEuropean Communities argued that, notwithstanding the fact that this category of subsidies was\nnot directly related to Boeing's production of individual LCA, Boeing's receipt of the subsidies of the\nmagnitudes in question, in light of the strategic incentives in the LCA market, and Boeing's\nfinancial condition, made it reasonable to infer that the subsidies did in fact affect Boeing's L CA\npricing behaviour.3101\n9.263. The European Communities' original case that subsidies that are untied , in the sense tha t\ntheir receipt is not contingent on production or sale of LCA on a per -unit basis, can nonetheless\naffect Boeing's LCA pricing behaviour, was t herefore based on a combination of: (a) an\neconometric simulation model developed by Professor Luís Cabral concerning the effects of\n\"development subsidies\"; (b) the financial condition or economic viability of Boeing's LCA division\nin the absence of the s ubsidy amounts; (c) subsidy magnitudes; (d) the conditions of competition\nin the LCA market; and (e) selected individual LCA sales campaigns.3102\n9.264. The United States in the original proceeding agreed with the European Communities that\nthe abse nce of a direct li nk (i.e. tie ) to production of a particular product is not of itself\ndeterminative of the outcome of the Panel's causation analysis. At the same time, in the absence\nof such a tie, a complaining Member would bear the burden of identifying persuasive eviden ce that\nthe subsidy was used by the recipient in a way that caused the adverse effects at issue, or that,\nbut for the subsidy, the recipient could not have competed in the market as it did.3103\n9.265. The original panel's discussion of the econometric simulati on mo del developed by\nProfessor Cabral is set forth in appendix VII.F.2 of the original panel report. 3104 The original panel\nconsidered that a principal weakness of Professor Cabral's model, insofar as it purported to\ndemonstrate that Boeing would use a significan t portion of each additional dollar of untied subsidy\nto engage in aggressive pricing of its LCA, was that the theory appeared to be inconsistent with\n\n3095 United States' first written submission, para. 730 (citing Appellate Body Report, US – Large Civil\n3096 United States' first written submission, para. 722.\n3097 United States' first written submission, para. 729.\n3098 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1825.\n3099 Panel Report, US – Large Civil Aircraft (2nd complaint), paras. 7.1609 and 7.1827.\n3100 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1609.\n3101 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1610.\n3102 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1611.\n3103 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1828 and fn 3786.\n3104 As the panel explains, the \"Cabral Model\" actually comprised two models, the \"objective function\nmodel\" and the \"price competition model\". The main purpose of the \"price competition model\" was to\ndetermine Boeing's allocation of subsidies between three types of \"investment\": (a) \"aggressive pricing\" due to\nlearning curve efficiencies; (b) \"aggressive pricing\" due to buyer switching costs; and (c) R&D expenditures.\n(Panel Report, US – Large Civil Aircraft (2nd complaint), appendix VII.F.2, para. 30).\n\nBoeing's actual pricing behaviour between 2001 and 2006. 3105 The original panel also expressed\nthe view that the relationship between a reduction in Boeing's general costs that are not part of\nthe development costs for a particular LCA programme (e.g. general R&D costs ), and LCA prices\nwas less direct than suggested by Professor Cabral, especially in light of th e evidence as to how\nLCA manufacturers set their prices. 3106 The panel's conclusions regarding the Cabral model were\nnot appealed.\n9.266. The original panel also found unpersuasive the European Communities' attempt to\ndemonstrate that, but for Boeing's receipt of th e subsidies in question between 1989 and 2006,\nBoeing's LCA division would not have been \"economically viable\", in large part because the\nEuropean Communities' argument rested on the proposition th at Boeing had received\nUSD 19.1 billion in subsidies over t hat 17 year period, wh ile the panel found that Boeing had\nreceived a fraction of that amount. 3107 Indeed, the panel estimated that the magnitude of the\nsubsidies that could appropriately be analysed as operating as the functional equivalent of\nadditional cash to Boeing was only USD 550 million over that 17 year period. The panel was\nunpersuaded that subsidies which by their nature are not directly tied to the production or sale of\nproducts, in such comparatively small amounts, could have affected Boeing's LCA pricing in a\nmanner that could give rise to serious prejudice.3108\n9.267. The European Communities appealed this finding on the basis that the panel should have\nassessed the effects of this group of untied subsidies, either with the tied tax subsidies, as an\naggregated single group, or at least by cumulating the effects of the group of untied subsidies with\nthose of the tied tax subsidies.3109 While the Appellate Body did not find fault with the pane l's\ndecision not to conduct an aggregated analysis of the effects of t he two groups of subsidies as\nthough they were a single subsidy, it found that the panel had erred in failing to make a\ncumulative assessment of whether the effects of the untied subsidies complemented and\nsupplemented the effects that the original panel h ad found were caused by the tied tax\nsubsidies.3110\n9.268. The Appellate Body, in completing t he analysis on this issue, found that w ith one\nexception, none of the untied subsidies at issue was a genuine cause of serious prejudice in the\nsingle-aisle market. The e xception was with respect to the tax abatements related to the City of\nWichita IRBs, which we f ind have been withdrawn by the United States.3111 There, the Appellate\nBody found that because the subsidy could \"not be considered trivial\" in its overall magnitud e and\nduration, and was \"closely connected\" to Boeing's production of the 737, it had a genuine causal\nconnection to the serious prejudice already found to have been caused by the tied tax subsidies in\nthe single-aisle market.3112 With respect to the remainin g untied subsidies, which were the other\nWashington tax subsi dies that are also at issue as state and local cash flow subsidies in this\nproceeding, the Appellate Body found insufficient evidence that the subsidies had been used in\nconnection with expenditu res associated with the 737NG. As a resu lt, it found there could be no\ngenuine causal connection between the subsidies and serious prejudice in the single -aisle\nmarket.3113\nThe amounts of the state and local cash flow subsidies and their alleged \"links\" to p roduction of\nparticular Boeing LCA\n9.269. In Section 8 of this Report, we estimate the relevant amounts of the various state and\nlocal cash flow subsidies for the 2013-2015 period, which we present in the table below, along with\nan estimate of the value of Boeing orders for the various LCA over that same period. We also\nindicate the LCA programmes to which the particular subsidies are alleged by the European Union\nto be \"linked\".\n\n3105 Panel Report, US – Large Civil Aircraft (2nd complaint), appendix VII.F.2, paras. 68 and 72.\n3106 Panel Report, US – Large Civil Aircraft (2nd complaint), appendix VII.F.2, para. 74 and fn 4262.\n3107 Panel Report, US – Large Civil Aircraft (2nd complaint), paras. 7.1830 and 7.1831.\n3108 Panel Report, US – Large Civil Aircraft (2nd complaint), paras. 7.1828 and 7.1834.\n3109 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 1323.\n3110 See Appellate Body Report, US – Large Civil Aircraft (2nd complaint), paras. 1287 and 1288; and\nPanel Report, EC and certain member States – Large Civil Aircraft, para. 7.1956.\n3111 See para. 8.640 above.\n3112 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 1348.\n3113 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), paras. 1341-1346.\n\nTable 11: Estimated amounts of state and local cash flow subsidies 2013-2015\nSubsidy 2013-2015\n(USD millions)\nBoeing LCA in respect of\nwhich the European\nUnion alleges the\nsubsidy arises\nValue of Boeing\norders\n2013-20153114\nWashington State B&O tax credits for\npreproduction/aerospace product\ndevelopment\n[***] 737 MAX and 787-10s and\n777Xs manufactured in the\nState of Washington\n\n737NG:\nUSD 45.7 billion\n737 MAX:\nUSD 97.6 billion\n787: USD 36 billion\n777X:\nUSD 63.3 billion\n\nWashington State B&O tax credit for\nproperty taxes and leasehold excise\ntaxes\n[***] 737NG, 737 MAX, and\n787s manufactured in the\nState of Washington\nWashington State sales and use tax\nexemptions for computer hardware,\nsoftware, and peripherals\n[***] 737NG, 737 MAX, and\n787s manufactured in the\nState of Washington\nSouth Carolina payment of proceeds of\nUSD 50 million in bond issuances\n50 (lump sum) 787s manufactured in\nSouth Carolina\nSouth Carolina property tax exemption\nin respect of Boeing LCFs\n25.82 787s manufactured in\nSouth Carolina\nSouth Carolina sales and use tax\nexemptions in respect of aircraft fuel,\ncomputer equipment, and construction\nmaterials\n2.25 787s manufactured in\nSouth Carolina\n\n9.270. Unlike the tied tax subsidies, Boeing's receipt of the state and local cash flow subsidies is\nnot contingent on the production or sale of LCA on a per-unit basis. The state and local cash flow\nsubsidies represent the functional equivalent of additional cash to Boeing. The European Union\nasserts that the state and local cash flow subsidies reduce Boeing's fixed costs of production.\nHowever, it does not demonstrate that any particular subsidy affects the programme costs for any\nspecific Boeing LCA programme , in the sense that the subsidies in question affect Boeing's\nproduction cost forecasts for an LCA programme, and thereby alter the profitability calcul us of\nsales of those LCA at particular prices .3115 In addition, in asserting generally that certain state and\nlocal cash flow subsidies can be considered \"linked\" to multiple Boeing LCA programmes (as is the\ncase for the Washington state and local cash flow subsidies), the European Union does not explain\nhow much of the subsidy should be considered to be allocated to each aircraft programme, based\non such \"link\".\n9.271. The Panel does not rule out the possibility that, in certain specific contexts, subsidies that\nreduce the fixed costs of a producer may be shown to impact prices. For example, if Boeing were\nfacing capacity constraints (such that any additional sales would result in higher marginal costs), a\nsubsidized expansion of production capacity could be demonst rated to allow for a reduction of\n\n3114 These calculations have been made using an estimated discount of 44% off the average 2012\nlist-price of the relevant LCA. The average 2012 list prices are set forth in Boeing list prices, (Exhibit EU-1210).\nThe 44% discount is the discount from average 2012 list prices of Boeing LCA used in the International Trade\nResources Report submitted by the European Union in connection with its calculation of the annual amounts of\nthe Washington State B&O tax rate reduction. (See ITR Report, (Exhibit EU-25), para. 11).\n3115 See Section 9.2.2 above. Compare, for example, the European Union's response to Panel question\nNo. 169, fn 408. The European Union has not explained, beyond generalized assertions, how the individual\nstate and local cash flow subsidies impact Boeing's fixed costs of production in relation to any of its LCA\nprogrammes. We note, moreover, that the Washington State B&O tax credits for property and leasehold excise\ntaxes and for preproduction/aerospace product development, as well as the Washington State sales and use\ntax exemptions for computer hardware, software, and peripherals, were all challenged in the original\nproceeding and argued by the European Communities to be untied subsidies which were not linked to\nproduction of particular families of Boeing LCA or to the production or sale of individual LCA. (See Panel Report,\nUS – Large Civil Aircraft (2nd complaint), para. 7.1609 and fn 3376). The European Union does not explain why\nit is now appropriate to analyse these same subsidy measures as reducing Boeing's fixed costs of production of\nany particular LCA programme or programmes.\n\nmarginal costs, and hence prices.3116 Nor is the situation before us one in which a subsidy enables\nan otherwise uncompetitive producer to remain in the market, distorting market prices by\ncontributing to excess supply or cap acity.3117 There is no evidence before us from which the Panel\ncan conclude that, absent the state and local cash flow subsidies, Boeing would not have engaged,\nor would not have been financially able to engage, in the same pricing behaviour in which it\nengaged.\n9.272. The European Union refers to the Appellate Body's finding with respect to the tax\nabatements related to the City of Wichita IRBs to support the argument that, in light of the\nincentives that Boeing has to reduce its prices in strategic LCA sales campa igns, and the subsidy\nmagnitudes, the untied Washington State subsidies that have a \"link\" to the production of the\nrelevant Boeing LCA, can be considered to have a genuine causal link to Boeing's pricing of those\naircraft.3118\n9.273. The Appellate Body's finding in relation to the tax abatements related to the City of Wichita\nIRBs was a factual determination made in the context o f completing the analysis .3119 To interpret\nwhat the Appellate Body said in that particular context as setting forth an economic theory or le gal\nruling regarding the basis on which untied subsidies, through their impact on the recipient's pricing\nbehaviour, should be considered to be a genuine cause of serious prejudice would, in our view, be\noverstretching the application of that finding. The state and local cash flow subsidies may be\nrelated in a factual sense to the production of certain (or all) LCA by Boeing. The subsidies\ngenerally arise from Boeing's location of its LCA manufacturing in particular places. However, the\nfact that the produc tion of certain (or all) Boeing LCA in a particular location gives rise to certain\nsubsidies, does not of itself, say anything meaningful in an economic sense about how Boeing\nwould apply the notional additional cash represented by those subsidies, and mor e specifically,\nwhether it would use such additional cash to lower the prices of its LCA, or how it would allocate\nthat additional cash to lower pricing of different LCA models where the subsidies in question are\n\"linked\" in a factual sense to production of a number of LCA models.3120\n\n3116 This is assuming that learning curve efficiencies are not adversely impacted by the addition of the\nnew capacity. Aviation industry analysts have speculated that Boeing's decision to split its 787 production\nbetween two assembly sites on opposite coasts may have adversely affected the rate at which Boeing's 787\nproduction costs have declined. (D. Gates, \"Will 787 program ever show an overall profit? Analysts grow more\nsceptical\", The Seattle Times, 17 October 2015, (Exhibit EU-1705), p. 9).\n3117 The evidence before the Panel suggests that, if anything, there is greater demand for LCA in the\nproduct markets the subject of this proceeding than can currently be met. Evidence before the Panel indicates\nthat, as of the end of July 2014, both Airbus and Boeing held record backlogs of orders for approximately\n11,000 aircraft combined. The 787 was reported to be sold out through the end of the decade. Boeing was\nreported to have raised its prices by approximately 3.1%, which was almost twice the rate of price increases of\nthe previous year. (\"Boeing Raises Jet Prices 3.1 Per cent; 777-9X Costs Most\", Bloomberg, 31 July 2014,\n(Exhibit EU-1447)). Both Airbus and Boeing were reported in late 2014 and 2015 to be considering increasing\nproduction targets for single-aisle LCA to meet anticipated demand which already exceeded capacity, with\nBoeing's reported backlog for the 737 family being reported as 4,008 orders as of September 2014; almost\neight years of production at current rates. (\"Boeing considering further boost in 737 production\", Chicago\nTribune, 17 September 2014, (Exhibit EU-1684); and \"UPDATE 2 – Airbus debates new A320 output hike,\nsuffers test glitch\", Reuters, 28 May 2015, (Exhibit EU-1686)).\n3118 And correspondingly, that untied subsidies that have a close connection or \"link\" to the production\nof other Boeing LCA at issue in this proceeding (i.e. the 787 and 777X), can also be considered to have a\ngenuine causal link to Boeing's pricing of those aircraft.\n3119 The Appellate Body found that the original panel erred in failing to consider whether the \"remaining\"\n(untied) subsidies had a genuine causal relationship with; i.e. made a \"real or meaningful contribution to\" the\neffects of the tied tax subsidies on Boeing's pricing in the 100-200 seat LCA product market, such that the\nremaining subsidies could be said to \"complement and supplement\" the effects of the tied tax subsidies and\nthereby also cause serious prejudice. (Appellate Body Report, US – Large Civil Aircraft (2nd complaint),\nparas. 1328 and 1329). The Appellate Body then decided to complete the analysis. The Appellate Body has\ncompleted the analysis only in cases in which there are sufficient factual findings in the panel report or\nundisputed facts in the panel record to enable it to carry out the legal analysis. (See e.g. Appellate Body\nReport, EC and certain member States – Large Civil Aircraft, paras. 1143-1147). The United States had\nasserted that there were no such findings or undisputed facts on the record that would enable the Appellate\nBody to complete the analysis in this instance, and moreover, that the European Union had failed to identify\nany. (Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 1332).\n3120 To take an example, although the Washington State B&O tax credits for pre-production/aerospace\nproduct development may currently be generated in respect of Boeing aircraft that are in pre-production, such\nas the 737 MAX, 787-10, and 777X, given the nature of this subsidy as untied, we do not consider that this\nnecessarily provides a basis for concluding, in a manner analogous to the Appellate Body's analysis of the per-\n\n9.274. In the original proceeding, the Appellate Body reasoned (in relation to its analysis of the\ntied tax subsidies) that it is rational to expect that, where a subsidy is provided on a per-unit basis\nin respect of LCA produced or so ld, the manufacturer would be inclined, in the appropriate market\ncontext, to pass on all or part of that subsidy to the purchaser because it is possible to do so\nwithout sacrificing profit margins. 3121 The calculus of the extent to which untied subsidies, wh ich\nrelate in a less direct way to production or sales than per -unit subsidies, potentially affect the\nprofitability of a n LCA sale in light of the competitive dynamics of the LCA markets , is far less\nclear. We are unable to identify any economic rationale or other explanation as to why untied\nsubsidies that ma y be considered factually associated with production of Boeing aircraft, whether\nindividual aircraft models, certain models, or all models , would contribute to Boeing's ab ility to\nlower the prices of those aircraft.3122\n9.275. The European Union does not advance an economic theory to support its argument that\nsubsidies that reduce Boeing's fixed costs in a general sense impact its LCA prices generally or\nmore specifically, over the short-term or over the long -term.3123 Nor does it attempt to\ndemonstrate that Boeing's LCA pricing would not be economically feasible absent the receipt of the\nstate and local cash flow subsidies.3124\n9.276. Because the European Union has failed to demonstrate any effect of the state and local\ncash flow subsidies on Boeing's prices of the 787 or 777X in the post -implementation period, the\npossibility of any consequent impact of those subsidies on sales and prices of the A350XWB does\nnot arise.3125 Accordingly, there is no basis on which the state and local cash flow subsidies can be\nfound to be a genuine and substantial cause of any of the forms o f serious prejudice alleged in\nrespect of the A350XWB in the post-implementation period, through a price causal mechanism.\n9.277. The Panel therefore finds that the European Union has failed to establish that the\nstate and local cash flow subsidies are a genuine and substantial cause of any of the\n\nunit tied tax subsidies in the original proceeding, that Boeing would have the ability and incentive to use that\nsubsidy to lower its LCA prices in relation to those aircraft models. The same analysis applies with respect to\nthe other state and local cash flow subsidies which the European Union alleges are \"linked\" to the production of\none or more Boeing LCA.\n3121 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 1261.\n3122 We note that the Appellate Body has explained that, even where a panel considers its view to\nrepresent common sense or its own conception of economic rationality, it should at least explain the economic\nrationale that supports its \"intuition\" and moreover, should test its intuitions empirically. (Appellate Body\nReport, US – Large Civil Aircraft (2nd complaint), para. 643). Indeed, accepting the European Union's\narguments would, in this instance amount to \"causation through association\". (See Appellate Body Report, EC\nand certain member States – Large Civil Aircraft, para. 1404). Our approach to this issue is consistent with the\napproach to an analogous issue taken by the Appellate Body in EC and certain member States – Large Civil\nAircraft. In that case, the Appellate Body found that the panel's generalized finding that the R&TD subsidies\nenabled Airbus to develop features and aspects of its aircraft faster than would otherwise have been possible\nwas insufficient to justify cumulating the effects of the R&TD subsidies with the \"product effects\" of the launch\naid/member State financing subsidies in enabling Airbus to launch particular models. Rather, in order to\nestablish the requisite genuine causal link, the panel should have made specific findings that technology or\nproduction processes funded by the R&TD subsidies contributed to Airbus' ability to launch and bring to market\nparticular models of LCA. (Appellate Body Report, EC and certain member States – Large Civil Aircraft,\nparas. 1404 and 1407).\n3123 Unlike in the original proceeding, the European Union does not submit an economic model\nexplaining how subsidies the receipt of which is not contingent on per-unit production or sale of LCA, by virtue\nof operating to increase Boeing's cash flow in a general sense, cause Boeing to lower its LCA prices. (Panel\nReport, US – Large Civil Aircraft (2nd complaint), para. 7.1613).\n3124 This is a significant departure from the European Communities' case in the original proceeding,\nwhere it sought to demonstrate that Boeing's pricing and product development decisions would have been\n\"unsustainable and financially irrational\" absent Boeing's alleged receipt of the subsidies at issue. (See Panel\nReport, US – Large Civil Aircraft (2nd complaint), paras. 7.1621, 7.1830, and 7.1831, and fn 3787). The\nevidence before us suggests that the 787 programme has thus far generated significant losses for Boeing. See\npara. 9.55 where the Panel discusses evidence that the accumulated \"deferred costs\" for the 787 programme\nare projected to peak at USD 33 billion late 2016 and that these losses are in addition to Boeing's original\ninvestment to develop the 787, which has been estimated by analysts at an additional USD 20 billion or more.\n(D. Gates, \"Will 787 program ever show an overall profit? Analysts grow more sceptical\", The Seattle Times,\n17 October 2015, (Exhibit EU-1705), p. 8). However, the evidence also suggests that Boeing has thus far been\nable to sustain this programme due to the cash generated by its highly profitable 777 and 737 programmes.\n(See para. 9.55 above).\n3125 See paras. 9.116 and 9.122 above.\n\nforms of serious prejudice alleged in respect of the A350XWB in the\npost-implementation period, through a price mechanism.\n9.3.2.2.3 The post-2006 aeronautics R&D subsidies\n9.278. The European Union argues that the post -2006 aeronautics R&D subsidies 3126 operate to\nlower Boeing's pricing of current LCA, such as the 787 and 777X, because they provide Boeing\nwith access to and use of research re sults and inputs that enable it to \"continue maturing\"\ntechnologies for application to future generations of LCA without having to pay the U.S.\nGovernment for such access and use. 3127 The European Union considers that the post -2006\naeronautics R&D subsidies o perate in a manner that is \"identical to the remaining state and local\nsubsidies\".3128\n9.279. The European Union considers that the post -2006 aeronautics R&D subsidies are similar in\nnature to the pre -2007 aeronautics R&D subsidies in that they concern the developm ent of LCA\ntechnologies that \"Boeing has a significant economic disincentive to research on its own\". 3129\nHowever, unlike the pre -2007 aeronautics R&D subsidies, the post -2006 aeronautics R&D\nsubsidies concern technologies that are not sufficiently mature for application to current Boeing\nLCA, and thus do not affect sales and prices of current generation Boeing LCA throug h a\ntechnology causal mechanism.3130 The European Union argues that the post-2006 aeronautics R&D\nsubsidies do affect the prices o f current Boei ng LCA through a price causal mechanism , however.\nThis is because the post-2006 aeronautics R&D subsidies relieve Boeing from paying to licence the\nuse of intellectual property in its technology development activities. The post -2006 aeronautics\nR&D subsidi es therefore lower Boeing's costs of licensing intellectual property rights to LCA\ntechnology, and of developing that technology , in order to continue improving its products and to\nmaintain the competitiveness of products, \"enabling it to act on its incent ive to pass such cost\nsavings on to its customers in the form of lower prices for Boeing LCA\".3131\n9.280. The European Union argues that the post -2006 aeronautics R&D subsidies, operating\nthrough a price causal mechanism , enable Boeing to lower the prices of its cu rrent LCA based on\nthe same reasoning that the Appellate Body adopted in concluding that the tax abatements related\nto the City of Wichita IRB s have a genuine causal link to, and \"complemented and supplemente d\"\nthe effects of the tied tax subsidies on Boei ng's LCA prices in the original proceeding. 3132 The\ngenuine causal link between the post-2006 aeronautics R&D subsidies and alleged present adverse\neffects is confirmed by the design, structure, magnitude, and operation of these subsidies, in light\nof the rel evant conditions of competition, as well as their nexus with the subsidi zed Boeing LCA.\nThis is sufficient to establish that the post -2006 aeronautics R&D subsidi es affect Boeing's LCA\npricing decisions, as the Appellate Body made clear that subsidies not contingent upon per-unit\nproduction or sale may affect prices, and given the conditions of competition, Boeing would have\n\n3126 Although the European Union argues that the non-flight testing portion of the FAA aeronautics R&D\nsubsidy should be analysed as operating through a technology causal mechanism, it requests the Panel to\nanalyse this aspect of the FAA aeronautics R&D subsidy as operating through a price causal mechanism if the\nPanel were to reject its technology effects arguments. (European Union's response to Panel question No. 43,\nfn 352).\n3127 European Union's response to Panel question No. 43, para. 280.\n3128 European Union's first written submission, paras. 1180 and 1187. See also European Union's\ncomments on United States' response to Panel question No. 158, para. 79, where the European Union explains\nthat the post-2006 aeronautics R&D subsidies that operate through a price causal mechanism are not, in the\nshort-term, materially different from the tax abatements related to the City of Wichita IRBs.\n3129 European Union's response to Panel question No. 43, para. 280.\n3130 The post-2006 aeronautics R&D subsidies cannot be linked to particular Boeing LCA currently\nmarketed, owing to their nature as \"funding early-stage R&D intended to create technologies that do not\nactually appear on LCA until years or decades in the future\". (European Union's response to Panel question No.\n158, para. 72). Compare to European Union's second written submission, paras. 1099 and 1100 and United\nStates' comments on the European Union's response to Panel question No. 43, paras. 239-246.\n3131 European Union's response to Panel question No. 43, para. 280. See also European Union's first\nwritten submission, para. 1187; opening statement at the meeting with the Panel, paras. 81 and 82; and\nclosing statement at the meeting with the Panel, paras. 25 and 26.\n3132 European Union's first written submission, para. 1187: \"{w}hile the City of Wichita IRBs provided\nbenefits through tax breaks on property investment, and the aeronautics R&D subsidies here relate to funding\nand support for R&D, both share the salient feature that they generate or free non-operating cash flow that\nBoeing can use to lower LCA prices\".\n\nused the post-2006 aeronautics R&D subsidies available to it to reduce prices in competitive sales\ncampaigns.3133\n9.281. The United States makes a number of arguments, first with respect to the proposition that,\nabsent the post -2006 aeronautics R&D subsidies, Boeing would have had to pay the U.S.\nGovernment to licence the intellectual property, and second, with respect to the proposition that\ncost savings represented by Boeing not having to pay to licence the intellectual property represent\nthe equivalent of additional cash flow that Boeing would use to lower its current LCA prices.\n9.282. The United States considers that there is no support for the Euro pean Union's argument\nthat, absent the post -2006 aeronautics R&D subsidies, Boeing would have had to incur additional\ncosts licensing intellectual property from the U.S. Government. According to the United States, the\nEuropean Union's argument implies that , because the benefit conferred by the subsidy concerns\nthe more favourable allocation of intellectual property right s to Boeing, the counterfactual\nassessment of Boeing's LCA pricing in the absence of the post -2006 aeronautics R&D subsidies\nshould assume that Boeing would need to licence those technologies from the U.S. Government in\norder to carry out its LCA technology development activities. However, the nature of the research\nfunded by the post -2006 aeronautics R&D subsidies is research that would not have been\nundertaken in the absence of the subsidies. Thus, in the appropriate counterfactual, the research\nwould not have been undertaken by Boeing or by the U.S. Government and there is no basis for\nthinking that Boeing would pay to obtain intellectual p roperty rights to such non -existent\nresearch.3134 Moreover, the European Union provides no evidence that the R&D funded by the\npost-2006 aeronautics R&D subsidies can be expected to produce significant protectable\nintellectual property, or that any such prote cted intellectual property is likely to be needed to\nconduct subsequent research relevant to Boeing's LCA.3135\n9.283. The United States also considers that, even assuming arguendo that the post -2006\naeronautics R&D subsidies resulted in lower intellectual property licensing fees for Boeing, the\nEuropean Union fails to provide any economic theory to explain why, in a counterfactual world in\nwhich Boeing paid to licence the equivalent intellectual property, Boeing would need to raise the\nprices of its current LCA. Fir st, the European Union does not address the magnitude of the\nlicensing fees that Boeing would have had to pay absent the post -2006 aeronautics R&D subsidies,\nor support an estimate of the value of the putative cost savings with any evidence. Second and\nmore fundamentally, there is no basis for concluding that, in a counterfactual world where Boeing\nhad to pay to licence intellectual property to develop LCA technologies for application to future LCA\nmodels, it would need to raise the prices of its current LC A.3136 Third, given the European Union's\nposition that the post-2006 aeronautics R&D subsidies support research into technologies that are\nnot linked to current Boeing LCA (i.e. the 787, 777X, 737 MAX , or 737NG)3137, the so-called \"cost\nsavings\" from not having to licence intellectual property are \"untied\" to the production of current\nLCA and therefore would not affect pricing of current Boeing LCA , unless Boeing were shown to\nface significant capital constraints, such that its investment and pricing behaviour wo uld be\nsensitive to fluctuations in cash flows.3138\n9.284. Finally, as regards the European Union's attempt to argue that the post -2006 aeronautics\nR&D subsidies complement and supplement the effects of other subsidies on Boeing's LCA prices,\nby analogy to the way that the Appellate Body cumulated the effects of the tax abatements related\nto the City of Wichita IRBs with those of the tied tax subsidies in the 100 -200 seat LCA product\n\n3133 European Union's first written submission, paras. 1114-1116 and 1183-1190; and second written\nsubmission, paras. 1083-1091.\n3134 United States' comments on the European Union's response to Panel question No. 43,\nparas. 249-251. The United States adds that, if the nature of the subsidized research is such that the R&D\nwould have been conducted by Boeing absent the post-2006 aeronautics R&D subsidies, there would be no\nbasis for finding that the post-2006 aeronautics R&D subsidies at any point in the future could give rise to\ntechnology effects, and the European Union's position is therefore internally inconsistent. See also\nUnited States' response to Panel question No. 158, para. 45.\n3135 United States' comments on the European Union's response to Panel question No. 43, para. 252.\n3136 United States' comments on the European Union's response to Panel question No. 43, paras. 253\nand 254.\n3137 Referring to European Union's response to Panel question No. 43, para. 280.\n3138 United States' comments on the European Union's response to Panel question No. 43, para. 255.\nThe United States notes that the European Union has stated clearly that it is not attempting to show that\nBoeing was or is capital constrained.\n\nmarket, the United States argues that the European Union has failed to establish an y \"link\" to\nparticular Boeing LCA. 3139 Specifically, the European Union does not explain how intellectual\nproperty licensing fees that would be required to develop a future technology for a future aircraft\nmodel are linked to the production of existing aircraft that are currently being sold.\n9.285. Japan and Korea advance arguments supporting the analysis of R&D subsidies through a\nprice causal mechanism. Japan argues that a price causal mechanism is inherent in any subsidy\nthat has the potential to cause price-related effects, and that R&D subsidies are no exception. R&D\nsubsidies function by enabling the recipient to lower the sales price of products incorporating the\nresults of the subsidized research and development. 3140 Japan considers that, even assuming for\nthe sa ke of argument that, with respect to the aeronautics R&D subsidies at issue in this\nproceeding, Boeing used the previously -subsidized technology, experience , and knowledge to\nfurther the development of new innovative technologies (the so -called \"spill -over\" and sleeper\ntechnology effects), this does not mean that the assessment of adverse effects can properly be\nbased on such a technology causal mechanism. 3141 For Japan, the fact that a recipient has\ninvented a particular technology likely reveals that it had the technological potential to do so, but\ncould not afford to commercially, in the absence of subsidization. 3142 In this situation, the proper\ncounterfactual in analysing adverse effects is whether the recipient, as a business entity, would\nhave had to offer products using the technology it developed without the R&D subsidies at higher\nprices, rather than whether the recipient could, or could not, have invented the particular\ntechnology.3143 Japan further observes that it is not clear what realistic steps the sub sidizing\ngovernment could take to remove the \"technological effect\" of R&D subsidies. However, if the\nremoval of adverse effects is considered from the perspective of the price effects of R&D subsidies,\nit is more realistic for a subsidizing government to take appropriate steps to remove the adverse\neffects, within the meaning of Article 7.8 of the SCM Agreement.3144\n9.286. Korea considers that the technology causal mechanism is difficult to reconcile with the\nstructure of the SCM Agreement and its definition of sub sidies and that it is doubtful that such an\nanalysis can properly be extended to other situations in which the parties have not accepted its\nuse.3145 A subsidy only exists where government action takes the form of a financial contribution.\nIn essence, then, a subsidy always consists of extra money for the recipient. Because the essence\nof a subsidy is the extra money the recipient obtains, the effects of the subsidy must be measured\nby the effects of that money. Therefore, as a logical matter, the only direct effect of the provision\nof money to a recipient at lower -than-market cost is a reduction in the recipient's overall cost of\nfinancing.3146 Korea considers that the proposed technology causal mechanism presents\ninsuperable conceptual difficulties in cases such as this, with a product characterized by long\ndevelopment times that can continue to provide multiple benefits over multiple generations. As a\npractical matter, technological advantages gained in the past cannot be withdrawn and their\neffects cannot be er ased. Korea fails to see how the U.S. producer in this proceeding can be\nexpected to unlearn the knowledge it has gained over the years, while by the same token, the\nbenefits of any continuing subsidies would not be reflected for many years, when the knowl edge\ngenerated today is actually put to use. By contrast, money obtained through improper subsidies\ncan be repaid or otherwise offset through taxes or other levies; the financial effects of a subsidy\nare quantifiable and remediable. The technological effec ts are not. Korea therefore considers that\nthe assessment of adverse effects through a technological mechanism should be carefully\ncircumscribed, if not entirely rejected.3147\n9.287. The parties' arguments raise two basic issues. Th e first is whether the post -2006\naeronautics R&D subsidies relieve Boeing from paying to licence intellectual property in its\n\n3139 United States' comments on the European Union's response to Panel question No. 43,\nparas. 257-259.\n3140 Japan's third-party submission, paras. 10 and 11.\n3141 Japan's third-party submission, para. 12.\n3142 Japan emphasizes in this respect the positive externalities of R&D subsidies, and that R&D subsidies,\nby their nature, can be distinguished from those that provide a competitive advantage to inefficient\nenterprises. Indeed, R&D subsidies are meaningless unless the recipient has the requisite internal\ncompetencies to achieve the desired result. (Japan's third-party submission, paras. 21-23).\n3143 Japan's third-party submission, para. 14; third-party statement, paras. 24-26.\n3144 Japan's third-party submission, para. 16.\n3145 Korea's third-party submission, para. 25.\n3146 Korea's third-party submission, paras. 25-27.\n3147 Korea's third-party submission, paras. 29 and 30.\n\ntechnology development activities and thus can be considered to lower Boeing's costs. 3148 The\nsecond is whether, if the Panel accepts that characterization of the oper ation of the subsidies,\nthese subsidies have been demonstrated to affect Boeing's LCA pricing behaviour.\n9.288. With respect to this second issue, we recall that in Section 9.3.2.2.2 above, we evaluate\nthe European Union's argument that certain state and local cash flow subsidies provide Boeing with\nadditional cash flow because they are linked to (and lower) Boeing's costs of researching,\ndeveloping or producing LCA. We f ind that the European Union ha s failed to demonstrate that\nthese subsidies, by virtue of operating to increase Boeing's overall cash flow, have a genuine\ncausal link to Boeing's LCA pricing. This is because the European Union does not provide any\ntheoretical or other basis (such as cash flow constraints) for considerin g that Boeing's LCA pricing\nbehaviour would have been any different absent the subsidies. The European Union's argument\nregarding Boeing's incentives to apply the alleged cost savings represented by the post -2006\naeronautics R&D subsidies to lower pricing of its LCA parallels the argument it makes in this regard\nin relation to the state and local cash flow subsidies. This argument must therefore fail for the\nsame reasons that we find that the European Union ha s failed to demonstrate that Boeing would\nuse the additional cash flow represented by the state and local cash flow subsidies to lower its LCA\nprices.\n9.289. It is therefore unnecessary for us to address the first issue, which is whether the post-\n2006 aeronautics R&D subsidies should be analysed as representi ng additional cash flow to Boeing\non the basis that they relieve Boeing from paying to licence intellectual property in its technology\ndevelopment activities and thereby lower Boeing's costs. We merely observe that the vast majority\nof the post-2006 aeronautics R&D subsidies do not appear, on the basis of the evidence before us,\nto be related in any sense to the production of the particular LCA that the European Union alleges\nare being offered to customers at lower prices. 3149 At most, these subsidies could relate to the\ndevelopment technologies for potential application of future generations of Boeing LCA.\n9.290. Because the European Union has failed to demonstrate any effect of the post -2006\naeronautics R&D subsidies on Boeing's prices of the 787 or 777X in the pos t-implementation\nperiod (assuming, arguendo, that we treat these subsidies as relieving Boeing from paying to\nlicence intellectual property in its technology development activities, and thus as subsidies that\nlowered Boeings' costs, an issue we need not and do not decide), the possibility of any consequent\nimpact of those subsidies on sales and prices of the A350XWB does not arise. 3150 Accordingly,\nthere is no basis on which the post -2006 aeronautics R&D subsidies can be found to be a genuine\nand substantial cause of any of the forms o f serious prejudice alleged in respect of the A350XWB\nin the post-implementation period, through a price causal mechanism.\n9.291. The Panel therefore finds that the European Union has failed to establish that the\npost-2006 aeronautics R&D subsidies are a genuine and substantial cause of any of the\nforms of serious prejudice alleged in respect of the A350XWB in the\npost-implementation period, through a price mechanism.\n\n3148 Alternatively, whether for aeronautics R&D that Boeing would have undertaken in the absence of the\nsubsidies, the full amount of the financial contributions should be treated as \"cost savings\" to Boeing.\n3149 For the vast majority of the post-2006 aeronautics R&D subsidies, the European Union indicates that\nthe subsidies concern technologies that are not yet sufficiently mature for application to current Boeing LCA.\nThese subsidies therefore do not bear any relation to expenditures associated with Boeing's current LCA\nofferings. The European Union alleges that a relatively small number of individual post-2006 aeronautics R&D\nsubsidies are in fact related to Boeing's development of innovative technologies for current LCA offerings, i.e.\nthe non-flight testing portion of the FAA aeronautics R&D subsidy, which the European Union requests the\nPanel to analyse as operating through a technology causal mechanism based on their contribution to Boeing's\ndevelopment of innovative technologies for current LCA offerings, specifically the 787, 737 MAX, and 777X. As\nregards this subsidy, the European Union argues in the alternative that it be considered to operate through a\nprice causal mechanism.\n3150 See paras. 9.116 and 9.122 above.\n\n9.3.2.2.4 Summary of conclusions on whether the post -2006 subsidies benefiting the\n787 and 777X cause serious prejudice to the interests of the European Union, within the\nmeaning of Articles 5(c) and 6.3, in respect of the A350XWB in the post-implementation\nperiod, through a price causal mechanism\nTied tax subsidies\n9.292. The Panel recalls that the Appellate Body in the original proceeding emphasi zed the nature\nof the tied tax subsidies as tied to the production and sale of LCA on a per -unit basis in reaching\nthe conclusion that subsidies of this nature a re capable of affecting Boeing's pri cing decisions with\nrespect to the relevant LCA. The Appellate Body reasoned that, given the nature of the tied tax\nsubsidies, their operation over time, their magnitude, and the competitive conditions in the LCA\nmarkets, Boeing had the ability and incenti ve to lower its LCA prices, however it would be\nnecessary to establish that (a) Boeing was under particular pressure to reduce its prices in order to\nsecure LCA sales in particular sales campaigns and (b) there were no other non -price factors that\nexplained Boeing's success in obtaining the sale, in order to conclude that the subsidies\ncontributed in a genuine and substantial way to the lowering of Boeing's prices. T he Appellate\nBody therefore considered that it would only be possible to reach a conclusion regarding the causal\nconnection between the tied tax subsidies and Boeing's prices by examining the sales campaign\nevidence.\n9.293. Following the approach of the Appellate Body to the analysis of the tied tax subsidies, t he\nPanel has evaluated the sales campaign evidence submitted in relation to sales campaigns won by\nBoeing with the 787 and/or 777X at the expense of the A350XWB between 2007 and 2015 and\nwhich are argued to be evidence of significant lost sales of the A350XWB, as well as impedance of\nA350XWB imports and exports, and significant price suppression of the A350XWB, and threats of\nthe foregoing, in each case an effect of the U.S. subsidies. In doing so, it sought to determine\nwhether the campaigns are price-sensitive, in the sense that Boeing was under particular pressure\nto reduce its prices in order to secure LCA sales in particular sales campaigns and there were no\nother non-price factors that explain Boeing's success in obtaining the sale. The Panel concluded\nthat none of the sales campaigns involvin g the 787 and 777X and the A350XWB were price-\nsensitive in the above sense, and that there were other factors that featured prominently in the\ncustomers' evaluations of the suitability of the competing offers and the objective evidence on the\nrecord explai ning the reasons why the customer chose to order the Boeing aircraft over the\ncompeting Airbus offering. Accordingly, the European Union has failed to establish that the tied tax\nsubsidies are a genuine and substantial cause of any of the forms of serious prejudice alleged by\nthe European Union in respect of the A350XWB in the post -implementation period through a price\ncausal mechanism.\nState and local cash flow subsidies\n9.294. Unlike the tied tax subsidies, Boeing's receipt of the state and local cash flow subsidies is\nnot contingent on the production or sale of LCA on a per -unit basis. Therefore, rather than\noperating to directly reduce the marginal unit costs of each Boeing LCA, the state and local cash\nflow subsidies represent additional untied cash to Boeing . The European Union asserts that the\nstate and local cash flow subsidies reduce Boeing's fixed costs of production. However, it does not\ndemonstrate that any particular subsidy affects the programme costs for any specific Boeing LCA\nprogramme, in the sens e that the subsidies in question affect Boeing's production cost forecasts\nfor an LCA programme, and thereby alter the profitability calculus of sales of those LCA at\nparticular prices.\n9.295. The Panel does not consider that asserted factual \"links\" between the receipt of a subsidy\nand the production of LCA mean that the subsidies thereby have a genuine causal relationship to\nBoeing's prices, and to consequent effects on Airbus' sales and prices. The Appellate Body's finding\nin relation to the tax abatements rela ted to the City of Wichita IRBs was a factual determination\nmade in the context o f completing the analysis . The Panel does not interpret what the Appellate\nBody said in the particular context of cumulating the effects of the tax abatements related to the\nCity of Wichita IRBs with the effects of the tied tax subsidies in the 100 -200 seat LCA product\nmarket, as part of completing the analysis, as setting forth an economic theory or legal rulin g\nregarding the basis on which untied subsidies, through their impa ct on the recipient's pricing\nbehaviour, should be considered to be a genuine cause of serious prejudice. Moreover, in asserting\ngenerally that certain state and local cash flow subsidies can be considered \"linked\" to multiple\n\nBoeing LCA models (as is the case for the Washington state and local cash flow subsidies), the\nEuropean Union does not explain how much of the subsidy should be considered to be allocated to\neach aircraft model, based on such \"link\".\n9.296. The European Union does not advance an economic theory to support its argument that\nsubsidies that reduce Boeing's fixed costs in a general sense impact its LCA prices generally or\nmore specifically, over the short -term or over the long -term. Nor does it attempt to demonstrate\nthat Boeing's LCA pricing wo uld not be economically feasible absent the receipt of the state and\nlocal cash flow subsidies.3151\n9.297. Accordingly, the European Union has failed to establish that the state and local cash flow\nsubsidies are a genuine and substantial cause of any of the forms o f serious prejudice al leged by\nthe European Union in respect of the A350XWB in the post -implementation period through a price\ncausal mechanism.\nPost-2006 aeronautics R&D subsidies\n9.298. The European Union has failed to establish that the post-2006 aeronautics R&D subsidies,\nassuming for purposes of argument that the post -2006 aeronautics R&D operate in the same\nmanner as the state and local cash flow subsidies , are a genuine and substantial cause of any of\nthe forms of serious prejudice alleged by the European U nion in respect of the A350XWB in the\npost-implementation period through a price causal mechanism.\n9.3.3 The parallel argument: Whether the original serious prejudice caused by the pre-\n2007 aeronautics R&D subsidies in respect of the A330 and Original A350 cont inues in\nthe post -implementation period as serious prejudice t o the interests of the\nEuropean Union in respect of the A330 and A350XWB\n9.299. In this Section, we address the European Union's parallel argument that the United States\nhas failed to take appropriate steps to remove the adverse effects , within the meaning of\nArticle 7.8, because each of: (a) the significant price suppression of the A330 and Original A350;\n(b) the significant lost sales of the Original A350; and (c) the threat of displacement or impedan ce\nin the 200-300 seat LCA product market, found to exist in the 2004 -2006 reference period in the\noriginal proceeding, continues to exist in the post-implementation period.\n9.300. The European Union argues that the United States has failed to remove the significant\nprice suppression of the A330 on a number of grounds. 3152 First, some of the 2004 -2006\nprice-suppressed orders of the A330 have yet to be delivered in the post -implementation period.\nSecond, customers who placed orders of the A330 at suppressed prices in 2004-2006 have\nexercised options or purchase rights in respect of those price suppressed orders (and based on the\nsame pricing), enabling them to buy more A330s at the same suppressed prices. Third, those\nsame customers, after 2006, have made \"follow -on or ders\" influenced by the same low pricing\nexpectations that Airbus had met in 2004 -2006 in respect of 17 out of 28 of the original\n2004-2006 customers. In addition, the European Union argues that, after 2006, the market\nbecame conditioned to expecting lower prices for A330s and has never changed that view. In other\nwords, the pricing expectations of all customers, not just those who benefited from price\nsuppressed sales in 2004-2006, have been adversely affected and this phenomenon continues into\nthe post-implementation period.3153\n\n3151 The evidence before the Panel suggests that Boeing has thus far been able to sustain the significant\n\"deferred production costs\" associated with the 787 programme due to the cash generated by its highly\nprofitable 777 and 737 programmes. See above para. 9.55.\n3152 The European Union rejects the argument of the United States that its claim of price suppression in\nrespect of the A330 must fail as a matter of law because of its position that the A330 is in a separate market.\n(European Union's second written submission, para. 1459). The European Union argues that the omission, from\nthe second part of Article 6.3(c) of the SCM Agreement, of the requirement that the \"subsidized product\" and\nthe \"like product\" be in the same market, means that significant price suppression, price depression, and lost\nsales may be established where the effects of a subsidy arise in a product market separate from the product\nmarket in which the subsidized product competes. (European Union's response to Panel question No. 40,\nparas. 229-250; comments on the United States' response to Panel question No. 40, paras. 233-247).\n3153 European Union's first written submission, paras. 1226-1265; second written submission,\nparas. 1453-1462.\n\n9.301. The European Union bases its arguments that the United States has failed to remove the\nsignificant price suppression of the Original A350 on what it alleges is significant price suppression\nof the A350XWB in the post -implementation period. In essence, the European Union argues that\nthe significant price suppression of the Original A350 that was found to exist in 2004 -2006\ncontinues in the post -implementation period through deliveries of A350XWBs that were\nconversions (at suppressed prices) of orders for Original A350s that were placed in 2004-2006.3154\n9.302. The European Union considers that the United States has failed to remove the significant\nlost sales of the Original A350 because those lost sales continue in the post-implementation period\nas lost sales of the A350XWB through deliveries of 787 orders placed in the nine sales campaigns\nthat the European Communities alleged were significant lost sales to Airbus over the 2004 -2006\nperiod in the original proceeding.3155 The European Union also alleges that any options or purchase\nrights that were part of these orders, when \"firmed up\", also lead to a threat of significant lost\nsales. The European Union similarly treats these nine alleged lost sales of the Original A350 in the\n2004-2006 period as impe ded exports of the A350XWB in the post -implementation period where\ndeliveries of the 787 from those lost sales are occurring in the post -implementation period.\nAccordingly, the European Union considers that the United States has failed to remove the threat\nof displacement and impedance found to exist in the original proceeding.3156\n9.303. With respect to the alleged continuing significant price suppression of the A330 , the\nUnited States argues that the European Union fails as a legal matter to establish one of the ba sic\nelements of a price suppression claim under Article 6.3(c) because the European Union's argument\nthat the A330 is in a \"monopoly\" market for \"existing technology, small wide -body aircraft that are\navailable for near -term delivery\" means that the A330 i s not in the same market as any Boeing\naircraft.3157\n9.304. The United States argues that the European Union is precluded from arguing that the\nUnited States has failed to remove the significant price suppression of the Original A350 on the\nbasis of alleged signifi cant price suppression of the A350XWBs currently being delivered (as a\nresult of converted orders of Original A350s). The United States considers that the original panel\nrejected the argument that suppression of Original A350 prices necessarily led to supp ression of\nA350XWB prices when the orders were converted. It also disputes that Airbus had no choice but to\nconvert the Original A350 orders to A350XWB orders at the same price. However, even if the\nEuropean Union were correct that Airbus had no choice but to convert the Original A350 orders to\nA350XWB at lower prices to avoid cancellation and penalty fees, this is not an effect of the pre -\n2007 aeronautics R&D subsidies.3158\n9.305. As to the alleged continuing significant lost sales of the Original A350 as significant lost\nsales of the A350XWB in respect of deliveries in the post -implementation period of 787s ordered\nout of those lost sales campaigns, the United States argues that the European Union cannot turn\nwhat were found in the original proceeding to be lost sales of the Original A350 into lost sale s of\nthe A350XWB in the compliance proceeding. The United States also argues that five of the LCA\nsales campaigns at issue in the original proceeding cannot be the basis of lost sales claims in this\nproceeding because they were rejected as lost sales in the origi nal proceeding and the\nEuropean Union did not appeal those panel findings. Even if the Panel in this proceeding did\n\"reassess\" those alleged lost sales cases, it would conclude as it did in the original proceeding, that\nthere were other factors besides the subsidies that explained the outcomes of those campaigns.\nSimilarly, original findings based on impedance of exports of A330 and Original A350 aircraft\ncannot be the basis for impedance findings regarding the A 350XWB. Moreover, five of the nine\nsales campaigns at issue in the original proceeding were found not to be lost sales (findings the\n\n3154 European Union's first written submission, paras. 1277-1289; second written submission,\nparas. 1465-1481.\n3155 European Union's first written submission, paras. 1337-1406; second written submission,\nparas. 1204-1255.\n3156 European Union's first written submission, paras. 1569, 1570, 1586-1588, 1590, 1591, 1594-1597,\n1602, 1604, 1605, 1608, and 1609; second written submission, paras. 1532-1550, 1554-1559, and\n1567-1573.\n3158 United States' first written submission, paras. 830-831; second written submission, paras. 939-945.\n\nEuropean Union did not appeal) and therefore cannot support arguments of displacement of\nexports in this proceeding.3159\n9.306. Canada argues that the European Union's claims regarding the continuation of adverse\neffects in the form of price suppression and lost sales should fail because it is not sufficient for the\nEuropean Union to establish that current and future deliveries are rela ted to orders placed during\nthe original reference period. Rather, the European Union must establish that these Boeing\ndeliveries and their negative effects on Airbus (lost sales and price suppression) are attributable to\nthe presence of subsidies at the e nd of the implementation period. The European Union fails to\nconduct a proper counterfactual analysis to establish that the situation would have been different\nin the absence of the subsidies at the end of the implementation period.3160\n9.307. We note that an impor tant element of the European Unio n's arguments that the\nUnited States has not removed the effects of the past serious prejudice in respect of the A330 and\nOriginal A350, because that serious prejudice continues in the post -implementation period, is the\nidea that serious prejudice continues to exist until the relevant LCA is delivered . In support of this\nview, the European Union relies on the original panel's observation that the phenomena of price\nsuppression and lost sales do not begin and end at the time an LCA is ordered but continue up to\nand including the time at which the aircraft is delivered (or not delivered):\nIn the Panel's view, the phenomena of \"price suppression\" and \"lost sales\" do not\nbegin and end at the time at which an LCA is ordered. Rath er, given the particularities\nof LCA production and sale, these forms of serious prejudice should be understood to\nbegin at the time at which an LCA order is obtained (or an order is lost), and to\ncontinue up to and including the time at which that aircraf t is delivered (or not\ndelivered). However, the Panel considers that the ordinary meaning of the terms\n\"imports\" and \"exports\" in Articles 6.3(a) and (b) of the SCM Agreement, respectively,\nsuggests that these forms of serious prejudice arise only on deliv ery of the aircraft to\nthe customer.3161\nBecause we regard price suppression and lost sales to exist from the time an order for\nLCA is made, up to and including its delivery, data pertaining to both LCA orders and\nto LCA deliveries will potentially be releva nt to demonstrating the existence of\nsignificant price suppression and significant lost sales. As regards displacement and\nimpedance or imports or exports, the Panel considers that the existence of these\nserious prejudice phenomena can only be definitely e stablished by relevant delivery\ndata. 3162\n9.308. We note that the relevant paragraphs of the panel report explaining the findings of\nsignificant price suppression and lost sales suffered by Airbus in the 200 -300 seat LCA product\nmarket do not explicitly mention the idea that price suppression and lost sales begin at the time of\nan order and continue up to and including the delivery of an aircraft, which suggests that these\nfindings were made with respect to orders only. 3163 The European Union contends that, in respect\nof \"sales of A330 family LCA to customers that placed orders during the original 2004 -2006\nreference period\", \"{t}he original panel found that, for those sales, the significant price\nsuppression continued from the initial order through each of the aircraft deliveries\".3164 Actually,\nno explicit statement to that effect appears in the panel report. The only discussion of the role of\ndeliveries appears in the context of the panel's finding that lost sales of A330 and Original A350\n\n3159 United States' first written submission, paras. 845-868; second written submission, paras. 999-1034\nand 1131-1186.\n3160 Canada's third-party submission, para. 41.\n3161 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1685.\n3162 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1686. (fn omitted)\n3163 Panel Report, US – Large Civil Aircraft (2nd complaint), paras. 7.1781-7.1788.\n3164 European Union's first written submission, para. 1231 (emphasis omitted). We note that with regard\nto the panel's findings of significant price suppression and significant lost sales in the 100 to 200 seat LCA\nproduct market, the Appellate Body noted that it was \"uncertain whether the Panel was referring to orders, or\nto deliveries, or whether it was referring to such orders or deliveries occurring inside or outside the reference\nperiod\". (Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 1222).\n\nLCA constituted evidence of a t hreat of displacement or impedance of exports from certain third\ncountry markets.3165\n9.309. Moreover, the Appellate Body made findings of significant price suppression and lost sales\nsolely based on orders without referring to deliveries. Following its reversal of the panel's findings\nof significant price suppression and significant lost sales in the 100 to 200 and 300 to 400 seat LCA\nproduct markets3166, the Appellate Body proceeded to complete the analysis through an analysis of\nevidence related to specific sales ca mpaigns. The Appellate Body made no reference to the role of\ndeliveries in this regard.3167\n9.310. Thus, it is somewhat unclear whether and, if so, how the idea that price suppression and\nlost sales \"exist from the time an order is made, up to and including its del ivery\" is reflected in the\nactual findings of significant price suppression and lost sales made in the original proceeding. More\nimportantly, however, we consider that the European Union's reliance on this idea as a basis for a\nfinding that the United Stat es has failed to take appropriate steps to remove the adverse effects\nreflects an interpretation of Article 7.8 that we find problematic. Moreover, we consider that\ncertain factual arguments of the European Union in support of its claim that the particular adverse\neffects found to exist in the original proceeding have continued into the post -implementation\nperiod are contradicted by the evidence before us and/or inconsistent with the findings made in\nthe original proceeding.\n9.311. We consider that the European Union's approach poses the following problems with respect\nto the interpretation of Article 7.8 of the SCM Agreement.\n9.312. First, the European Union's argument involves an assumption that the phrase \"take\nappropriate steps to remove the adverse effects\" in Artic le 7.8 must be interpreted to mean that a\nMember found to be granting or maintaining an actionable subsidy is obligated to ensure that the\nparticular adverse effects found to exist in respect of the specific transactions during the original\nreference period cease to exist in respect of those same transactions .3168 We doubt whether such\nan interpretation of \"remove the adverse effects\" is meaningful in a practical sense. It is not clear,\nfor example, how it is possible in practice for a Member to take steps to ensure that significant\nprice suppression found in relation to specific transactions during the original reference period\ndoes not continue in respect of those same transactions in the post-implementation period or that\na significant lost sale found in the original reference period in respect of a specific transaction does\nnot continue to constitute a lost sale in respect of that transaction in the post -implementation\nperiod. The European Union never explains what kind of action the United States could have taken\nwith respect to that undelivered aircraft that would have removed the \"present\" adverse effects.\n9.313. Second, the idea that \"to take appropriate steps to remove the adverse effects\" entails an\nobligation to ensure that adverse effects must be \"removed\" from the specific transactions that\nformed the basis for the adverse effects findings in the original proceeding is also difficult to\nreconcile with the prospective interpretation of Article 7.8. 3169 The European Union has explicitly\nendorsed such a prospective reading of Article 7.8, arguing that \"{t}he removal of adverse effects\ndoes not refer to the removal of adverse effects in the past. It refers to the withdrawal of adverse\neffects in the sense of ensuring that there are no adverse effects arising in the new reference\nperiod\".3170 In our view, the European Union has not explained how the \"historic\" aspect of its\nclaim of present adverse effects in relation to the A330 and the A350XWB is consistent with this\nprospective approach to the interpretation of Artic le 7.8. In our view, to interpret \"to take\nappropriate steps to remove the adverse effects\" to mean \"ensuring that no adverse effects arise\nin the new reference period\", is very different from interpreting this phrase to mean that a Member\n\n3165 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1791.\n3166 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 1249.\n3167 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), paras. 1262-1274.\n3168 See e.g. European Union's first written submission, paras. 1330 (\"the United States has failed to\nremove the adverse effects from those 787 sales that were found in the original proceedings to be caused by\nthe subsidies\"), 1331 (\"{t}he United States has failed to remove the adverse effects associated with each of\nthese sales\"), 1339 (\"{b}elow, the European Union demonstrates that the United States has not removed the\nadverse effects related to these significant lost sales at Qantas, Ethiopian Airlines, Icelandair and Kenya\nAirways. These sales constitute present significant lost sales to the extent that deliveries flowing from those\nsales remain outstanding.\")\n3169 See Section 6.3 above.\n3170 European Union's first written submission, para. 49. (emphasis added)\n\nis obligated \"to remove the adverse effects associated with each of {the} sales\" 3171 that were\nfound to be lost sales in the original proceeding.\n9.314. We disagree, in this regard, with the notion that where aircraft the subject of a past order\nfound in the original proceeding to be a lost sale are undelivered at the time of the expiry of the\nimplementation period, this is a \"present\" adverse effect. The European Union appears to consider\nthat the fact that aircraft will be delivered in the post -implementation period means that th ere is\nan \"adverse effect arising in the new reference period\". 3172 In our view, the fact that aircraft are\nundelivered after the expiry of the implementation period is not a \"present\" adverse effect arising\nin the post-implementation period but a consequence or manifestation of an event that occurred in\nthe past. Because of the inherent relationship between orders and deliveries, we fail to see how\nthe United States could have taken any steps with respect to outstanding deliveries without\nretroactively affect ing the underlying orders. More generally, we consid er that the\nEuropean Union's \"historic\" case essentially attempts to show present adverse effects on the basis\nof phenomena that are not effects that presently arise from subsidies granted or maintained a t\n\"present\" but are more accurately described as continuing manifestations or effects of past\nadverse effects. In our view, to interpret Article 7.8 to mean that a Member is obligated to remove\nthe \"effects of adverse effects\" of subsidies granted in the p ast is in contradiction with the\nprospective interpretation of that provision.\n9.315. In addition to these legal and conceptual problems, we find that the European Union's\nargument that the adverse effects , in the form of certain kinds of serious prejudice withi n the\nmeaning of Articles 5(c) and 6.3, found to exist in the original proceeding in respect of particular\ntransactions in the 200 -300 seat LCA product market , continue into the post -implementation\nperiod, is in several respects contradicted by the evidenc e before us and/or inconsistent with\nrelevant findings made in the original proceeding.\n9.316. Regarding the alleged continuation of serious prejudice in the form of significant price\nsuppression of A330 LCA3173, we recall that as support for its argument that foll ow-on orders by\nairlines that had purchased A330s at significantly suppressed prices in 2004 -2006 were also made\nat significantly supressed prices, the European Union relies on the average A330 pricing trend\nduring the period 2001 -2012 and on a comparison of average prices of follow -on orders by those\nairlines during the period 2007 -2012 with average price s of A330 orders paid by all other\ncustomers in that period.3174\n\n3171 See fn 3168 above.\n3172 The European Union states, for example, in respect of aircraft the subject of orders found to be lost\nsales in the original proceeding that \"{t}o the extent they remain undelivered, they represent present adverse\neffects to the European Union in the form of significant lost sales to the EU LCA industry that the United States\nhas failed to remove\". (European Union's first written submission, para. 1342).\n3173 We do not consider that, as argued by the United States, the European Union's argument that the\nA330 is now in a monopoly market means that the European Union has failed to make a prima facie case\nbecause it has not established that the A330 is \"in the same market\" as any Boeing aircraft. The\nEuropean Union's claim of significant price suppression in relation to the A330 is not based on the existence of\ncurrent competition between the A330 and any subsidized Boeing aircraft. The European Union's case with\nrespect to the A330 is that the 2004-2006 adverse effects experienced by the A330 have \"lingered\" and that\nthe A330 continues to experience price suppression as a result. The European Union's argument is that \"much\nof the present significant price suppression is a continuation or extension of significant price suppression that\narose in the 2004-2006 period, when the products were in the same product market\". (European Union's\nresponse to Panel question No. 170, para. 557). According to the internal logic of the European Union's case,\nthe A330 may have moved into a different market from the 787 but the \"lingering\" effects of the original\nserious prejudice caused by the 787 when the A330 and the 787 were in the same market continue regardless.\nTherefore, because of this particular causation theory relied upon by the European Union, it is possible for the\nEuropean Union's claim to be sustained even if the A330 currently exists in its own market. Thus, there is no\nbasis to find that by asserting that the A330 is in a market of its own, the European Union has failed to make a\nprima facie case under Article 6.3(c) of the SCM Agreement.\n3174 European Union's first written submission, paras. 1242-1246. The European Union asserts that the\naverage A330 family price trend supports the conclusion that Airbus [***], even though Airbus' input costs\nhave increased steadily over the 2005-2012 period. (European Union's first written submission, paras. 1244\nand 1245). The European Union asserts that the comparison of average prices of follow-on orders with average\nprices of orders of A330s to other customers during the period 2007-2012 shows that average prices for the\nfollow-on orders [***] and that, while average prices for both sets of customers [***], average prices for\nfollow-on orders by customers that ordered A330s in 2004-2006 [***] than orders by other customers.\n(European Union's first written submission, para. 1246).\n\n9.317. As noted above, the European Union also argues that the pre -2007 aeronautics R&D\nsubsidies c ause significant price suppression with respect to post -2006 orders (and related\ndeliveries) of A330s to all customers other than those that purchased A330s in the original\nreference period.3175 The European Union asserts that this is supported by evidence sh owing that\nthe average indexed pricing of A330 family orders [***] notwithstanding that Airbus made\nsubstantial investments in the A330 since 2004 to improve its performance and faced steadily\nrising input costs. 3176 The European Union argues that the fact th at Airbus was unable to [***]\nA330 prices was the effect of the pre-2007 U.S. aeronautics R&D subsidies.3177\n9.318. We note that the pricing data that the European Union presents in support of its argument\nthat significant price suppression of the A330 found to exi st in the original reference period has\ncontinued into the post -implementation period only covers the period up to 20123178 and was not\nupdated to cover the post -implementation period. Although in October 2015 the Panel requested\nthe European Union to update the data on which it relied to substantiate its serious prejudice case,\nthe European Union did not update much of the data on which it relies to demonstrate that the\nA330 has suffered significant price suppression in the post-implementation period.3179\n9.319. In any case, much of that data is directed to an argument that A330 prices have never\nrecovered to their 2003 highs, and that therefore \"something\" is holding down A330 prices.\nHowever, it is not clear to us why Airbus could have legitimately expected A330 pric es to ever\n\"recover\" to their pre -2004 levels, when the A330 was the technological market leader, given the\nreality that since then, the 787 and A350XWB have changed the competitive dynamics of this\nmarket. The A330 still has a place in the market and its sales still appear robust, but there is no\nreason to think it could command the sort of price it once did.\n9.320. Finally, we note that data presented by the United States demonstrates that there is no\ncorrelation in price movements between the A330 and the 787. Specifically, [***].3180\n9.321. Thus, even setting aside the problems with the European Union's A330 price suppression\narguments that arise due to the \"historic\" nature of its case 3181, we find that the European Union\nhas failed to empirically demonstrate that the A33 0 is suffering significant price suppression in the\npost-implementation period.3182\n9.322. Regarding the European Union's argument that price suppression found to exist in the\noriginal proceeding continues into the post -implementation period as significant price suppression\nof the A350XWB3183, we are of the view that this argument is in contradiction with the fact that the\nprice suppression that occurred in 2004 -2006 was price suppression of a different aircraft, the\n\n3175 See para. 9.300 above.\n3176 European Union's first written submission, paras. 1247-1250.\n3177 European Union's first written submission, paras. 1252-1264.\n3178 European Union's first written submission, paras. 1245 (figures 2 and 3), 1246 (figure 4), and 1250\n(figures 5 and 6).\n3179 European Union's response to Panel question Nos. 169 and 170. The European Union provided\ninformation on the post-2012 evolution of average A330 prices. However, it did not update the data presented\nin its first written submission concerning the discrepancy in the evolution of A330 average pricing and\nAirbus' input costs and the data on A330 prices in 2007-2012 in follow-on orders by customers who ordered\nA330s in 2004-2006 compared with A330 prices paid by new customers in that period.\n3180 United States' comments on European Union's response to Panel question Nos. 169 and 170,\npara. 203.\n3181 See paras. 9.311-9.314 above.\n3182 The empirical problems with the European Union's price trend data are discussed in further detail in\nSection 9.4.3.1.4 below in connection with the Panel's evaluation of the European Union's claims of significant\nprice suppression of the A320neo and A320ceo. A number of the problems identified in that Section regarding\nthe price trend data for the A320neo and A320ceo apply equally to the European Union's price trend data for\nthe A330. First, since a claim of significant price suppression requires establishing where prices would have\nbeen in the absence of the subsidies, price trend data alone is not sufficient to demonstrate the existence of\nthis market phenomenon; it is also necessary to present counterfactual argumentation demonstrating that, in\nthe absence of the subsidies, prices would have been higher (see paras. 9.450 through 9.462 below for further\nexplanation). Second, we consider that the European Union cannot rely on sales campaigns that Boeing won to\nsubstantiate its claims that Airbus LCA prices were suppressed (see 9.457 through 9.460 below for further\nexplanation). Third, the European Union ultimately appears to repudiate its own price trend data on the basis\nof methodological flaws (see paras. 9.463 and 9.464 below for further explanation).\n3183 European Union's first written submission, paras. 1277-1289; second written submission,\nparas. 1465-1481; response to Panel questions Nos. 152, paras. 10 and 11, and 170, paras. 559-563.\n\nOriginal A3503184 and that the original panel rejected the European Union's argument that the price\nsuppression of the Original A350 would necessarily lead to price suppression of the A350XWB\nwhen the orders were converted.3185\n9.323. We consider that the European Union's argument that the serious prejudice, in the form of\nsignificant lost sales found to exist in the original reference period , continues into the\npost-implementation period as significant lost sales of A350XWB is inconsistent with the findings\nmade in the original proceeding in that, first, the original pan el made findings of significant lost\nsales in respect of the A330 and Original A350, not the A350XWB and, second, the European Union\nrelies on several sales campaigns in respect of which no findings of significant lost sales were\nactually made in the original proceeding.\n9.324. First, the original panel found, with respect to four sales campaigns, that, but for the\neffects of aeronautics R&D subsidies that had contributed in a genuine and substantial way to\nBoeing's development of technologies for the 787, \"Airbus would have made additional sales of the\nA330 and Original A350 over the same period, and to that extent, would not have suffered\nsignificant lost sales in the 200 -300 seat wide -body LCA product market, within the meaning of\nArticle 6.3(c) of the SCM Agre ement\".3186 Thus, the relevant findings of lost sales made in the\noriginal proceeding pertained to the A330 and Original A350.\n9.325. The European Union argues in this proceeding that the United States has failed to\n\"remove{} the adverse effects related to these si gnificant lost sales at Qantas, Ethiopian Airlines,\nIcelandair and Kenya Airways\" because \"{t}hese sales constitute present significant lost sales to\nthe extent that deliveries flowing from those sales remain outstanding\". 3187 The European Union\nmakes this argument as support for its claim that \"the US subsidies benefiting Boeing's 787 family\nLCA presently cause present adverse effects, in the form of significant lost sales of A350XWB\nfamily LCA\". 3188 In other words, the European Union effectively argues that the significant lost\nsales that it alleges have continued to exist at present because the aircraft remain undelivered are\nsignificant lost sales of the A350XWB rather than of the A330 and A350 in respect of which the\nfindings of significant lost sales were ma de in the original proceeding. The European Union does\nnot request the Panel to make a finding of present adverse effects in the form of significant lost\nsales to the A330 and Original A350. In our view, the European Union has not provided a\nconvincing explanation as to why \"it is irrelevant whether or not the 787 orders found to be lost\nsales in the original reference period are lost sales for the A350XWB, rather than the A330 or\nOriginal A350\".3189 The lost sales, which according to the European Union's theo ry that lost sales\ncontinue until the aircraft are delivered, the United States failed to remove as a result of the fact\nthat the deliveries of the Boeing 787 remained outstanding at the expiry of the implementation\nperiod, were lost sales of A330 and Orig inal A350 aircraft. There is no logical basis to now treat\nthose lost sales as lost sales of A350XWB LCA. We do not see how the fact that the 787 and the\n\n3184 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1792.\n3185 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1793.\n3186 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1794; see also para. 7.1786. The\nAppellate Body discussed this panel finding at paragraphs 1056-1063 of its report.\n3187 European Union's first written submission, para. 1339.\n3188 European Union's first written submission, para. 1329.\n3189 European Union's second written submission, para. 1207:\nHowever, for the US failure to remove the adverse effects, it is irrelevant whether\nor not the 787 orders found to be lost sales in the original reference period are lost\nsales for the A350XWB, rather than the A330 or Original A350. Instead, when the\nsubsidies caused the airlines to order these 787 aircraft under conditions of\ncompetition contemporaneous wi th the original reference period , these orders\nrepresented lost sales to the A330 or Original A350, as these were the Airbus\naircraft that competed with the 787 in the same product market at that point in\ntime. That the 787 competes in the same product mar ket with the A350XWB under\npresent conditions of competition does not alter the fact that, under conditions of\ncompetition contemporaneous with the original reference period, the original panel\nand the Appellate Body found that Airbus suffered lost A330 an d Original A350\nsales to the 787. With its argument, the United States ignores the findings in the\noriginal proceedings, which served as the basis for the DSB's recommendations\nand rulings.\n(emphasis original)\nSee also European Union's second written submission, para. 1209.\n\nA350XWB now compete in the same product market 3190 can alter the fact that at the time the 787\nsales were made, they caused lost sales of the A330 and Original A350, not the A350XWB , which\nhad not even been launched at that time.\n9.326. Therefore, even assuming that, in light of the panel's observation that lost sales \"continue\nup to and including the time at which that aircraft is delivered\", sales of Boeing 787 that were\nfound to be lost sales in respect of Airbus LCA in the original proceeding should be considered to\ngive rise to present serious prejudice where the aircraft have not been delivered, there is no bas is\nto find any such present serious prejudice in relation to the A350XWB.\n9.327. Second, the European Union relies on the notion that adverse effects in the form of\nsignificant lost sales continue where the aircraft remain undelivered not only with regard to the\nsales campaigns that resulted in findings of lost sales but also in relation to certain sales\ncampaigns in respect of which the Panel in the original proceeding found that the aeronautics R&D\nsubsidies at issue were not a cause of lost sales to Airbus. 3191 The original panel found that in ten\nsales campaigns 3192, including the five sales campaigns that the European Union treats as\n\"additional significant lost sales in the original reference period\" 3193, \"factors other than the\nperformance characteristics of the 787 over the A330 or Original A350, and the 2008 delivery date\nfor the 787, played a significant part in the Boeing sale\".3194\n9.328. The European Union submits with respect to these additional lost sales that the claim it\npresented in the original proceeding \"remains unresolved\". While the Appellate Body found that\nthe original panel erred in not cumulating the price effects of the B&O tax rate reductions with the\ntechnology effects of the aeronautics R&D subsidies in causing significant lost sales 3195 and also\nclarified the causation standard in a way that implies that the non -subsidy factors identified by the\noriginal panel as having contributed to the 787 sales at issue cannot be the basis for vitiating a\ngenuine and substantial causal link 3196, the Appellate Body found i tself unable to complete the\nanalysis.3197 The European Union argues for each of these additional sales that \"to the extent\ndeliveries remain outstanding, these 787 sales constitute present significant lost sales, and that\nthe US subsidies are a genuine and s ubstantial cause thereof\", including follow -on orders and\noption exercises resulting from those sales.3198\n9.329. We consider that the European Union is factually incorrect when it argues that the matter\nwas left unresolved because the Appellate Body did not complete the analysis.3199 Indeed, as noted\nby the United States3200, these sales campaigns were not left unresolved: the panel's finding in the\noriginal proceeding that these sales campaigns were not lost sales attributable to the subsidies\nwas not appealed. The Appe llate Body found that the original panel erred in assuming that\ndifferent causal mechanisms precluded cumulation of two aggregated groups of subsidies.\nHowever, contrary to the European Union's assertion, the Appellate Body did not find that\nsubsidies with a technology and price causal mechanism should be cumulated. The Appellate Body\ndid not attempt to complete the analysis because the European Union did not request it to do\nso.3201 Since no findings of lost sales were made in the original proceeding in respe ct of the five\n\n3190 European Union's second written submission, para. 1209.\n3191 European Union's first written submission, paras. 1345-1406.\n3192 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1786 and fn 3724.\n3193 European Union's first written submission, para. 1345. Specifically, the European Union's argument\nconcerns the following sales campaigns: (a) All Nippon Airways (2004, 2009 and 2012); (b) Japan Airlines\n(2005, 2007 and 2012); (c) Air Canada (2005 and 2007); (d) Continental Airlines (2004, 2006 and 2007); and\n(e) Northwest Airlines (2005). Thus, in most of these cases, the European Union includes both the orders at\nissue in the original proceeding and follow-on orders.\n3194 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1786 and fn 3725.\n3195 European Union's first written submission, paras. 1347-1349 (referring to Appellate Body Report, US\n3196 European Union's first written submission, paras. 1350 and 1351 (referring to Appellate Body\nReport, US – Large Civil Aircraft (2nd complaint), para. 913).\n3197 European Union's first written submission, paras. 1349 and 1351.\n3198 European Union's first written submission, para. 1352.\n3199 European Union's first written submission, paras. 1345, 1349, and 1351; second written submission,\npara. 1212.\n3200 United States' second written submission, paras. 1005-1012.\n3201 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 1321: \"{b}y closing its mind\nto such an approach, 'owing to the very different way' in which the two groups of subsidies operate and their\n'entirely distinct causal mechanisms', the Panel failed to give full consideration to the possibility of cumulating\n\nsales campaigns that the European Union treats as \"additional lost sales in the original reference\nperiod\", the question of whether any lost sales have continued into the post-implementation period\non the grounds that the aircraft at issue have not been delivered does not arise.\n9.330. In sum, the nine sales campaigns considered in the original proceeding upon which the\nEuropean Union relies in this proceeding to support its argument that adverse effects in the form\nof lost sales found in the origi nal proceeding continue with respect to the A350XWB include four\nsales campaigns in which findings of lost sales were made in respect of a product other than the\nA350XWB and five sales campaigns in which no finding of lost sale was made at all.3202\n9.331. Finally, in support of its argument that the serious prejudice found to exist in the original\nproceeding continue s at present as serious prejudice in respe ct of the A350XWB, the\nEuropean Union also asserts that the United States has failed to remove the threat of displacement\nfrom the Australian market because there continue to be outstanding deliveries of 787 family LCA\nto Qantas under the order that formed the basis for this finding in the original proceeding.3203 First,\nwe have explained above that we find that this type of argument is problematic in terms of the\nunderlying interpretation of Article 7.8. Second, we note that the original panel based its finding of\na threat of displacement on a sales campaign involving the Original A350. 3204 There is no basis to\ntreat this now as a finding of a threat of displacement in respect of the A350XWB. As in the case of\nthe European Union's argument that serious prejudice in the form of lost sales found to exist in the\noriginal proceeding in respect of the A330 and Original A350 c ontinues as serious prejudice in\nrespect of the A350XWB, we consider that the European Union does not offer a convincing reason\nto explain why a particular form of serious prejudice found to exist during the original reference\nperiod in respect of a particular aircraft should now be considered to continue to exist as a form of\nserious prejudice in respect of a different aircraft.\n9.332. We reject the European Union's argument that certain past serious prejudice of\nthe pre -2007 aeronautics R&D subsidies continue i nto the post -implementation period\nas present serious prejudice in relation to the A330 and A350XWB . This is because: (a)\nthe European Union's reliance on the role of deliveries of aircraft in the post -\nimplementation period as evidence of a continuation of serious prejudice (and more\ngenerally its theory that Article 7.8 applies to continuing effects of past adverse effects)\nis inconsistent with a prospective interpretation of Article 7.8 and leads to results that\nwe consider to be illogical; and (b) the Eu ropean Union's arguments are unsupported by\nthe evidence and/or in contradiction with the findings made in the original proceeding.\n9.3.4 Summary of findings on whether subsidies benefiting the 787 and 777X cause\nserious prejudice to the interests of the Europea n Union in respect of the A350XWB and\nA330 in the post-implementation period\n9.333. As regards the European Union's main case ; i.e. whether the pre -2007 aeronautics R&D\nsubsidies and certain post-2006 aeronautics R&D subsidies, operating through a technology caus al\nmechanism, combined with the other post -2006 subsidies operating through a price causal\nmechanism, cause serious prejudice to the interests of the European Union in respect of the\nA350XWB in the post-implementation period, we find as follows:\na. The Europe an Union has failed to demonstrate the existence of original technology\neffects of the pre -2007 aeronautics R&D subsidies, or of so -called spill-over technology\neffects or sleeper technology effects of the pre-2007 aeronautics R&D subsidies in\nrespect of the 787-9/10 or 777X, in the post-implementation period.\n\nthe effects of these two groups of subsidies. We therefore find that the Panel erred in failing to consider\nwhether the price effects of the B&O tax rate reductions complement and supplement the technology effects of\nthe aeronautics R&D subsidies in causing significant lost sales and significant price suppression, and a threat of\ndisplacement and impedance, in the 200-300 seat LCA product market. The European Union does not request\nus to complete the analysis on this issue.\" (emphasis original, fn omitted)\n3202 For these reasons, we consider that these nine sales campaigns also cannot support the\nEuropean Union's argument that the lost sales found in the original proceeding constitute evidence of (threat\nof) impedance of exports of A350XWB.\n3203 European Union's first written submission, para. 1569.\n3204 For the finding of the original panel, see Panel Report, US – Large Civil Aircraft (2nd complaint),\npara. 7.1791.\n\nb. The European Union has failed to demonstrate the existence of so-called new technology\neffects of certain post -2006 aeronautics R&D subsidies in respect of the 787 -9/10 or\n777X in the post-implementation period.\nc. The European Uni on has failed to demonstrate any effect of the tied tax subsidies, the\nstate and local cash flow subsidies, or the post -2006 aeronautics R&D subsidies on\nBoeing's 787 or 777X pricing in the post-implementation period.\nd. Because the European Union has failed to demonstrate any effect of the pre -2007\naeronautics R&D subsidies, or of certain post -2006 aeronautics R&D subsidies, on\nBoeing's product development in respect of the 787 or 777X in the post -implementation\nperiod, there is no basis on which these subsidies can be found to be a genuine and\nsubstantial cause of any of the forms of serious prejudice alleged in respect of the\nA350XWB in the post -implementation period through a technology causal mechanism.\nBy the same token, because the European Union has failed to demonstrate any effect of\nthe post -2006 subsidies (tied tax subsidies, state and local cash flow subsidies and\naeronautics R&D subsidies) on Boeing's 787 or 777X prices in the post -implementation\nperiod, the possibility of any consequent impact of those subsidies on sales and prices of\nthe A350XWB does not arise, and there is no basis on which those subsidies can be\nfound to be a genuine and substantial cause of any of the forms of serious prejudice\nalleged in respect o f the A350XWB in the post -implementation period through a price\ncausal mechanism.\n9.334. We also find, with respect to the European Union's parallel argument, that t he\nEuropean Union has also failed to establish that certain forms of past serious prejudice , which\nwere the effects of the pre-2007 aeronautics R&D subsidies, continue into the post-implementation\nperiod as present serious prejudice in respect of the A330 and A350XWB.\n9.335. The European Union has therefore failed to establish that subsidies benefiting the\n787 an d 777X cause serious prejudice to its interests , within the meaning of\nArticles 5(c) and 6.3, in respect of the A350XWB and A330 in the post -implementation\nperiod.\n9.4 Whether subsidies benefiting the 737 MAX and 737NG cause serious prejudice to\nthe inte rests of the European Union , within the meaning of Articles 5(c) and 6.3, in\nrespect of the A320neo and A320ceo in the post-implementation period\n9.4.1 Introduction\n9.336. In this Section we evaluate the European Union's case that the United States grants or\nmaintains subsidies to Boeing benefiting the 737 MAX and 737NG , which cause present adverse\neffects in the form of certain kinds of serious prejudice to the European Union's interests in respect\nof the A320neo and A320ceo, respectively, in the post-implementation period. The European Union\nhas divided its discussion of the effects of the U.S. subsidies benefiting the 737 MAX and adversely\naffecting the A320neo, and of the effects of the U.S. subsidies benefiting the 737NG and adversely\naffecting the A320ceo, on the basis that the narrow-body, single-aisle LCA product market actually\nconsists of two p roduct markets: the market for new technology single-aisle LCA (comprising the\n737 MAX and A320neo) and the market for existing technology LCA (comprising the 737NG and\nthe A320ceo). For reasons we explain in paragraphs 9.35 through 9.40 above, we disagree with\nthe European Union's proposed market del ineation and instead treat the new technology A320neo\nand 737 MAX a s competing in the same product market for nar row-body, single-aisle aircraft as\nthe existing technology A320ceo and 737NG.\n9.337. As previously explained, the European Union for the most part presents its arguments as\nto how certain aeronautics R &D subsidies op erate through a technology causal mechanism, and\nhow the majority of post -2006 subsidies operate through a price causal mechanism, on a\nhorizontal basis; i.e. based on the nature of the particular subsidy or subsidy groups at issue,\nrather than the particu lar Boeing LCA said to be subsidized by the various subsidies in\ncombination.3205 Accordingly, in Section VII.E of its first written submission, the European Union\n\n3205 See e.g. European Union's first written submission, section VII.E (Technology Causal Mechanism)\nand section VII.F (The U.S. Subsidies Cause Adverse Effects Through a Price Causal Mechanism), dealing in a\n\npurports to establish a \"genuine\" and \"substantial\" causal link between certain aeronautics R&D\nsubsidies and \"present adverse effects through a technology effects causal mechanism\". 3206 In\nSection VII.F of its first written submission, the European Union purports to establish a \"genuine\"\nand \"substantial\" causal link between the majority of the post -2006 subsidies and present adverse\neffects through a price causal mechanism.3207\n9.338. In Section VII.I of its first written submission, dealing with the effects of the subsidies\nbenefiting the 737 MAX on the A320neo, the European Union presents its case that the e ffects of:\n(a) certain aeronautics R&D subsidies which improve the quality and accelerate the launch and\ndelivery positions of the 737 MAX LCA family aircraft (the technology causal mechanism); and (b)\nthe majority of the post-2006 subsidies which enable Boeing to lower its 737 MAX prices (the price\ncausal mechanism), collectively, are a genuine and substantial cause of: significant lost sales (and\na threat of significant lost sales) of the A320neo; significant price suppression (and a threat of\nsignificant price suppression) of the A320neo; impedance and a threat of impedance of the\nA320neo in the U.S. market and a number of third country markets.3208\n9.339. In Section VII.J of its first written submission, dealing with the effects of the subsidies\nbenefiting the 737NG on the A320ceo, the European Union presents its case that the effects of the\nmajority of the post -2006 subsidies which enable Boeing to lower its 737NG prices (the price\ncausal mechanism) are a genuine and substantial cause of: significant lost sales ( and a threat of\nsignificant lost sales) of the A320ceo; significant price suppression of the A320ceo; displacement,\nimpedance and a threat of thereof of the A320ceo in the U.S. market and a number of third\ncountry markets.3209\n9.340. The European Union's serious prejudice allegations concerning the effects of the subsidies\nbenefiting the 737 MAX and 737NG on the A320neo and A320ceo, respectively, are as follows:\na. Significant lost sales, within the meaning of Article 6.3(c) of the SCM Agreement, and a\nthreat thereof.3210\nb. Impedance of imports of the A320neo and A320ceo to the United States, within the\nmeaning of Article 6.3(a) of the SCM Agreement, and a threat thereof.3211\nc. Impedance and/or displacement of exports of the A320neo and A320ceo , within the\nmeaning of Article 6.3(b) of the SCM Agreement, to the third -country markets of\nAustralia3212, Brazil 3213, Canada 3214, Iceland 3215, Indonesia 3216, Malaysia 3217, Mexico3218,\n\nhorizontal fashion with the arguments concerning the technology causal mechanism and price causal\nmechanism, compared to section VII.H (Effects of U.S. Subsidies Benefiting the 787 and 777X on the A330 and\nA350XWB), section VII.I (Effects of U.S. Subsidies Benefiting the 737 MAX on the A320neo), and section VII.J\n(Effects of the U.S. Subsidies Benefiting the 737NG on the A320ceo), dealing with the collective effects of all of\nthe subsidies benefiting the various Boeing aircraft on the competing Airbus aircraft.\n3206 See European Union's first written submission, para. 1205.\n3207 See European Union's first written submission, para. 1223.\n3208 European Union's first written submission, paras. 1616 and 1617.\n3209 European Union's first written submission, paras. 1840 and 1841.\n3210 As evidenced by a number of LCA sales campaigns involving the 737 MAX in competition with the\nA320neo occurring between 2007 and 2015 and involving the 737NG in competition with the A320ceo. The\nrelevant sales campaigns and aircraft are set forth in Section 9.4.3.1.1 below.\n3211 As evidenced by certain sales campaigns alleged to be significant lost sales of the A320neo and\nA320ceo, respectively, and involving a U.S. customer. The relevant sales campaigns are American Airlines\n2011, Southwest Airlines 2011 and 2013, Delta Airlines 2011 and United Airlines 2012 and 2013. As regards\nthe impedance, and threat thereof, of imports with respect to the A320ceo, the European Union argues that, in\na duopoly environment, \"rough parity in the distribution of market shares between the duopolists would be\nexpected\", while the effect of the U.S. subsidies is that the vast majority of present and future deliveries of\nexisting technology single-aisle LCA will be 737NG family aircraft. (European Union's first written submission,\nparas. 1903-1905). The European Union provides data concerning orders to date and deliveries due in the\nUnited States for the 737NG and A320ceo. (See European Union's response to Panel question No. 169,\npara. 509).\n3212 Displacement of exports of the 320ceo. (European Union's first written submission,\nparas. 1908-1910; second written submission, paras. 1959-1961; response to Panel question No. 169,\npara. 511).\n3213 Threat of impedance of exports of the A320neo: European Union's first written submission,\nparas. 1831 and 1832; second written submission, paras. 1850-1852; and response to Panel question No. 169,\npara. 493. The European Union adds that the GOL (2012) campaign won by the 737 MAX is a lost sale of the\n\nNorway3219, Russia 3220, Singapore 3221, and the United Arab Emirates, and a threat\nthereof.3222\nd. Significant price suppression of the A320neo and A320ceo and a threat thereof.3223\n\nA320neo due to the U.S. subsidies and is further evidence of the existence of a threat of impedance of exports\nof the A320neo in the Brazilian market. In its first written submission, the European Union also argued that the\nBrazilian market is a significantly large geographical market for new technology, single-aisle LCA and that in a\nduopoly environment, \"rough parity in the distribution of market shares between the duopolists would be\nexpected\". (European Union's first written submission, para. 1831). Threat of displacement of exports of the\nA320ceo: European Union's first written submission, paras. 1911 and 1912.\n3214 Threat of impedance of exports of the A320neo: European Union's response to Panel question\nNo. 169, para. 494. The European Union adds that the Air Canada (2013) campaign won by the 737 MAX is a\nlost sale of the A320neo due to the U.S. subsidies and is further evidence of the existence of a threat of\nimpedance of exports of the A320neo in the Canadian market. (European Union's response to Panel question\nNo. 169, para. 495). Impedance and threat of impedance of the A320ceo: European Union's first written\nsubmission, paras. 1913-1914; second written submission, paras. 1953-1954; and response to Panel question\nNo. 169, paras. 512 and 513.\n3215 Threat of impedance of exports of the A320neo: European Union's first written submission,\npara. 1834; second written submission, paras. 1853-1855; and response to Panel question No. 169, para. 498.\n3216 Threat of impedance of exports of the A320neo: European Union's first written submission,\npara. 1835; second written submission, paras. 1856-1858; and response to Panel question No. 169, para. 499.\nThe European Union adds that the Lion Air (2012) campaign won by the 737 MAX is a lost sale of the A320neo\ndue to the U.S. subsidies and is further evidence of the existence of a threat of impedance of exports of the\nA320neo in the Indonesian market. (European Union's response to Panel question No. 169, para. 500).\nDisplacement, impedance and threat of impedance of the A320ceo: European Union's first written submission,\nparas. 1915-1920; second written submission, paras. 1955-1958; and response to Panel question No. 169,\nparas. 514-516. The European Union refers to Lion Air's 2012 sales campaign, which it alleges is a lost sale of\nthe A320ceo due to the U.S. subsidies as a further illustration that Airbus would have achieved greater future\ndeliveries in the Indonesian existing technology single-aisle market absent the U.S. subsidies.\n3217 Displacement of exports of the A320ceo, and threat thereof: European Union's first written\nsubmission, paras. 1921 and 1922; second written submission, paras. 1953-1954; response to Panel question\nNo. 169, paras. 517-519.\n3218 Threat of impedance of exports of the A320neo: European Union's first written submission,\npara. 1836; second written submission, paras. 1859-1861; and response to Panel question No. 169, para. 501.\n3219 Threat of impedance of exports of the A320neo: European Union's first written submission,\npara. 1837; second written submission, paras. 1862-1864; and response to Panel question No. 169, para. 502.\nThe European Union adds that the portion of the Norwegian Air Shuttle (2012) campaign won by the 737 MAX\nis a lost sale of the A320neo due to the U.S. subsidies and is further evidence of the existence of a threat of\nimpedance of exports of the A320neo in the Norwegian new technology single-aisle market. (European Union's\nresponse to Panel question No. 169, para. 502). Impedance and threat of impedance of exports of the\nA320ceo: European Union's first written submission, paras. 1923 and 1924; second written submission,\nparas. 1953 and 1954; and response to Panel question No. 169, paras. 520 and 521. The European Union\nrefers to Norwegian Air Shuttle's 2012 sales campaign, which it alleges is a lost sale of the A320ceo due to the\nU.S. subsidies as a further illustration that Airbus would have achieved greater future deliveries in the\nNorwegian existing technology single-aisle market absent the U.S. subsidies.\n3220 Displacement and threat of displacement of exports of the A320ceo: European Union's first written\nsubmission, paras. 1925 and 1926; second written submission, paras. 1953 and 1954; and response to Panel\nquestion No. 169, paras. 522 and 523.\n3221 Threat of impedance of exports of the A320neo: European Union's first written submission,\npara. 1838; second written submission, paras. 1865-1867; and response to Panel question No. 169, para. 503.\nThe European Union adds that the Silk Air (2012 and 2015) campaigns won by the 737 MAX are lost sales of\nthe A320neo due to the U.S. subsidies and further evidence of the existence of a threat of impedance of\nexports of the A320neo to the Singaporean market. (European Union's response to Panel question No. 169,\npara. 504). Displacement and impedance of exports of the A320ceo (and threats thereof): European Union's\nfirst written submission, paras. 1927 and 1928; second written submission, paras. 1955-1958; and response to\nPanel question No. 169, paras. 524 and 525. The European Union refers to Silk Air's 2012 sales campaign,\nwhich it alleges is a lost sale of the A320ceo due to the U.S. subsidies as a further illustration that Airbus would\nhave achieved greater future deliveries in the Singaporean existing technology single-aisle market absent the\nU.S. subsidies.\n3222 Threat of impedance of exports of the A320neo: European Union's response to Panel question\nNo. 169, paras. 349-374 and 505. The European Union adds that the Fly Dubai (2013) campaign won by the\n737 MAX is a lost sale of the A320neo due to the U.S. subsidies and is further evidence of the existence of a\nthreat of impedance of exports of the A320neo in the United Arab Emirates market. Displacement, impedance\n(and threats thereof) of exports of the A320ceo: European Union's first written submission, paras. 1929-1932;\nsecond written submission, paras. 1953-1954; and response to Panel question No. 169, paras. 526-528. The\nEuropean Union refers to Fly Dubai's 2008 and 2014 sales campaigns, which it alleges resulted in lost sales of\nthe A320ceo due to the U.S. subsidies as a further illustration that Airbus would have achieved greater future\ndeliveries in the United Arab Emirates existing technology single-aisle market absent the U.S. subsidies.\n\n9.341. The Panel adopts a unitary approach to establishing causation, under which prices, sales,\nmarket share, and other indicators of competitive harm are not assessed in isolation, but rather as\npart of an integrated causati on analysis. 3224 Our analysis is counterfactual in nature . We ask\nwhether, but for the effects of the various subsidies, Airbus' sales, prices and market share would\nbe higher. We will analyse the effects of the subsidies in two related phases: First, we examine the\neffects, if any, of the relevant category of subsidies on Boeing's product development and pricing\nof the 737 MAX and pricing of the 737NG; and second , we examine whether any such effects of\nthe subsidies in question on Boeing's product development and prices have the alleged impact on\nA320neo and A320ceo sales and prices in the post -implementation period , such that these\nsubsidies constitute a genuine and substantial cause of the particular forms of serious prejudice\nalleged by the European Union with respect to the A320neo and A320ceo.\n9.342. In Section 9.4.2 we address whether the European Union has established that certain\naeronautics R&D subsidies benefiting the 737 MAX cause serious prejudice with respect to the\nA320neo i n the post -implementation period through a technology causal mechanism. In\nSection 9.4.3, we evaluate the European Union's arguments that the post-2006 subsidies\nbenefiting the 737 MAX and 737NG cause serious prejudice with res pect to the A320neo and\nA320ceo in the post-implementation period through a price causal mechanism.\n9.4.2 Whether certain aeronautics R&D subsidies benefiting the 737 MAX cause serious\nprejudice to the interests of the European Union, within the meaning of Articles 5(c) and\n6.3, in respect of the A320neo in the post-implementation period, through a technology\ncausal mechanism\n9.343. As explained in Section 9.3.2.1.2, the European Union argues that one of the ways in\nwhich the pre -2007 aeronautics R&D subsidies continue to cause significant competitive harm to\nthe European Union's LCA-related interests in the post-implementation period is through spill-over\ntechnology effects resulting from the application of the \"subsidized 787 technologies\" to Boeing's\nmore recent aircraft developments, including the 737 MAX. 3225 Additionally, the European Union\nargues that certain post-2006 aeronautics R&D subsidies have given rise to new technology effects\nin that they have enabled Boeing to develop new techn ologies for its more recent aircraft\ndevelopments, including the 737 MAX.3226\n9.4.2.1 Spill-over technology effects of the pre-2007 aeronautics R&D subsidies\n9.344. The European Union argues that Boeing's participation in the original NASA and DOD\nprogrammes enabled Boeing to incorporate larger, more fuel -efficient engines, enhanced\naerodynamics, and modern flight controls onto the 737 MAX as inspired by the 787's design.\nOverall, the European Union asserts that the technologies applied to the 737 MAX represent a 13%\nfuel-burn savings over the 737NG. 3227 Without the contribution of the pre -2007 aeronautics R&D\nsubsidies, Boeing would have been unable to develop the proprietary technology to launch the\n737 MAX in August 2011 and promise first deliveries in 2017.3228\n9.345. The European Union submits that Boeing's incorporation of larger engines on the 737 MAX\nis \"one of the quintessential technology changes – and selling points – of the 737 MAX\" and has\ncontributed \"a significant part\" of the fuel burn advantage of the aircraft. 3229 The European Union\n\n3223 As evidenced by certain pricing and market share data for the A320neo and A320ceo as well as\ncertain of the sales campaigns alleged to be significant lost sales and which are said to demonstrate a pattern\nof pricing behaviour in which Airbus was forced to lower its own prices in reaction to Boeing's aggressive\npricing. (European Union's first written submission, paras. 1808-1810).\n3224 See Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1658.\n3225 European Union's first written submission, para. 984.\n3226 European Union's first written submission, para. 986.\n3227 European Union's first written submission, para. 1621.\n3228 European Union's first written submission, para. 1621. See also European Union's first written\nsubmission, paras. 1038-1060 and 1620; and Airbus Engineer's Statement, (Exhibit EU-31) (BCI),\nparas. 23-42 and 55-61.\n3229 European Union's first written submission, para. 993. The European Union submits that its argument\nis not directly related to the new engines, but instead, concerns Boeing's ability to integrate the engines\nthrough close coupling of the engine nacelles and through the use of CFD codes. It considers that Boeing's role\nas an integrator of different technologies was key in researching designing and developing the close coupling of\nthe engines to the 787 wing. (European Union's second written submission, para. 1596).\n\nalleges that Boeing's engine integration design on the 737 MAX was enabled by: (a) the close\ncoupling of the engines to the wings, using new nacelles and new pylons, which Boeing had\ndeveloped previously for the 787; and (b) CFD codes that were de veloped and enhanced under\nseveral original NASA aeronautics R&D programmes (HSR, AST, HPCC, and R&T Base). 3230 The\nminimal ground clearance inherent in the 737 design means that, absent the innovative engine\nintegration design on the 737 MAX, Boeing would no t have been able to apply the larger diameter\nCFM LEAP engines to the 737 MAX without either building a new wing for the 737 MAX or\notherwise devising its own engine integration. Both alternatives would have been more expensive\nand involved greater risk.3231\n9.346. The European Union contends that Boeing was able to make changes to the aerodynamic\nshape of the overall aircraft using knowledge of CFD codes developed under the pre -2007\naeronautics R&D subsidies. This includes the incorporation of a \"787 -style tail cone\" for the conical\ntail cone of the 737 MAX that reduces drag by 1%. Finally, the European Union contends that\nBoeing was able to develop a partial fly -by-wire system on the 737 MAX incorporating manoeuvre\nand gust load alleviation based on Boeing's experi ence in introducing load alleviation systems on\nthe 787.3232 The European Union submits that assertions that there were no spill -over effects from\nthe original pre -2007 aeronautics R&D subsidies affecting the 787 to the design of the 737 MAX\ntail cone and fly -by-wire spoilers are contradicted by Boeing statements made outside this\ndispute.3233\n9.347. The United States argues that the acceleration effect of the pre -2007 aeronautics R&D\nsubsidies was relatively short-lived, and to the extent there is any technological con tinuity leading\nto spill-over onto newer Boeing LCA such as the 737 MAX, the launch of the 787 in 2006 would\nhave left ample time for Boeing to adapt technologies to the 737 MAX well before its actual\nlaunch.3234 As regards the alleged technological connectio ns between the 787 technologies and\nthose developed for the 737 MAX, the United States makes a number of arguments in response to\nthe European Union's assertions.\n9.348. The United States argues that the 737 MAX \"primarily involve{s}\" improved engine\ntechnology, which is outside the scope of this dispute. 3235 Although the European Union attempts\nto link Boeing's engine integration design for the 737 MAX to the 787, Boeing's primary reference\npoints for the 737 MAX engine installation were in fact production configura tions for the 737NG\nand to a lesser degree the 777, along with earlier work [***]3236 The United States explains that,\nstarting in [***], Boeing considered that improvements in engine technology had advanced to the\npoint where a re -engined 737 might be viable , and began intensive product development studies\nand testing. This included wind tunnel tests at Boeing's Transonic Wind Tunnel in Seattle to\n\n3230 More specifically, the European Union alleges that, based on research conducted under the NASA\nSubsonic Fixed Wing Project on the \"Multi-Objective Optimization of a Turbofan for an Advanced, Single-Aisle\nTransport\", Boeing was able to develop a technical solution to close couple the engine nacelles (i.e. the outer\ncasing of the engine) to the wing, allowing the engines to be located higher up and more forward relative to\nthe wing leading edge, based on the use of advanced computational fluid dynamics (CFD) codes to determine\noptimal engine size and configuration.\n3231 European Union's first written submission, para. 1624; and Airbus Engineer's Statement, (Exhibit\nEU-31) (BCI), paras. 99 and 134.\n3232 The European Union submits that the 737 MAX's fly-by-wire system is based on Boeing's experience\ndeveloping a more electric architecture for the 787. (European Union's first written submission, para. 1622).\nSee also European Union's response to Panel question No. 165, paras. 139-141; and Boeing Presentation #18,\n(Exhibit EU-1680) (HSBI). This feature will specifically enable Boeing to reduce airframe weight, due to lower\nsustained structural loads, thereby allowing higher permissible airplane gross weights for take-off and landing\nand increasing payload range capability. (European Union's response to Panel question No. 165, para. 140\n(referring to Boeing Presentation #18, (Exhibit EU-1680) (HSBI))).\n3233 European Union's second written submission, paras. 1598-1601; Airbus Engineer's Statement,\n(Exhibit EU-31) (BCI), para. 111.\n3234 See United States' first written submission, paras. 3, 682, 703-711, 735-738, and 782-799;\nUnited States' second written submission, paras. 732-739, 743-849, 881-904, and 1187-1204; response to\nPanel question Nos. 45, 46, 47, 151, 152, 153, 156, 157, and 165; and comments on European Union's\nresponse to Panel question Nos. 45, 46, 47, 151, 152, 153, 156, 157, and 165.\n3235 United States' first written submission, para. 968. The United States submits this is \"the same\nengine technology\" as features on A320neo update. See also United States' first written submission, para. 972\nand Boeing Engineers' Statement, (Exhibit USA-283) (BCI), para. 44.\n3236 United States' first written submission, para. 980 (citing Boeing Engineers' Statement, (Exhibit\nUSA-283) (BCI), para. 54).\n\nevaluate engine installation configurations. 3237 Boeing concluded that, since [***], Boeing would\nbe able to make co mmitments for the 737 MAX to American Airlines in July 2011. 3238 As for the\nEuropean Union's allegations regarding the contribution of CFD codes to the 737 MAX engine\nintegration design, the United States argues, based on the statement of the Boeing engineers, that\nBoeing's would have replicated in six months its experience with CFD codes from its work under\nthe various NASA aeronautics R&D programmes.3239 Finally, the United States considers that while\nstatements by the European Union that the chevron technology for the 787 is the same or similar\nto that of the 737 MAX [***], the two types of chevrons are [***].3240\n9.349. The United States argues that the European Union's arguments regarding the alleged spill -\nover effects of the design of the conical tail cone for the 787 on the 737 MAX tail cone are based\non \"superficial similarity\" 3241. The two designs are only broadly similar in the sense that they are\nboth conical. 3242 The Boeing engineers explain that, while the 737NG represented a hybrid\nbetween cone and blade, for the 737 MAX, Boeing returned to the conical shape. This was part of\nimprovements to the aft body design to improve the steadiness of air flow and eliminate the need\nfor vortex generators on the tail. The basis for the final 737 MAX tail cone design was [***]. That\nbasis for the design used the [***3243]3244 Overall, even if the 787 did not exist, Boeing would\nhave designed the 737 MAX tail cone as it is, in the same timeframe.3245\n9.350. The United States argues that the fly -by-wire system on the 737 MAX \"is very different\nfrom that of the 787, in terms of its extent, its systems architecture, and its suppliers\". 3246 It is\npartial, applied on [***], rather than all of the aircraft's spoilers. The allocation of spoiler pairs on\nthe 737 MAX is the same as the 737NG, involving [***] for airplane control and [***] as speed\nbrakes for ground operations. The control architecture for the 737 MAX's fly-by-wire spoilers is\nmost similar to the control architecture applied to the fly-by-wire spoilers on the 767 and the\n757.3247 The actuators are su pplied by [***]. The United States argues that the 787 uses a\ndifferent, digital fly -by-wire system on all spoilers, with actuators supplied by Moog. The 787\nsystem also includes a vertical gust suppression droop spoiler that is not on the 737 MAX. If the\n787 did not exist, Boeing would still have designed the 737 MAX fly -by-wire system exactly as it\nis.3248\n9.351. As we have previously explained in the context of our evaluation of the European Union's\narguments regarding the alleged spill -over technology effects of the pre -2007 aerona utics R&D\nsubsidies to the technological developments of the 787 -9/10 and the 777X, the European Union's\nspill-over technology effects theory raises two issues. The first is whether , conceptually, the\noriginal technology effects of the pre-2007 aeronautics R&D subsidies could have \"spilled-over\" to\nother aircraft , bearing in mind that these effects pertain to the acceleration of Boeing's\ndevelopment of 787-related technologies and not to the existence , as such, of those technologies.\nIf so, the second issue is whether any of the alleged technologies identified by the European Union\nin relation to the 737 MAX are related or linked to the 787 technologies such that the latter bear a\nmeaningful technological connection to the former.\n\n3237 Boeing Engineers' Statement, (Exhibit USA-283) (BCI), para. 44. See also United States' first\nwritten submission, paras. 980 and 972; and Boeing Engineers' Statement, (Exhibit USA-283) (BCI), para. 54.\n3238 Boeing Engineers' Statement, (Exhibit USA-283) (BCI), para. 47.\n3239 United States' second written submission, para. 1188; Boeing Engineers' Statement, (Exhibit\nUSA-283) (BCI), para. 30.\n3240 United States' second written submission, paras. 788 and 1191-1192; Boeing Engineers' Statement,\n(Exhibit USA-283) (BCI), para. 56; Boeing Engineers' Reply, (Exhibit USA-359) (BCI), para. 33.\n3241 United States' first written submission, para. 982.\n3242 United States' second written submission, paras. 791 and 1197; Boeing Engineers' Reply, (Exhibit\nUSA-359) (BCI), paras. 37 and 38.\n3243 Boeing Engineers' Statement, (Exhibit USA-283) (BCI), para. 58.\n3244 United States' second written submission, paras. 791 and 1197; Boeing Engineers' Reply, (Exhibit\nUSA-359) (BCI), paras. 37 and 38.\n3245 Boeing Engineers' Statement, (Exhibit USA-283) (BCI), para. 58.\n3246 United States' first written submission, para. 984 (referring to Boeing Engineers' Statement, (Exhibit\nUSA-283) (BCI), para. 58).\n3247 United States' second written submission, paras. 789 and 1199; Boeing Engineers' Reply, (Exhibit\nUSA-359) (BCI), paras. 34 and 35; and comments on European Union's response to Panel question No. 165,\npara. 169.\n3248 United States' first written submission, para. 984 (referring to Boeing Engineers' Statement, (Exhibit\nUSA-283) (BCI), para. 58).\n\n9.352. As previously noted, the causation finding in the original proceeding was that the pre -2007\naeronautics R&D subsidies accelerated the development by Boeing of the 787 technologies. The\nrelevant question before us is therefore whether, owing to that acceleration, any alleged so-called\nspill-over technologies in relation to the 737 MAX also came into existence earlier than would\notherwise be the case, enabling an earlier than otherwise launch of this aircraft.\n9.353. We conclude in Section 9.3.2.1.1 above, in our evaluation of the European Union's\narguments regarding the continuation of the alleged \"original technology effects\" of the pre -2007\naeronautics R&D subsidies, that the European Union fail s to demonstrate that, absent the pre -\n2007 aero nautics R&D subsidies, Boeing would have launched the 787 after the end of the\nimplementation period in September 2012. We note that the end of the implementation period is\nmore than eight years after Boeing actually launched the 787 in 2004, and is ten or more years\nafter when Boeing began pre -launch R&D for the development of the 787 following its decision to\ndevelop a replacement for the 767. At the point in time of an unsubsidized 787 launch, Boeing\nwould have undertaken all of the R&D necessary to laun ch 787 that the pre-2007 aeronautics R&D\nsubsidies had enabled it to undertake at an accelerated rate.\n9.354. We find above that, although it is more difficult for us to confidently predict exactly when\nBoeing would have been able to launch the 787 absent the pr e-2007 aeronautics R&D subsidies,\nBoeing would have done so well before (i.e. at least several years before) the end of the\nimplementation period.3249 In our view, it is not unrealistic to believe that Boeing would have been\nin a position to have launched the 737 MAX before the end of the implementation period. The\nEuropean Union has not provided credible evidence that the 787 technologies that an unsubsidized\nBoeing would have developed could not have been adapted to the 737 MAX in sufficient time to\nenable its respective launch in August 2011. We recall in this respect our earlier observation that\nthe European Union misconstrues the findings from the original proceeding as to the effects of the\npre-2007 aeronautics R&D subsidies.3250\n9.355. Accordingly, we conclude that the European Union has failed to demonstrate the existence\nof so-called spill-over technology effects of the pre-2007 aeronautics R&D subsidies in respect of\nthe 737 MAX in the post-implementation period .3251\n9.4.2.2 New technology effects of certain post-2006 aeronautics R&D subsidies\n9.356. We recall that the European Union points to a relatively small number of individual\npost-2006 aeronautics R&D subsidies which it argues operate through a technology causal\nmechanism (rather than a price causal mechanism) to contribu te to \"Boeing's development of\ninnovative technologies for its current aircraft\", such as the 737 MAX. 3252 In this Section of the\nReport, we evaluate the European Union's arguments regarding th ese post-2006 aeronautics R&D\nsubsidies that are said to operate t hrough a technology causal mechanism to affect the\ndevelopment of technologies for the 737 MAX and thereby cause serious prejudice to the\nEuropean Union's interests in the post-implementation period.\n9.357. The European Union argues that Boeing's participation in : (a) NASA's ERA Project, and the\nSubsonic Fixed Wing Project under NASA's Fundamental Aeronautics Program; (b) the DOD KC -46\nNext Generation Aerial Refueling Aircraft program element; and (c) the ecoDemonstrator\nprogramme pursuant to the Boeing CLEEN Agre ement enabled Boeing's development of\n\n3249 See para. 9.176 above.\n3250 As previously explained, the causation finding in the original proceeding was that the pre-2007\naeronautics R&D subsidies accelerated the development by Boeing of the 787 technologies; they did not create\nthose 787 technologies. The knowledge and experience gained through the pre-2007 aeronautics R&D\nsubsidies were not the effect of the subsidies per se. This finding therefore provides no basis for the argument\nthat the pre-2007 aeronautics R&D subsidies provided the advantage each time a technology is put into use by\nBoeing, unless the European Union could have established that, by the end of the implementation period,\nBoeing would still not have developed the 787 technologies and launched the 787, a proposition which we\nrejected on the evidence before us.\n3251 In light of this conclusion, we need not address the second question, which is whether any of the\nalleged technologies identified by the European Union in relation to the 737 MAX are in some way related or\nlinked to those on the 787.\n3252 European Union's first written submission, para. 979.\n\ntechnologies for the 737 MAX (as well as for the 787 -9/10 and 777X, discussed in\nSection 9.3.2.1.4), thereby contributing to adverse effects caused through that aircraft.3253\n9.358. The European Union alleges that Boeing conducted research under NASA's Subsonic Fixed\nWing Project on the \"Multi -Objective Optimization of a Turbofan for an Advanced Single -Aisle\nTransport\", to identify a design solution for incorporating larger engines on a next -generation\nsingle-aisle aircraft that helped Boeing determine the configuration for the 737 MAX. 3254 In\naddition, the European Union submits that Boeing learned how to integrate large format\nmultifunction primary displays into the legacy architecture of the 737 MAX c ockpit through\nparticipation in the DOD KC -46, Next Generation Aerial Refueling Aircraft program element,\nspecifically related to the 767 -2C.3255 Finally, the European Union argues that Boeing has tested\nand validated various technologies related to the devel opment of the 737 MAX as part of the 2012\necoDemonstrator 737-800 flight test bed, including adaptive trailing edges and variable area fan\nnozzle (VAFN) technology that could contribute to additional fuel burn savings of 2% and reduce\ntake-off noise as well as Boeing-proprietary winglet technology.3256\n9.359. The United States denies that Boeing conducted research under the \"Multi -Objective\nOptimization of a Turbofan for an Advanced, Single -Aisle Transport\". Rather, the document on\nwhich the European Union relies for its assertions regarding the contribution of the NASA Subsonic\nFixed Wing Project on the \"Multi -Objective Optimization of a Turbofan for an Advanced,\nSingle-Aisle Transport\" argument is a \" NASA study by NASA employees Jeffrey Berton and\nMark Guynn, which used public data on Boeing's 737NG aircraft\".3257\n9.360. The United States further argues that the DOD KC -46 Next Generation Aerial Refueling\nAircraft program element is outside the scope of this proceeding and therefore warrants no further\nconsideration. The Unite d States also denies that the KC -46 Next Generation Aerial Refueling\nAircraft program element contributed to Boeing's ability to incorporate multifunction primary\ndisplays in the 737 MAX. While it is true that the 737 MAX primary displays are derived from the\ndisplays developed for the 787, this was done by Boeing and its supplier Rockwell Collins without\nany U.S. Government funding. Although both the 737 MAX and 767 -derivative KC -46 primary\ndisplays are derived from those on the 787, there was no transfer of technology or learning from\nthe KC-46 displays to those on the 737 MAX. 3258 The 737 MAX and KC -46 displays are different\ndevices; the KC-46 displays are designed to interact with military night vision systems, while those\non the 737 MAX are not. The United States submits that Boeing has updated the legacy\narchitecture of the 737 and 767 \"numerous times\" over the years and there is no legacy\narchitecture display integration challenge in common between the two aircraft. 3259 Contrary to the\nEuropean Union's argum ent, the flow of technology is from civil to military, with the display\ntechnology from the 787 being incorporated into the KC-46.\n\n3253 The European Union argues that, should the Panel disagree that any of these alleged post-2006\naeronautics R&D subsidies operate, at present, through a technology causal pathway, they should in the\nalternative be understood to operate through a price causal pathway. (See European Union's response to Panel\nquestion No. 43, fn 352).\n3254 European Union's first written submission, paras. 1095 and 1096; Airbus Engineer's Statement,\n(Exhibit EU-31) (BCI), section IV.B.1 (referring to J. J. Berton and M. D. Guynn, NASA, Multi-Objective\noptimization of a Turbofan for an advanced, single-aisle transport, (April 2012), (Exhibit EU-666), p. 22).\n3255 European Union's first written submission, paras. 1095-1099 and 1623; Airbus Engineer's\nStatement, (Exhibit EU-31) (BCI), section IV; and Airbus Engineers' Response, (Exhibit EU-1014) (BCI),\npara. 104. (fn omitted)\n3256 European Union's first written submission, paras. 1090-1094; Airbus Engineer's Statement, (Exhibit\nEU-31) (BCI), section IV; and C. Wilsey and R. Stoker, \"Continuous Lower Energy, Emissions and Noise\n(CLEEN) Technologies Development – Boeing Program Overview\", Presentation at the CLEEN Consortium Public\nSession, 27 October 2010, (Exhibit EU-665), p. 6\n3257 See United States' first written submission, para. 976 (referring to J. J. Berton and M. D. Guynn,\nNASA, Multi-Objective optimization of a Turbofan for an advanced, single-aisle transport (April 2012), (Exhibit\nEU-666)) (emphasis original). See also Boeing Engineers' Statement, (Exhibit USA-283) (BCI), paras. 49 and\n50 (\"{s}cientists preparing documents of this nature usually thank other scientists who have reviewed their\nwork or provided other input. The absence of any Boeing employees from the acknowledgement page of the\nNASA study confirms that Boeing played no role in that project\").\n3258 Boeing Engineers' Reply, (Exhibit USA-359) (BCI), paras. 39 and 40.\n3259 United States' second written submission, para. 1195 (referring to Boeing Engineers' Reply, (Exhibit\nUSA-359) (BCI), paras. 39 and 40).\n\n9.361. The United States acknowledges that FAA CLEEN funding under the Boeing CLEEN\nAgreement was used for preparation of the aircr aft/instrumentation specific to CLEEN test\nrequirements, operation, fuel and support of the aircraft during 51.5 hours of dedicated adaptive\ntrailing edge flight testing based in Glasgow, Montana, and subsequently, an apportioned\npercentage was used on pos t-test refurbishment costs of the aircraft to make it suitable for\ncommercial operation with American Airlines. However, it submits that Boeing's proprietary\nadaptive trailing wing edge technology [***].3260 The United States argues that testing for\nBoeing's proprietary VAFN technology, multi-spar winglet design, and deployment of RFID devices\nwas not conducted pursuant to the Boeing CLEEN Agreement on the 737 -800 ecoDemonstrator\ntest bed, but was funded at Boeing's own expense. In cases where technologies are tested on the\n737-800 ecoDemonstrator test bed, the United States submits that great care is employed to\nsegregate CLEEN costs from ecoDemonstrator costs. At most, it is possible that the Boeing CLEEN\nAgreement funded a small portion of the fuel cost incu rred for a given technology. In this regard,\nonly a small amount of FAA CLEEN funding may be allocated to testing of VAFN technology or RFID\ndevices. It is unreasonable to suggest that a possible fuel cost contribution had a meaningful\nimpact on Boeing's t esting of these technologies, let alone on Boeing's ability to develop the 737\nMAX. In any case, the Boeing CLEEN Agreement was not a source of funding of fuel costs for\ntesting of the multi -spar winglet that the 737 MAX design incorporates, as the winglet was not\neven installed on the test aircraft during the CLEEN phase of flight testing in Glasgow, Montana. In\naddition, the United States also emphasizes that VAFN technology [***].3261\n9.362. We begin by addressing the European Union's argument that knowledge and e xperience\ngained under the Multi -Objective Optimization of a Turbofan for an Advanced, Single -Aisle\nTransport aspect of NASA's Subsonic Fixed Wing Project helped Boeing in its decision to integrate\nlarger engines on the 737 MAX and proceed with the overall 737 MAX design as opposed to a clean\nsheet replacement design. While the European Union submits a copy of the results of the NASA\nresearch effort, it does not identify how Boeing participated in this effort, or indeed whether this\nparticipation occurred through a NASA procurement contract or other agreement funded under any\nof the challenged NASA aeronautics R&D programmes. 3262 Nor does the European Union provide\nevidence of the contribution of the study to Boeing's decision to incorporate the relevant\ntechnologies onto the 737 MAX, or of the extent to which this project contributed towards an\nearlier launch of the 737 MAX or a launch that would otherwise not have been possible. The Airbus\nengineers concede that \"{t}he choice {to proceed with the 737 MAX design} was certainly not\nbased on the result of this study alone\". 3263 On the basis of the evidence before us, we are not\npersuaded that Boeing was directly involved in the research in question, or even that the research\ncontributed to the development of the rele vant 737 MAX technologies or to enabling an earlier\nlaunch of the 737 MAX.\n9.363. We next address the European Union's allegations that Boeing's participation in the KC-46,\nNext Generation Aerial Refueling Aircraft program element enabled Boeing to integrate larg e\nformat multifunction primary displays into the legacy architecture of the 737 MAX cockpit. We\nrecall that in Section 7.3.3.3, we have ruled that the KC-46 New Generation Aerial Refueling\nAircraft program element is outside the scope of th e compliance proceeding. We therefore do not\nfurther consider the European Union's argument regarding the implications of Boeing's\nparticipation in this program element for Boeing's development of the legacy architecture of the\n737 MAX cockpit.\n9.364. Finally, we turn to the European Union's allegations concerning Boeing's participation in\nthe FAA CLEEN Program through the Boein g CLEEN Agreement in respect of the 737 MAX. The\nEuropean Union alleges that Boeing tested variable area fan nozzles and adap tive trailing edges\n\n3260 United States' second written submission, para. 1203; and Boeing Engineers' Reply, (Exhibit\nUSA-359) (BCI), para. 43.\n3261 United States' second written submission, para. 1203. See also United States' first written\nsubmission, para. 989; second written submission, paras. 1201, and 1202; Boeing Engineers' Statement,\n(Exhibit USA-283) (BCI), paras. 64-68; and Boeing Engineers' Reply, (Exhibit USA-359) (BCI), paras. 44-47.\n3262 J. J. Berton and M. D. Guynn, NASA, Multi-Objective optimization of a Turbofan for an advanced,\nsingle-aisle transport, (April 2012), (Exhibit EU-666).\n3263 Airbus Engineer's Statement, (Exhibit EU-31)(BCI), para. 136.\n\nunder the 2012 ecoDemonstrator 737 -800 test bed, and that these technologies both appear on\nthe 737 MAX.3264\n9.365. In Section 9.3.2.1.4 above, we reject the European Union's argument that Boeing's\nparticipation in t he FAA CLEEN Program, through the Boeing CLEEN Agreement, created or\naccelerated the creation of RFID technology or HLFC technologies for use on the 787 -9/10 or\n777X. In reaching this conclusion, we distinguished the types of early -stage, high -risk R&D at\nissue in the original proceeding from the type of testing and validation of technologies that are\nalready i n a late stage of development , which takes place under Boeing's ecoDemonstrator\nprogramme. As we explain in paragraph s 9.205 and 9.206 above, we are not persuaded that\nBoeing would not have undertaken the testing and validation work on its own, absent its work\nunder the Boeing CLEEN Agreement.\n9.366. Therefore we are similarly not persuaded that Boein g's participation in the FAA CLEEN\nProgram through the Boeing CLEEN Agreement materially helped Boeing to undertake R&D in\nrelation to the alleged technologies that now feature on the 737 MAX, that it would not otherwise\nhave undertaken, or to achieve the same gains that it would not otherwise have achieved within\nessentially the same time -frame. Rather, if anything, Boeing's participation in a cost -sharing\narrangement such as the Boeing CLEEN Agreement merely somewhat lower the cost at which it\nwas able to undertake research it would have undertaken in any case . We therefore conclude that\nthe European Union has failed to demonstrate that Boeing's participation in the FAA CLEEN\nProgram, through the Boeing CLEEN Agreement, created or accelerated the developme nt and\ncreation of the variable area fan nozzles and adaptive trailing edges that are alleged to feature on\nthe 737 MAX. T he European Union has therefore failed to demonstrate the existence of new\ntechnology effects of the particular post-2006 aeronautics R&D subsidies in respect of the 737 MAX\nin the post-implementation period.3265\n9.4.2.3 Summary of c onclusions on whether certain aeronaut ics R&D subsidies\nbenefiting the 737 MAX cause serious prejudice to the interests of the European Union,\nwithin the meaning of Ar ticles 5(c) and 6.3, in respect of the A320neo in the\npost-implementation period, through a technology causal mechanism\n9.367. In this Section, we evaluate the European Union's arguments that the pre -2007\naeronautics R&D subsidies, through their effects on Boeing 's development of 787 technologies,\nhave \"spilled over\" to affect the technological development of the 737 MAX and the timing of its\nlaunch (the spill -over technology effects), and that certain post -2006 aeronautics R&D subsidies\nhave led Boeing to develop other technologies which also affect this aircraft's technological\ndevelopment and the timing of its launch (the new technology effects).\n9.368. As regards the spill-over technology effects of the pre-2007 aeronautics R&D subsidies, we\nrefer to the original pan el's finding that the effect of the pre -2007 aeronautics R&D subsidies was\nto accelerate Boeing's development of the 787 technologies (rather than to create technologies\nthat would not otherwise exist), and our conclusion in Section 9.3.2.1.1, that the European Union\nhas failed to demonstrate that, absent the pre -2007 aeronautics R&D subsidies, Boeing would\nhave launched the 787 after the end of the implementation period in September 2012. We explain\nthat, owing to this finding, the onus is on the European Union to demonstrate that, absent the\nacceleration effect of the pre -2007 aeronautics R&D subsidies on Boeing's development of 787\ntechnologies, Boeing would not have had sufficient time to further develop technologies that wou ld\nhave enabled it to launch the 737 MAX in 201 1. We conclude that the European Union has not\nprovided credible evidence that, absent the pre -2007 aeronautics R&D subsidies, the 787\ntechnologies that Boeing would have developed could not have been adapted and further\ndeveloped for the 737 MAX in sufficient time to enable Boeing to launch the 737 MAX in\n\n3264 Airbus Engineer's Statement, (Exhibit EU-31) (BCI), para. 121. See also Airbus Engineer's\nStatement, (Exhibit EU-31) (BCI), para. 16 (referring to Boeing, Fact Sheet, \"The Suite of Technologies on the\necoDemonstrator Tests New Ways to Reduce Fuel Consumption and Community Noise\", June 2012, (Exhibit\nEU-262)).\n3265 Given the European Union's request that if we reject its arguments that the particular, identified\npost-2006 aeronautics R&D subsidies operate through a technology causal mechanism, we consider in the\nalternative whether they should be analysed as operating through a price causal mechanism, we will address\nwhether these particular, identified post-2006 aeronautics R&D subsidies operate through a price causal\nmechanism in Section 9.4.3.3 below.\n\nAugust 2011. This is sufficient to enable the Panel to reject the European Union's argument\nregarding spill-over technology effects in relation to the 737 MA X without addressing whether\nthere is in any case a sufficient technological link between the 787 technologies and the features of\nthe 737 MAX that the European Union alleges are derived from the 787 technologies.\n9.369. As regards the new technology effects of certain post-2006 aeronautics R&D subsidies, we\nexplain that there are three such subsidies that are alleged to have affected Boeing's development\nof certain technologies for the 737 MAX: (a) NASA's ERA Project and the Subsonic Fixed Wing\nProject under NAS A's Fundamental Aeronautics Program; (b) the DOD KC -46, Next Generation\nAerial Refueling Aircraft program element; and (c) the ecoDemonstrator programme pursuant to\nthe Boeing CLEEN Agreement.\n9.370. We reject the arguments regarding the NASA aeronautics R&D programmes above because\nthey are based on results of a study published by NASA, without any indication of whether Boeing\nparticipated in the study in question, and if so, how and through which instruments. There is also\nno evidence as to the degree to which the study in question contributed to solving the\ntechnological problems or to Boeing's decision to incorporate the relevant technologies onto the\n737 MAX. We reject the arguments regarding the DOD KC-46, Next Generation Aerial Refueling\nAircraft program el ement because the KC -46, Next Generation Aerial Refueling Aircraft program\nelement is outside the scope of the proceeding. Finally, we decline to analyse the Boeing CLEEN\nAgreement as contributing to Boeing's development of technologies for the 737 MAX bec ause the\nnature of the R&D performed is testing, validation and refinement of late -stage technologies.\nUnlike the R&D that Boeing performed under the pre -2007 aeronautics R&D subsidies, the R&D\nperformed by Boeing under the Boeing CLEEN Agreement is R&D that Boeing would otherwise (and\ncould otherwise) have performed itself. As the Boeing CLEEN Agreement is a cost -sharing\narrangement, we consider the material contribution of that subsidy is to lower Boeing's costs of\nundertaking late stage testing and valid ation work. We will therefore consider whether, analysed\nas operating through a price causal mechanism, this post -2006 aeronautics R&D subsidy can be\nsaid to affect Boeing's LCA prices.\n9.371. Finally, in Section 9.3.2.1.4, we reject the European Union's argument that research\nBoeing conducted under NASA's Subsonic Fixed Wing Project related to the development of\nPRSEUS composite materials or Boeing's research and testing of VAFN, RFID devices, adaptive\ntrailing wing edge technology or a modified winglet can give rise to \"future technology effects\" that\ncould constitute a threat of serious prejudice, within the meaning of Article 5(c) and footnote 13\nand Article 6.3 of the SCM Agreement. This finding is similarly relevant to our assessment here.\n9.372. In conclusion, we reject the European Union's arguments concerning the existence of\nvarious alleged technology effects of the pre -2007 aeronautics R&D subsidies and certain post -\n2006 aeronautics R&D subsidies in respect of the 737 MAX in the post-implementation period.\n9.373. Because the European Union has failed to demonstrate any effect s of the pre -2007\naeronautics R&D subsidies, or of the particular, identified post-2006 aeronautics R&D subsidies, on\nBoeing's product development in re spect of the 737 MAX in the post -implementation period, the\npossibility of any consequent impact of those subsidies on sales and prices of the A320neo does\nnot arise.3266 Accordingly, there is no basis on which the pre-2007 aeronautics R&D subsidies or\nthe particular, identified post -2006 aeronautics R&D subsidies can be found to be a genuine and\nsubstantial cause of any of the forms of serious prejudice alleged in respect of the A320neo in the\npost-implementation period, through a technology causal mechanism.\n9.4.3 Whether the post -2006 subsidies benefiting the 737 MAX and 737NG cause\nserious prejudice to the interests of the European Union, wit hin the meaning of\nArticles 5(c) and 6.3, in respect of the A320neo and A320ceo in the post-implementation\nperiod, through a price causal mechanism\n9.374. The European Union argues that certain unwithdrawn subsidies that the United States\ngrants and maintains since the end of the reference period in the original proceeding (the\npost-2006 subsidies), through their effects on Boeing's pricing of the 737 MAX in certain\nprice-sensitive LCA sales campaigns, considered collectively with the effects of certain aeronautics\nR&D subsidies on Boeing's technology developments for the 737 MAX, cause various forms of\n\n3266 See para. 9.341 above.\n\nserious prejudice with respect to the A320neo in the post-implementation period. It further argues\nthat the post -2006 subsidies, through their effects on Boeing's pricing of the 737NG in certain\nprice-sensitive LCA sales campaigns, cause various forms of serious prejudice with respect t o the\nA320ceo in the post-implementation period.\n9.375. In Section 9.4.2 above, the Panel conclude s that the European Union has failed to\ndemonstrate the first part of its serious prejudice argument in relation to the 737 MAX and\nA320neo; namely, that the various aeronautics R&D subsidies affected Boeing's development of\ntechnologies for the 737 MAX in the post -implementation period. The consequence of this\nconclusion is that the technological advancements (including the timing of del ivery) of the 737\nMAX cannot be considered to be an effect of the subsidies.\n9.376. This means that the remaining element of the European Union's serious prejudice case\nregarding the A320neo that we must address is whether the post-2006 subsidies have enabled\nBoeing to lower the prices of the 737 MAX in certain highly competitive LCA sales campaigns ,\nthereby causing serious prejudice with respect to the A320neo in the pos t-implementation period.\nWe note that the European Union also argues that the post-2006 subsidies have enabled Boeing to\nlower the pri ces of the 737NG only in certain highly competitive LCA sales campaigns , thereby\ncausing serious prejudice with respect to the A320ceo in the post-implementation period. Given\nour finding that the 737 MAX, 737NG, A3 20neo and A320ceo compete in one LCA product market\nfor narrow-body, single-aisle LCA, we will consider whether the post -2006 subsidies, through their\neffects on Boeing's prices of the 737 MAX and 737NG, are a genuine and substantial cause of\nsignificant l ost sales of the A320neo and A320ceo, of i mpedance as well as displace ment of\nA320neo and A320ceo imports (to the United States) and exports (to certain third country\nmarkets), and of significant price suppression of the A320neo and A320ceo , and threats of all of\nthe foregoing, in the post-implementation period.\n9.377. In Section 9.2.3, we explain that we shall conduct our anal ysis of the effects of the\npost-2006 subsidies that operate through a price causal mechanism by aggregating them into one\nof three categories: (a) tied tax subsidies, comprising the Washington State and City of Everett\nB&O tax rate reductions, the receipt of which is contingent on the sale of particular Boein g LCA on\na per-unit basis; (b) state and local cash flo w subsidies, comprising incentives provided by state\nand municipal authorities in Washington and South Carolina related to Boeing's LCA production\nactivities in those jurisdictions, but which are not related to LCA production on a per -unit basis;\nand (c) post-2006 aeronautics R&D subsidies, which the European Union argues enable Boeing to\nuse intellectual property to continue developing technologies for future LCA without having to pay\nlicence fees.\n9.4.3.1 The Washington State B&O tax rate reduction\n9.378. The subsidy within the tied tax subsidies aggregated category that is alleged to benefit the\n737 MAX and 737NG is the Washington State B&O tax rate reduction. This subsidy reduces the\nstate B&O taxes applicable to the revenues earned from the sale of 737 MAX and 737NG aircraft,\nlowering Boeing's taxes and thereby increasing Boeing's after-tax profits.3267\n9.379. We have previously explained the parties' general arguments as to t he nature and\noperation of the tied tax category of post -2006 subsidies in connection with our analysi s of the\neffects of these subsidies on Boeing's 787 and 777X prices in the wide -body, twin -aisle LCA\nmarkets.3268 In Section 9.3.2.2.1 of this Report we explain ed the approach taken by the Appellate\nBody to determining whether the FSC/ETI subsidies and Washington State B&O tax rate reduction\nin the original proceeding, given their nature as tied tax subsidies, the dynamics of price\ncompetition between Boeing and Airbus in a duopolistic market, and the way that the tied tax\nsubsidies are said to be applied by Boe ing to lower prices in certain price-sensitive sales\ncampaigns, contributed in a genuine and substantial way to the lowering of Boeing's prices. 3269\nBased on this approach, we then proceeded to evaluate the sales campaign evidence to determine\nwhether any of the sales campaigns involving wide-body, twin-aisle aircraft were price-sensitive, in\nthe sense that Boeing appeared to be under particular pressure to reduce its prices in order to\nsecure the sales, and whether there were any non-price factors that explained Boeing's success in\n\n3267 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1806.\n3268 See paras. 9.235 through 9.237 above.\n3269 See paras. 9.239 through 9.241 above.\n\nobtaining the sale ; e.g. Boeing's incumbency and a consequent switching cost advantage, the\nsuitability of the aircraft for the particular customer's requirements (in terms of range, capac ity\nand delivery availability). Had we concluded that Boeing appeared to be under particular pressure\nto reduce its prices in order to secure the sales, and that there were no non-price factors that\nexplained Boeing's success in obtaining the sale, we would have concluded that the tied tax\nsubsidies contributed in a genuine and substantial way to the lowering of Boeing's LCA prices in\nthe wide -body, twin -aisle LCA markets . As a second step in the analysis, we would then have\naddressed the United States' argument concerning the relative insignificance of the magnitudes by\ndetermining whether, on the basis of the evidence before us, the magnitudes of the tied tax\nsubsidies were enough to \"cover the margin of victory between the final net prices of Boeing and\nAirbus\"3270 such that the tied tax subsidies, through their effects on Boeing's prices, are a genuine\nand substantial cause of lost sales of the A350XWB.\n9.380. We will follow the same approach in analysing the effects of the Washington State B&O tax\nrate reduction on Boeing's 737 MAX and 737NG prices in so-called price-sensitive sales campaigns,\nand their consequent effect on A320neo and A320ceo sales. We therefore begin by examining the\nsales campaign evidence involving the 737 MAX and 737NG on the one hand, and the A320neo\nand A320ceo, on the other, to determi ne whether, in any of these campaigns, Boeing appeared to\nbe under particular pressure to reduce its prices in order to secure the sales, and whether there\nwere no non-price factors that explained Boeing's success in obtaining the sale.\n9.4.3.1.1 The sales campaigns involving competition between the 737 MAX and\nA320neo and the 737NG and A320ceo\n9.381. The European Union submits eviden ce concerning certain LCA sales campaigns involving\nthe 737 MAX and A320neo, and the 737NG and A320ceo, betwe en 2007 and 2015 which it argues\nare highly competitive, and instances where Boeing did in fact act on its incentive, enabled by the\nreceipt of subsidies, to offer pricing concessions that enabled it to secure the sales at the expense\nof Airbus. The main details concerning these sales campaigns are set forth in Table 12 below3271:\n\n3270 See Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 1263.\n3271 The year following the name of the airline customer designates the date of the order, although in\nsome cases much of the sales campaign activity may have taken place in the preceding year. For this reason,\nthe years of the sales campaigns as designated by the Panel may differ in certain cases from the years of those\ncampaigns as indicated in the European Union's submissions, which appear generally to refer to the year in\nwhich the sales campaign was conducted.\n\nTable 12: Alleged lost sales of the A320neo and A320ceo in the post-implementation\nperiod due to the 737 MAX and 737NG\nSales campaigns alleged to demonstrate lost sales of both the A320neo and the A320ceo due to the\n737 MAX and the 737NG3272\n\nCampaign Number of 737NG\norders\nNumber of 737 MAX\norders A320neo /A320ceo3273\nAmerican Airlines 2011 100, plus 40 options 100, plus 60 options 260 single-aisle aircraft\nSouthwest Airlines 2011 58 150 None\nSouthwest Airlines 2013\n(\"Follow-on\")\n5 50 None\nAvolon 2012 10 15 20 (A320neo)\nNorwegian Air Shuttle\n2012\n22 100 100 (A320neo)\nUnited Airlines 2012 and\n2013\n64, of which 50 in 2012\nand 14 in 2013\n100 None\n\nSilkAir 2012 23 31 None\nLion Air 2012 29 201 174 (A320neo)\n60 (A320ceo)\nFly Dubai 2014 11 75, plus 25 purchase\nrights\nNone\n\nSales campaigns alleged to demonstrate lost sales of the A320neo due to the 737 MAX\n\nCampaign Number of 737NG\norders\nNumber of 737 MAX\norders A320neo/A320ceo\nGOL 2012 None 60 None\n\nAvolon 2014 (\"Follow-on\")\n\nNone 5 None\nAviation Capital Group\n2012\nNone 60 30 (A320neo)\nAeromexico 2012\n\nNone 60 None\nIcelandair 2013\n\nNone 16 None\nTUI Travel 2013\n\nNone 60, plus 90 options None\nAir Canada 2013\n\nNone 61, plus 18 options and\n30 purchase rights\nNone\nMonarch Airlines 2014\n\nNone\n\n30, plus 15 options None\nSilkAir 2015 (\"Follow-on\")\n\nNone 63274 None\n\n3272 The European Union had also challenged the Air Lease Corp 2012 and GECAS 2012 single-aisle\ncampaigns, but does not pursue its arguments in relation to these campaigns on account of both airlines\nhaving subsequently announced a number of Airbus orders. (European Union's response to Panel question\nNo. 169, para. 408).\n3273 Certain of the campaigns cited by the European Union are \"split campaigns\" in that the customer\ndivided the order across both Airbus and Boeing.\n3274 We note that the European Union argues that this \"follow-on\" order consisted of seven 737 MAX\naircraft. However, the evidence presented by the European Union only shows an order for six 737s, without\nspecifying whether the aircraft concerned are 737 MAX or NG. (European Union's response to Panel question\nNo. 169, para. 407, and table at para. 329; and Boeing website, Orders and Deliveries – 2015 Net Orders,\nthrough 22 September 2015, available at <http://www.boeing.com/commercial/#/orders-deliveries>,\naccessed 8 August 2016, (Exhibit EU-1568)).\n\nSales campaigns alleged to demonstrate lost sales of the A320ceo due to the 737NG\n\nCampaign Number of 737NG\norders\nNumber of 737 MAX\norders A320neo/A320ceo\nFly Dubai 2008\n\n50 None None\nDelta Airlines 2011\n\n100 None None\nThe data in Table 12 above is supported by the following ev idence: Boeing Press Release, \"Boeing and\nAmerican Airlines Agree on Order for up to 300 Airplanes\", 20 July 2011, (Exhibit EU -883); \"American Airlines\nDeal Seen as Win for Airbus, Bad Omen for Boeing\", Ascend Advisory, 21 July 2011, (Exhibit EU-886); \"Boeing\nOrders Likely to Survive American Bankruptcy\" , Seattle Times, 29 November 2011 , (Exhibit EU-891); Boeing\nPress Release, \"Boeing 737 MAX Logs First Firm Order from Launch Customer Southwest Airlines\", 13\nDecember 2011, (Exhibit EU -896); Boeing website, Orders and deliveries – 2013 Orders Detail, available at\n<http://www.boeing.com/commercial/#/orders-deliveries>, last accessed 8 August 2016, (Exhibit EU -1647);\nBoeing Press Release, \"Boeing Announces Historic 737 Order for United Airlines\", 12 July 2012, (Exhibit\nEU-912); Boeing website, Orders and Deliveries – 2013 Net Orders, through 9 July 2013, available at\n<http://www.boeing.com/commercial/#/orders-deliveries>, last accessed 7 August 2016, (Exhibit EU -1185);\nBoeing website, Orders and Deliveries – 2013 Orders Detail, through June 2013, available at\n<http://www.boeing.com/commercial/#/orders-deliveries>, accessed 8 August 2016, (Exhibit EU -1151);\nBoeing Press Release, \"Boeing Statement on SilkAir Commitment to order 737s\", 3 August 2012, (Exhibit\nEU-922); Boeing website, Orders and Deliveries – Customer Summary SilkAir, through February 2013,\navailable at <http://www.boeing.com/commercial/#/orders -deliveries>, accessed 8 August 2016, (Exhibit EU -\n923); Boeing Press Release, \"Boeing, Lion Air Finalize Hist oric Order for up to 380 737s\", 14 February 2012,\n(Exhibit EU-961); Airbus Press Release, \"Lion Air orders 234 A320 Family aircraft\", 18 March 2013, (Exhibit\nEU-962); Boeing Press Release, \"Boeing, flydubai Finalize Order for 75 737 MAXs\", 6 January 2014, (Exhibit\nEU-1598); Boeing Press Release, \"Boeing, GOL Announce order for 60 737 MAX Airplanes\", 1 October 2012,\n(Exhibit EU-940); Boeing Press Release, \"Boeing and Norwegian Announce Order for 100 737 MAX; 22 Next -\nGeneration 737s\", 25 January 2012, (Exhibit EU-944); Airbus Press Release, \"Norwegian firms up order for 100\nAirbus A320neo\", 8 June 2012, (Exhibit EU -948); Boeing Press Release, \"Boeing, Avolon Announce\nCommitment for 737 MAXs and Next -Generation 737s\", 11 July 2012, (Exhibit EU -965); Boeing webs ite,\nOrders and Deliveries – Customer Summary Avolon, through February 2013, available at\n<http://www.boeing.com/commercial/#/orders-deliveries>, last accessed 8 August 2016, (Exhibit EU -966);\nAirbus Press Release, \"Avolon increases initial NEO commitment by signing order for 20\", 10 January 2013,\n(Exhibit EU -967); Boeing Press Release, \"Boeing, Avolon Announce Commitment for 787 Dreamliners,\nAdditional 737 MAXs\", 14 July 2014 , (Exhibit EU -1646); Boeing Press Release, \"Boeing, Aeromexico Finalize\nOrder for 737 MAX 8s and 9s\", 6 November 2012, (Exhibit EU -871); Boeing Press Release, \"Boeing, Icelandair\nFinalize Order for 16 737 MAX Airplanes\", 13 February 2013, (Exhibit EU -988); \"TUI Travel to Buy 60 Boeing\n737 MAX Aircraft\", BBC News, 31 May 2013, (Exhibit E U-1217); C. Buyck, \"TUI Travel Firms Up Boeing 737\nMAX Order\", Aviation Week, 17 June 2013, (Exhibit EU -1218); Air Canada Press Release, \"Air Canada Selects\nBoeing 737 MAX to Renew Mainline Narrowbody Fleet\", 11 December 2013, (Exhibit EU -1571); Boeing Pre ss\nRelease, \"Boeing Statement on Air Canada 737 MAX Commitment\", 11 December 2013, (Exhibit EU -1572);\nBoeing Press Release, \"Boeing, Air Canada Finalize Order for 61 737 MAXs\", 1 April 2014, (Exhibit EU -1573);\nBoeing Press Release, \"Monarch Airlines Finali ze Order for 30 787 MAX 8s \", 31 October 2014, (Exhibit\nEU-1624); Boeing Press Release, \"Monarch Airlines Selects Boeing as Preferred Bidder for Fleet Replacement\",\n14 July 2014, (Exhibit EU -1625); Boeing website, Orders and Deliverie s – 2015 Net Orders, th rough\n22 September 2015, available at <http://www.boeing.com/commercial/#/orders -deliveries>, accessed\n8 August 2016, (Exhibit EU -1568); Boeing Press Release, \"Boeing, Fly Dubai Announce Next -Generation 737\nOrder\", 14 July 2008, (Exhibit EU -1008); and Delta Press Release, \"Delta Announces Order for 100 Boeing\n737-900ER Aircraft\", 25 August 2011, (Exhibit EU-1001).\n\n9.382. The evidence submitted in relation to the above sales campaigns includes information\nconcerning: (a) the aircraft that were offered by Airbus an d Boeing, respectively, to customers in\neach sales campaign; (b) the particular needs of the airline customer in terms of factors such as\nseating capacity, range and routes to be served, efficiency and delivery dates; and (c) the\ndynamics of the pricing in teractions between Airbus and Boeing, on the one hand, and the airline\ncustomer or leasing company on the other, through repeated rounds of negotiations. This evidence\nallows the Panel to assess with a high degree of confidence the extent to which the sale s\ncampaigns were or were not particularly price -sensitive. While some of the sales campaign\nevidence is in the public domain (e.g. the information concerning the terms of the aircraft orders\nultimately placed by the customer), a significant part of it, especially as regards the internal Airbus\ncommunications describing Airbus' sales strategies and evaluating the competing Airbus and\nBoeing offers, is designated as HSBI. Therefore, in the discussion that follows, we provide a non -\nconfidential summary of our conclusions regarding the extent to which the outcomes of the\nindividual sales campaigns appeared to turn on the price of the competing offers. Our detailed\n\nanalysis of the evidence pertaining to each sales campaign is set forth in an HSBI Appendix to the\nReport.3275\n9.383. We conclude, based on our evaluation of the sales campaign evidence concerning the\nA320neo and A320ceo, that in five sales campaigns between 2007 and 2015 , Boeing appeared to\nbe under particular pressure to reduce its pri ces in order to secure th e sale, and there were no\nnon-price factors that explain Boeing's success in obtaining the sale .3276 While pricing was\ndiscussed in certain of the other single-aisle sales campaigns, Boeing does not appear to have\nbeen under particular pressure to reduce its prices in order to secure these sales, and there were\nnon-price factors that explain Boeing's success in obtaining the order s, or in the case of split\norders, the portion of the order s that it obtained. In the majority of these LCA sales campaigns, a\ncritical factor was Boeing's status as the incumbent aircraft supplier. 3277 Another critical factor in\nmany of these campaigns was the airline customer's preference for the delivery availability of the\nBoeing aircraft over the competing Airbus aircraft. 3278 The size and timing of certain airline\ncustomers' fleet replacement needs also featured as a decisive factor in some campaigns, meaning\nthat some orders could simply not be met by a single manufacturer and therefore necessarily\nresulted in split orders.3279 In other campaigns, vital factors included the technical performance of\ncompeting aircraft.3280 We conclude that in each of these other sales campaigns there were other\nfactors that explain why Airbus either did not win the sale, or in the case of the sales campaigns\nthat involved split orders, why there was no basis to conclude that Boeing's pricing resulted in the\ncustomer awarding a greater portion of the order to Boeing (and thus a lesser portion to Airbus)\nthan would otherwise have been the case.3281\n9.384. Accordingly, based on the reasoning of the Appellate Body when analysing the effects of\nthe FSC/ETI subsidies on Boeing's prices in the original proceeding, we conclude that the\nWashington State B&O tax rate reduction contributed in a genuine and substantial way to the\nlowering of Boeing's prices of narrow -body, single-aisle LCA in five LCA sales campaigns between\n2007 and 2015.\n9.385. As the European Union has demonstrated that the Washington State B&O tax rate\nreduction affected Boeing's pricing behaviour with respect to the 737 MAX and 737NG in five price-\nsensitive sales campaigns between 2007 and 2015, we will next consider whether , on the basis of\nthe evidence before us, the magnitudes of the Washington State B&O tax rate reduction were\nenough to \"cover the margin of victory between the final net prices of Boeing and Airbus\" 3282 such\nthat this subsidy, through its effects on Boeing's prices, is a genuine and substantial ca use of lost\nsales of the A320neo and A320ceo.\n9.4.3.1.2 Whether the Washington State B&O tax rate reduction is a genui ne and\nsubstantial cause of significant lost sales of the A320neo and A320ceo in the\npost-implementation period\n9.386. The principal argument that the United States makes is that the magnitudes of the tied tax\nsubsidies are too small to cause adverse effects. 3283 The United States emphasi zes that, in the\noriginal proceeding, the Washington State and City of Everett B&O tax rate reductions were found\nto cause adverse effects only when aggregated with FSC/ETI subsidies. It considers that, now that\nthe FSC/ETI subsidies are not relevant to the analysis, the B&O tax rate reductions are too small\nto cause the alleged market phenomena and therefore cannot support a conclusion that they are a\ngenuine and substantial cause of such phenomena.3284\n\n3275 See HSBI Appendix (Appendix 2).\n3276 Fly Dubai 2008, Delta 2011, Icelandair 2013, Air Canada 2013, and Fly Dubai 2014.\n3277 See HSBI Appendix (Appendix 2), paras. 179, 187, 194, 210, 216, 222, 237, 243, and 257.\n3278 See HSBI Appendix (Appendix 2), paras. 194, 200, 216, and 237.\n3279 See HSBI Appendix (Appendix 2), paras. 179 and 222.\n3280 See HSBI Appendix (Appendix 2), paras. 216 and 257.\n3281 Several of the single-aisle LCA sales campaigns involved split orders of both Airbus and Boeing\naircraft: American Airlines (2011), Norwegian Air Shuttle (2012), Lion Air (2012), Avolon (2012 and 2014), and\nAviation Capital Group (2012).\n3282 See Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 1263.\n3283 United States' first written submission, paras. 719-721; second written submission, paras. 863-865.\n3284 To recall, in the original proceeding the FSC/ETI subsidies amounted to USD 435 million between\n2004 and 2006. The Washington State and City of Everett B&O tax rate reductions amounted to USD 13.8 and\n\n9.387. We do not agree with the United States that, simply because the amounts of the\nWashington State B&O tax rate reduction were considered too small to cause adverse effects on\ntheir own in 2004-2006, far greater amounts of th is subsidy in the 2013-2015 period are similarly\nincapable of causing adverse effects after the end of the implementation period.\n9.388. The amount of the FSC/ETI subsidies, which were found in the original proceeding to have\ncaused adverse effects, was USD 435 million over a 2004 -2006 reference period. The combined\namounts of the Washington State and City of Everett B&O tax rate reductions over the same three\nyear period was USD 16 million. 3285 Although the FSC/ETI subsidies are no longer relevant to the\nanalysis, the amounts of the Washington State B&O tax rate reduction have increased significantly\nfrom the amounts that were found to exist in the 2004 -2006 reference period in the original\nproceeding.3286 We estimate the total amount of the Washington State B&O tax rate reduc tion to\nbe approximately USD 325 million over the equivalent three year period 2013 - 2015.3287\n9.389. In its first written submission in this proceeding, the United States estimates the average\nannual amounts of the tied tax subsidies between 2007 and 2012, divided by the number of\nrelevant Boeing aircraft (787, 737 MAX, and 737NG) implicated in the sales campaigns between\n2007 and 2012 that the European Union alleges are evidence of significant lost sales. 3288 This\nresults in a per-aircraft rate of subsidisation of USD [***] for each 737 MAX and 737NG involved\nin the allegedly price-sensitive LCA sales campaigns submitted by the European Union as evidence\nof significant lost sales of the A320neo and A320ceo .3289 The United States compares these per -\naircraft subsidization rates to average list prices of the 737 MAX and 737NG, as well as average\nactual prices of the Boeing LCA in sales campaigns subject to the Panel's request for information\npursuant to Article 13 of the DSU.3290 These comparisons are presented in Table 13 below. Owing\nto the fact that the a verage actual prices are HSBI, the Panel has calculated estimated average\nactual prices, based on an assumed average discount off list prices, in order to provide a sense of\nthose average actual prices.\n\nUSD 2.2 million respectively, over the same period. (See Panel Report, US – Large Civil Aircraft (2nd\ncomplaint), para. 7.1811).\n3285 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1811.\n3286 Section 8.2.7.2.2 above.\n3287 See para. 8.670 above.\n3288 The subsidy amounts used by the United States in this calculation are based on its own estimates,\nwhich as explained in Section 8.2.7.2.2.1, are somewhat [***] the Panel's estimates (although not\nsignificantly so).The number of aircraft alleged to be lost sales of the A350XWB, A320neo and A320ceo\nbetween 2007 and 2012 is 1,830. The United States says that its allocation of the annual tax savings from the\nB&O tax rate reductions over 305 aircraft per year is conservative because it is based on the assumption that\nBoeing would only use the tied tax subsidies to lower LCA prices in the sales campaigns that the\nEuropean Union alleges to be lost sales in this proceeding, rather than all sales campaigns that Boeing won\nover this period. (United States' first written submission, paras. 821 and 822).\n3289 Compilation of Number of Boeing Aircraft Sold in Alleged Lost Sales Campaigns and Related\nCalculations, (Exhibit USA-295) (HSBI). The United States' methodology determines the average annual\namount of the Washington State (and where applicable, City of Everett) B&O tax rate reductions between 2007\nand 2012. It then determines the number of sales of the 787 and 737 (both MAX and NG) between 2007 and\n2012, and determines the average number of sales of each plane per year in the sales campaigns challenged\nby the European Union. It divides the annual amount of the Washington State B&O tax rate reduction by the\nnumber of sales of the 787, 737 MAX, and 737NG, and the annual amount City of Everett B&O tax rate\nreduction by the number of sales of the 787. This is to take into account that the Washington State B&O tax\nrate reduction applies to both the 787 and the 737 families of LCA.\n3290 United States' response to Panel question No. 164, paras. 69-77. For the sales campaigns subject to\nthe Panel's request for information pursuant to Article 13 of the DSU, see annex 1 to the Panel's request to the\nUnited States for information pursuant to Article 13 of the DSU, dated 18 December 2012.\n\nTable 13: Comparisons of per-aircraft rates of subsidization with per aircraft prices\nLCA model\nPer-aircraft rate of\nsubsidisation3291\nUSD\nAverage 2012 list\nprice3292\nUSD\nAverage actual\n2012 price3293\nUSD\nEstimated\naverage actual\nprice3294\nUSD\n787\n\n[***] 225 million [[HSBI]] 126 million\n737 MAX\n\n[***] 96.6 million [[HSBI]] 54.1 million\n737NG3295\n\n[***] 86.2 million [[HSBI]] 48.3 million\n\n9.390. The United States concludes that the per -aircraft rates of subsidization are dwarfed by the\nactual prices of the aircraft in question, demonstrating that the tie d tax subsidies could not\npossibly have caused the adverse effects alleged by the European Union.3296\n9.391. In the original proceeding, the Appellate Body discu ssed how the magnitudes of the tied\ntax subsidies should be taken into account in assessing their impact on Boeing's prices:\nDepending on the circumstances of each case, an assessment of whether subsidy\namounts are significant should not necessarily be limited to a mere inquiry into what\nthose amounts are, either in absolute or per-unit terms. Rather, such an analysis may\nbe situated within a larger inquiry that could, for instance, entail viewing these\namounts against considerations such as the size of the market as a whole, the size of\nthe subsidy recipient, the per -unit price of the subsidised product, the price elasticity\nof demand, and, depending on the market structure, the extent to which a subsidy\nrecipient is able to set its own prices in the market, and the extent to which rivals are\nable or prompted to react to each other's pricing within that market structure.3297\n9.392. We therefore briefly set forth the evidence before the Panel pertaining to the factors\nidentified by the Appellate Body as being potentially relevant to an assessment of the magnitudes\nof subsidies and their impact on Boeing's prices. Narrow -body, single-aisle LCA represented in the\nvicinity of USD 61.9 billion, 63.4 billion and 18 billion in sales, based on the Panel's approximation\nof order values, in the 2013 -2015 period.3298 Boeing's Commercial Airplanes segment 3299 reported\n\n3291 United States' first written submission, paras. 820-824.\n3292 United States' response to Panel question No. 164 (citing European Union's first written submission,\nparas. 894, 898, and 923). The United States calculates the average list price of the 737 MAX, 737NG, and 787\nby averaging the 2012 list price across each family's size variations.\n3293 United States' response to Panel question No. 164, paras. 69-76. These are the average actual\nprices paid in sales campaigns subject to the Panel's Article 13 request (see annex 1 to the Panel's request to\nthe United States for Information pursuant to Article 13 of the DSU, dated 18 December 2012).\n3294 This calculation was made using an estimated discount of 44% off the average 2012 list-price of the\nrelevant LCA. The 44% discount is the average discount from 2012 list prices of Boeing LCA estimated in the\nInternational Trade Resources Report submitted by the European Union in connection with its calculation of the\nannual amounts of the Washington State B&O tax rate reduction. (See ITR Report, (Exhibit EU-25), para. 11).\n3295 The United States appears to have made an error in calculating the 2012 average list price of the\n737NG. It states that the average list price of the 737NG is USD 96.6 million, which is the same as the average\nlist price for the 737 MAX. The correct 2012 average list price for the 737NG, based on the figures that the\nUnited States cites from the European Union's first written submission, is USD 86.2 million. (See United States'\nresponse to Panel question No. 164 (citing European Union's first written submission, para. 894)).\n3296 United States' first written submission, paras. 819-824; response to Panel question No. 164,\nparas. 69-79; and comments on the European Union's response to Panel question No. 164, paras. 146-155.\n3297 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 1193. (emphasis original)\n3298 These approximate order values were obtained by multiplying estimates of actual prices for the 737\nMAX and 737NG by the number of orders of each LCA model between 2013 and 2015, reported in the Ascend\ndata base submitted by the European Union. (See Ascend data base, Orders, data request as of\n29 September 2015, (Exhibit EU-1658)). The estimated actual prices of USD 54.1 million and USD 48.3 million\nfor the 737 MAX and 737NG, respectively, were obtained by applying a 44% discount rate to their 2012\naverage list prices. The estimated discount rate of 44% is from the International Trade Resources Report\nsubmitted by the European Union. (See ITR Report, (Exhibit EU-25)).\n3299 Boeing's activities are organized into five principal segments, of which \"Commercial Airplanes\" is\none. The other segments are the three Defense, Space & Security segments (Boeing Military Aircraft, Network\n& Space Systems and Global Services & Support), and Boeing Capital. Boeing's Commercial Airplanes segment\noccupies floor space for manufacturing, warehousing, engineering, and other productive uses in Greater Seattle\n(the State of Washington), Greater Charleston (South Carolina), Portland (Oregon), Greater Los Angeles\n\nrevenues of approxim ately USD 49 billion, 53 billion and 60 billion in 2012, 2013, and 2014,\nrespectively.3300 Its reported R&D expenses over the same period were approximately\nUSD 2 billion, 1.8 billion and 1.8 billion, respectively. 3301 As already noted in Table 13 above, the\nestimated actual per -unit prices of a 737 MAX and 737NG (based on 2012 average list prices of\nUSD 96.6 million and USD 86.2 million, respectively) were approximately USD 54.1 million and\nUSD 48.3 million.\n9.393. We have calculated the number and estimated value of Boeing 737 MAX and 737NG orders\n(as well as the number and estimated value of 787, 777, and 777X orders) from 2013 -2015, as\nset forth in Table 14 below.\nTable 14: Number and estimated value of orders of Boeing LCA 2013-20153302\n Number and value of\norders in 2013\nNumber and value of\norders in 2014\nNumber and value of\norders to\nSeptember 20153303\n\n777 55 orders 63 orders 34 orders\nUSD 8.7 billion USD 10 billion USD 5.4 billion\n\n777X 66 orders 220 orders 20 orders\nUSD 13.7 billion USD 45.5 billion USD 4.1 billion\n\n787 183 orders 50 orders 52 orders\nUSD 23.1 billion USD 6.3 billion USD 6.6 billion\n\n737 MAX 699 orders 900 orders 206 orders\nUSD 37.8 billion USD 48.7 billion\n USD 11.1 billion\n\n737NG 498 orders 305 orders 143 orders\nUSD 24.1 billion USD 14.7 billion USD 6.9 billion\n\nTotal value\nof orders USD 107.4 billion USD 125.2 billion\n\nUSD 34.1 billion\n\n9.394. We recall that the estimated total amount of the Washington State B&O t ax rate reduction\nis approximately USD 325 million over the equivalent three year period 2013 - 2015.3304 It appears\nthat the ratios of subsidy to order value are not unlike those before the panel in the original\nproceeding.3305 Of the figures in the original pr oceeding, the Appellate Body stated that, while it\nwas possible to observe \"at a high level of generalization\" that the annual value of Boeing's sales is\n\"many orders of magnitude greater than the annual value of the subsidies\", this alone is not\n\n(California), Greater Salt Lake City (Utah), Australia, and Canada. (Subsidies to Boeing's LCA Division\n(2013-2014 Update), (Exhibit EU-1451), annex A: Boeing's Annual Report on Form 10-K for the fiscal year\nended 31 December 2014, p. 16).\n3300 Subsidies to Boeing's LCA Division (2013-2014 Update), (Exhibit EU-1451), annex A: Boeing's\nAnnual Report on Form 10-K for the fiscal year ended 31 December 2014, item 6, Selected Financial Data.\n3301 Subsidies to Boeing's LCA Division (2013-2014 Update), (Exhibit EU-1451), annex A: Boeing's\nAnnual Report on Form 10-K for the fiscal year ended 31 December 2014, p. 23.\n3302 As explained in fn 3298 above, the estimated value of the orders each year is calculated by\nmultiplying the number of orders of each LCA model by an estimate of the actual price of that LCA model (as\nopposed to list prices). The estimate of the actual price of each LCA model is obtained by applying a 44%\ndiscount rate to the average 2012 list price of each model. The estimated discount rate of 44% is obtained\nfrom the International Trade Resources Report submitted by the European Union. (See ITR Report, (Exhibit\nEU-25)). The number of orders of each LCA model per year is based on the Ascend data base submitted by the\nEuropean Union. (See Ascend data base, Orders, data request as of 29 September 2015, (Exhibit EU-1658)).\n3303 Includes orders until September 2015. (See Ascend data base, Orders, data request as of\n29 September 2015, (Exhibit EU-1658)).\n3304 See para. 8.670 above.\n3305 See Panel Report, US – Large Civil Aircraft (2nd complaint), paras. 7.1814 and 7.1815.\n\nindicative of the significance of the subsidy amounts. 3306 According to the Appellate Body, this is\nbecause \"even relatively small subsidies may have significant effects, depending on the nature of\nthe subsidies, and the circumstances in which those subsidies are rece ived, including the relevant\nmarket structure and conditions of competition in that market.\"3307\n9.395. The Panel sought to determine whether a price reduction enabled by a relatively small\nsubsidy could nevertheless have determined the outcome of a price -sensitive sales campaign.\nAccordingly, in its third set of questions to the parties, the Panel asked both parties to provide\nsome indication of the magnitude of difference in Airbus and Boeing LCA pricing that had\ndetermined the outcomes of any of the highly compet itive LCA sa les campaigns that the\nEuropean Union had identified as evidence of Airbus lost sales in this proceeding.\n9.396. In response, t he United States points to two types of evidence on the record that it\nconsiders useful in making this determination. The f irst involves the magnitudes of price\nmovements in the sales campaigns, based on information such as price lists and the initial and\nfinal offer data in the sales campaign evidence. 3308 For sales campaigns involving single -aisle\naircraft, the United States refers to HSBI evidence for select single-aisle campaigns where Boeing's\nfinal offer involved increases in direct price discounts in the range of USD [[HSBI]].3309 According\nto the United States, the scale of such direct price discounts arising through the cour se of\nnegotiations in a campaign show s that the amounts of Washington State B&O tax rate reduction\nare too small to plausibly be a genuine and substantial cause of significant lost sales. The second\ntype of evidence involves the European Union's calculatio ns of the differences between Boeing's\nnet aircraft prices and its appraised values, which the European Union had submitted as an\nobjective indicator of low pricing by Boeing given the difficulty of assessing net aircraft prices in a\nnon-transparent market context.3310 The United States argues that, although the European Union's\ncalculations are flawed, the magnitude of the differences, which for single -aisle aircraft average in\nthe vicinity of USD [[HSBI]], also reveals the relative insignificance of the Washington State B&O\ntax rate reduction amounts.3311\n9.397. The European Union considers that airframe list prices and discounts from list prices are\nirrelevant as indicators of whether the subsidy magnitudes could have affected the outcomes of\nthe sales campaigns because published list prices are well known to be wholly unreliable guides to\nthe prices that customers actually pay. 3312 The levels of additional price discounts between initial\nand final offers are no more illuminating, because LCA manufacturers understand that a sales\ncampaign will involve several rounds of bidding, requiring improved offers, and they therefore\nfactor the expectation of this strategic interaction into their initial offers. 3313 The European Union\nsimilarly considers that differences between Boeing' s net prices and its appraised values say\nnothing about the relative value between Boeing and Airbus offers, which is the relevant metric\nthat drives customers' purchasing decisions.3314\n9.398. The European Union also argues that differences in actual pricing of LC A are not\nmeaningful in and of themselves because the \"net prices\" of Airbus and Boeing LCA offers obscure\nprice differences that arise from differences between the competing but nevertheless\n\"non-identical\" aircraft in terms of their size and range, per -trip and per-seat operating costs and\ntiming of their availability, all of which must be assessed against the specific requirements of a\ncustomer and that customer's cost of capital, among other factors. 3315 To overcome this lack of\n\n3306 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 1254.\n3307 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 1254. The Panel also\nacknowledges Canada's argument that the fact that the effects of subsidies will likely vary depending on their\nrelative magnitude as compared to prices, production costs, overall size of the market or sales of a company in\nthe market holds true, in particular, in the case of a small subsidy. According to Canada, while a small subsidy\nmay have an effect on prices (depending on its nature, the circumstances of its provision, market structure and\nconditions of competition), a panel must provide a reasoned and adequate explanation if it so concludes.\n(Canada's third-party submission, paras. 50-53).\n3308 United States' response to Panel question No. 164, para. 68.\n3309 United States' response to Panel question No. 164, paras. 75 and 76.\n3310 See European Union's comments on the United States' response to Panel question No. 164,\npara. 144.\n3311 United States' response to Panel question No. 164, paras. 78 and 79.\n3312 European Union's comments on the United States' response to Panel question No. 164, para. 143.\n3313 European Union's comments on the United States' response to Panel question No. 164, para. 143.\n3314 European Union's comments on the United States' response to Panel question No. 164, para. 144.\n3315 European Union's response to Panel question No. 164, para. 108.\n\ncomparability of prices offered by Airbus and Boeing for their competing LCA, customers account\nfor non-price factors through NPV assessments for the respective offers. 3316 The European Union\nargues that the differences in NPVs between the respective offers of Airbus and Boeing in\nparticular sales campaigns are a \"reliable surrogate\" for the information concerning the differences\nin sales campaign pricing requested by the Panel.3317\n9.399. The European Union does not, however, provide an indication of the differences in\ncustomers' NPV assessment s of the respective Airbus and Boeing offers for any individual sales\ncampaigns before the Panel. Rather, it submits a statement by Kiran Rao, Airbus' Executive Vice\nPresident Strategy and Marketing. 3318 Mr Rao states that [[HSBI]]. The European Union then\npresents a calculation of its allegations of the total amounts of all measures alleged to be specific\nsubsidies in this proceeding from 2007 through 2014 (including its estimates of the amounts of the\n\"financial contributions\" provided through the post -2006 NASA aeronautics R&D measures based\non the \" top-down\" methodology discussed in Section 8.2.2.6) compared to Boeing's total annual\ndeliveries of aircraft between 2007 and 2014. The European Union's calculations result in\ngeneralized per-aircraft subsidy amounts of USD 1.95 million, 1.93 million, and 1.86 million for\n2012, 2013, and 2014, respectively, which the European Union argues exceeds the NPV difference\ndiscussed by Mr Rao. On the basis of this comparison, the European Unio n asserts that the \"per -\naircraft\" amount of all of the subsidies significantly exceeds the typical difference in value between\nthe respective Airbus and Boeing offers in \"closely fought and very competitive sales\ncampaigns\".3319\n9.400. We agree with the European Uni on that an analysis of the degree of magnitudes of price\nmovements in sales campaigns, or of the differences between Boeing's net prices and appraised\nvalues, however measured, is of limited assistance in assessing whether a comparatively small\nsubsidy may make a difference to the outcome of a sales campaign. While we are mindful of the\nlimits to which customers' NPV analyses of competing offers can be relied upon, we consider that\nthis information could at least provide some indication of the potential for a comparatively small\nprice reduction to determine the outcome of a sales campaign.\n9.401. However, w e do not accept the European Union's estimates of per -aircraft subsidy\namounts, because they are based on significantly flawed estimates of the amounts of the\nsubsidies. First, the amount estimate on which the European Union bases its per -aircraft subsidy\ncalculations covers not only the annual amounts of the tied tax subsidies benefiting the relevant\nBoeing aircraft, but the alleged annual amounts of all post -2006 measures challenged by the\nEuropean Union, which it aggregates together into one single annual subsidy amount that is then\nallocated over the number of Boeing LCA delivered in that year. Second, the European Union's\ntotal amount estimate includes amount estimates for measures that we f ind are not specific\nsubsidies, and amount estimates for subsidies which we have rejected as not being an appropriate\nmeasure of the amount of the subsidy, or otherwise not being the best evidence.3320\n9.402. If the Panel replicates the United States' methodology for calculating the per -aircraft rates\nof subsidization in 2007-2012 for the 2013-2015 period, based on our estimates of the amounts of\nthe Washington State B&O tax rate reduction in 2013-2015 and the aircraft involved in th e price-\nsensitive sal es campaigns that occurred in the post -implementation period, we arrive at a per -\n\n3316 As explained earlier in para. 9.21 when evaluating competing offers, airline and leasing company\ncustomers quantify the projected economic value of the aircraft to that customer over a defined period of time,\ntaking into account price as well as various non-price factors such as delivery availability, fuel efficiency,\nperformance guarantees or financing assistance to arrive at a \"net present value\" (NPV) represented by each\naircraft manufacturer's offer. (Mourey Statement, (Exhibit EU-34) (BCI), paras. 44-61).\n3317 European Union's response to Panel question No. 164, para. 108. The United States responds that\nthe European Union overstates the importance of NPV differences by treating them as determinative in sales\ncampaigns. According to the United States, NPV analysis is an important tool, but it is understood by\ncustomers to be sensitive to inputs and assumptions that are uncertain or subjective. For this reason, small\ndifferences in NPV between two offers would likely be viewed as immaterial by customers, and other factors\nwould determine the outcome of the sale. (United States' comments on European Union's response to Panel\nquestion No. 164, para. 118). The United States provides a more detailed explanation of the specific limitations\nof NPV analyses in paras. 119-129 and in the Statement of J. Wojick, Senior Vice President, Global Sales &\nMarketing, Boeing Commercial Airplanes, (Exhibit USA-600) (HSBI).\n3318 Statement of K. Rao, 6 October 2015, (Exhibit EU-1668) (HSBI). Mr Rao has responsibility for\npricing and the competitive positioning of Airbus products.\n3319 European Union's response to Panel question No. 164, paras. 114 and 115.\n3320 See Section 8.3 above.\n\naircraft rate of subsidization of approximately USD 1.99 million per 737 MAX and 737NG. 3321 This\namount does exceed the NPV difference that the evidence before us suggests can be determinative\nof the outcomes of sales campaigns involving single -aisle aircraft, as well as what we are\nreasonably able to infer regarding the differences in final net prices for the price-sensitive sales\ncampaigns in the post -implementation period , based on our analysis of the sales campaign\nevidence.\n9.403. While the sales campaign evidence does not provide direct evidence of the net prices of\nthe final Boeing and Airbus offers, the parties do allege approximate differences in net prices\nbetween the competing Airbus and Boeing offers for some of the sales campaigns .3322 There is\nHSBI evidence from the sales campaign that led to the Fly Dubai 2014 order from which it is\npossible to infer that the difference between Boeing and Airbus final net p rices was in the vicinity\nof [[HSBI]].3323 There is also evidence from the Air Canada 2013 campaign regarding the\nmagnitudes of the incremental proposals made by Airbus in the concluding stages of the campaign\nthat suggests that Airbus thought it was close en ough to Boeing on price that relatively small\nimprovements on price could affect the outcome of the campaign. 3324 The evidence from the sales\ncampaigns in respect of the Icelandair 201 3 order could suggest a somewhat larger price\ndifferential than appears fro m the evidence in the Fly Dubai and Air Canada campaigns, however,\nthis is somewhat contradicted by other evidence that Airbus' final offer for both the A320neo and\nA320ceo was [[HSBI]], which suggests that at the final stage, Airbus had closed the gap. 3325 We\nalso recall the evidence submitted by the European Union, which the United States does not\nappear to contradict, that in certain price -sensitive sales campaigns involving single-aisle LCA, the\nNPV differences can be as small as [[HSBI]].3326 The HSBI evidence from the Fly Dubai 2008 and\nDelta 2011 campaigns suggests that the difference in net prices in those campaigns were\napproximately [[HSBI]]3327 and [[HSBI]]3328 which indicates that the magnitudes of the\nWashington State B&O tax rate reduction were capable of enabling at least a portion of Boeing's\npricing advantage, contributing in substantial part to its winning those campaigns.\n9.404. We are therefore satisfied that the Washington State B&O tax rate reduction , through the\neffects on Boeing's pricing, contributed i n a genuine and substantial way to determining the\noutcome of price -sensitive sales campaigns involving the 737 MAX and 737NG and the A320neo\nand A320ceo in the Fly Dubai 2014, Air Canada 2013 and Icelandair 2013 campaigns.3329\nAccordingly, we consider that the effects of the Washington State B&O tax rate reduction were lost\nsales of the A320neo and A320ceo in the Fly Dubai, Air Canada, and Icelandair sales campaigns in\nthe 2013-2015 period.3330\n\n3321 Applying the United States' methodology, the Panel divides the total amount of the Washington\nState B&O tax rate reduction for 2013-2015, based on the Panel's estimate (USD 325 million) for an average of\nUSD 108.3 million per year, by an average of 54.3 single-aisle aircraft orders per year for 2013-2015\n(calculated from the total of 11 737NGs and 152 737 MAX ordered from the Fly Dubai 2014, Air Canada 2013\nand Icelandair 2013 campaigns, divided by three), to arrive at approximately USD 1.99 million\n(USD 1.994 million) per single-aisle aircraft ordered in price-sensitive LCA sales campaigns between 2013 and\n2015.\n3322 However, neither party provides direct evidence concerning the magnitudes of difference in Boeing\nand Airbus pricing that had determined the outcomes of any of the sales campaigns at issue.\n3323 HSBI Appendix (Appendix 2), fn 588. Three of the five LCA sales campaigns that we find to be\nprice-sensitive occurred in the post-implementation period: Fly Dubai 2013, Air Canada 2013 and\nIcelandair 2012. Although the Icelandair sales campaign took place from May 2012, the order did not occur\nuntil February 2013. (European Union's first written submission, para. 1788).\n3324 HSBI Appendix (Appendix 2), para. 264.\n3325 HSBI Appendix (Appendix 2), paras. 249 and 250.\n3326 Statement of K. Rao, 6 October 2015, (Exhibit EU-1668) (HSBI), para. 2.\n3327 HSBI Appendix (Appendix 2), para. 164.\n3328 HSBI Appendix (Appendix 2), para. 170.\n3329 Although not necessary for our findings concerning the existence of significant lost sales in the\npost-implementation period, we also consider that the Washington State B&O tax rate reduction was a genuine\nand substantial cause of lost sales of the A320ceo in the Fly Dubai 2008 and Delta Airlines 2011 sales\ncampaigns.\n3330 The European Union further argues that U.S. subsidies benefiting the 737 MAX and 737NG cause a\npresent threat of significant lost sales, within the meaning of Article 6.3(c) and footnote 13 of the SCM\nAgreement. (European Union's first written submission, paras. 1649, 1658, 1676, 1691, 1705, 1721, 1746,\n1759, and 1795; second written submission, paras. 1790-1797 and 1910-1915; and response to Panel\nquestion No. 169, paras. 447-452). In support of this argument, the European Union relies on evidence of the\nexistence of options and purchase rights negotiated in connection with the relevant orders (including evidence\n\n9.405. Finally, we address whether these lost sales can be considered \"sign ificant\". The Appellate\nBody has stated that something that is \"significant\" can be characterized as \"important, notable or\nconsequential\".3331 The Appellate Body has also expressed the view that an assessment of whether\na lost sale is significant can have bo th quantitative and qualitative dimensions. 3332 In the original\nproceeding, the Appellate Body referred to the size of the orders that Boeing had won, the\nprice-competitive nature of the sales campaigns and their strategic importance in concluding that\nthe lost sales represented by the SALE and JAL campaigns were significant lost sales within the\nmeaning of Article 6.3(c) of the SCM Agreement.3333\n9.406. The Fly Dubai, Air Canada and Icelandair sales campaigns involve orders for approximately\n152 737 MAX and 11 737NG a ircraft. These orders are comparable in size to the SALE and JAL\norders for the 737NG, which the Appellate Body considered to be significant lost sales in the\noriginal proceeding. Moreover, there is evidence that each of these campaigns was strategically\nimportant to Boeing and Airbus, for various reasons. 3334 We are satisfied that these lost sales are\nsignificant lost sales, within the meaning of Article 6.3(c) of the SCM Agreement.3335\n9.407. We find that the Washington State B&O tax rate reduction is a genuine and\nsubstantial cause of serious prejudice in the form of significant lost sales of A320neo\nand A320ceo families of LCA in the post -implementation period, in respect of the sales\ncampaigns Fly Dubai 2014, Air Canada 2013, and Icelandair 2013.\n9.4.3.1.3 Whether the Washin gton State B&O tax rate reduction is a genuine and\nsubstantial cause of impedance or a threat thereof , and displacement or a threat\nthereof, in respect of the A320neo and A320ceo in the post-implementation period\n9.408. In this Section of the Report, we determine whether the Washington State B&O tax rate\nreduction is a genuine and substantial cause of impedance (or a threat thereof) and displacement\n(or a threat thereof) of A320neo and A320ceo imports to the United States, within the meaning of\nArticle 6.3(a) of t he SCM Agreement, and of A320neo and A320ceo exports to various third\ncountry markets, within the meaning of Article 6.3(b) of the SCM Agreement.\n\nof purchase commitments submitted by the United States in response to the Panel's request for information\npursuant to Article 13 of the DSU, showing purchase commitments accompanying firm orders of Boeing LCA.\n(Boeing Aircraft Commitments, (Exhibit US-13-331) (HSBI)). The European Union makes this threat of\nsignificant lost sales argument in relation to the following sales campaigns that we find to evidence significant\nlost sales: Icelandair 2013 (European Union's first written submission, para. 1795, second written submission,\npara. 1777), Air Canada 2013 (European Union's response to Panel question No. 169, para. 348), and Fly\nDubai 2014 (European Union's response to Panel question No. 169, para. 374). We do not consider that the\nmere fact that an LCA customer was additionally granted options or purchase rights is sufficient to demonstrate\nthat lost sales in relation to these options and purchase rights are clearly foreseen and imminent, and thus give\nrise to a threat of significant lost sales. The Panel does not possess sufficient information about the nature of\nthese options and purchase rights, including the conditions under which they may be exercised, to justify\ntreating them as firm orders that are waiting to materialize. Indeed, there is evidence before us to suggest that\nnot all options will be exercised. (See European Union's response to Panel question No. 169, para. 451). We\nare therefore not persuaded that the European Union has demonstrated that further significant lost sales are\nlikely and \"imminent\". (Appellate Body Report, EC and certain member States – Large Civil Aircraft,\npara. 1171). Finally, we acknowledge the European Union's argument that \"follow-on\" orders have occurred,\nwhich it considers to demonstrate: (a) the materialization of the threat of significant lost sales; as well as (b)\nthe existence of a threat of further significant lost sales. (European Union's second written submission,\npara. 1797). However, the European Union's use of the term \"follow-on\" order is not necessarily synonymous\nwith the subsequent exercise of previously acquired options or purchase rights arising out of a previous order.\nRather, the European Union uses this term to encompass more broadly situations where Boeing has an\nincumbency advantage by virtue of a previously won LCA sales campaign. As such, the existence of \"follow-on\"\norders is unconvincing as evidence of a threat of further significant lost sales because such \"follow-on\" orders\nin fact arise out of new LCA sales campaigns.\n3331 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 1272.\n3332 Appellate Body Report, EC and certain member States – Large Civil Aircraft, para. 1218.\n3333 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 1272.\n3334 Airbus' pricing in the Icelandair campaign, discussed at paragraphs 245-251 of the HSBI Appendix,\nitself suggests the importance of this sale to Airbus. The factors that explain the strategic importance of the Air\nCanada and Fly Dubai campaigns are discussed at paragraphs 261 and 268, respectively, of the HSBI Appendix\n(Appendix 2).\n3335 Although not necessary for our findings concerning the existence of significant lost sales in the\npost-implementation period, we also consider that the lost sales of the A320ceo in the Fly Dubai 2008 and\nDelta Airlines 2011 sales campaigns were significant lost sales, within the meaning of Article 6.3(c) of the SCM\nAgreement.\n\n9.409. The European Union argues that \"certain developments in Airbus' market shares and\ndelivery volumes in various product markets\" constitute a threat of impedance, within the meaning\nof Articles 6.3(a) and 6.3(b) (with respect to the A320neo), and displacement or impedance, or a\nthreat thereof, within the meaning of Article 6.3(a) and 6.3(b) (with respect to the A320 ceo), in\neach case, caused in a genuine and substantial manner by the non-withdrawn U.S. subsidies.3336\n9.410. In respect of its claims of threat of impedance of imports of the A320neo to the\nUnited States and of exports to various third country markets, the European Union argues that the\nU.S. subsidies enable Boeing's product development and pricing decisions that result in deliveries\nof the 737 MAX family LCA at the expense of deliveries of Airbus' A320neo family LCA. In this\nrespect, the European Union refers to its arguments and evidence concerning the alleged\ntechnology effects of the aeronautics R&D subsidies, which the European Union argues have\nenabled the advanced technology, early launch and early delivery availability of the 737 MAX, and\nwhich allegedly gi ve that aircraft family a competitive advantage in the context of the global\nmarket for new technology, single -aisle aircraft.3337 It also refers to its arguments and evidence\nconcerning the effects of the post-2006 subsidies on Boeing's LCA pricing, which it argues result in\nan increase in Boeing's market share at Airbus' expense. 3338 The European Union asserts that\n\"consequently\", Boeing's future delivery advantage in these markets, based on present orders, is\nthe result of U.S. subsidies.3339\n9.411. Additionally, for c ertain geographic markets of substantial size, such as the Brazilian\nmarket, the European Union asserts that \"rough parity in the distribution of market shares\nbetween duopolists\" would be expected. It alleges that Boeing's significantly greater than 50%\nmarket share of present and future deliveries of narrow -body, single-aisle LCA in these markets,\nfor several years, along with other evidence of causation, supports the argument that the\ndeviation is the result of the U.S. subsidies.3340 Finally, the European Union refers to its allegations\nof significant lost sales of A320neo family LCA due to U.S. subsidies benefiting the 737 MAX. It\nargues that, as a result of those lost sales, deliveries of A320neo family LCA will be impeded in the\nrelevant country markets.3341\n9.412. In respect of its claims of displacement or impedance, or threats thereof, of imports of the\nA320ceo to the United States and of exports to various third country markets, the European Union\nrefers to its arguments and evidence concerning the effects of the post-2006 subsidies on Boeing's\nLCA pricing, which it argues result in an increase in Boeing's market share at Airbus' expense. 3342\nThe European Union also refers to certain \"large volume country markets\" in which Boeing has,\nand will continue to have , a m ajority of present and/or future deliveries of 737NGs over the\nA320ceo (United States, Canada and Indonesia). The European Union asserts that \"rough parity in\nthe distribution of market shares between duopolists\" would be expected 3343 and that Boeing's\ndelivery advantage in these markets results from Boeing's \"aggressive pricing\" which is enabled by\nthe U.S. subsidies. 3344 Additionally, the European Union refers to its allegations of significant lost\nsales of A320ceo family LCA due to U.S. subsidies benefiting the 737NG. It argues that, as a result\nof those lost sales, deliveries of A320ceo family LCA are displaced or impeded, and/or there is a\nthreat that A320ceo deliveries will be displaced or impeded in the relevant country markets.3345\n9.413. The United States responds that, based on the Appellate Body's guidance in the original\nproceeding, claims of impedance should be supported by evidence of changes in the relative\nmarket shares, over a sufficiently representative period, to demonstrate clear trends. 3346 The\nUnited States argues that the market share data provided by the European Union in support of its\n\n3336 European Union's first written submission, paras. 1823 and 1893; second written submission,\nparas. 1837 and 1946.\n3337 European Union's first written submission, para. 1826.\n3338 European Union's first written submission, para. 1826.\n3339 European Union's first written submission, para. 1827.\n3340 European Union's first written submission, para. 1831; second written submission, para. 1840;\nresponse to Panel question No. 169, para. 537.\n3341 European Union's first written submission, para. 1828.\n3342 European Union's first written submission, para. 1898.\n3343 European Union's first written submission, paras. 1903, 1913, and 1917.\n3344 European Union's first written submission, para. 1900; second written submission, para. 1950; and\nresponse to Panel question No. 169, para. 537.\n3345 European Union's first written submission, para. 1902.\n3346 United States' first written submission, para. 1041.\n\nclaims does not establish that, absent the alleged subsidies, Boeing would have been unable to\noffer the 737 MAX as and when it did, or that 737 MAX or 737NG prices would be higher. The\nmagnitudes of any alleged subsidies that could conceivably be found to affect Boeing's pricing are\nfar too small to cause impedance.3347\n9.414. The United States argues that the European Union's reliance on 50% market share as a\n\"benchmark\" for assess ing impedance, displacement and threat thereof in large volume markets\nsuch as the Brazilian, United States, Indonesian and Canadian geographic markets , where the\nmarket participants are two duopolists , lacks any support in the SCM Agreement. In addition, the\nEuropean Union has not shown that, absent the subsidies, the market shares would be 50% in any\nmarket, much less all large volume markets.3348\n9.415. The United States also argues that the Appellate Body in the original proceeding\nunambiguously indicated that th e mere recitation of lost sales in a market is insufficient to\nestablish displacement, impedance, or threat s thereof. The United States argues that the alleged\nlost sales on which the European Union bases its claims of displacement, impedance, or threats\nthereof are not genuinely and substantially caused by the alleged subsidies.3349\n9.416. We begin our evaluation of the European Union's claims of impedance, displacement and\nthreats thereof by first explaining our understanding of the phenomena of impedance and\ndisplacement, and the evidence that is relevant or necessary to support the existence of each\nphenomenon, based on the explanations of the Appellate Body in EC and certain member States –\nLarge Civil Aircraft.\n9.417. \"Displacement\", within the meaning of Article s 6.3(a) and 6.3(b) of the SCM Agreement ,\nrefers to an economic mechanism in which imports or exports of a like product are replaced by the\nsales of the subsidized product. 3350 Specifically, displacement connotes a \"substitution effect\nbetween the subsidized produ ct and the like product of the complaining Member\" and in the\ncontext of Article 6.3(b), displacement arises where exports of the like product of the complaining\nMember are substituted in a third country market by exports of the subsidized product.3351\n9.418. The e xistence of displacement depends upon there being a competitive relationship\nbetween the two sets of products in the market. An analysis of displacement should assess\nwhether the phenomenon is discernible by examining trends in data relating to export volu mes\nand market shares over an appropriately representative period. 3352 The Appellate Body's analysis\nin EC and certain member States – Large Civil Aircraft suggests that the following characteristics\nwill normally be necessary before a panel can reach a findi ng of displacement under\nArticle 6.3(b): First, at least a portion of the market share of the exports of the like product of the\ncomplaining Member must have been taken over or substituted by the subsidized product; and\nsecond, it must be possible to disce rn trends in volume and market share. 3353 Article 6.4 of the\nSCM Agreement, which applies to the phenomenon of displacement referred to in Article 6.3(b),\nrequires that a finding of displacement be supported by evidence of changes in the relative market\nshare in favour of the subsidized product, over a sufficiently representative period, to demonstrate\n\"clear trends\" in the development of the market concerned. A panel assessing a claim of\ndisplacement of exports would have to look at whether trends are discern ible, with the\nidentification of a trend being more accurate the larger the data set used in the analysis.3354\n\n3347 United States' second written submission, paras. 1309 and 1380.\n3348 United States' first written submission, paras. 1043 and 1085; second written submission,\nparas. 1313 and 1382.\n3349 United States' first written submission, paras. 1042, 1045,1046,1050, 1052,1054, 1056, 1058,\n1099, and 1108; second written submission, paras. 1310,1315, 1317, 1319, 1321, 1323, 1326, 1329, and\n1382.\n3350 Appellate Body Reports, EC and certain member States – Large Civil Aircraft, para. 1119; and US –\n3351 Appellate Body Reports, EC and certain member States – Large Civil Aircraft, para. 1160; and US –\n3352 Appellate Body Reports, EC and certain member States – Large Civil Aircraft, paras. 1165, 1166,\nand 1170; and US – Large Civil Aircraft (2nd complaint), para. 1071.\n3353 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 1082.\n3354 Appellate Body Reports, EC and certain member States – Large Civil Aircraft, paras. 1166 and 1167;\nand US – Large Civil Aircraft (2nd complaint), para. 1081.\n\n9.419. \"Impedance\" arises both in situations where the exports or imports of the like product of\nthe complaining Member would have expanded had they not be en obstructed or hindered by the\nsubsidized product, as well as where such exports or imports did not materialize at all because\nproduction was held back by the subsidized product. 3355 The concept of impedance may involve a\nbroader range of situations than di splacement, and while there may be some overlap between the\nconcepts of displacement and impedance, they are not interchangeable.3356\n9.420. As with claims of displacement under Article 6.3(b), Article 6.4 of the SCM Agreement\nprovides that a finding of impedance of exports under Article 6.3(b) should be supported by\nevidence of changes in the relative market share in favour of the subsidized product, over a\nsufficiently representative period to demonstrate clear trends in the development of the market\nconcerned. However, since impedance may not be a \"visible\" phenomenon (unlike displacement),\nevidence of trends may not be dispositive, or may hold less probative value , for a finding of\nimpedance.3357\n9.421. The Appellate Body has explained that there are important distinctions between the\nphenomena of displacement, impedance and lost sales, even though the concepts may potentially\noverlap in that these phenomena all relate to a firm's sales. 3358 Importantly for the present claims,\nthe Appellate Body considered that the original pa nel had implicitly accepted the European\nCommunities' argument that every lost sale to Airbus in a particular country necessarily resulted in\nthe displacement or impedance of exports of Airbus aircraft in that third-country LCA market. The\nAppellate Body s tated that it did not agree with the implication of the panel's reasoning that the\nphenomena of displacement and impedance necessarily follow from a finding of significant lost\nsales.3359\n9.422. The European Union seeks to demonstrate the existence of impedance, di splacement and\nthreats thereof , by reference to data showing deliveries of sin gle-aisle LCA due in the\nUnited States and in various third -country markets over periods that extend as far as 2025.\nUnderpinning this data are the European Union's causation arg uments in support of its claims of\nimpedance, displacement and threats thereof: (a) the combined effects of the aeronautics R&D\nsubsidies that operate through a technology causal mechanism with those of the post -2006\nsubsidies that operate through a price causal mechanism, collectively, give the 737 MAX a\ncompetitive and pricing advantage over the A320neo ; and (b) the effects of the post -2006\nsubsidies that operate through a price causal mechanism give the 737NG a pricing advantage over\nthe A320ceo.\n9.423. The Eu ropean Union's approach to demonstrating the existence of impedance,\ndisplacement and threats thereof is therefore based on an implicit aggregation of all of the\nsubsidies at issue in this proceeding into one group, and an argument that the collective effects of\nthese subsidies provides an explanation for Airbus' market shares in the various geographic\nmarkets. As we explain in Section 9.2.3.4, we have aggregated various subsidies into groups\ndepending on our analysis of their n ature and operation. We do not, however, consider it\nappropriate to aggregate all of the subsidies into one single group and to assess their effects on\nAirbus' sales, market shares or prices in an integrated manner. Consistent with the approach to\ncollective assessment of multiple subsidies articulated by the Appellate Body in the original\nproceeding, provided we find that one aggregated group of subsidies is a genuine and substantial\ncause of any of the alleged serious prejudice phenomena in the narrow -body, single-aisle product\nmarket, we would then consider whether to cumulate those effects with the effects of any other\naggregated group of subsidies that we find to be a genuine cause of the same phenomena. The\nEuropean Union's approach to analysing whethe r the U.S. subsidies benefiting the 737 MAX and\nthe 737NG are a genuine and substantial cause of any of the Article 6.3 (a) and (b) market\nphenomena is necessarily at odds with the Panel's conclusions as to the appropriate way to\n\n3355 Appellate Body Reports, EC and certain member States – Large Civil Aircraft, para. 1161; US –\nLarge Civil Aircraft (2nd complaint), paras. 1071 and 1086.\n3356 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 1071.\n3357 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 1086.\n3358 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 1241. According to the\nAppellate Body, the assessment of displacement or impedance has a well-defined geographic focus, whereas\nthe relevant geographic market for assessing lost sales is not similarly confined. The fact that lost sales must\nbe \"significant\" implies that the assessment has both a quantitative and qualitative dimension, whereas the\nassessments of displacement or impedance is primarily quantitative in nature.\n3359 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), paras. 1240 and 1241.\n\ncollectively assess the eff ects of the subsidies at issue in this proceeding, given their nature and\noperation.\n9.424. We recall that, in analysing whether the U.S. subsidies, operating through either a\ntechnology causal mechanism or a price causal mechanism, cause any of the alleged forms of\nserious prejudice with respect to Airbus single -aisle aircraft in the post-implementation period, the\nstructure of the Panel's analysis is necessarily as follows: (a) to analyse whether an aggregated\ngroup of subsidies (aggregated in accordance with ou r explanation in Section 9.2.3) is a genuine\nand substantial cause of any one or more of the Article 6.3 market phenomena; and (b) if so, to\nanalyse whether any other aggregated group of subsidies is a genuine cause of any of t he same\nArticle 6.3 market phenomena, so that the effects of the latter aggregated group can be cumulated\nwith those of the former.\n9.425. In Section 9.4.2, we evaluate the various alleged technology effects on the 737 MAX of the\npre-2007 aeronautics R&D subsidies and of certain post -2006 aeronautics R&D subsidies, and find\nthat the European Union has not demonstrated that these technology effects arise, and thus that\nthe effects of the subsidies in question are any of the alleged Art icle 6.3 market phenomena with\nrespect to the A320neo.3360\n9.426. In Section 9.4.3.1, we evaluate the European Union's arguments that the Washington\nState B&O tax rate reduction b enefiting the 737 MAX and 737NG, through its effects on Bo eing's\npricing of narrow-body, single-aisle LCA, is a genuine and substantial cause of significant lost sales\nof Airbus narrow -body, single -aisle LCA in the post -implementation period. To recall, in\nSection 9.4.3.1.2, we identi fy five LCA sales campaigns involving the 737 MAX/737NG and\nA320neo/A320ceo between 2007 and 2015 which were price -sensitive in the sense that Boeing\nwas under particular pressure to reduce its prices in order to secure the sales and there were no\nnon-price factors that explain Boeing's success in obtaining the sale. We therefore conclude that\nthe Washington State B&O tax rate reduction , in these sales campaigns, contributed in a genuine\nand substantial way to the lowering of Boeing's prices, and moreover, that the effects of this\nsubsidy were three significant lost sales of Airbus narrow -body, single -aisle LCA in the\npost-implementation period.\n9.427. Accordingly, we next analyse here, in this Section 9.4.3.1.3, whether the Washington State\nB&O tax rate reduction is a genuine and substantial cause of the next category of Article 6.3\nmarket phenomena alleged by the European Union ; i.e. impedance and/or displacement (and/or\nthreats of the foregoing) of imports and/or exports of Airbus si ngle-aisle LCA in the\npost-implementation period , within the meaning of Articles 6.3(a) and 6.3(b) of the SCM\nAgreement.3361 To do this, we necessarily begin with our conclusion from Section 9.4.3.1.1 above,\nthat the Washington State B&O tax rate reduction affected Boeing's pricing behaviour in five price -\nsensitive sales campaigns between 2007 and 2015. We also take into account our finding s at the\nconclusion of Section 9.4.3.1.2 above that all five of those LCA sales campaigns were significant\nlost sales which are the effects of the Washington State B&O tax rate reduction.3362\n9.428. The European Union has not advanced an additional causal theory to support the alleged\ncausal link between the Washington State B& O tax rate reduction benefiting the 737 MAX and the\n737NG, and the phenomena of impedance, displacement and threats thereof, beyond that\nadvanced and discussed comprehensively in connection with our evaluation of whether this subsidy\nwas a genuine and subs tantial cause of significant lost sales. 3363 To the extent that the\nEuropean Union relies on lost sales in the single -aisle market (as the effects of the Washington\nState B&O tax rate reduction) to support its claims of impedance and displacement (including\nthreats thereof), it can only validly do so for the geographic markets related to the sales\ncampaigns for which we f ind the Washington State B&O tax rate reduction w as a genuine and\nsubstantial cause of Boeing's lower prices, and of the lost sales to Airbus . For the other geographic\nmarkets, there is no basis for considering whether the effects of the Washington State B&O tax\n\n3360 See Section 9.4.2.3 above.\n3361 Should the Panel find that the remaining aggregated categories of subsidies benefiting the 737 MAX\nand 737NG; i.e. the state and local cash flow subsidies, or the post-2006 aeronautics R&D subsidies that\noperate through a price causal mechanism, through their effects on Boeing's pricing of those aircraft, are a\ngenuine cause of any of the Article 6.3 market phenomena, we will then cumulate the effects of those subsidies\nwith those of the Washington State B&O tax rate reduction.\n3362 Only three occurred in the post-implementation period.\n3363 See Sections 9.4.3.1.1 and 9.4.3.1.2 above.\n\nrate reduction are impedance, displacement or threats thereof because it has not been established\nthat the subsid y in question affecte d Boeing's prices and thus ha s any causal connection to\nBoeing's share of orders or deliveries in those markets.\n9.429. The European Union does additionally argue that, for large volume markets such as Brazil,\nUnited States, Canada, and Indonesia, it can be assum ed that, in the absence of one duopolist's\nproduct being subsidi zed, market share should be roughly 50% each. 3364 Accordingly, Boeing's\nsignificantly greater than 50% market share of present and future deliveries of narrow -body,\nsingle-aisle LCA in these mark ets, for several years, along with other evidence of causation,\nsupports the argument that the deviation from rough parity is the result of the U.S. subsidies. 3365\nWe are not persuaded by the European Union's counterfactual argument that, in the absence of\nthe Washington State B&O tax rate reduction, Airbus' market share in these markets would have\nbeen close to 50%.\n9.430. We see no reason to as sume that, due to the nature of the global LCA product markets as\nduopolies, LCA deliveries to certain geographic markets should be more or less evenly split\nbetween Airbus and Boeing. It is not uncommon for multiple airlines from a particular region to\nmaintain a long -term preference for either Airbus or Boeing, due their pre -existing relationships\nwith the manufacturer and the costs associated with switching LCA manufacturers. There is no\nbasis to conclude that the dynamics of the LCA market s are such that for each large volume\ncountry market, Airbus and Boeing should generally each maintain a 50% share of deliveries.\n9.431. Although the European Union argues that data showing trends in Airbus' and Boeing's\nrelative shares of actual and projected LCA deliveries for the various geographic markets supports\nits claims of impedance and displacement and threats thereof, without a causal theory that\nexplains how the subsid y in question affected Boeing's pricing behaviour, leading to the\nconsequent impact on Airbus' sales, the Panel is unable to attribute the alleged impedance or\ndisplacement of Airbus' imports and exports to the effects o f the Washington State B&O tax rate\nreduction.\n9.432. We will therefore examine whether the European Union's evidence demonstrates that the\neffect of the Washington State B&O tax rate reduction was displacement , impedance or threat s\nthereof for the four geograph ic markets for which we f ind Boeing and Airbus were involved in\nprice-sensitive, single-aisle LCA sales campaigns, and therefore, for which a causal connection is\nestablished between the Washington State B&O tax rate reduction and Boeing's LCA prices. 3366 For\nthose geographic markets, we will compare the combined market shares of the A320neo and the\nA320ceo to the combined market share s of the 737 MAX and the 737NG.3367 Specifically, we will\nbase our analysis of relative market shares on actual and projected Airbus and Boeing deliveries of\nsingle-aisle LCA over the period from 2007 to 2025.3368\n\n3364 European Union's first written submission, para. 1582.\n3365 European Union's first written submission, para. 1831; second written submission, para. 1840; and\nresponse to Panel question No. 169, para. 537.\n3366 United States (Delta Airlines 2011); United Arab Emirates (Fly Dubai 2008 and 2014); Canada (Air\nCanada 2013) and Iceland (Icelandair 2013). For these geographic markets, there is accordingly a causal\nphenomenon in which Boeing's receipt of the Washington State B&O tax rate reduction gave rise to lower than\notherwise 737 MAX and 737NG prices, and lost sales of competing Airbus single-aisle aircraft.\n3367 For reasons we explain in paras. 9.35 through 9.39 we disagree with the European Union's proposed\nproduct market delineation and instead treat the existing technology A320ceo and 737NG and the new\ntechnology A320neo and 737 MAX as competing in the same product market for narrow-body, single-aisle\naircraft. Our comparison of the relative market share data is based on the European Union's evidence as\nsubmitted in the Ascend data base, Deliveries made, data request as of 22 September 2015, (Exhibit\nEU-1660); and the Ascend data base, Deliveries due, data request as of 22 September 2015, (Exhibit\nEU-1659).\n3368 As the original panel explained, displacement, impedance, and threat thereof of the complaining\nparty's imports or exports necessarily involves the existence of goods crossing borders. For the LCA market, in\nwhich there is often a significant time-lag between order and delivery, this means any demonstration of market\nshare trends for the purposes of a displacement, impedance or threat thereof claim should be based on\ndelivery data, rather than order data. (See Panel Report, US – Large Civil Aircraft (2nd complaint),\nparas. 7.1683-7.1686). With respect to the time-period over which we evaluate the existence of market share\ntrends, 2007 to 2025 is the time-period over which the European Union presents its market share data. We\nnote that this period extends both prior to and beyond the reference period of 2013-2015 that we use\nelsewhere in our findings. We take this longer period in order to ensure, in accordance with the Appellate\n\n9.433. We are aware that the Appellate Body has cautioned against panels mechanistically\nassuming that a finding of significant lost sales will of itself suffice to additionally est ablish the\nexistence of impedance. We will examine the market share data submitted by the European Union\nin support of its claims of impedance and threat of impedance for these four geographic markets in\norder to determine whether, in light of the Panel's conclusions that in these markets the\nWashington State B&O tax rate reduction affected Boeing's prices in a manner that gave rise to\nsignificant lost sales, it is possible to identify \"clear trends\".\n9.434. We begin with the data for the United States market, whi ch covers claims of threat of\nimpedance of imports of the A320neo and impedance and threat thereof of imports of the A320ceo\npursuant to Article 6.3(a) of the SCM Agreement.\nTable 15: U.S. single-aisle sales volume and market share data\nYear 737NG 737 MAX A320ceo A320neo Boeing market\nshare\nAirbus market\nshare\n2007 77 -- 35 -- 69% 31%\n2008 91 -- 34 -- 73% 27%\n2009 89 -- 23 -- 79% 21%\n2010 98 -- 11 -- 90% 10%\n2011 46 -- 40 -- 53% 47%\n2012 96 -- 32 -- 75% 25%\n2013 99 -- 52 -- 66% 34%\n2014 126 -- 73 -- 63% 37%\n2015 104 -- 77 1 57% 43%\n2016 109 -- 75 8 57% 43%\n2017 91 26 86 33 50% 50%\n2018 45 86 25 71 58% 42%\n2019 5 128 -- 143 48% 52%\n2020 -- 155 -- 152 50% 50%\n2021 -- 130 -- 143 48% 52%\n2022 -- 113 -- 56 67% 33%\n2023 -- 45 -- 40 53% 47%\n2024 -- 22 -- 9 71% 29%\n2025 -- -- 9 0% 100%\nTotal 1076 705 563 665 59% 41%\nSource: Ascend database, Deliveries made, data request as of 22 September 2015, (Exhibit EU-1659); and\nAscend database, Deliveries due, data request as of 22 September 2015, (Exhibit EU-1660).\n\n9.435. The market share data shows that Boeing has enjoyed the majority of the market share for\ndeliveries of single-aisle LCA in the United States between 2007 and 2016. While Boeing's share of\ndeliveries is projected to decrease to 50% in 2017, recover to 58% in 2018 and then hover around\nthe 50% level until 2021, it appears that Boeing has been, and overall will remain, the dominant\nduopolist for deliveries of single-aisle LCA in the United States' market. If anything, the trend that\nseems to emerge is that for the next several years until 2021, Airbus' market share will increase.\nWe are aware that an increase in Airbus' market share does not necessarily refute the existence of\nimpedance or threat of impedance, as the relevant question is whether, but for the subsidies at\nissue, Airbus' imports of single-aisle LCA to the United States would otherwise be higher than they\nare.\n\nBody's guidance, that the effects of the subsidy are examined over a period of time that is long enough to\ndiscern the existence of clear trends. (Appellate Body Report, US – Large Civil Aircraft (2nd complaint),\npara. 1081 (citing Appellate Body Reports, EC and certain member States – Large Civil Aircraft, para. 1166;\nand US – Upland Cotton, para. 478)). This is particularly important for the European Union's threat of\ndisplacement and impedance claims, which necessarily require evidence of projected future deliveries.\n\n9.436. However, the only Boeing sale to a U.S. customer that can be causally connected to the\nWashington State B&O tax rate reduction is the order of 100 737NG aircraft by Delta Airlines in\n2011. The Panel was not persuaded that the Washington State B&O tax rate reduction could be\ncausally linked to orders of Boeing single -aisle aircraft by other U.S. customers (A merican Airlines'\n2011 order of 100 737 MAX and 100 737NG, Southwest Airlines' 2 011 order of 150 737 MAX and\n50 737NG and 2013 order of five 737NG, and United Airlines' 2 012 order of 100 737 MAX and\n50 737NG and 2013 order of 14 737NG) . As explained in the HSBI Appendix and summarized in\nparagraph 9.383. , Boeing does not appear to have been under particular pressure to reduce its\nprices in those sales campaigns, and there were non -price factors that explain Boeing's success in\nobtaining those orders, or the portion of the order that it obtained.\n9.437. Although it seems logical to us that, owing to Airbus losing the 2011 Delta Airlines sales\ncampaign due to the effects of the Washington State B&O tax rate reduction , its imports of\nsingle-aisle LCA to the United States market will, to that extent be obstructed, hindered or held\nback, we are mindful that the phenomenon of impedance is not synonymous with that of lost\nsales. In any case, there would be little to be gained by the Panel ma king a finding of impedance\nof imports in relation solely to lost sales that are already the subject of a finding of significant lost\nsales.\n9.438. However, in this instance, because the Delta Airlines order arose in 2011, the Delta Airlines\n2011 campaign is not part of the Panel's finding of significant lost sales in the post-implementation\nperiod. The threat of impeded imports of A320ceos into the United States market that arises from\nthat 2011 Delta Airlines lost sale does, however, arise in the post -implementation period. In these\ncircumstances, we consider it appropriate to make a finding in relation to the threat of impedance\narising from that lost sale. We therefore find that the effect of the Washington State B&O tax rate\nreduction is a threat of impedance of imports of Airbus single -aisle LCA into the United States\nmarket.\n9.439. We next examine the market share data for each of the third -country markets of Canada,\nIceland and the United Arab Emirates in relation to claims of impedance and threat thereof, and\ndisplacement and threat thereof.\nTable 16: Canada single-aisle sales volume and market share data\nYear 737NG 737 MAX A320ceo A320neo Boeing market\nshare\nAirbus market\nshare\n2007 7 -- -- -- 100% --\n2008 7 -- -- -- 100% --\n2009 10 -- -- -- 100% --\n2010 6 -- -- -- 100% --\n2011 6 -- -- -- 100% --\n2012 3 -- -- -- 100% --\n2013 5 -- -- -- 100% --\n2014 9 -- -- -- 100% --\n2015 13 -- -- -- 100% --\n2016 9 -- -- -- 100% --\n2017 1 3 -- -- 100% --\n2018 -- 27 -- -- 100% --\n2019 -- 35 -- -- 100% --\n2020 -- 20 -- -- 100% --\n2021 -- 16 -- -- 100% --\n2022 -- 8 -- -- 100% --\n2023 -- 5 -- -- 100% --\n2024 -- 3 -- -- 100% --\n2025 -- 5 -- -- 100% --\nTotal 76 122 -- -- 100% 0%\nSource: Ascend data base, Deliveries made, data request as of 22 September 2015, (Exhibit EU-1659); and\nAscend data base, deliveries due, data request as of 22 September 2015, (Exhibit EU-1660).\n\nTable 17: Iceland single-aisle sales volume and market share data3369\nYear 737NG 737 MAX A320ceo A320neo Boeing market\nshare\nAirbus market\nshare\n2018 -- 3 -- -- 100% --\n2019 -- 6 -- -- 100% --\n2020 -- 5 -- -- 100% --\n2021 -- 2 -- -- 100% --\nTotal -- 16 -- -- 100% 0%\nSource: Ascend data base, Deliveries made, data request as of 22 September 2015 (Exhibit EU-1659); and\nAscend data base, deliveries due, data request as of 22 September 2015 (Exhibit EU-1660).\nTable 18: United Arab Emirates: Historic and scheduled volumes and market share in\n2007-2025\nYear 737NG 737 MAX A320ceo A320neo Boeing market\nshare\nAirbus market\nshare\n2007 -- -- 3 -- 0.0% 100.0%\n2008 -- -- 5 -- 0.0% 100.0%\n2009 6 -- 10 -- 37.5% 62.5%\n2010 4 -- 4 -- 50.0% 50.0%\n2011 11 -- 8 -- 57.9% 42.1%\n2012 7 -- 10 -- 41.2% 58.8%\n2013 7 -- 12 -- 36.8% 63.2%\n2014 8 -- 15 -- 34.8% 65.2%\n2015 9 -- 13 -- 40.9% 59.1%\n2016 5 -- 8 -- 38.5% 61.5%\n2017 6 5 -- -- 100.0% 0.0%\n2018 -- 9 -- -- 100.0% 0.0%\n2019 -- 3 -- -- 100.0% 0.0%\n2020 -- 18 -- 3 85.7% 14.3%\n2021 -- 17 -- 7 70.8% 29.2%\n2022 -- 22 -- 7 75.9% 24.1%\n2023 -- 1 -- 3 25.0% 75.0%\n2024 -- -- -- 6 0.0% 100.0%\n2025 -- -- -- -- 0.0% 0.0%\nTotal 63 75 80 26 56.6% 43.4%\nSource: Ascend data base, Deliveries made, data request as of 22 September 2015, (Exhibit EU-1659); and\nAscend data base, deliveries due, data request as of 22 September 2015, (Exhibit EU-1660).\n\n9.440. As regards the market share data for Canada and Iceland, Boeing maintains 100% of\nactual and projected deliveries. We note that no deliveries of single -aisle LCA were made or are\nscheduled to be made into th e Icelandic market between 2007 and 2018 or after 2021. Moreover,\nthe volumes of 3, 6, 5 and 2 737 MAX deliveries between 2018 and 2021 are quite low, and are\nsimilar to the volumes involved in the Kenyan third -party market for 200 -300 seat LCA in the\noriginal proceeding.3370\n\n3369 No deliveries of single-aisle LCA were made or are scheduled to be made between 2007 and 2018 or\nafter 2021.\n3370 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 1073, table 5, and 1078.\n\n9.441. The issue that arises with respect to the Canadian and Icelandic markets is whether the\ndata is sufficient to identify clear trends as contemplated in Article 6.4. We are mindful that, in the\noriginal proceeding, the Appellate Body consi dered that data showing that Boeing's market share\nremained at 100% for all periods, and data showing sporadic and low volumes of deliveries, were\ninsufficient to demonstrate clear trends. To recall, the panel considered that there was a threat of\nimpedance in the third -country markets of Ethiopia, Kenya and Iceland based on data showing\nactual and projected future deliveries of Airbus and Boeing LCA over a period of years from the\nearly 2000s to 2012. 3371 For these third -country markets, however, Boeing's mar ket share\nremained at 100% over all of the periods considered by the panel. The data for Iceland covered\nonly the years 2010 and 2011, with Boeing deliveries remaining stable at two per year, while the\ndata for Kenya related to 2001, 2010, 2011 and 2012, w ith very small numbers of deliveries. The\nAppellate Body considered that this data did not represent a \"clear trend\". The Appellate Body also\nexpressed reservations as to whether the data for Ethiopia, in terms of the years in which\nprojected deliveries we re recorded and the number of deliveries amounted to a \"clear trend\". 3372\nConsequently, the Appellate Body considered the data insufficient to demonstrate clear trends of a\nthreat of impedance as required by Article 6.4 of the SCM Agreement and the panel's fi ndings of\nthreat of impedance in respect of these third-country markets were reversed.3373\n9.442. Notwithstanding our findings of lost sales of the A320neo being the effects of the\nWashington State B&O tax rate reduction in relation to Air Canada's order of 61 737 MAX in 2013\nand Icelandair's 2013 order of 16 737 MAX, we are unable to see in the data or in the\nEuropean Union's impedance and threat of impedance arguments regarding the Canadian and\nIcelandic single-aisle LCA markets anything that would justify us depa rting from the approach that\nthe Appellate Body took to similar data (and lost sales findings), showing that Boeing enjoyed and\nwill enjoy 100% market share at all relevant times in respect of the Kenyan, Icelandic and\nEthiopian third-country markets in the original proceeding.\n9.443. With respect to the United Arab Emirates, the data shows a clear trend in which Boeing's\nsingle-aisle LCA deliveries are increasing, at least from 2017 until 2022. Airbus maintained a\nmajority of deliveries in every year from 2007 to 2016 except for one. In 2017, when deliveries of\nthe 737 MAX are due to begin, Boeing will overtake Airbus and retain a market share of between\n70 and 100% for the subsequent six years. We also f ind that Fly Dubai's 2008 and 2014 orders of\n50 737NG and 75 737 MAX , respectively, are significant lost sale s for Airbus. 3374 We conclude,\nbased on the evidence concerning market share trends in the United Arab Emirates market and the\nevidence of the se lost sales , that the effect of the Washington State B&O tax rate reduction is a\nthreat of impedance in the United Arab Emirates market in the post-implementation period.\n9.444. We find that the Washington State B&O tax rate reduction is a genuine and\nsubstantial cause of serious prejudice to the interests of the European Unio n in the form\nof a threat of impedance of imports of the A320ceo to the United States market , within\nthe meaning of Article 6.3(a) of the SCM Agreement, and in the form of a threat of\nimpedance of Airbus single -aisle exports to the United Arab Emirates , within the\nmeaning of Article 6.3(b) of the SCM Agreement, in each case, in the post -\nimplementation period.\n9.4.3.1.4 Whether the Washington State B&O tax rate reduction is a genuine and\nsubstantial cause of significant price suppression (including threat thereof) in respect of\nthe A320neo and A320ceo in the post-implementation period\n9.445. The European Union argues that the effects of the Washington State B&O tax rate\nreduction are significant price suppression , and threat of significant price suppression, of the\nA320neo and A320ceo, within the meaning of Article 6.3(c) of the SCM Agreement.\n9.446. We have already found, in paragraph 9.383 above, that in five sales campaigns between\n2007 and 2015 , Boeing appeared to be under particular pressure to red uce its prices in order to\nsecure the sales, and that there were no non -price factors that explain Boeing's success in\n\n3371 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 1073, table 5.\n3372 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 1087.\n3373 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), paras. 1089 and 1090.\n3374 See para. 9.404 above.\n\nobtaining the sales.3375 Accordingly, based on the reasoning of the Appellate Body when analysing\nthe effects of the FSC/ETI subsidies on Bo eing's prices in the original proceeding, the Washington\nState B&O tax rate reduction contributed in a genuine and substantial way to the lowering of\nBoeing's prices of narrow -body, single-aisle LCA in these five LCA sales campaigns. We will now\nexamine whether the evidence submitted by the European Union demonstrates that the effect of\nthis impact of the Washington State B&O tax rate reduction on Boeing's 737 MAX and 737NG\nprices is suppression of Airbus' prices of the A320neo and A320ceo in the post -implementation\nperiod.\n9.447. The European Union argues that the U.S. subsidies cause significant price suppression of\nthe A320neo and A320ceo through a price causal mechanism because they enabled Boeing to: (a)\nlower the prices of the 737 MAX in competitive sales ca mpaigns and Airbus was required to react\nto such low pricing by Boeing by reducing the prices at which it offered the A320neo in an attempt\nto maintain market share 3376; and (b) lower the prices of the 737NG in competitive sales\ncampaigns and Airbus was requi red to react to such low pricing by Boeing by reducing the prices\nat which it offered the A320ceo. 3377 The European Union bases its arguments concerning the\nexistence of significant price suppression of the A320neo and A320ceo on the conditions of\ncompetition in the market for \"new technology single -aisle LCA\" and in the market for \"existing\ntechnology single-aisle LCA\", respectively.3378 The European Union's significant price suppression\nclaims rely on two types of evidence: (a) price trend data which purport s to demonstrate that,\nabsent the U.S subsidies, prices for the A320neo and A320ceo in the post -implementation period\nwould be higher3379; and (b) certain sales campaigns that Boeing won, which the European Union\nnonetheless considers are illustrative examples o f Boeing's strategy of \"aggressive pricing\" which\nadversely impacts Airbus' pricing.3380\n9.448. The European Union presents average aggregated prices at order data and average price\nper seat data for A320neo family aircraft , showing that average A320neo family pric es have\n[***].3381 As regards the A320ceo, the European Union presents average aggregated prices at\norder data and average price per seat data showing that A320ceo order prices have [***].3382 The\nEuropean Union compares A320neo and A320ceo price movements to Ai rbus' changing input costs\n\n3375 Fly Dubai 2008, Delta 2011, Icelandair 2012, Air Canada 2013, and Fly Dubai 2014.\n3376 The European Union's claims of significant price suppression with respect to the A320neo are also\nbased on the alleged effects of the aeronautics R&D subsidies that operate through a technology causal\nmechanism to enable early 737 MAX delivery slots than would otherwise have been available, see\nSection 9.4.2.\n3377 European Union's first written submission, paras. 1805 and 1873.\n3378 European Union's first written submission, paras. 1806, 1807, 1873, and 1883.\n3379 European Union's first written submission, paras. 1801 (for A320neo), 1876 (for A320ceo price\ntrends); and Airbus proprietary presentation, \"Price and price per seat evolution of net order intakes of A330,\nA320ceo, A320neo and A350XWB family LCA\", Airbus proprietary presentation, 13 February 2013, (Exhibit\nEU-690) (BCI). The European Union presents the following diagrams: (a) A320neo net order prices from\n2010-2012 plotted against Airbus' input costs to produce the A320neo, as reflected in Airbus' price escalation\nformula, showing that, while Airbus production costs have increased, A320neo prices have [***]; and (b)\nA320ceo net order prices plotted against Airbus' input costs to produce the A320ceo, as reflected in Airbus'\nprice escalation formula, showing that, while Airbus production costs have increased, A320ceo prices have\n\n3380 The European Union presents seven sales campaigns involving single-aisle LCA which Boeing won,\nbut which the European Union presents as \"illustrative\" of Boeing's aggressive pricing of the 737 MAX:\nSouthwest Airlines 2011, SilkAir 2012, Aeromexico 2012, United Airlines 2012, GOL 2012, Norwegian Air\nShuttle 2012, and American Airlines 2011. (See European Union's first written submission, para. 1808). In\nsupport of its significant price suppression claims with respect to the A320ceo, the European Union refers to\nthe Delta Airlines 2011, Fly Dubai 2008, American Airlines 2011, Southwest Airlines 2011, United Airlines 2012,\nSilkAir 2012, and LionAir 2012 campaigns. (European Union's first written submission, para. 1887). Although\nthe European Union updated the data on which it relies to demonstrate the existence of lost sales of the\nA320neo and A320ceo in the post-implementation period to include a number of single-aisle sales campaigns\nwhich occurred in 2013-2015, it does not indicate that it wishes to also rely on any of these sales campaigns as\nillustrating Boeing's \"aggressive pricing\" in relation to its claims of significant price suppression of the A320neo\nand A320ceo.\n3381 European Union's first written submission, para. 1802; and Airbus proprietary presentation, \"Price\nand price per seat evolution of net order intakes of A330, A320ceo, A320neo and A350XWB family LCA\", Airbus\nproprietary Presentation, 13 February 2013, (Exhibit EU-690) (BCI).\n3382 European Union's first written submission, paras. 1876-1882; and Airbus proprietary presentation,\n\"Price and price per seat evolution of net order intakes of A330, A320ceo, A320neo and A350XWB family LCA\",\nAirbus proprietary Presentation, 13 February 2013, (Exhibit EU-690) (BCI).\n\nover time for th e same period, as reflected in Airbus' price escalation formula .3383 The European\nUnion's position is that, because Airbus' input costs (as reflected in Airbus' price escalation\nformula) have increased over time, Air bus' LCA prices should have increased to a commensurate\ndegree (and would have increased, absent the U.S. subsidies). In its response to the Panel's third\nset of questions, the European Union updated the pricing information underpinning its significant\nprice suppression arguments to cover the 2013 and 2014 period.3384 The European Union considers\nthat this new data indicates that: (a) [***]; and (b) [***].3385\n9.449. The United States argues that the European Union has failed to establish significant price\nsuppression because it does not demonstrate the requisite genuine and substantial causal link\nbetween the U.S. subsidies and Airbus' prices, under either a technology causal mechanism or a\nprice causal mechanism.3386 The United States also considers that the pricing data provided by the\nEuropean Union is distorted and unreliable because it is aggregated for all models of the A320neo\nand A320ceo families. In any case, the pricing data fails to show that any impact on A320neo and\nA320ceo prices arises from the effects of th e subsidies on, respectively, 737 MAX and 737NG\nprices, rather than from competition from single -aisle LCA more generally.3387 Price trend data for\nthe A320neo shows a [***].3388 With respect to the A320ceo, whereas 737NG prices [***]\nbetween 2007 and 2012, A320 ceo prices [***].3389 The United States further notes that the\nmajority of the sales campaigns that the European Union considers to evidence Boeing's\n\"aggressive pricing\" involve all-Boeing customers in which Boeing enjoyed an incumbency\nadvantage: \"{p}rying these customers away from Boeing necessarily required offering the\nA320neo on more attractive terms than would be the case where Boeing was not the\nincumbent.\"3390 Moreover, Airbus' significant production rate increases for the A320ceo are an\nadditional reason why A320ceo prices are not higher than they are.3391\n9.450. We begin our analysis by recalling that \"price suppression\" refers to a situation where\n\"prices\" either are prevented or inhibited from rising (i.e. they do not increase when they\notherwise would have) or they do actually increase, but the increase is less than it would otherwise\nhave been.3392 The Appellate Body has further noted:\n{P}rice suppression is not {a directly observable phenomenon} … price suppression\nconcerns whether prices are less than they woul d otherwise have been … The\nidentification of price suppression, therefore, presupposes a comparison of an\nobservable factual situation (prices) with a counterfactual situation (what prices would\nhave been) where one has to determine whether, in the absenc e of the subsidies (or\nsome other controlling phenomenon), prices would have increased or would have\nincreased more than they actually did.3393\n\n3383 European Union's first written submission, paras. 1802 and 1875. The European Union explains that\npricing escalation is used by Airbus and by Boeing to reflect increased costs in the same period. An escalation\nformula is applied to aircraft pricing to reflect changing costs and economic conditions over time.\n(European Union's first written submission, para. 1802 and fn 3327). See also Panel Report, US – Large Civil\nAircraft (2nd complaint), para. 7.1685.\n3384 European Union's response to Panel question No. 170, para. 546; \"Price Evolution Net Order\nIntakes\", Airbus Presentation, October 2015, (Exhibit EU-1669) (BCI), pp. 3 and 4. The European Union did\nnot, however, update the information concerning Airbus' input costs based on Airbus' price escalation formula,\nso there is no data on the record to indicate the level of Airbus' input costs for the A320neo and A320ceo in the\npost-implementation period.\n3385 European Union's response to Panel question No. 170, para. 571.\n3386 United States' first written submission, paras. 1001 and 1071; second written submission,\nparas. 1233 and 1358; and comments on the European Union's response to Panel question Nos. 166 and 170,\nparas. 206-209.\n3387 United States' first written submission, paras. 1005-1008 and 1076-1077; second written\nsubmission, paras. 1233, 1358, and 1367; comments on the European Union's response to Panel question\nNos. 166 and 170, paras. 211-213.\n3388 United States' comments on the European Union's response to Panel question No. 170, para. 223.\n3389 United States' comments on the European Union's response to Panel question No. 170, paras. 221\nand 222.\n3390 United States' first written submission, para. 1008; second written submission, para. 1233; and\ncomments on the European Union's response to Panel question Nos. 166 and 170, paras. 214 and 215.\n3391 United States' first written submission, para. 1077; second written submission, paras. 1368 and\n1369.\n3392 Appellate Body Report, US – Upland Cotton, para. 423.\n3393 Appellate Body Report, US – Upland Cotton (Article 21.5 – Brazil), para. 351.\n\n9.451. A counterfactual analysis is therefore an \"inescapable part\" of analysing the effect of a\nsubsidy under Article 6.3 (c) of the SCM Agreement. 3394 The Panel must compare the observable\nfactual situation of the prices for Airbus' A320neo and A320ceo with the counterfactual situation of\nwhat those prices would have been absent the Washington State B&O tax rate reduction.\n9.452. In addition, Article 6.3(c) requires that the Panel determine that the effect of the subsidy\nin question is significant price suppression in the same market . As explained in Section 9.2.1, the\nEuropean Union has argued its serious prejudice claims on the basis of a market delineation that\nplaces in distinct product markets existing technology aircraft such as the 737NG and A320ceo,\nwhich are less fuel efficient but avail able for earlier delivery, and new technology aircraft such as\nthe 737 MAX and A320 neo, which are more fuel efficient but may not be available for delivery for\nmany years, despite the similarities in seating capacity, range , and MTOW that might otherwise\nexist between all of these aircraft. For reasons we explain in paragraphs 9.35 through 9.39, we\ndisagree with the European Union's proposed market delineation and instead treat the existing\ntechnology A320ceo and 737NG and the new technology A320neo and 737 MAX as competing in\nthe same product market for narrow -body, single -aisle aircraft. The practical implication of our\ndelineation of one narrow -body, single-aisle product market is that we should take into account\nany evidence that prices for the A320ceo and 7 37NG (and not just the 737 MAX) exercised\nconstraints on A320neo pricing, and prices for the A320neo and 737 MAX (and not just the 737NG)\nexercised constraints on A320ceo pricing.3395\n9.453. Airbus launched the A320neo family LCA in December 2010, with first deliver ies scheduled\nfor October 2015. Some eight months later, in August 2011, Boeing launched the 737 MAX family,\nwith first deliveries scheduled for 2017. 3396 There is evidence that Airbus priced the A320neo at a\npremium of USD 7 -8 million over the A320ceo, which represents one half of the NPV of the 15%\nfuel saving that the A320neo was expected to deliver over the A320ceo and 737NG. 3397 An Airbus\npresentation in early 2013 declared that the A320neo had 35% more orders than the 737 MAX in\nthe first year after its lau nch.3398 As can be seen from the order data set forth in Table 19 below,\nAirbus gained significant market share in the single -aisle market in 2011 following the A320neo\nlaunch. This declined following Boeing's launch of the 737 MAX i n the latter part of 2011.\nAirbus' share of the single-aisle market has increased since so that it was at 57% by 2014.\nTable 19: Airbus & Boeing Single-Aisle Orders and Market Share (2007-2014)3399\n\n2007 2008 2009 2010 2011 2012 2013 2014\nAirbus A320ceo/neo orders 662 436 228 450 1526 756 1303 1597\nBoeing 737NG/MAX orders 707 447 177 416 579 1165 1197 1205\nGrand Total 1369 883 405 866 2105 1921 2500 2802\nAirbus market share 48% 49% 56% 52% 72% 39% 52% 57%\nBoeing market share 52% 51% 44% 48% 28% 61% 48% 43%\n9.454. The LCA markets pose particular challenges for th e analysis of claims of price suppression,\nowing to the difficulty of identifying and measuring a \"price\" for LCA. As discussed in Section 9.2.2\nof this Report, the pric e at which a particular LCA is sold can vary significantly depending on the\ncustomer and the campaign. Actual negotiated LCA prices are commercially sensitive and highly\nconfidential. Factors such as performance guarantees, credit terms, buying back of old aircraft and\nother aspects of an overall transaction also make it difficult to compare in a meaningful way the\nprices of the same aircraft sold to different customers (or even the same customers), at different\n\n3394 Appellate Body Report, US – Upland Cotton (Article 21.5 – Brazil), para. 351.\n3395 The European Union appears to agree with this, noting that to the extent that any price suppression\nfor the A320neo results from the 737NG, or for the A320ceo from the 737 MAX, these would be \"non-subsidy\"\nfactors based on the structure of the European Union's arguments. (European Union's response to Panel\nquestion No. 170, para. 568).\n3396 Mourey Statement, (Exhibit EU-34) (BCI), para. 81.\n3397 S. Hamilton, \"A320 NEO to have $7-8 million Price Premium\", Flight International, 23 August 2010,\n(Exhibit USA-361).\n3398 F. Bregier, \"Airbus Results 2012, Outlook 2013\", Presentation at the Annual Press Conference,\n17 January 2013, (Exhibit USA-296).\n3399 Ascend data base, Orders, data request as of 29 September 2015, (Exhibit EU-1658).\n\npoints in time .3400 Prices for aircraft will differ for a number of reasons, including the size of the\norder, incumbency and \"product availability issues\".3401\n9.455. In the original proceeding, the panel found that the aeronautics R&D subsidies enabled\nBoeing to launch the technologically advanced 787 earlier than would have otherwise been\npossible, and that this required Airbus to lower its A330 prices in order to compete. The \"economic\nlogic\" of the impact of the aeronautics R&D subsidies, through the accelerated launch of the 787,\non prices of the A330, was consistent with the trend of decreases in indexed A330 price data in the\noriginal reference period, coupled with overall trends demonstrating erosion of Airbus' market\nshare as compared with the period prior to the launch of the 787. 3402 The panel reasoned that,\nabsent the launch of the 787 in 2004, the A330 would have continued its pre -2004 dominant\nposition in the 200 -300 seat LCA product market for a longer period of time, and for that\nadditional period, would have been able to command higher prices in general.3403\n9.456. In Section 9.4.2, we reject the European Union's arguments concerning the alleged\nspill-over effects and new technology effects of the aeronautics R&D subsidies in relation to the\n737 MA X in the post -implementation period and thus the argument that the aeronautics R&D\nsubsidies are causally related to any of the forms of serious prejudice alleged in respect of the 737\nMAX in the post-implementation period. Therefore, unlike the situation involving the 787 and A330\nin the original proceeding, there is no event or factor such as the accelerated launch of a\ntechnologically advanced aircraft that is the effect of the U.S. subsidies that can clearly and\nrationally be expected to have a generally suppressing effect on prices of the A320neo or A320ceo.\n9.457. Another difference between the significant price suppression claims of the European\nCommunities in the original proceeding, and those made in this proceeding is that in the original\nproceeding, the European Communities supported its price suppression claims with evidence from\nsales campaigns which Airbus had won, at the cost of significantly reducing its A330 and Original\nA350 prices to offset the technological advantages of the 787. 3404 By contrast, evidence on which\nthe European Union relies to support its significant price suppression claims in this proceeding\ncomprises the sales campaigns that Boeing won; i.e. campaigns that Airbus lost and for which\nthere is necessarily no Airbus LCA \"price\" that w as suppressed. The European Union argues that\nthese campaigns are still evidence of price suppression because they are \"illustrative\" of Boeing's\naggressive pricing which, according to the European Union, suppresses Airbus' prices more\ngenerally.\n\n3400 See paras. 9.20 and 9.21 above. The global LCA market can be contrasted with international\ncommodity markets, such as market at issue in US – Upland Cotton. In that case, there were discernible \"world\nprices\" for upland cotton that allowed for the use of modelling exercises to predict such prices in a\ncounterfactual scenario. See Appellate Body Report, US – Upland Cotton, para. 415: \"{t}he Panel found that\n'the A-index can be taken to reflect a world price in the world market for upland cotton that is sufficient to form\nthe basis for our analysis as to whether there is price suppression\". See also Appellate Body Report, US –\nUpland Cotton (Article 21.5 – Brazil), para. 357: \"because the examination of price suppression necessarily\ninvolves an analysis of what would have been the case in the absence of an intervening event, modelling\nexercises are likely to be an important analytical tool that a panel should scrutinize\".\n3401 European Union's second written submission, paras. 1493-1497; response to Panel question\nNo. 166, paras. 147-151; and comments on the United States' response to Panel question No. 171, para. 164.\n3402 See Appellate Body Report, US – Large Civil Aircraft (2nd complaint), paras. 1106-1113; and Panel\nReport, US – Large Civil Aircraft (2nd complaint), paras. 7.1781-7.1785.\n3403 Panel Report, US – Large Civil Aircraft (2nd complaint), paras. 7.1785-7.1797. The original panel's\nfindings of price suppression in the 100-200 and 300-400 seat markets, which were not based on an event\nsuch as the launch of a competing, technologically advanced aircraft, were overturned by the Appellate Body\non the basis that they were insufficiently supported by evidence on the record. The original panel in EC and\ncertain member States – Large Civil Aircraft, which also considered a price suppression claim in the context of\nthe LCA market, found that while Boeing's LCA prices were being suppressed in some way, the United States\nhad failed to establish that this phenomenon was caused by the subsidies. This finding was made on the basis\nof a \"bifurcated\" analysis, in which the panel first addressed whether the complainant had established the\nexistence of the market phenomena identified in Article 6.3, and then separately addressed whether the\ncomplainant had established whether the price suppression phenomenon was caused by the subsidies. This\napproach is in contrast to a \"unitary\" approach, which involves a \"single, integrated analysis of both the market\nphenomena and the issue of whether they have been caused by the subsidies at issue\". The bifurcated\nevaluation of the existence of Article 6.3 market phenomena has been criticised on the basis that it \"may be\ndifficult to ascertain the existence of some of the market phenomena in Article 6.3 without considering the\neffect of the subsidy at issue\". (See Appellate Body Report, EC and certain member States – Large Civil\nAircraft, para. 1107).\n3404 Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1792.\n\n9.458. We examine the sales campaigns that occurred between 2007 -2012, which the\nEuropean Union alleges evidence Boeing's \"aggressive pricing\", in the context of our evaluation of\nwhether the Washington State B&O tax rate reduction affected Boeing's 737 MAX and 737NG\nprices. Of those sales campaigns, only two (the Fly Dubai 2008 and Delta 2011 campaigns, both\ninvolving the 737NG and A320ceo) are campaigns where the Panel finds that: (a) the outcomes\nwere price-sensitive, in the sense that Boeing was under particular press ure to reduce its prices in\norder to secure sales and there were no other non -price factors that explain Boeing's success in\nobtaining the sale; and (b) the Washington State B&O tax rate reduction was causally linked to the\noutcome of the sale.\n9.459. This means that there are many other campaigns in the single-aisle market which we have\neither found were not price-sensitive in the sense described above , or where the European Union\nitself does not allege that the campaigns were highly competitive. For example, in updating its lost\nsales and displacement evidence to include the most recent data and developments since 20133405,\nthe European Union explains that it does not challenge campaigns such as an order by a group of\nChinese airlines for 300 Boeing aircraft, value d at approximately USD 38 billion 3406, Ryanair's\norders in 2013 for 175 737 -800s (valued at USD 15.6 billion) or in 2014 for 100 737 MAX aircraft\n(valued at USD 11 billion). 3407 Nor does it challenge Turkish Airlines' 2013 order for 50 737MAX\nand 20 737-800s (valued at USD 6.9 billion).3408 As for sales campaigns involving leasing company\ncustomers, the European Union notes that it does not challenge orders such as AerCap's 2015\norder for 100 737 MAX (valued at USD 10.7 billion), SMBC Aviation Capital's order for 80 737 MAX\n(valued at USD 8.5 billion) or BO C Aviation's 2014 orders for 50 737 MAX and 30 737 -800s\n(valued at USD 8.8 billion). 3409 The European Union adds that there are \"many further small and\nlarge Boeing orders that remain unchallenged in these proceedings , demonstrating that the\nEuropean Union's challenge is limited to a relatively small portion of Boeing's overall sales\".3410\n9.460. The European Union acknowledges that some sales campaigns are price -sensitive and\nsome are not. It argues that Boeing uses the subsid ies in the price -sensitive campaigns.3411 We\nhave found that this is the case in relation to a limited number of single -aisle sales campaigns that\nBoeing won. In this context, the fact that Boeing used subsidies to win a comparatively small\nnumber of price-sensitive campaigns does not illustrate that Boeing similarly used the subsidies in\nother single-aisle sales campaigns that Airbus won at prices that were consequently suppressed\ndue to the effects of the subsidies. Had the European Union submitted evidence from sales\ncampaigns that Airbus won, which were price -sensitive in the above sense , or had there been\nadditional evidence that Airbus' offer prices in the sales campaigns that it lost were transmitted to\naffect the prices Airbus achieved in sales campaign s that it won, there would have been a basis to\nconsider a causal link between the subsidies enabling Boeing's lower prices in price -sensitive sales\ncampaigns, and suppression of Airbus' prices. As it stands, however, there is insufficient evidence\nto support the proposition that, but for the Washington State B&O tax rate reduction benefiting the\n737 MAX and 737NG, A320neo and A320ceo prices obtained by Airbus in sales campaigns not\nbefore us in evidence, which Airbus won, would be higher than they are.\n9.461. The European Union presents evidence of Airbus' cost escalation to show what\nAirbus' prices should have been absent the U.S. subsidies. 3412 However, in markets in which a\nproducer can enjoy a temporary monopoly position or greater than normal profits for certai n LCA\nmodels at certain points in time, it is not apparent to us why LCA prices would necessarily be\nexpected to track escalations in the input costs of LCA manufactu rers. In any case, the\n\n3405 European Union's response to Panel question No. 169, para. 174.\n3406 Boeing Press Release, \"Boeing Hosts China President Xi Jinping, Announces Airplane Sale, Expanded\nCollaboration with China's Aviation Industry\", 23 September 2015, (Exhibit EU-1441).\n3407 Boeing Press Release, \"Boeing, Ryanair Finalize Order for 175 Next-Generation 737s\",\n19 June 2013, (Exhibit EU-1653); and Boeing Press Release, \"Boeing, Ryanair Finalize Order for 100 737 MAX\n200\", 1 December 2014, (Exhibit EU-1442).\n3408 Boeing Press Release, \"Boeing, Turkish Airlines Finalize Order for 50 737 MAXs, 20 Next-Generation\n737s\", 14 May 2013, (Exhibit EU-1654).\n3409 Boeing Press Release, \"Boeing, AerCap Announce order for 100 737 MAX 8s\", 16 June 2015, (Exhibit\nEU-1655); Boeing Press Release, \"Boeing, SMBC Aviation Capital Announces Order for 80 737 MAXs\",\n10 November 2014, (Exhibit EU-1656); and Boeing Press Release, \"Boeing, BOC Aviation Announce Order for\n82 Airplanes\", 25 August 2014, (Exhibit EU-1657).\n3410 European Union's response to Panel question No. 169, para. 174.\n3411 See paras. 9.52 and 9.236 above.\n3412 See fn 2723 above for an explanation of the concept of \"escalation\" in the context of the LCA\nindustry.\n\nEuropean Union did not update the information concerning Airbus' input costs so there is no data\non the record to indicate the level of Airbus' input costs for the A320neo and A320ceo in the post -\nimplementation period.3413\n9.462. Moreover, when Boeing indexed average order prices for the 737 MAX are graphed against\nAirbus A320neo a nd A320ceo indexed average order prices, there is a correlation between price\nmovements of the A320neo and A320ceo, but not between those two aircraft and the 737 MAX.3414\nThis suggests to us the possibility of a relationship between A320neo and A320ceo price s.\nHowever, [***]. Without additional information to explain [***], all that we are able to deduce\nfrom this evidence is that the relationship between 737 MAX prices and prices of the A320neo and\nA320ceo is not apparent, and there is nothing to indicate th at 737 MAX prices are suppressing\nA320neo prices.\n9.463. More generally, the parties disagree as to the validity of price trend data presented on an\nLCA-family, rather than a model -specific, basis in relation to the significant price suppression\nclaims in respec t of the A320neo and A320ceo , as well as the A350XWB and A330 . The\nUnited States argues that aggregated data masks the different pricing trends that may occur\nacross differently -sized (and priced) LCA models. 3415 In its second written submission, the\nEuropean Union acknowledges the limitations of aggregated family data, but argues: (a) that it is\nnonetheless more useful, since model -specific data is more likely to contain gaps and other flaws\nrelated to the small and uneven number of sales of individual size v ariations per year3416; and (b)\nthe aggregated per-seat price trend data submitted by the European Union corrects for these\nlimitations, since it evens out the changing mix of size variations within each LCA family.3417 To the\nextent that the United States has i dentified trends in the pricing relationship between Boeing and\nAirbus LCA that contradict the European Union's argument, this is only because it is comparing\nAirbus and Boeing aggregated net price trends, rather than aggregated per-seat price trends.3418\n9.464. However, in its December 2015 comments on the United States' responses to the Panel's\nthird set of questions, the European Union argues that while per -seat price trend data is a \"more\nmeaningful proxy\" for trends in aircraft prices, it too is flawed and cann ot support the\nUnited States' argument that price trend data undermines the European Union's position on price\nsuppression. The European Union refers to \"limitations inherent in aggregated annual pricing data\nfor families or individual LCA, reflecting a sm all number of heterogeneous sales transactions\" and\nconcludes that these limitations undermine the usefulness of the data as a true indicator of market\nrealities in a given year, and of competitive constraints between products that the parties agree\nare in close competition.3419 At the same time, however, the European Union appears to maintain\nits previous position that disaggregated, model-specific data is flawed, and disagrees on that basis\nwith the United States' arguments that a comparison of disaggregated Boeing and Airbus model-\nspecific price trend data also contradicts the European Union's price suppression argument.3420 The\nEuropean Union thus appears to repudiate not only the United States' data as providing a reliable\nbasis for drawing conclusions about market conditions, but also its own.\n\n3413 This is also the case with respect to the European Union's significant price suppression claims with\nrespect to the A350XWB and A330. To the extent that the European Union relies on an alleged absence of\ncorrelation between trends in A350XWB and A330 family prices and Airbus price escalation, the\nEuropean Union does not establish this for the post-implementation period.\n3414 United States' comments on the European Union's response to Panel question Nos. 166 and 170,\npara. 223; Indexed Model-Specific and Family-Wide Average Pricing for 787, 777X, 737 MAX, and 737NG\n(2001-2014), (Exhibit USA-599) (BCI), p. 11; and \"Price Evolution Net Order Intakes\", Airbus Presentation,\nOctober 2015, (Exhibit EU-1669) (BCI), pp. 3 and 4.\n3415 United States' second written submission, paras. 946-949.\n3416 European Union's second written submission, paras. 1485-1489.\n3417 European Union's second written submission, para. 1488. The European Union also notes that,\ndespite its criticisms of aggregated price trend data, the United States has itself submitted aggregated pricing\ndata for the relevant Boeing LCA families and, unlike the European Union, has not submitted per-seat price\ntrend data. (European Union's second written submission, paras. 1492-1497).\n3418 In its second written submission, however, the United States submits aggregated per-seat price\ntrend data, and maintains that this too contradicts the European Union's price suppression arguments.\n3419 European Union's comments on the United States' response to Panel question No. 170, paras. 163\nand 170.\n3420 European Union's comments on the United States' response to Panel question No. 171,\nparas. 163-171.\n\n9.465. Finally, we pr ovide our views on a non -attribution factor raised by the United States that\nwe consider the European Union has failed to adequately address. It concerns the impact of\ncompetition from existing technology single-aisle LCA (i.e. the A320ceo and 737NG) on the\nA320neo and, conversely, the impact of new technology single-aisle LCA (i.e. the A320neo and the\n737 MAX) on the prices of the A320ceo. As already noted, we treat the existing technology\nA320ceo and 737 NG and the new technology A320neo and 737 MAX as competing in the same\nproduct market for narrow -body, single -aisle aircraft. Indeed, of the sales campaigns involving\nsingle-aisle LCA between 2007 -2015 that the European Union alleges are significant lost s ales to\nAirbus, a not insignificant number involved both existing technology and new technology LCA. It is\nclear to us that, especially where customers are c ontemplating ordering a mix of existing\ntechnology and new technology aircraft of the same size, ra nge and MTOW, the prices of existing\ntechnology single-aisle aircraft constrain those of new technology single-aisle aircraft and\nvice-versa.3421 The European Union has failed to address this factor in its arguments owing to its\noverly-narrow definitions of the relevant product markets.\n9.466. In our view, for the reasons stated above, there is insufficient evidence to demonstrate\nthat, but for the Washington State B&O tax rate reduction benefiting the 737 MAX and 737NG,\nprices of the A320neo and A320ceo, respectiv ely, in the post -implementation period, would be\nhigher.3422\n9.467. We find that the European Union has failed to establish that the Washington\nState B&O tax rate reduction is a genuine and substantial cause of serious prejudice to\nits interests in the form of sign ificant price suppression (including threat thereof) in\nrespect of the A320neo or the A320ceo in the post-implementation period.\n9.4.3.2 The state and local cash flow subsidies\n9.468. We next address the effects of the state and local cash flow subsidies on Boeing's prices of\nthe 737 MAX and 737NG, and whether any such effects also contribute to the effects of the\nWashington State B&O tax rate reduction as a cause of serious prejudice in respect of the A320neo\nand A320ceo in the post -implementation period. 3423 We are mindful that, where a category of\nsubsidies has already been found t o be a genuine and substantial cause of serious prejudice, a\npanel may ascertain whether any ot her category of subsidies is a genuine cause of serious\nprejudice, and if so, whether the effects of the latter group of subsi dies complement and\nsupplement those of the former, and thereby also constitute a cause of serious prejudice.3424\n9.469. Because the Panel finds that the Washington State B&O tax rate reduction is a genuine and\nsubstantial cause of serious prejudice to Airbus narrow -body, single -aisle LCA in the post -\nimplementation period, we will evaluate the effects of the state and local cash flow subsidies by\nasking: (a) whether these subsidies have a genuine causal connection with the relevant market\neffects on Airbus' narrow -body, single -aisle aircraft; and if so, (b) whether the effects of these\nsubsidies should be cumulated with the effects of the Washington State B&O tax rate reduction\nalready found for the narrow -body, single -aisle market , and foun d to also contribute to the\nrelevant serious prejudice phenomena . However, if the P anel is not satisfied that the state and\nlocal cash flow subsidies have a genuine causal connection with the relevant market effects on\n\n3421 A 2013 article indicated that there A320ceos and 737NGs were being \"massively discounted\" owing\nto customer preference for the more fuel-efficient versions of the A320neo and 737 MAX that were then in\ndevelopment. (\"Le vrai prix des avions d'Airbus et de Boeing\", Challenges, 13 June 2013, (Exhibit EU-1709)).\n3422 The European Union also argues that, in light of the continuation of the U.S. subsidies and the\nunchanged conditions of competition in the relevant markets, there is a threat of further significant price\nsuppression. (European Union's first written submission, paras. 1821 and 1891). We find, however, that the\nexisting U.S. subsidies and conditions of competition do not give rise to significant price suppression. The\nEuropean Union's threat arguments do not provide a basis for any change in circumstances that would warrant\nthe conclusion that price suppression that does not currently exist is nevertheless clearly foreseeable and\nimminent.\n3423 See para. 9.253 above for a summary of the subsidies included within this category of post-2006\nsubsidies.\n3424 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), paras. 1287 and 1288.\n\nAirbus' narrow-body, single-aisle, aircraft, there is no basis for finding that they contribute to the\nrelevant serious prejudice phenomena.3425\n9.470. As previously explained, the European Union argues that the state and local cash flo w\nsubsidies generally operate to reduce costs that Boeing would otherwise have incurred with its own\nresources, and thereby liberate funds that Boeing can and does apply to lower LCA pricing in\ncertain highly-competitive LCA sales campaigns. The European Union considers that Boeing is able,\nand has strong incentives, to use the additional cash flow represe nted by the state and local cash\nflow subsidies to lower prices for its LCA in competitive sales campaigns without reducing its\nprofits.3426 In Section 9.3.2.2.2, in evaluating the effects of the state and local cash flow subsidies\nbenefiting the 787 and 777X on the A350XWB, we note that the European Union relies on the\nAppellate Body's finding with respect to the tax abatements related to the City of Wichita IRBs to\nsupport the argument that, in light of the incentives that Boeing has to reduce its prices in\nstrategic LCA sales campaign s, and the subsidy magnitudes, untied subsidies such as the\nWashington State tax subsidies, which have a close connection, or \"link\" to the production of the\nrelevant Boeing LCA, can be considered to have a genuine causal link to Boeing's pricing of those\naircraft.3427 For the reasons set forth in paragraphs 9.272 through 9.275 of this Report, we do not\nconsider that the Appellate Body's finding with respect to the tax abatements related to the City of\nWichita IRBs supports the Euro pean Union's argument that the state and local cash flow subsid ies\nimpact Boeing's LCA prices.\n9.471. We therefore consider that the Europea n Union has failed to demonstrate that the state\nand local cash flow subsidies, by virtue of operating to increase Boeing's cash flow, would be used\nby Boeing to lower the prices of the 737 MAX and 737NG. There is no evidence before us from\nwhich we could conclude that, absent the state and local cash flow subsidies, Boeing would have\nbeen financially unable to engage in exactly the same pricing behaviour in which it engaged. 3428\nThere is accordingly no basis for finding that the state and local cash flow subs idies affect Boeing's\npricing behaviour, even in so -called price-sensitive sales campaigns and are thus a genuine cause\nof serious prejudice in relation to Airbus single -aisle LCA . Accordingly, there is no basis for\ncumulating the effects of these subsidie s with those of the Washington State B&O tax rate\nreduction in the single-aisle market.\n9.472. The Panel finds that the European Union has failed to establish that the state and\nlocal cash flow subsidies are a genuine cause of any of the forms of serious prejudice\nalleged in respect of the A320neo or A320ceo in the post-implementation period through\na price causal mechanism.\n9.4.3.3 The post-2006 aeronautics R&D subsidies\n9.473. The European Union argues that the post -2006 aeronautics R&D subsidies 3429 operate to\nlower Boeing's pr icing of current LCA, such as the 737 MAX and 737NG, because they provide\nBoeing with access to and use of research results and inputs that enable it to \"continue maturing\"\ntechnologies for application to future generations of LCA without having to pay the U.S.\nGovernment for such access and use.3430\n\n3425 In this latter situation, it would also logically follow that the state and local cash flow subsidies could\nnot, on their own, constitute a genuine and substantial cause of adverse effects on Airbus' narrow-body,\nsingle-aisle aircraft.\n3426 European Union's first written submission, para. 1156; second written submission, para. 1080. See\nalso paras. 9.255 and 9.256 above.\n3427 And correspondingly, that \"untied\" subsidies which have a close connection or \"link\" to the\nproduction of other Boeing LCA at issue in this proceeding (i.e. the 787 and 777X), can also be considered to\nhave a genuine causal link to Boeing's pricing of those aircraft.\n3428 We reiterate that the European Union does not attempt to demonstrate that Boeing's LCA pricing\nwould not be economically feasible absent the receipt of the state and local cash flow subsidies, which\nrepresents a significant departure from the European Communities' case in the original proceeding, where it\nsought to demonstrate that Boeing's pricing and product development decisions would have been\n\"unsustainable and financially irrational\" absent Boeing's alleged receipt of the subsidies at issue. (See Panel\nReport, US – Large Civil Aircraft (2nd complaint), paras. 7.1621, 7.1830, and 7.1831, and fn 3787).\n3429 Other than the non-flight testing portion of the FAA aeronautics R&D subsidy above, fn 3149.\n3430 European Union's response to Panel question No. 43, para. 280.\n\n9.474. As previously explained in Section 9.3.2.2.3 in evaluating the effects of the post -2006\naeronautics R&D subsidies benefiting the 787 and 777X on the A350XWB, the European Union\nconsiders that the post -2006 aeronautics R&D subsidies operate in a manner that is \"identical to\nthe remaining state and local subsidies\". 3431 The Panel has alre ady explained that the\nEuropean Union's argument that the post-2006 aeronautics R&D subsidies enabled Boeing to lower\nits LCA prices would ultimately fail for the reasons that this same argument with respect to the\neffects of the state and local cash flow subsidies on Boeing's prices also fails.3432\n9.475. We therefore conclude that the European Union has failed to d emonstrate that the\npost-2006 aeronautics R&D subsidies affected Boeing's pricing behaviour with respect to the 737\nMAX and 737NG . Having failed to demonstrate that these subsidies affected Boeing's pricing\nbehaviour, there is no basis on which the subsidi es can be demonstrated to have caused the\nvarious forms of serious prejudice alleged with respect to the A320neo and A320ceo.\n9.476. The Panel finds that the European Union has failed to establish that the post -\n2006 aeronautics R&D subsidies are a genuine cause of any of the forms of serious\nprejudice alleged in respect of the A320neo or A320ceo in the post -implementation\nperiod through a price causal mechanism.\n9.4.3.4 Summary of conclusions on whether the post-2006 subsidies benefiting the 737\nMAX and 737NG cause seri ous prejudice to the interests of the European Union, within\nthe meaning of Articles 5(c) and 6.3, in respect of the A320neo and A320ceo in the post-\nimplementation period, through a price causal mechanism\n9.4.3.4.1 Washington State B&O tax rate reduction\n9.477. The Panel has concluded that the Washington State B&O tax rate reduction , which is the\nonly tied tax subsidy alleged to benefit the 737 MAX and 737NG , affected Boeing's pricing\nbehaviour in five price -sensitive LCA sales campaigns in the 2007 -2012 period: Fly Dubai 2008,\nDelta Airlines 2011, Icelandair 2013, Air Canada 2013, and Fly Dubai 2014.3433\nSignificant lost sales\n9.478. Three of the five sales campaigns that the Panel finds are price-sensitive involved orders\nthat occurred in the post -implementation period: Fly Dubai 2014, Air Canada 2013 and Icelandair\n2013. The Panel f inds that the Washington State B&O tax rate reduc tion contributed in a genuine\nand substantial way to determining the outcomes of these campaigns. Accordingly , the effects of\nthe Washington State B&O tax rate reduction are lost sales of the A320neo and A320ceo in the Fly\nDubai 2014, Air Canada 2013 and Icelandair 201 3 sales campaigns. Each of these lost sales is\n\"significant\", within the meaning of Article 6.3(c) of the SCM Agreement.\n9.479. Therefore, the Panel finds that the Washington State B&O tax rate reduction is a genuine\nand substantial cause of serious prejudice in the form of significant lost sales of A320neo and\nA320ceo families of LCA in the post -implementation period, in respect of the sales campa igns for\nFly Dubai in 2014, Air Canada in 2013, and Icelandair in 2013.\nImpedance, displacement (and threats thereof)\n9.480. With the exceptions set forth in the next paragraph , the Panel is not satisfied that the\nEuropean Union has adequately substantiated its claims of impedance, displacement, or threats\nthereof, of imports of Airbus single-aisle aircraft to the United States or of exports of Airbus single-\naisle aircraft to various third country markets. The Panel's previous finding that the Washington\nState B&O tax rate reduction is a genuine and substantial cause of significant lost sales of Airbus\n\n3431 European Union's first written submission, para. 1187. See also European Union's comments on\nUnited States' response to panel question No. 158. Japan and Korea also advance arguments supporting the\nanalysis of R&D subsidies through a price causal mechanism. See paras. 9.285 and 9.286 above.\n3432 See paras. 9.285 and 9.286 above.\n3433 Following the approach of the Appellate Body to determining the impact of the tied tax subsidies on\nBoeing's pricing behaviour in the original proceeding, LCA sales campaigns are considered price-sensitive\nwhere it is demonstrated that Boeing was under particular pressure to reduce its prices in order to secure sales\nand there were no other non-price factors that explain Boeing's success in obtaining the sale.\n\nsingle-aisle aircraft in respect of certain price-sensitive LCA sales campaigns does not, on its own,\ndemonstrate impedance , displacement (or threat s thereof) of A irbus single -aisle imports or\nexports to the geographic markets associated with those customers. Moreover, there would be\nlittle to be gained by the Panel making a finding of impedance of imports or exports in relation\nsolely to lost sales that are already the subject of a finding of significant lost sales. The Panel\nadditionally rejects the proposi tion that in certain so -called \"large volume\" markets, it is\nreasonable to expect that Boeing and Airbus, as duopolists, would have approximately 50%\nmarket share each, so that significant departures from this allocation serve as additional evidence\nthat Airbus' single-aisle imports or exports are being impeded.\n9.481. The threat of impeded imports of A320ceos into the United States market that arises from\nthe Delta Air lines 2011 lost sale, unlike the lost sale itself, arises in the post -implementation\nperiod. In these circumstances, we consider it appropriate to make a finding in relation to the\nthreat of impedance of A320ceo imports to the United States market arising from this lost sale.\nAdditionally, the market share data for the third -country market of the United Arab Emirates\nshows a clear trend in which Boeing's share of single -aisle deliveries grows at the expense of\nAirbus' from 2017 to 2022, reversing a pattern in which Airbus had previously mostly maintained a\nmajority of deliveries from 2007 to 2016. Co nsidered in combination with the Panel's findings that\nthe Fly Dubai 2008 and 2014 sales campaigns were significant lost sale s which are the effects of\nthe Washington State B&O tax rate reduction, we conclude that the Washington State B&O tax\nrate reduction is also a genuine and substantial cause of a threat of impedance of Airbus' exports\nof single -aisle LCA to the U nited Arab Emirates market in the post -implementation period. We\ntherefore find that the effects of the Washington State B&O tax rate reduction are a threat of\nimpedance of imports of the A320ceo into the United States market and of exports of Airbus\nsingle-aisle aircraft from the United Arab Emirates market.\n9.482. Therefore, the Panel finds that the Washington State B&O tax rate reduction is a genuine\nand substantial cause of serious prejudice to the European Union's interests, in the fo rm of a\nthreat of impedance of imports of the A320ceo into the United St ates market, and of exports of\nAirbus single-aisle aircraft to the United Arab Emirates market, in the post-implementation period.\nSignificant price suppression\n9.483. The European Union has failed to demonstrate that, but for the Washington State B&O tax\nrate reduction, prices for the A320neo and A320ceo would be higher in the post -implementation\nperiod than they actually are. The Panel is not persuaded that the evidence that the\nEuropean Union has provided regarding the divergences in movements between Airbus' single-\naisle prices and its input costs (represented by Airbus' price escalation), which were not updated\nfor the post -implementation period, or regarding the LCA sales campaigns that Boeing won,\ndemonstrates that Airbus' single-aisle LCA prices are lower than they would otherwise be, owing to\nthe Washington State B&O tax rate reduction. Moreover, the Pa nel considers that the\nEuropean Union has itself cast doubt upon the reliability of the data it has presented purporting to\ndemonstrate trends in Airbus air craft prices. Finally, the European Union has failed to adequately\naddress a non-attribution factor that the Panel considers could plausibly have affected prices of the\nA320neo and A320ceo. Therefore, the European Union has failed to establish that the Was hington\nState B&O tax rate reduction is a genuine and substantial cause of significant price suppression of\nthe A320neo or A320ceo, or threat thereof, in the post -implementation period, through a price\ncausal mechanism.\n9.4.3.4.2 State and local cash flow subsidies\n9.484. The European Union has failed to demonstrate that the state and local cash flow subsidies,\nby virtue of operating to increase Boeing's overall cash flow, are a genuine cause of lower prices of\nthe 737 MAX and 737NG, absent any showing that Boeing's LCA pricing would not be economically\nfeasible absent the receipt of the state and local cash flow subsidies. Accordingly, there is no basis\nfor finding that the state and local cash flow subsidies affect Boeing's pricing behaviour, even in\nso-called price-sensitive sales campaigns. Given that the European Union has failed to\ndemonstrate that the state and local cash flow subsidies affect Boeing's pricing behaviour, there is\nno basis for cumulating the effects of these subsidies with those of the Washington State B&O tax\nrate reduction in the single-aisle market.\n\n9.4.3.4.3 Post-2006 aeronautics R&D subsidies\n9.485. The European Union has failed to demonstrate that the post -2006 aeronautics R&D\nsubsidies, assuming the Panel were to accept that they operate in the same manner as the state\nand local cash flow subsidies, are a genuine cause of lower prices of the 737 MAX and 737NG,\nabsent any showing that Boeing's LCA pricing wo uld not be economically feasible absent the\nreceipt of the state and local cash flow subsidies (and assuming for purposes of argument that the\npost-2006 aeronautics R&D did operate in the same manner as the state and local cash flow\nsubsidies). Given that the European Union has failed to demonstrate that the post -2006\naeronautics R&D subsidies affect Boeing's pric ing behaviour, there is no basis for cumulating the\neffects of these subsidies with those of the Washington State B&O tax rate reduction in the single -\naisle market.\n9.4.4 Summary of f indings on whether subsidies benefiting the 737 MAX and 737NG\ncause serious prejudice to the interests of the European Union in respect of the A320neo\nand A320ceo in the post-implementation period\n9.486. The Panel finds as follows:\na. The European Union has failed to establish that the pre -2007 aeronautics R&D subsidies\nand certain post-2006 aeronautics R&D subsidies are a genuine and substantial cause of\nany of the forms of serious prejudice alleged with respect to the A320neo in the\npost-implementation period, through a technology causal mechanism.\nb. The Washington State B&O tax rate reduction is a genuine and substantial cause of\nserious prejudice in the form of:\ni. significant lost sales of A320neo and A320ceo families of LCA in the\npost-implementation period, in respect of the sales campaigns for Fly Dubai 201 4,\nAir Canada 2013, and Icelandair 2013; and\nii. a threat of impedance of imports of the A320ceo to the United States market, and of\nAirbus single-aisle exports to the United Arab Emirates market, in each case in the\npost-implementation period.\nc. The European Union has failed to establish that t he Washington State B&O tax rate\nreduction is a genuine and substantial cause of serious prejudice in the form of\nsignificant price suppression of the A320neo or A320ceo , or threat thereof, in the post-\nimplementation period, through a price causal mechanism.\nd. The European Union has failed to establish that the effects of the state and local cash\nflow subsidies, or of the post-2006 aeronautics R&D subsidies, are a genuine cause of\nsignificant lost sales of the A320neo or A320ceo, impedance or displacement of Airbus\nsingle-aisle LCA imports to the United States or of exports to third countries, or\nsignificant price suppression with respect to the A320neo or A320ceo , or threats of any\nof the foregoing, in the post-implementation period, through a price causal mechanism.\n9.5 Overall conclusion as to whether the subsidies benefiting the 787 and 777X cause\nserious prejudice to the interests of the European Union in respect of the A350XWB and\nA330 in the post -implementation period, and whether the subsidies benefiting th e 737\nMAX and 737NG cause serious prejudice to the interests of the European Union in\nrespect of the A320neo and A320ceo in the post-implementation period\n9.487. The Panel concludes from its analysis in Sections 9.3 and 9.4 that:\na. The European Union has failed to establish that the subsidies granted or maintained by\nthe United States after the end of the implementation period and benefiting the 787 and\n777X; namely, the pre-2007 aeronautics R&D subsidies, the tied tax subsidies, the state\nand local cash flow subsidies, and the post -2006 aeronautics R&D subsidies, cause\nserious prejudice to the interests of the European Union, within the meaning of\n\nArticle 5(c) and 6.3 of the SCM Agreement in respect of the A3 50XWB and A330, in the\npost-implementation period.\nb. The European Union has established that the Washington State B&O tax rate reduction\ngranted or maintained by the United States after the end of the implementation period\nand benefiting the 737 MAX and 737 NG, causes serious prejudice to the interests of the\nEuropean Union, within the meaning of Articles 5(c) and 6.3 of the SCM Agreement , in\nthe form of : (i) significant lost sales of the A320neo and A320ceo families in the post -\nimplementation period in respect of the sales campaigns for Fly Dubai 201 4, Air Canada\n2013 and Icelandair 201 3; and ( ii) a threat of impedance of impor ts of the A320ceo to\nthe United States market and of exports of Airbus single-aisle aircraft to the United Arab\nEmirates. In this resp ect, the United States has failed to take appropriate steps to\nremove the adverse effects , within the meaning of Article 7.8 of the SCM Agreement ,\nand has failed to comply with the DSB recommendations and rulings in the original\nproceeding in this dispute.\nc. The European Union has failed to establish that the pre -2007 aeronautics R&D subsidies,\nthe state and local cash flow subsidies and the post -2006 aeronautics R&D subsidies\ncause serious prejudice to the interests of the European Union, within the meaning of\nArticle 5(c) and 6.3 of the SCM Agreement , in respect of the A320neo and A320 ceo, in\nthe post-implementation period.\n10 WHETHER THE UNITED STATES GRANTS OR MAIN TAINS SUBSIDIES INCO NSISTENT\nWITH ARTICLES 3.1(A) AND (B) AND 3.2 OF T HE SCM AGREEMENT AND ARTICLE III:4\nOF THE GATT 1994\n10.1 Introduction\n10.1. In this Section of the Report, the Panel evaluates the European Union's claims that after the\nend of the implementation period the United States grant s or maintain s subsidies that are\ninconsistent with Articles 3.1(a) and (b) and 3.2 of the SCM Agreement and Article III:4 of the\nGATT 1994.3434\n10.2. We recall that in Section 7 of this Report we ma ke rulings that these claims are within the\nPanel's terms of reference, but that they are within the scope of this proceeding only with respect\nto certain of the measures challenged by the European Union. As a result of our ruling regarding\nthe measures with respect to which these claims are within the scope of this proceeding , the\nEuropean Union may validly make claims under Articles 3.1(a), 3.1(b) , and 3.2 of the SCM\nAgreement and under Article III:4 of the GATT 1994 in respect of the South Carolina measures\nthat are otherwise within the Panel's terms of reference, the FAA aeronautics R&D measure, and\nthe post-2006 NASA and DOD aerona utics R&D measures. The European Union may also validly\nmake claims under Articles 3.1(a) and 3.2 of the SCM Agreement in respect of the FSC/ETI\nmeasures.3435\n10.2 Whether the United States grants or maintains s ubsidies prohibited by\nArticles 3.1(a) and 3.2 of the SCM Agreement\n10.2.1 Main arguments of the parties and third parties\n10.3. The European Union claims that \" {t}he United States is granting or maintaining subsidies\ncontingent/conditioned in law or in fact upon actual or anticipated export , which are thus\nprohibited b y Articles 3.1(a) and 3.2 , and footnote 4 , of the SCM Agreement\". 3436 The\n\n3434 While paragraph 32 of the European Union's panel request alleges that the measures in items I.A\nthrough I.G are inconsistent with Articles III:1, III:4, and III:5 of the GATT 1994, in its first and second written\nsubmissions, the European Union's claims in relation to Article III of the GATT 1994 are limited to alleged\ninconsistency with Article III:4 of the GATT 1994. (See European Union's first written submission,\nparas. 777-788; and second written submission, paras. 851-864). The European Union therefore appears not\nto pursue its other claims under Article III of the GATT 1994.\n3435 See para. 7.438 above.\n3436 European Union's first written submission, para. 737.\n\nEuropean Union submits that: (a) the FSC/ETI measures 3437 and the South Carolina income tax\napportionment method provided for in the Income Allocation and Apportionment Agreement\nentered into between South Carolina and Boeing as of 1 January 2012 3438 are subsidies that are\n\"contingent/conditioned in law upon export\"3439; and (b) all measures at issue in this proceeding\nare subsidies that are \"contingent/conditioned in fact upon export\".3440\n10.4. The European Union argues that it has demonstrated in this proceeding that the FSC/ETI\nmeasures continue to provide subsidies to Boeing and that the United States has therefore failed\nto withdraw the subsidy , within the meaning of Article 7.8 of the SCM Agreement. The\nEuropean Union also recalls that the original panel found that the FSC/ETI measures were\nexport-contingent subsidies to Boeing's LCA divi sion, prohibited under Articles 3.1(a) and 3.2 of\nthe SCM Agreement. As the tax exemptions that continue to be pro vided through the FSC/ETI\nmeasures ultimately derive from precisely the same legislation that has previously been found to\nbe contingent upon export performance, the violation of Article 3.1(a) of the SCM Agreement\npersists.3441 In response to the United Stat es' arguments that the relevant legislation has been\nterminated and that the United States has confirmed that Boeing has not used FSC/ETI tax\nbenefits after 2006, the European Union argues that asserting that Boeing did not \"use\" the tax\nbenefits necessarily implies that the benefit was conferred on Boeing by the relevant measures at\nissue, since otherwise the opportunity to \"use\" the benefit would never arise. The European Union\nthus considers that whether Boeing has \"used\" the FSC/ETI tax benefits after 2 006 is irrelevant to\nthe question of whether a prohibited export subsidy \"exists\". 3442 The European Union also\nreiterates its view that the United States has failed to adequately substantiate its assertion that\nBoeing has not used the FSC/ETI tax benefits after 2006.3443\n10.5. With respect to the Income Allocation and Apportionment Agreement between Boeing and\nSouth Carolina, the European Union argues that, in derogation from the normal rule under South\nCarolina law, the apportionment method to which Boeing is entitle d excludes sales of Boeing LCA\ndelivered in South Carolina from being considered as South Carolina sales, on the condition that\nthey are destined for export markets outside the United States, thus reducing Boeing's income tax\nliability. As such, the measur e is contingent in law upon export performance and, as a\nconsequence prohibited by Articles 3.1(a) and 3.2, footnote 4, and Annex I(e) of the SCM\nAgreement.3444 The European Union furthermore notes that by merely arguing that there is no\nsubsidy with respect to the income tax apportionment method because there is no financial\ncontribution or benefit, the United States fails to respond to the European Union's argument that\nthe measure is contingent upon export. Consequently, if the Panel agrees with the Europea n Union\nthat there is a subsidy, it must necessarily find that such a subsidy is contingent upon export and\ntherefore prohibited.3445\n10.6. In support of its claim that the United States is granting or maintaining subsidies\n\"contingent/conditioned in fact, upon export\", prohibited by Articles 3.1(a) and 3.2, and footnote 4\nof the SCM Agreement, the European Union makes the followi ng arguments. First, the\nUnited States is granting or maintaining subsidies to Boeing LCA \"{a}s found in the original\nproceedings, and as demonstrated in section V of this submission\" 3446. Second, the evidence\ndemonstrates that both \"the ratio of actual sales of Boeing LCA\" and \"the ratio of anticipated sales\nof Boeing LCA\" are skewed towards exports. 3447 Third, the subsidies at issue are geared to induce\n\n3437 See Section 8.2.5 above.\n3438 See Section 8.2.8.9 above.\n3439 European Union's first written submission, section VI.A.2(a). (emphasis original)\n3440 European Union's first written submission, section VI.A.2(b). (emphasis original)\n3441 European Union's first written submission, paras. 743-746; second written submission,\nparas. 794-796.\n3442 European Union's second written submission, paras. 797 and 798 (referring to United States' first\nwritten submission, para. 678).\n3443 European Union's second written submission, paras. 799-801.\n3444 European Union's first written submission, paras. 749 and 750; second written submission,\nparas. 804-806.\n3445 European Union's second written submission, para. 807 (referring to United States' first written\nsubmission, para. 677).\n3446 European Union's first written submission, para. 751.\n3447 European Union's first written submission, paras. 752-756; second written submission,\nparas. 811-817; Summary of Actual Boeing LCA Export Sales as a Percentage of Total Sales, (Exhibit EU-563);\nSummary of Anticipated Boeing LCA Export Sales as a Percentage of Total Sales, and Supporting Boeing\n\nor incentivize the skewing of Boeing LCA sales towards exports because the United States favours\nexports and conditions Boeing's behaviour by encouraging and directing Boeing to favour exports\nand by rewarding Boeing when it complies. 3448 In support of its position, the European Union\nsubmits an exhibit containing what it describes as \"a series of representative examples of\nstatements attributable to the United States or Boeing and extracted from the documents relating\nto the subsidies, which stateme nts refer expressly to exports, or a proxy for exports\". 3449\nAccording to the European Union, these statements speak to the structure, design , and operation\nof the subsidies, and are in the nature both of encouragement and direction going forward, as well\nas of reward for past export performance. 3450 Fourth, the skewing of Boeing's LCA sales towards\nexports is not reflective of the conditions of supply and demand that would exist in the absence of\nthe subsidies. This is because it would be highly implausible t hat the behaviour of the\nUnited States and Boeing has had no impact on the distribution of sales between the domestic and\nexport markets. Absent the subsidies, the share of sales accounted for by exports would\nnecessarily be diminished in some measure. In the original proceeding a finding was made that the\nlaunch of certain aircraft would not have occurred or would have been delayed in the absence of\nthe subsidies. This implies at a minimum that the actual and anticipated development of Boeing\nand its sales have been accelerated by the subsidies.3451\n10.7. With respect to the European Union's claim that the FSC/ETI measures are subsidies\ncontingent in law upon export performance and thus inconsistent with Articles 3.1(a) and 3.2, the\nUnited States argues that it enacted legislation terminating the FSC/ETI tax benefits and confirmed\nthat Boeing did not use FSC /ETI tax benefits after 2006. 3452 The United States considers that the\nEuropean Union's claim that the Income Allocation and Apportionment Agreement between Boeing\nand South Carolina is a subsidy contingent in law upon export performance and thus inconsistent\nwith Articles 3.1(a) and 3.2 is based on a misunderstanding of South Carolina tax law. Indeed, the\nEuropean Union has failed to establish a prima facie case that t he Agreement confers a specific\nsubsidy to Boeing, within the meaning of Article 1, let alone a subsidy that is contingent on export\nperformance, within the meaning of Article 3.1(a). 3453 Even if the European Union could\ndemonstrate the existence of a subsidy , it must also demonstrate that the granting of the subsidy\nis conditioned on export performance, which it cannot.3454\n10.8. With respect to the European Union's claim of de facto export contingency under\nArticles 3.1(a) and 3.2, the United States argues that the European Union fails to make a prima\nfacie case that the United States presently provides Boeing with subs idies prohibited under\nArticles 3.1(a) and 3.2 of the SCM Agreement. Indeed, the European Union fails to specify with\nany particularity how the allege d subsidies are in fact contingent on export performance. Instead\nof relying on any explicit link between export behaviour and an y alleged subsidy, the\nEuropean Union's position is based on the assertions that Boeing's export sales are increasing as a\npercentage of its total sales, and that a selection of statements, unrelated to any particular\nmeasure at issue, demonstrates that the United States has conditioned Boeing's behaviour to\nfavour exports. These statements concerning the importance of exports to the U.S. economy are\nunremarkable, and certainly do not allow the United States to understand how the Kansas IRBs,\nfor example, induce Boeing to skew sales in favour of exports.3455\n10.9. Brazil argues that the determination of whether a subsidy is contingent in fa ct upon export\nperformance should be based on an examination of the total configuration of facts surrounding the\ngranting of a subsidy rather than only on an examination of sales ratios. The fact that a finding of\n\nCurrent Market Outlooks, (Exhibit EU-564); and Summary of Airbus Global Market Forecasts, and\nCorroborating Data on Anticipated Boeing LCA Export Sales, (Exhibit EU-565).\n3448 European Union's first written submission, paras. 757 and 758; second written submission,\nparas. 818-827; and Illustrative Statements Relating to De Facto Export Contingency of U.S. Subsidies,\n(Exhibit EU-566).\n3449 European Union's first written submission, para. 757; and Illustrative Statements Relating to De\nFacto Export Contingency of U.S. Subsidies, (Exhibit EU-566).\n3450 European Union's second written submission, 824-834 (referring to United States' first written\nsubmission, para. 674; and Illustrative Statements Relating to De Facto Export Contingency of U.S. Subsidies,\n(Exhibit EU-566)).\n3451 European Union's first written submission, paras. 760 and 761.\n3454 United States' second written submission, para. 636.\n3455 United States' first written submission, para. 674; second written submission, paras. 627-630.\n\nde facto export contingency must involve a n examination of \"the total configuration of the facts\nconstituting and surrounding the granting of the subsidy, none of which is likely to be decisive in\nany given case\" means that a comparison of sales ratios cannot be decisive or required as a\nnecessary element of proof. Brazil considers that the Appellate Body's analysis in EC and certain\nmember States – Large Civil Aircraft confirms that the evidence for demonstrating de facto export\ncontingency does not require in whole or in part reliance on an analysis of sales ratios.3456\n10.10. Canada submits that the European Union has failed to demonstrate that subsidies granted\nby the United States are contingent in fact upon export performance a nd thus in violation of\nArticle 3.1(a) of the SCM Agreement. Canada notes that the test established by the Appellate Body\nfor determining whether a subsidy is contingent in fact upon anticipated exportation is whether\n\"the granting of the subsidy {is} geared to induce the promotion of future export performance by\nthe recipient\". This standard is met \"when 'the subsidy is granted so as to provide an incentive to\nthe recipient to export in a way that is not simply reflective of the conditions of supply and\ndemand in the domestic and export markets undistorted by the granting of the s ubsidy'\".3457 In\nthis context, the Appellate Body has explained that an assessment of whether the granting of a\nsubsidy is in fact tied to anticipated exportation could be based on a comparison of the ratio of\nanticipated export sales to domestic sales of the subsidized product that would result from the\ngranting of the subsidy with the ratio of export sales to domestic sales of that product in the\nabsence of the subsidy.3458\n10.11. In light of the guidance provided by the Appellate Body, Canada argues that the\nEuropean Union has failed to demonstrate that subsidies to Boeing are in fact tied to anticipated\nexportation for three main reasons. First, the European Union presents charts showing export\nsales as a percentage of total sales but does not provide baseline data demonstrating the extent to\nwhich Boeing would be expected to export in the absence of the subsidies. 3459 Second, the\nEuropean Union does not demonstrate that increased exports as a percentage of total sales are\ndue to subsidies and not merely reflective of a change in market conditions. In fact, the evidence\nsubmitted by the European Union suggests that it is more likely a change in market conditions\nrather than subsidization that accounts for the increase in export sales relative to domestic\nsales.3460 Third, the European Union fails to explain how the factual circumstances surrounding the\ngranting of the subsidies support a finding of de facto export contingency. The statements relied\nupon by the European Union as evidence of a U.S. policy of favouring exports do not prove that\nthe subsidies were geared to induce export performance.3461\n10.12. Japan recalls that the appropriate legal standard for determining whether a subsidy is de\nfacto export contingent is whether \"the granting of the subsidy is geared to induce the pr omotion\nof future export performance by the recipient\", which standard is met \"when the subsidy is\ngranted so as to provide an incentive to the recipient to export in a way that is not simply\nreflective of the conditions of supply and demand in the domesti c and export markets undistorted\nby the granting of the subsidy\". Whether a subsidy is geared to induce the promotion of future\nexport performance \" must be inferred from the total configuration of the facts constituting and\nsurrounding the granting of the subsidy\", including the design and structure of the measure, the\nmodalities of the operation set out in the measure, and the relevant factual circumstances\nsurrounding the granting of the subsidy that provide the context for understanding the measure's\ndesign, structure and modalities of operation. 3462 A comparison of the ratio of anticipated export\nsales to domestic sales of a subsidized product to the ratio of export sales and domestic sales in\nthe absence of the subsidy may be one of the \"facts constituting and surrounding the granting of\nthe subsidy\" but cannot in and of itself be determinative of whether a given subsidy is de facto\nexport contingent. In this respect, Japan considers that the state ments submitted by the\nEuropean Union in support of its de f acto export contingency claim do not demonstrate an\n\n3456 Brazil's third-party submission, paras. 72-83 (citing Appellate Body Report, Canada – Aircraft,\npara. 76).\n3457 Canada's third-party submission, para. 5 (quoting Appellate Body Report, EC and certain member\nStates – Large Civil Aircraft, paras. 1044 and 1045).\n3458 Canada's third-party submission, para. 6 (quoting Appellate Body Report, EC and certain member\n3459 Canada's third-party submission, paras. 10-12.\n3460 Canada's third-party submission, paras. 13 and 14.\n3461 Canada's third-party submission, paras. 15 and 16.\n3462 Japan's third-party submission, paras. 28 and 29 (quoting Appellate Body Report, EC and certain\nmember States – Large Civil Aircraft, paras. 1044-1047 (emphasis added by Japan)).\n\nincentive to skew anticipated sales towards exports. 3463 Japan considers that to accept that de\nfacto export contingency can be established solely on the basis of this anticipate d ratio test would\ncreate leg al uncertainty and make Members with small domestic markets more vulnerable to\nfindings of de facto export contingency than Members with larger domestic markets.3464\n10.2.2 Evaluation by the Panel\n10.13. The issue before us is whether the United States is granting or mai ntaining subsidies\ncontingent on export performance, in contravention of Articles 3.1(a) and 3.2 of the SCM\nAgreement.\n10.14. We recall that our preliminary ruling in Section 7.6 means that the European Union may\nvalidly make claims under Articles 3.1(a) and 3.2 of the SCM Agreement only in respect of the\npost-2006 NASA and DOD aeronautics R&D measures, the FAA aeronautics R&D measure, the\nFSC/ETI measures, and the South Carolina measures that are otherwise within the Panel's terms\nof reference.3465 Where we find, in Section 8 of this Report, that any measure in respect of which\nthe European Union may validly make claims under Articles 3.1(a) and 3.2 of the SCM Agreement\nis not a subsidy, within the meaning of Article 1 of the SCM Agreement, there obviously is no basis\nfor a finding that the measure is inconsistent with Article 3.1(a) as a subsidy that is contingent in\nlaw or in fact upon export performance. For example, with regard to the two measures that the\nEuropean Union alleges are s ubsidies contingent in law upon export performance, namely the\nFSC/ETI measures and the South Carolina Income Allocation and Apportionment Agreement, we\nfind, in Sections 8.2.5 and 8.2.8.9 of this Report, that these measures do not constitute subsidies\nto Boeing after the end of the implementation period. Since the measures are not subsidies to\nBoeing, they cannot be subsidies to Boeing contingent in law (or in fact) upon export performance.\n10.15. Therefore, o ur examination in the remainder of this Section concerns any measures in\nrespect of which the European Union's claims under Articles 3.1(a) and 3.2 of the SCM Agreement\nare within the scope of this proceeding and which we find to be subsidies, includi ng subsidies not\nfound to be specific under Articles 2.1 or 2.2.3466\n10.16. In this respect, we recall the relevant findings made in Section 8.2 of the Report:\na. Post-2006 NASA procurement contracts, cooperative agreements , and Space Act\nAgreements confer subsidies to Boeing that are specific , within the meaning of Article\n2.1(a) of the SCM Agreement.3467\nb. Post-2006 DOD assistance instruments confer subsidies to Boeing that are specific ,\nwithin the meaning of Article 2.1(a) of the SCM Agreement.3468\nc. The Boeing CLEEN Agreement involves subsidies to Boeing that are specific , within the\nmeaning of Article 2.1(a) of the SCM Agreement.3469\nd. The direct transfer of funds by South Carolina to Boeing to compensate Boeing for a\nportion of the costs to constr uct the Gemini facilities is a subsidy to Boeing. The subsidy\nis specific, within the meaning of Article 2.1(c) , insofar as the transfer involved funds\ngenerated by the issuance of air hub bonds . The subsidy is not specific , within the\nmeaning of Article 2 .1, insofar as the transfer involved funds generated by the issuance\nof economic development bonds.3470\n\n3463 Japan's third-party submission, paras. 31 and 32.\n3464 Japan's third-party submission, paras. 35-37.\n3465 See para. 7.438 above.\n3466 Article 2.3 of the SCM Agreement provides that \"{a}ny subsidy falling under the provisions of\nArticle 3 shall be deemed to be specific\". A subsidy not found to be specific under Articles 2.1 or 2.2 can be\nfound to be specific (and thereby be subject to the provisions of Part III or V of the SCM Agreement pursuant\nto Article 1.2), if it is a prohibited subsidy, within the meaning of Article 2.3 of the SCM Agreement.\n3467 See para. 8.231 above.\n3468 See para. 8.469 above.\n3469 See para. 8.565 above.\n3470 See para. 8.850 above.\n\ne. The Project Emerald F ILOT Agreement and the Boeing F ILOT Agreement constitute\nsubsidies to Boeing but are not specific , within the meaning of Article 2.1 of the SCM\nAgreement.3471\nf. The MCIP job tax credits are subsidies to Boeing but are not specific under Articles 2.1 or\n2.2 of the SCM Agreement.3472\ng. The LCF property tax exemption is a subsidy to Boeing that is specific , within the\nmeaning of Article 2.1(c) of the SCM Agreement.3473\nh. Sales and use tax exemptions on aircraft fuel, computer equipment , and construction\nmaterials are subsidies to Boeing that are specifi c, within the meaning of\nArticle 2.1(c).3474\ni. The Boeing workforce programme is a subsidy to Boeing but is not specific under\nArticle 2.1(c) of the SCM Agreement.3475\n10.17. Articles 3.1(a) and 3.2 of the SCM Agreement read as follows:\n3.1 Except as provided in the Agreement on Agriculture, the following subsidies,\nwithin the meaning of Article 1, shall be prohibited:\n(a) subsidies contingent, in law or in fact{*}, whether solely or as one\nof several other conditions, upon export performance, including\nthose illustrated in Annex I{*};\n…\n3.2 A Member shall neither grant nor maintain subsidies referred to in paragraph 1.\n{*fn original}4 This standard is met when the facts demonstrate that the granting of a subsidy,\nwithout having been made legally contingent upon export performance, is in fact tied to actual or\nanticipated exportation or export earnings. The mere fact that a subsidy is granted to enterprises\nwhich export shall not for that reason alone be considered to be an export subsidy within the\nmeaning of this provision.\n{*fn original}5 Measures referred to in Annex I as not constituting export subsidies shall not be\nprohibited under this or any other provision of this Agreement.\n\n10.18. Article 3.1(a) of the SCM Agreement has been subject to interpretation by the Appellate\nBody and several panels. In particular, the Appellate Body has explained that the word\n\"contingent\" in Article 3.1(a) means \"conditional\" or \"dependent for its existence on something\nelse\", and that the legal standard for export cont ingency expressed in Article 3.1(a) is the same\nfor both de jure and de facto contingency.3476\n10.19. With respect to the evidence required to demonstrate export contingency, the Appellate\nBody has found that the evidence that may demonstrate de jure export contingency is different\nfrom the evidence that may reveal de facto export contingency. De jure contingency \"can be\ndemonstrated on the basis of the very words of the relevant legislation, regulation or other legal\ninstrument constituting the measure\". Nonetheless, de jure export contingency does not have to\nbe set out expressly, but can also be derived by \"necessary implication\" fr om the wording of a\nlegal instrument. 3477 By contrast, the evidence needed to establish de facto export contingency\ngoes beyond a legal instrument and includes a variety of factual elements concerning the granting\nof the subsidy in a specific case. In this respect, the Appellate Body has stated the following:\n\n3471 See para. 8.908 above.\n3472 See para. 8.933 above.\n3473 See para. 8.1017 above.\n3474 See para. 8.1059 above.\n3475 See para. 8.1074 above.\n3476 Appellate Body Report, Canada – Aircraft, paras. 166 and 167. See also Appellate Body Report, EC\nand certain member States – Large Civil Aircraft, para. 1037.\n3477 Appellate Body Report, Canada – Autos, para. 100. See also Appellate Body Report, EC and certain\nmember States – Large Civil Aircraft, para. 1038.\n\nProving de facto export contingency is a much more difficult task. There is no single\nlegal document which will demonstrate, on its face, that a subsidy is \"contingent … in\nfact … upon export performance\" . Instead, the existence of this relationship of\ncontingency, between the subsidy and export performance, must be inferred from the\ntotal configuration of the facts constituting and surrounding the granting of the\nsubsidy, none of which on its own is likely to be decisive in any given case.3478\nThe factors to be considered as part of an analysis of \"the total configuration of the facts\nconstituting and surrounding the granting of the subsidy\" include the design and structure of a\nmeasure, its modalities of operation and relevant factual circumstances that provide context for an\nunderstanding of the measure's design, structure and modalities of operation.3479\n\n10.20. The Appellate Body has noted that the ordinary meaning of the word \"tie\" in the first\nsentence of footnot e 4 is to \"limit or restrict as to … conditions\". The Appellate Body has thus\nfound that to satisfy the standard for de facto export contingency \"a relationship of conditionality\nor dependence\" must be demonstrated between the subsidy and \"actual or antici pated exportation\nor export earnings\". 3480 With respect to anticipated exportation or export earnings in particular,\nthe Appellate Body has further observed that the meaning of the word \"anticipated\" in footnote 4\nis \"expected\", and that \"{w}hether exports were anticipated or 'expected' is to be gleaned from an\nexamination of objective evidence\". The Appellate Body has stressed, however, that the use of this\nword does not transform the standard for \"contingent … in fact\" into a standard that is satisfied by\nmerely ascertaining \"expectations\" of exports on the part of the granting authority. The Appellate\nBody has explained that, although a subsidy \"may well be granted in the knowledge, or with the\nanticipation, that exports will result\", \"that alone is not suff icient, because that alone is not proof\nthat the granting of the subsidy is tied to the anticipation of exportation\".3481\n10.21. The Appellate Body has emphasized that \"merely knowing that a recipient's sales are\nexport-oriented does not demonstrate, without more, t hat the granting of a subsidy is tied to\nactual or anticipated exports.\" Rather, \"the export orientation of a recipient may be taken into\naccount as a relevant fact, provided that it is one of several facts which are considered and is not\nthe only fact sup porting a finding.\" 3482 The Appellate Body has explained that the relationship of\nconditionality that must be found between the granting of a subsidy and anticipated exportation in\norder to find that a subsidy is tied to anticipated exportation \"can be establ ished by recourse to\nthe following test: is the granting of the subsidy geared to induce the promotion of future export\nperformance by the recipient?\".3483 Thus:\n{T}he standard for de facto export contingency under Article 3.1(a) and footnote 4 of\nthe SCM Agr eement would be met when the subsidy is granted so as to provide an\nincentive to the recipient to export in a way that is not simply reflective of the\nconditions of supply and demand in the domestic and export markets undistorted by\nthe granting of the subsidy.3484\n10.22. The Appellate Body also observed in this connection that:\nMoreover, where relevant evidence exists, the assessment could be based on a\ncomparison between, on the one hand, the ratio of anticipated export and domestic\n\n3478 Appellate Body Report, Canada – Aircraft, para. 167. See also Appellate Body Report, EC and certain\nmember States – Large Civil Aircraft, para. 1038. (emphasis original)\n3479 Appellate Body Report, EC and certain member States – Large Civil Aircraft, paras. 1046, 1050, and\n1056 (quoting Appellate Body Report, Canada – Aircraft, para. 167).\n3480 Appellate Body Report, Canada – Aircraft, para. 171. See also Appellate Body Report, EC and certain\nmember States – Large Civil Aircraft, para. 1037.\n3481 Appellate Body Report, Canada – Aircraft, para. 172 (emphasis original). See also Appellate Body\nReport, EC and certain member States – Large Civil Aircraft, para. 1037.\n3482 Appellate Body Report, Canada – Aircraft, para. 173. See also Appellate Body Report, EC and certain\nmember States – Large Civil Aircraft, para. 1039.\n3483 Appellate Body Report, EC and certain member States – Large Civil Aircraft, para. 1044.\n3484 Appellate Body Report, EC and certain member States – Large Civil Aircraft, para. 1045.\n\nsales of the subsidized product that would come about in consequence of the granting\nof the subsidy, and, on the other hand, the situation in the absence of the subsidy.3485\n10.23. Finally, the Appellate Body, in EC and certain member States – Large Civil Aircraft ,\ncautioned against undue relian ce on government intent in determining whether a subsidy is de\nfacto contingent on export performance:\n{W}e note that the Appellate Body and panels have, on several occasions, cautioned\nagainst undue reliance on the intent of a government behind a measure to determine\nthe WTO-consistency of that measure. The Appellate Body has found that \"the intent,\nstated or otherwise, of the legislators is not conclusive\" as to whether a measure is\nconsistent with the covered agreement. In our view, the same understandin g applies\nin the context of a determination on export contingency, where the requisite\nconditionality between the subsidy and anticipated exportation under Article 3.1(a)\nand footnote 4 of the SCM Agreement must be established on the basis of objective\nevidence, rather than subjective intent. We note, however, that while the standard for\nde facto export contingency cannot be satisfied by the subjective motivation of\ngranting government, objectively reviewable expressions of a government's policy\nobjectives for granting a subsidy may, however, constitute relevant evidence in an\ninquiry into whether a subsidy is geared to induce the promotion of future export\nperformance by the recipient.3486\n10.24. We consider that the European Union has failed to establish that any of the measures with\nrespect to which its claims are within the scope of this proceeding and which we find to be a\nsubsidy is contingent in fact upon export performance .3487 This is because the European Union\ndoes not provide an adequate analysis of \"the total configuration of the facts constituting and\nsurrounding the granting of the subsidy\", including the design and structure of the measures, their\nmodalities of operation and relevant factual circumstances that provide context for an\nunderstanding of the measures' design, structure, and modalities of operation.3488 The generalized\nnature of the European Union's assertions is inconsistent with the guidance provided by the\nAppellate Body regarding the evidence necessary to establish the existence of a subsidy contingent\nin fact upon export performance. The relevant sections of the European Union's submissions do not\nprovide any discussion of any individual measure alleged to be a subsidy contingent upon export\nperformance. The European Union states that \" {a}s found in the original proceedings, and as\ndemonstrated in Section V of this submission, the United States is granting or maintaining\nsubsidies to Boeing LCA\"3489 but it does not provide any factual analysis of any particular measure\nto show how that measure is gear ed to induce the promotion of future export performance. The\nEuropean Union asserts that actual and anticipated sales of Boeing are skewed towards exports\nand that \"the subsidies are geared to induce or incentivise this skewing because the United States\nfavours exports, and conditions Boeing's behaviour by encouraging and directing Boeing to favour\nexports and by rewarding Boeing when it complies\" .3490 However, the statements the\nEuropean Union submits in support of this assertion 3491 do not address any of the me asures in\nsufficient detail to enable an understanding of its design, structure, and modalities.\n10.25. Thus, for example, the document provided by the European Union (Illustrative Statements\nRelating to De Facto Export Contingency of U .S. Subsidies) include s the following statements\nrelating to various NASA programmes:\nWith competition from foreign competitors greatly increasing, affordable, innovative\ntechnology is critically needed to help preserve the U.S. aeronautics industry market\n\n3485 Appellate Body Report, EC and certain member States – Large Civil Aircraft, para. 1047. (emphasis\noriginal)\n3486 Appellate Body Report, EC and certain member States – Large Civil Aircraft, para. 1050. (emphasis\noriginal, fns omitted)\n3487 As noted above, we find that two measures which the European Union alleges are contingent in law\nupon export performance are not subsidies to Boeing and therefore cannot be subsidies that are inconsistent\nwith Article 3.1(a).\n3488 See para. 10.19 above.\n3489 European Union's first written submission, para. 751.\n3490 European Union's first written submission, p. 321, item (iv).\n3491 Illustrative Statements Relating to De Facto Export Contingency of U.S. Subsidies, (Exhibit EU-566).\n\nshare, jobs, and balance of trade. Exports in large commercial transports make a\nsignificant contribution to the U.S. balance of trade.\nThe President, Congress and the NASA Administrator are emphasizing the value of\nNASA's research and technology base to U.S. industry in helping to increase industrial\ncompetitiveness, provide jobs and improve the quality of life and the balance of trade.\nThe taxpayers' investment in NASA is an investment in the international\ncompetitiveness of U.S. industry through partnerships that build upon NA SA's\nresearch and make it available to U.S. industry.\nMaintenance of the United States aircraft industry's market position is critical for the\npreservation of high paying skilled jobs, a capable industrial base, and balance of\ntrade.\nBoeing is the world' s largest producer of commercial transport aircraft, maintaining a\nmarket share of over 57% for the world and over 80% for the United States. This\nprovides a large benefit to the US. economy. Approximately 75% of Boeing sales are\nexports, helping to reduce the US. trade deficit. Every $1 billion in US . airplane sales\ncreates about 30,000 labor years of work, of which 87% is performed in the US.\nThe aerospace industry is a major contributor to the balance of trade and the balance\nof trade has an effect on the U.S. standard of living.\nAs mentioned earlier, NASA's aeronautics customers play major roles in the economic\ngrowth and national security of the United States. In 1994 (a year of record low\nperformance) the aerospace industry, primarily aeronautics, ge nerated $112 billion in\nsales, over $38 billion in exports, and over $25 billion in positive balance of trade.\nAppearing before the US House of Representatives, Wesley Harris, NASA's Associate\nAdministrator, testified that the objective of the NASA AST Program was to provide\n\"U.S. industry with a competitive edge to recapture market share {and} maintain a\nstrongly positive balance of trade\".\nBy the mid-1980s, there was yet another argument for continued government support\nof aeronautical research : the dim inishing level of U.S. industrial competitiveness in\nthe global market … Leaders in government, industry, academia and the media all\nbegan stress that to preserve the U.S. lead in aeronautics and, indeed, the U.S.\nbalance of trade, the country had to accor d a much higher priority to aeronautical\nresearch and development.3492\n10.26. Other statements in this document are even more general in nature. Overall, we agree\nwith Canada's characterization of the statements in this document:\nThe statements of Boeing employees and U.S. government officials merely reflect that\nBoeing is considered to generate high -value technology through research and\ndevelopment, that it is a large exporter of products making an important contribution\nto the United States' trade balance, that e xports are important because they generate\nemployment and that the U.S. government values Boeing's contribution as an\nexporter of high -technology products. These statements do not, however, prove that\nthe subsidies were geared to induce export performance.3493\n10.27. While the European Union asserts that these statements \"also speak to the structure,\ndesign and operation of the subsidies\" 3494, it fails to connect any of these statements with any\nparticular measure and explain how they demonstrate that the measure is con tingent in fact upon\nexport performance. Instead, the European Union argues that \"{t}aken as a whole , this evidence\n\n3492 Illustrative Statements Relating to De Facto Export Contingency of U.S. Subsidies, (EU-Exhibit-566),\np. 4. We also note that most statements reproduced in this document that relate to NASA aeronautics R&D\nprogrammes pertain to a period well before the expiry of the implementation period in this proceeding.\n3493 Canada's third-party submission, para. 16.\n3494 European Union's first written submission, para. 757.\n\ndemonstrates a US policy of favouring exports\". 3495 In our view, statements at this level of\ngenerality regarding the existence of a \"US policy of favouring exports\", unsubstantiated by\nmeasure-specific analysis of design, structure and modalities of operation of particular measures,\ncannot support a finding of de facto export contingency. In sum, we find that, as stated by the\nUnited States, \"th e EU fails to specify with any particularity how the alleged subsidies are in fact\ncontingent on export performance\".3496\n10.28. Finally, insofar as the European Union's argument is based on data purporting to show that\nthe ratios of Boeing's actual and anticipated export sales to total sales have increased over time,\nwe note that the European Union fails to compare the anticipated export ratio that would come\nabout in consequence of the granting of the subsidy with the situation in the absence of the\nsubsidy.3497\n10.29. For these reasons, to the extent that we have ruled that the European Union's\nclaims under Articles 3.1(a) and 3.2 are within the scope of this proceeding , we reject\nthese claims as unfounded because: (a) certain measures challenged by the European\nUnion are not subsidies provided to Boeing after the end of the implementation period;\nand (b) where we find that the measures at issue are subsidies provided to Boeing after\nthe end of the implementation period, the European Union has failed to establish that\nany of these subsidies is contingent in fact upon export performance.\n10.3 Whether the United States grants or maintains subsidies prohibited by\nArticles 3.1(b) and 3.2 of the SCM Agreement\n10.3.1 Main arguments of the parties and third parties\n10.30. The European Union claims, with respect to all measures challenged in this proceeding,\nthat \"{t}he United States is granting or maintaining subsidies contingent/conditioned in fact upon\nthe use of domestic over imported goods, which are thus prohibited by Articles 3.1(b) and 3.2 of\nthe SCM Agreement \".3498 In support of this claim, the European Union makes the following\narguments. First, \"{a}s found in the original proceedings, and as demonstrated in Section V of this\nsubmission, the United States is granting or maintaining subsidies to Boeing\".3499 Second,\npursuant to the subsidies, Boeing is to produce goods, of U.S. domestic origin, destined to be used\nin the manufacture of Boeing LCA, to the exclusion of imported goods. 3500 Third, pursuant to the\nsubsidies, Boeing is to maintain employment levels in the United States that cannot be sustained\nwithout the use of U.S. domestic goods. 3501 Fourth, pursuant to the subsidies, Boeing is to locate\nsubstantial development and production activities in the United States, which necessarily implies\nthe use o f U.S. domestic goods. 3502 Finally, the United States favours the use of U.S. domestic\ngoods and labour, and conditions Boeing's behaviour by encouraging and directing Boeing to\nfavour U.S. domestic goods and labour, rewarding Boeing when it complies. 3503 Thus, the\nEuropean Union considers that, taken as a whole, or in any permutation, the facts and evidence\ndemonstrate that the granting or maintaining of the subsidies, without having been made legally\ncontingent/conditional upon the use of domestic over imported goods, is nevertheless tied to the\nuse of domestic over imported goods, and that the subsidies are thus contingent/conditioned in\nfact upon the use of domestic over imported goods, and are prohibited by Articles 3.1(b) and 3.2\nof the SCM Agreement.3504\n\n3495 European Union's first written submission, para. 758.\n3496 United States' first written submission, para. 674. Also see Canada's third-party submission,\nparas. 15 and 16; and Japan's third-party submission, paras, 29 and 32.\n3497 Appellate Body Report, EC and certain member States – Large Civil Aircraft, para. 1047.\n3498 European Union's first written submission, para. 764.\n3499 European Union's first written submission, para. 768.\n3500 European Union's first written submission, para. 769; and Illustrative Statements Relating to De\nFacto Contingency on the Use of Domestic Over Imported Goods, (Exhibit EU-583).\n3501 European Union's first written submission, para. 770; Illustrative Statements Relating to De Facto\nContingency on the Use of Domestic Over Imported Goods, (Exhibit EU-583).\n3502 European Union's first written submission, para. 771; Illustrative Statements Relating to De Facto\nContingency on the Use of Domestic Over Imported Goods, (Exhibit EU-583).\n3503 European Union's first written submission, para. 772; and Illustrative Statements Relating to De\nFacto Contingency on the Use of Domestic Over Imported Goods, (Exhibit EU-583).\n3504 European Union's first written submission, para. 776.\n\n10.31. The United States argues with respect to the European Union's claim of de facto\ncontingency of all challenged subsidies under Articles 3.1(b) and 3.2 that the European Union fails\nto make a prima facie case that the United States presently provides Boeing with subsidies\nprohibited under Articles 3.1(b) and 3.2. Indeed, the European Union fails to identify a single\nmeasure that confers a subsidy contingent on the use of domestic over imported goods. Rather\nthan look to the text or operation of any particular measure, the European Union offers a collection\nof miscellaneous statements (ranging from statements by the U.S. President to statements by low-\nlevel county and municipal officials ), unrelated to any particular measure, which, according to the\nEuropean Union, have conditioned Boeing's behaviour to use domestic over imported goods. These\nstatements are unremarkable and fail to demonstrate contingency within the meaning of Article\n3.1(b). At most, they suggest that Boei ng makes products in the United States and e mploys\nworkers there, and that some in the United States like the fact that they do.3505\n10.32. Brazil notes that the European Union relies on the same evidence in support of its claims\nunder Article 3.1(b) and Article III:4 of the GATT 1994 and argues that while bo th provisions\naddress discriminatory conduct, they differ in scope and substantive obligations. Thus, a violation\nof Article 3.1(b) of the SCM Agreement does not necessarily and directly imply a violation of\nArticle III:4 of the GATT 1994. Brazil also considers that the Illustrative Statements Relating to De\nFacto Contingency on the Use of Domestic Over Imported Goods submitted by the European Union\nare of limited probative value, particularly given the lack of any specific evidence relating to how\neach mea sure either is conditioned upon the use of domestic over imported goods or acts to\naccord less favourable treatment to imported products.3506\n10.33. Canada argues that whereas the prohibition in Article 3.1(b) of the SCM Agreement covers\nsituations where the granting of a subsidy is contingent on the recipient purchasing domestic over\nimported goods, the European Union's position in this proceeding improperly expands the scope of\nArticle 3.1(b) to cover subsidies contingent on the recipient producing a particular int ermediate\ngood.3507 Nothing in the GATT 1994 or the SCM Agreement prohibits a Member from making the\ngranting of a subsidy contingent on a recipient producing goods in its territory. In fact, GATT\nArticle III:8(b) explicitly allows WTO Members to provide subs idies only to their domestic\nproducers. A producer of a final good that is required to produce an intermediate good is also a\nproducer of the intermediate good. 3508 Furthermore, Canada argues that the GATT and the SCM\nAgreement do not limit a subsidizing Memb er's ability to define the level of production for subsidy\neligibility purposes. As part of that discretion, a Member may explicitly require the production of an\nintermediate good and may also implicitly require the production of an intermediate good by\nrequiring a subsidy recipient to produce a final good or use a particular level of labour in a way\nthat cannot be accomplished without producing an intermediate good. If a Member could not\nrequire the production of an intermediate good, that Member's ability to condition the provision of\na subsidy on a production requirement would be significantly curtailed because the production\nrequirement would then have to be limited to simple assembly operations.3509\n10.34. In this respect, Canada argues that the European Union's position that a subsidy requiring\nthe production of an intermediate good to be used in the production of a final good is contingent\nupon the use of a domestic over an imported good , contrary to Article 3.1(b) is incorrect, as\ndemonstrated by the Appellate Body decision in Canada – Autos. In assessing whether a measure\nproviding Canadian automobile manufacturers with an import duty exemption contingent inter alia\nupon a Canadian value added requirement violated Article 3.1(b) of the SCM Agreement, the\nAppellate Body found that the Canadian value added requirement would violate Article 3.1(b) only\nif it required the manufacturer to use domestic goods. The Appellate Body did not consider that a\nrequirement to use domestic labour, regardless of whether that requ irement implied the\nproduction of intermediate goods would violate Article 3.1(b).3510\n\n3505 United States' first written submission, para. 676 (referring to European Union's first written\nsubmission, para. 773); second written submission, paras. 631-633.\n3506 Brazil's third-party submission, paras. 60-70.\n3507 Canada's third-party submission, para. 20.\n3508 Canada's third-party submission, para. 21.\n3509 Canada's third-party submission, para. 22.\n3510 Canada's third-party submission, paras. 24 and 25.\n\n10.3.2 Evaluation by the Panel\n10.35. We examine the European Union's claims under Article s 3.1(b) and 3.2 insofar as we have\ndetermined these claims to be within the scope of this pro ceeding.3511 We recall that our\npreliminary ruling in Section 7.6.2 means that the European Union may validly make claims under\nArticles 3.1(b) and 3.2 of the SCM Agreement (and Article III:4 of the GATT 1994) only in respect\nof the post-2006 NASA and DOD aeronau tics R&D measures, the FAA aeronautics R&D measure,\nand the South Carolina measures that are otherwise within the Panel's terms of reference. 3512\nWhere we f ind, in Section 8 of this Report, that any measure in respect of which the European\nUnion may validly make claims under Articles 3.1(b) and 3.2 of the SCM Agreement is not a\nsubsidy within the meaning of Article 1 of the SCM Agreement, there obviously is no basis for a\nfinding that the measure is inconsistent with Article 3.1(b) as a subsidy that is contingent in law or\nin fact upon the use of domestic over imported goods.\n10.36. Therefore, o ur examination in the remainder of this Section concerns any measures in\nrespect of which we have ruled that the European Union's claim under A rticles 3.1(b) and 3.2 of\nthe SCM Agreement are within the scope of this proceeding and which we find to be subsidies,\nincluding subsidies not found to be specific under Articles 2.1 or 2.2.3513\n10.37. Article 3.1(b) of the SCM Agreement reads as follows:\nExcept as provided in the Agreement on Agriculture, the following subsidies, within\nthe meaning of Article 1, shall be prohibited:\n…\n(b) subsidies contingent, whether solely or as one of several other conditions, upon\nthe use of domestic over imported goods.\n\n10.38. The term \"contingent\" has the same meaning in Article 3.1(b) as in Article 3.1(a). 3514 A\nsubsidy is prohibited under Article 3.1(b) if it is conditional, i.e. dependent for its existence on the\nuse of domestic over imported goods. Article 3.1(b) applies to both c ontingency in law and\ncontingency in fact. 3515 While the Appellate Body has not yet discussed the question of the\nevidence required to establish that a subsidy is contingent in fact upon the use of domestic over\nimported goods, we can see no logical reason wh y the Appellate Body's pronouncements on the\nevidence required to establish de facto contingency under Article 3.1(a) would not also apply to\nArticle 3.1(b).\n10.39. As in the case of the European Union's claim that the subsidies at issue in this proceeding\nare c ontingent in fact upon export performance, we consider that the European Union fails to\nadequately support its claim that the subsidies at issue are contingent in fact upon the use of\ndomestic over imported goods through a proper analysis of the particular measures at issue. With\nrespect to none of these measures does the European Union attempt to support its claim through\nan analysis of \"the total configuration of the facts constituting and surrounding the granting of the\nsubsidy\", including design, nature , and operation of the measure. Instead, the European Union\nsubmits a document entitled Illustrative Statements Relating to De Facto Contingency on the Use\nof Domestic Over Imported Goods3516 containing \"a series of extracts from the documents relating\nto the subsidies\" and argues that the statements in this document \"refer expressly or by\nimplication to the fact\" that \"Boeing is to produce certain goods in the United States\", \"Boeing is to\nmaintain certain employment levels in the United States\", \"Boeing is t o locate substantial\ndevelopment or production activities in the United States\" and \"refer expressly to the use of US\ndomestic goods or labour, or a proxy thereof\". 3517 In fact, however, the European Union does not\n\n3511 See para. 10.2 above.\n3512 See para. 7.438 above.\n3513 See para. 10.16 above.\n3514 Appellate Body Report, Canada – Autos, para. 123.\n3515 Appellate Body Report, Canada – Autos, para. 143.\n3516 Illustrative Statements Relating to De Facto Contingency on the Use of Domestic Over Imported\nGoods, (Exhibit EU-583).\n3517 European Union's first written submission, paras. 769, 770, 771, and 772.\n\nexplain how these Illustrative Statements ac tually support these assertions in respect of any\nparticular measure. We note that many of these statements are quite general in nature and don't\npertain to the design, nature and operation of particular measures.\n10.40. Thus, for example, with regard to NASA aer onautics R&D measures, the document\nIllustrative Statements Relating to De Facto Contingency on the Use of Domestic Over Imported\nGoods includes the following statements:\nWith competition from foreign competitors greatly increasing, affordable, innovative\ntechnology is critically needed to help preserve the U.S. aeronautics industry market\nshare, jobs and balance of trade.\nIn discussing the future of aeronautics in the US, Senator George Allen (VA), Chair of\nthe Senate Science , Technology and Space Subcommi ttee, commented: \"So, the\nquestion is: does the United States intend to respond to this competitive challenge\nfrom the Europeans , and if so, when and how? I recognize that the aviation -related\nmanufacturing sector is a net exporter, representing many good -paying jobs for our\nfellow Americans. A loss of these jobs has a direct impact on the quality of life for our\nconstituents.\"\nThe President, Congress, and the NASA Administrator are emphasizing the value of\nNASA's research and technology base to U.S. indust ry in helping to increase industrial\ncompetitiveness, provide jobs and improve the quality of life and the balance of trade.\nThe taxpayers' investment in NASA is an investment in the international\ncompetitiveness of U.S. industry through partnerships that build upon NASA's\nresearch and make it available to U.S. industry.\nMaintenance of the United States aircraft industry's market position is critical for the\npreservation of high paying skilled jobs, a capable industrial base, and balance of\ntrade.3518\n10.41. We fail to see how statements of this general nature demonstrate that the particular\npost-2006 NASA aeronautics R&D subsidies are in fact conditioned upon the production of certain\ngoods in the United States, the maintenance of certain employment levels in the Un ited States or\nthe location of substantial development or production activities in the United States or that these\nsubsidies expressly refer to the use of domestic goods or labour, as arg ued by the\nEuropean Union. Moreover, even assuming these assertions a re factually correct with respect to\nthese measures, the European Union has not explained why this would be sufficient to conclude\nthat the measures are contingent upon the use of domestic over imported goods and thereby\ninconsistent with Article 3.1(b). Thus, the European Union contends on the basis of the Illustrative\nStatements in its Exhibit that \"Boeing is to produce certain goods in the United States, which are\nthus goods of US origin, and which are destined to be used in the manufacture of Boeing LCA , to\nthe exclusion of imported goods\". The European Union does not state the legal basis for its\napparent view that if the recipient of a subsidy \"is to produce certain goods in the Un ited States\"\nand these goods \"are destined to be used in the manufacture of Boeing LCA\", the subsidy is\nthereby contingent upon \"the use of domestic goods over imported goods\".\n10.42. With respect to several other measures the statements in the document Illustrative\nStatements Relating to De Facto Contingency on the Use of Domestic Over Imported Goods are\nsomewhat more directly related to the particular measures than in the case of the NASA\naeronautics R&D measures. In particular, the document contains statements pertaining to some of\nthe South Carolina measures that we find to be subsidies in Section 8.2.8 of this Report. In respect\nof some of those South Carolina measures, the evidence in this document indicates that they are\nsubject to conditions relating to levels of employment and/or i nvestment or the location of\nproduction, as also discussed elsewhere in this Report. In contrast, we see no statements that\nrefer expressly to the use of domestic U.S. goods as a condition of eligibility for these subsidies.\nThe European Union does not exp lain with respect to any particular measure why the existence of\nsuch conditions relating to employment, investment or location of production means that the\n\n3518 Illustrative Statements Relating to De Facto Contingency on the Use of Domestic Over Imported\nGoods, (Exhibit EU-583), pp. 6 and 7.\n\nmeasure is in fact contingent upon the use of domestic over imported goods within the meaning of\nArticle 3.1(b) of the SCM Agreement.\n10.43. For these reasons, to the extent that we have ruled that the European Union's\nclaims under Articles 3.1(b) and 3.2 are within the scope of this proceeding , we reject\nthese claims as unfounded because: (a) certain measures challenged by the\nEuropean Union are not subsidies provided to Boeing after the end of the\nimplementation period; and (b) where we f ind the measures to be subsidies provided to\nBoeing after the end of the implementation period , the European Union has fai led to\nestablish that any of these subsidies is contingent in fact upon the use of domestic over\nimported goods.\n10.4 Whether the United States is maintaining measures inconsistent with Article III:4\nof the GATT 1994\n10.44. The European Union submits that the United States maintains measures inconsistent, in\nlaw or in fact, with Article III:4 of the GATT 1994. This claim concerns all measures challenged in\nthis proceeding.3519 The European Union argues that t hrough the subsidies granted or maintained\nby the United States , it grants less favourable treatment to imported parts and materials capable\nof being used in the production of Boeing LCA, when compared with domestic parts, with respect\nto the internal sale, offering for sale, purchase, transportation, distribution or use. As with its claim\nunder Article 3.1(b) of the SCM Agreement, the European Union's claim under Article III:4 of the\nGATT 1994 is based on its arguments, and evidence in support thereof, that Boeing is to produce\ngoods, of U.S. domestic origin, destined to be used in the manufacture of Boeing LCA, to the\nexclusion of imported goods; that Boeing is to maintain employment levels in the United States\nthat cannot be sustained without the use of U.S. domestic products or materials; that Boeing is to\nlocate su bstantial development and production activities in the United States, which necessarily\nimplies the use of U.S. domestic products or materials; and that the United States favours the use\nof U.S. domestic products or materials and labour, and conditions Boe ing's behaviour by\nencouraging and directing Boeing to favour U.S. domestic goods and labour, rewarding Boeing\nwhen it complies. 3520 The measures at issue are applied so as to afford protection to domestic\nproduction of parts and materials capable of being us ed in the production of Boeing LCA, and are\ntherefore inconsistent with Article III:4 of the GATT 1994.3521\n10.45. The United States rejects the European Union's argument that all measures challenged in\nthis proceeding are also inconsistent with Article III:4 of the GATT 1994. Indeed, the United States\nargues that it is impossible to discern the legal or factual basis for this claim, as it consists entirely\nof a cross-reference to the European Union's factual and legal arguments regarding Article 3.1(b)\nof the SCM Agreement, which applies an entirely different legal standard. This approach of treating\ntwo separate provisions of the covered agreements as being essentially the same fails to meet the\nEuropean Union's burden of proof to establish an inconsistency with Art icle III:4 of the\nGATT 1994.3522 Furthermore, the exhibit that the European Union relies on in its Article 3.1(b)\nclaim and references in its Article III:4 claim, consisting of statements by federal, state, and local\nofficials, entirely fails to explain the a lleged connection between the statements and the factual or\nlegal conclusions it asks the Panel to draw. At most, these statements suggest that Boeing makes\nproducts in the United States and employs workers there, and that some in the United States like\nthe fact that they do.3523\n10.46. We note that in support of its claim under Article III:4, the European Union makes the\nsame factual assertions and relies upon the same evidence as in res pect of its claim under\nArticle 3.1(b) of the SCM Agreement. We thus reject the European Union's claim for the\nsame reasons that we have rejected its claim under Article 3.1(b). First, the European\nUnion fails to substantiate its factual assertions through a sufficiently detailed\ndiscussion of the particular measures at issue . Second , the European Union does not\nprovide sufficient reasoning to explain how these factual assertions, even assuming they\n\n3519 European Union's first written submission, para. 786.\n3520 European Union's first written submission, para. 787; second written submission, para. 862.\n3521 European Union's first written submission, para. 788; second written submission, para. 863.\n3522 United States' second written submission, paras. 638-640.\n3523 United States' second written submission, para. 640 (referring to Illustrative Statements Relating to\nDe Facto Contingency on the Use of Domestic Over Imported Goods, (Exhibit EU-583)).\n\nwere correct, would warrant a fin ding of inconsistenc y with Article II I:4 of the\nGATT 1994.\n10.5 Conclusion\n10.47. We conclude that:\na. To the extent that we have ruled that the European Union's clai ms under Articles 3.1(a),\n3.1(b) and Article 3.2 of the SCM Agreement are within the scope of this proceeding,\nthese claims are unfounded because: (i) certain measur es challenged by the\nEuropean Union are not subsidies provided to Boeing after the end of the implementation\nperiod; and (ii) where we f ind that the measures at issue are subsidies provided to\nBoeing after the end of the implementation period, the European Union has failed to\nestablish that any of these subsidies is contingent in fact upon export performance or\nupon the use of domestic over imported goods.\nb. To the extent that we have ruled that the European Union's claims under Article III :4 of\nthe GATT 1994 are within the scope o f this proceeding, the European Union has failed to\nestablish that any of the measures at issue is inconsistent with Article III:4 of the\nGATT 1994.\n11 CONCLUSIONS AND RECOMMENDATIONS\n11.1. We recall that our task in this proceeding under Article 21.5 of the DSU is to resolve a\n\"disagreement as to the existence or consistency with a covered agreement of measures taken to\ncomply with the recommendations and rulings\" of the DSB. The European Union claims that the\nUnited States has failed to implement the DSB recommendations in US – Large Civil Aircraft (2 nd\ncomplaint) to withdraw the subsidies or take appropriate steps to remove the adverse effects,\npursuant to Article 7.8 of the SCM Agreement. The European Union also claims that the measures\nat issue in this proceeding are inconsisten t with Articles 3.1(a), 3.1(b), and 3.2 of the SCM\nAgreement and Article III:4 of the GATT 1994. The United States maintains that it has complied\nfully with the DSB recommendations and rulings by either withdrawing the relevant subsidies or\ntaking appropriate steps to remove their adverse effects.\n11.2. In this Section of the Report, we provide a summary of the conclusions we have reached in\nthe preceding Sections and formulate our overall conclusion as to whether the United States has\nfailed to comply with the DSB recommendations and rulings.\nRulings on the terms of reference and scope of the proceeding\n11.3. In Section 7 of this Report, the Panel has considered a large number of questions arising out\nof a request of the United States that the Panel rule that certain measures, and claims of the\nEuropean Union with regard to certain measures, are outside the Panel's terms of reference\nbecause the European Union's panel request does not satisfy the requirements of Article 6.2 of the\nDSU; and that certain measures, and cl aims of the European Union with regard to certain\nmeasures, are outside the scope of this compliance proceeding.3524\n11.4. In respect of whether certain measures, and claims with respect to certain measures, are\noutside our terms of reference for purposes of Articl e 6.2 of the DSU, we have made the following\nrulings:\na. the European Union's claims under Articles 3.1(a), 3.1(b), and 3.2 of the SCM\nAgreement, and under Article III :4 of the GATT 1994, are within the Panel's terms of\nreference3525;\n\n3524 See para. 7.1 above.\n3525 The Panel's ruling that the European Union's claims under Articles 3.1(a), 3.1(b), and 3.2 of the\nSCM Agreement, and under Article III of the GATT 1994, are within its terms of reference is without prejudice\nto its further rulings, in para. 11.6 below, as to whether these claims in respect of certain measures are\nnevertheless outside the scope of this compliance proceeding.\n\nb. the South Carolina Phase II measures are outside the Panel's terms of reference, owing\nto the failure of the European Union's panel request to m eet the requirements of\nArticle 6.2 of the DSU in respect of such measures; and\nc. the Washington State tax measures, as amended by SSB 5952 , are outside the Panel's\nterms of reference, owing to the failure of the European Union's panel request to meet\nthe requirements of Article 6.2 of the DSU in respect of such measures.\n11.5. In respect of whether certain measures are outside the scope of this compliance proceeding,\nwe have made the following rulings:\na. the following measures are within the scope of this compliance proceeding:\ni. the Washington State B&O tax credits for preproduction/aerospace product\ndevelopment3526; the Washington State B&O tax credit f or property taxes and\nleasehold excise taxes 3527; the Washington State sales and use tax exemptions for\ncomputer software, hardware, and peripherals ; and the City of Everett B&O tax rate\nreduction;\nii. DOD procurement contracts funded under the 23 original RDT&E program elements;\niii. DOD procurement contracts HR0011-06-C-0073 and HR -0011-08-C-0044 SOW and\nassistance instruments HR0011 -06-2-0008, FA8650 -07-2-7716, and\nHR0011-10-2-0001 funded under the Materials Processing Technology Project of the\nMaterials and Biological Technology program element;\niv. the provision of access to DOD equipment and employees through the post -2006\nDOD procurement contracts and assistance instruments funded under the 23 original\nRDT&E program elements and the \"additional\" program elements that we have found\nto be within the scope of this proceeding;\nv. the FAA aeronautics R&D measure; and\nvi. the South Carolina Project Gemini measures and the Project Emerald measures.\nb. the following measures are outside the scope of this compliance proceeding:\ni. the Washington State JCATI measure;\nii. Air Force Contract F19628-01-D-0016 funded under the DRAGON Project of the\nAirborne Warning and Control System (AWACS) (PE 0207417F) program element; Air\nForce Contract FA8625-11-C-6600 funded under the KC -46, Next Generation Aerial\nRefueling Aircraft (PE 0605221F) program element ; and measures funded under the\nMulti-Mission Mari time Aircraft (P -8A) (PE 0605500N) program element, including\nNavy contracts N00019-04-C-3146, N00019-09-C-0022, and N00019-12-C-01123528;\nand\niii. the provi sion of access to DOD equipment and employees through the pre -2007\nprocurement contracts and assistance instruments funded under the 23 original\nRDT&E program elements.\n11.6. In addition to the above, with respect to whether claims of the European Union with reg ard\nto certain measures are outside the scope of this compliance proceeding , we have made the\nfollowing rulings:\n\n3526 Including amendments thereto pursuant to SSB 6828.\n3527 Including amendments thereto pursuant to HB 2466.\n3528 The Panel has also ruled that claims concerning the Technology Transfer program element, the IP\nManTech program element and the Long Range Strike Bomber program element are not further considered in\nthis proceeding because the Panel is not satisfied of the existence of any procurement contracts or assistance\ninstruments with Boeing which the European Union identifies as relevant to its claims which are funded through\nthese program elements.\n\na. the European Union is precluded from bringing claims under Articles 3.1(a) and 3.2 of\nthe SCM Agreement against the following four original Was hington State tax measures\nenacted under HB 2294: the Washington State B&O tax rate reduction; the Washington\nState B&O tax credits for preproductio n/aerospace product development 3529; the\nWashington State B&O tax credit for property taxes 3530; and the Washington State sales\nand use tax exemptions for computer hardware, peripherals, and software.\nb. the European Union is precluded from bringing claims under Article s 3.1(b) and 3.2 of\nthe SCM Agreement, and under Article III:4 of the GATT 1994, in respect of the following\nfour original Washington State tax measures enacted under HB 2294: the Washington\nState B&O tax rate reduction; the Washington State B&O tax credits for\npreproduction/aerospace product development3531; the Washington State B&O tax credit\nfor property t axes3532; and the Washington State sales and use tax exemptions for\ncomputer hardware, peripherals, and software; as well as the FSC/ETI measures.\nc. the European Union is precluded from bringing claims under Articles 3.1(a), 3.1(b), and\n3.2 of the SCM Agreement and under Article III:4 of the GATT 1994 in respect of:\ni. the City of Everett B&O tax rate reduction, the tax abatements related to the City of\nWichita IRBs, and the pre -2007 NASA Space Act Agreements and DOD procurement\ncontracts at issue in the original proceeding; and\nii. the pre-2007 NASA procurement contracts and DOD assistance instruments at issue\nin the original proceeding, as amended by the respective Boeing Patent Licence\nAgreements.\nConclusions with respect to whether the United States has failed to wi thdraw the\nsubsidy within the meaning of Article 7.8 of the SCM Agreement\n11.7. With respect to the European Union's claim that the United States has failed to withdraw the\nsubsidy within the meaning of Article 7.8 of the SCM Agreement , the Panel concludes as follows in\nSection 8 of this Report:\na. with regard to pre-2007 NASA and DOD aeronautics R&D subsidies that were the subject\nof the DSB recommendations and rulings, the European Union has established that the\nmodifications made by the United States through the Boeing Patent Licence Agreements\nto the terms of the pre -2007 NASA procurement contracts and DOD assistance\ninstruments do not constitute a withdrawal of the subsidy within the meaning of\nArticle 7.8 of the SCM Agreement and that the United States, having taken no action in\nrespect of pre-2007 Space Act Agreements, has failed to withdraw the subsidy within the\nmeaning of Article 7.8 of the SCM Agreement.\nb. with regard to the post -2006 measures of the United States challenged in this\nproceeding, the European Union has established that the following measures involve\nspecific subsidies within the meaning of Articles 1 and 2 of the SCM Agreement, and that\nby granting or maintaining these specific subsidies after the end of the implementation\nperiod, the United St ates has failed to withdraw the subsid y within the meaning of\nArticle 7.8 of the SCM Agreement:\ni. certain transactions between NASA and Boeing pursuant to post -2006 NASA\nprocurement contracts, cooperative agreements, and Space Act Agreements, with\nrespect to which we are unable to estimate the amount of the subsidy on the basis of\nthe evidence on the record, but consider the United States' estimate of the amount\nof the financial contribution at [***] between 2007 and 2012 to be a credible\nestimate;\n\n3529 Including amendments thereto pursuant to SSB 6828.\n3530 Including amendments thereto pursuant to HB 2466.\n3531 Including amendments thereto pursuant to SSB 6828.\n3532 Including amendments thereto pursuant to HB 2466.\n\nii. certain transactions between DOD and Boeing pursuant to post-2006 DOD assistance\ninstruments, with respect to which we are unable to estimate the amount of the\nsubsidy on the basis of the evidence on the record, but consider the United States'\nestimate of the amount of the financial contribution at [***] between 2007 and\n2012 to be a credible estimate;\niii. transactions pursuant to the Boeing CLEEN Agreement with respect to which we are\nunable to estimate the amount of the subsidy on the basis of the evidence on the\nrecord, but consider the European Union's estimate of the amount of the financial\ncontribution at USD 27.99 million between 2010 and 2014 to be a credible estimate;\niv. Washington State B&O tax rate reduction for the aerospace industry, in the amount\nof USD 325 million between 2013 and 2015;\nv. Washington State B&O tax credits for preproduction/aerospace product development,\nas amended by section 7 of SSB 6828, in the amount of [***] between 2013 and\n2015;\nvi. Washington State B&O tax credit for property taxes, as amended by HB 2466 to\ninclude leasehold excise taxes, in the amount of [***] between 2013 and 2015;\nvii. Washington State sales and use tax exemptions for computer software, hardware,\nand peripherals, in the amount of [***] between 2013 and 2015;\nviii. City of Everett B&O ta x rate reduction, in the amount of USD 54.1 million between\n2013 and 2015;\nix. payments made by South Carolina pursuant to commitments made in the Project\nGemini Agreement to compensate Boeing for a portion of the costs incurred by\nBoeing in respect of the con struction of the Gemini facilities and infrastructure\nthrough air hub bond proceeds, in the amount of USD 50 million;\nx. South Carolina property tax exemption for Boeing's large cargo freighters, in the\namount of USD 25.82 million between 2013 and 2015; and\nxi. South Carolina sales and use tax exemptions for aircraft fuel, computer equipment ,\nand construction materials, in the amount of USD 2. 25 million between 20 13 and\n2015;\nc. the European Union has failed to establish that the following measures involve specific\nsubsidies within the meaning of Articles 1 and 2 of the SCM Agreement, and has\ntherefore failed to establish that by granting or maintaining these specific subsidies after\nthe end of the implementation period, the United States has failed to withdraw the\nsubsidy within the meaning of Article 7.8 of the SCM Agreement:\ni. certain transactions between DOD and Boeing pursuant to pre -2007 and post -2006\nDOD procurement contracts, on the grounds that, assuming arguendo that these\nmeasures were to involve financial con tributions within the meaning of\nArticle 1.1(a)(1) of the SCM Agreement, they do not confer a benefit on Boeing\nwithin the meaning of Article 1.1(b) of the SCM Agreement;\nii. tax exemptions and exclusions under FSC/ETI legislation and successor legislation,\non the grounds that the European Union has failed to establish that Boeing actually\nreceived the FSC/ETI tax benefits after 2006, and that the measure therefore\ninvolves a financial contribution within the meaning of Article 1.1(a)(1)(ii) of the SCM\nAgreement;\niii. tax abatements provided through IRBs issued by the City of Wichita, on the grounds\nthat these tax abatements are no longer specific within the meaning of Article 2.1(c)\nof the SCM Agreement and, as a result, the measure is no longer subject to the\nprovisions of the SCM Agreement on actionable subsidies;\n\niv. South Carolina sublease of the Project Site, on the grounds that the European Union\nhas failed to establish that the sublease involves a subsidy to Boeing;\nv. South Carolina provision of Gemini and Emerald f acilities and infrastructure, on the\ngrounds that the European Union has failed to establish that these measures involve\nfinancial contributions within the meaning of Article 1.1(a)(1)(iii) of the SCM\nAgreement;\nvi. South Carolina fee -in-lieu-of taxes arrangem ents set forth in the Boeing F ILOT\nAgreement and Project Emerald F ILOT Agreement, on the grounds that these\narrangements are not specific within the meaning of Article 2 of the SCM Agreement;\nvii. South Carolina corporate income tax credits in connection with the designation of the\nProject Gemini and Project Emerald portions of the Project Site as part of the same\nmulti-county industrial park, on the grounds that the tax credits are not specific\nwithin the meaning of Article 2 of the SCM Agreement;\nviii. South Carolin a Income Allocation and Apportionment Agreement, on the grounds\nthat the European Union has failed to establish that the agreement involves a\nfinancial contribution within the meaning of Article 1.1(a)(1)(ii) of the SCM\nAgreement; and\nix. South Carolina workforce recruitment, training and development programme, on the\ngrounds that the programme is not specific within the meaning of Article 2 of the\nSCM Agreement.\nConclusions with respect to whether the United States has failed to take appropriate\nsteps to remov e the adverse effects within the meaning of Article 7.8 of the SCM\nAgreement\n11.8. With respect to the European Union's claim that the United States has failed to comply with\nits obligation to take appropriate steps to remove the adverse effects within the mean ing of\nArticle 7.8 of the SCM Agreement, the Panel concludes as follows in Section 9 of this Report:\na. the European Union has failed to establish that the effects of certain aeronautics R&D\nsubsidies and other subsidies are a genuine and substantial cause o f significant lost\nsales, significant price suppression, impedance of imports to the United States market or\nimpedance of exports to various third country markets, or threats of any of the\nforegoing, within the meaning of Articles 5(c) and 6.3(a), (b) , and (c) of the SCM\nAgreement in respect of the A350XWB in the post-implementation period;\nb. the European Union has failed to establish that the original adverse effects of the pre -\n2007 aeronautics R&D subsidies in respect of the A330 and Original A350 continue in the\npost-implementation period as significant price suppression of the A330 and A350XWB,\nsignificant lost sales of the A350XWB, or a threat of impedance of exports of the\nA350XWB in the twin -aisle LCA market, within the meaning of Articles 5(c) and 6.3( a),\n(b), and (c) of the SCM Agreement in the post-implementation period;\nc. the European Union has established that the effects of the Washington State B&O tax\nrate reduction are a genuine and substantial cause of significant lost sales within the\nmeaning of Articles 5(c) and 6.3(c) of the SCM Agreement of A320neo and A320ceo\nfamilies of LCA in the single -aisle LCA market, in respect of the sales campaigns for Fly\nDubai in 2014, Air Canada in 2013, and Icelandair in 2013, in the post -implementation\nperiod;\nd. the European Union has established that the effects of the Washington State B&O tax\nrate reduction are a genuine and substantial cause of a threat of impedance of imports\nof the A320ceo to the United States single -aisle market, and a threat of impedance of\nexports of Airbus single -aisle LCA in the United Arab Emirates third country market ,\nwithin the meaning of Articles 5(c) and 6.3(a) and (b) of the SCM Agreement in the\npost-implementation period; and\n\ne. the European Union has failed to establish that the effect s of the pre-2007 aeronautics\nR&D subsidies and the post -2006 subsidies are a genuine and substantial cause of\nsignificant price suppression of the A320neo or A320ceo, impedance of imports of the\nA320neo or A320ceo to the United States market , or displacement and impedance of\nexports of the A320neo or A320ceo to the third country markets of Australia, Brazil,\nCanada, Iceland, Indonesia, Malaysia, Mexico, Norway, Russia, and Singapore, within\nthe meaning of Articles 5(c) and 6.3(a), (b), and (c) of the SCM Agreement, or threats of\nany of the foregoing, in the post-implementation period.\nConclusions with respect to whether the United States ac ts inconsistently with\nArticles 3.1 and 3.2 of the SCM Agreement and Article III:4 of the GATT 1994\n11.9. With respect to th e European Union's claims under Articles 3.1 and 3.2 of the SCM\nAgreement and Article III:4 of the GATT 1994 , the Panel concludes as follows in Section 10 of this\nReport:\na. to the extent that the Panel has found that the claims are within the scope of this\nproceeding, and that the measures at issue are subsidies within the meaning of Article 1\nof the SCM Agreement, the European Union has not established that the subsidies are\ninconsistent with Articles 3.1(a) and 3.2 or 3.1(b) and 3.2 of the SCM Agreement; and\nb. to the extent that the Panel has found that the claims are within the scope of the\nproceeding, the European Union has not established that the measures at issue are\ninconsistent with Article III:4 of the GATT 1994.\nConclusion with respect to whether the United States has complied with the DSB\nrecommendations and rulings\n11.10. In light of the foregoing, we conclude that by continuing to be in violation of Articles 5(c)\nand 6.3(a), (b), and (c) of the SCM Agreement, the United States has failed to comply with th e\nDSB recommendations and rulings and, in particular, the obligation under Article 7.8 of the SCM\nAgreement to \"take appropriate steps to remove the adverse effects or … withdraw the subsidy\".\n11.11. Under Article 3.8 of the DSU, in cases where there is an infrin gement of the obligations\nassumed under a covered agreement, the action is considered prima facie to constitute a case of\nnullification or impairment. We conclude that, to the extent that the measures at issue are\ninconsistent with the SCM Agreement, they have nullified or impaired the benefits accruing to the\nEuropean Union under that Agreement.\n11.12. We therefore conclude that the United States has failed to implement the DSB\nrecommendations and rulings to bring its measures into conformity with its obligations under the\nSCM Agreement. To the extent that the United States has failed to comply with the DSB\nrecommendations and rulings in the original dispute, those recommendations and rulings remain\noperative.\n\nAPPENDIX 1\nBCI APPENDIX\nIntroduction\n1. The parties ha ve submitted a number of collaborative R&D agreements in this proceeding as\nevidence of private collaborative R&D arrangements which are alleged to serve as relevant\nmarket benchmarks for determining whether certain of the aeronautics R&D measures before\nthe Panel confer a benefit on Boeing. In this Appendix, we set forth our evaluation of the\nallocation of intellectual property rights and rights resulting therefrom (i.e. licence rights)\nunder these collaborative R&D arrangements. We discuss five separate g roupings of these\nprivate collaborative R&D agreements.\n2. The first comprises the six BCI contracts between Boeing as commissioning party, and\nresearch institutes and for -profit entities as commissioned party , that were submitted in the\noriginal proceeding (designated by the Appellate Body as Contracts A through F). These\ncontracts were the basis for the Appellate Body's conclusion, in the context of completing the\nanalysis, that the allocation of patent rights under the NASA procurement contracts and DOD\nassistance instruments was more favourable to Boeing as commissioned party than the\ncorresponding allocations to the commissioned parties in Contracts A through F.\n3. The second consists of a total of 18 private, commercial collaborative R&D agreements\nsubmitted by the United States' and European Union's technology licensing experts. The United\nStates' expert, Louis P. Berneman, identified six private collaborative R&D agreements, five of\nwhich were drawn from his search of the Recap database, as examples of act ual,\nmarket-based arm's-length R&D collaborations in the biopharmaceutical industry. 1 The search\ncriteria were: (a) co -development; (b) collaboration; (c) joint venture; or (d) research. 2 The\nsixth is a Services Agreement between Plug Power Inc. and the Ge neral Electric Company. 3\nThe European Union's expert, Richard A. Razgaitis, identified a further 12 private, commercial\ncollaborative R&D agreements covering the same industry by replicating Berneman's Recap\ndatabase search criteria but restricting the dat e range from January 2007 to September 2012.\nFrom the results, he then narrowed his focus to agreements that produced non -confidential\nvalues for R&D expenditures and which he considered were \"reasonably comparable in\nbusiness purpose and structure to the U.S. Government R&D contracts with Boeing that are at\nissue in this dispute\".4\n4. The third comprises two private collaborative R&D agreements identified by Mr Razgaitis\nin which the commissioning party is not a commercial actor, but a not -for-profit foundation\n(which does not have a commercial interest in the intellectual property rights resulting from\nthe research), also in the biopharmaceutical industry and identified as part of the Recap\ndatabase search.\n5. The fourth is the standard terms and conditions of t he Wichita State University\nNational Institute for Aviation Research (NIAR ) in respect of industry research\ncollaborations in which NIAR is the commissioned party.5\n6. The fifth is a research and technology framework agreement between Airbus SAS and\nan unnamed university, in which Airbus is the commissioning party.\n\n1 Berneman explains that Recap is a commercially available subscription database which contains\nrecords of R&D collaborations, licences, and other alliances in the biopharmaceutical industry, including those\nbetween commercial firms. (Berneman Declaration, (Exhibit USA-322) (BCI), para. 18 and fn 15).\n2 Berneman explains that he additionally focused on alliances entered into when the research project\nwas in relatively early stages, focusing on alliances classified by Recap as \"discovery\", \"lead molecule\",\n\"formulation\" or \"preclinical\". (Berneman Declaration, (Exhibit USA-322) (BCI), para. 18 and fn 15).\n3 Services Agreement between Plug Power Inc. and General Electric Company (17 March 2000) (Plug\nPower-GE Contract), (Exhibit USA-354).\n4 Razgaitis Declaration, (Exhibit EU-1262) (BCI), para. 54.\n5 NIAR is the largest university aviation R&D institution in the United States. It provides research,\ndesign, testing, and certification services to the aviation manufacturing agencies, government agencies,\neducational entities, and other entities. (Statement of J. Tomblin, Executive Director of the National Institute\nfor Aviation Research, (Exhibit USA-263)).\n\n7. In the context of our discussion of these categories of collaborative R&D agreements, we also\nrefer to the expert opinions of both Mr Berneman and Mr Razgaitis where appropriate.\n[***6 ***7 ***8 ***9 ***10 ***11 ***12 ***13 ***14 ***15 ***16 ***17 ***18 ***19 ***20\n***21 ***22 ***23 ***24 ***25 ***26 ***27 ***28 ***29 ***30 ***31 ***32 ***33 ***34 ***35\n***36 ***37 ***].\nThe 18 private, commercial collaborative R&D agreements identified by Berneman and\nRazgaitis\n28. As previously n oted, the United States' expert, Mr Berneman, and the European Union's\nexpert, Mr Razgaitis, each discussed [***] as well as identifying a number of additional\nprivate, commercial collaborative R&D agreements in the biopharmaceutical industry. 38 Both\n\n6 [***\n7 ***\n8 ***\n9 ***\n10 ***\n11 ***\n12 ***\n13 ***\n14 ***\n15 ***\n16 ***\n17 ***\n18 ***\n19 ***\n20 ***\n21 ***\n22 ***\n23 ***\n24 ***\n25 ***\n26 ***\n27 ***\n28 ***\n29 ***\n30 ***\n31 ***\n32 ***\n33 ***\n34 ***\n35 ***\n36 ***\n37 ***]\n38 Mr Berneman identified the following six private, commercial collaborative R&D agreements: (1)\nCollaborative Pronet Research and Licence Agreement between Myriad Genetics, Inc. and Monsanto Company\n(11 November 1989) (Monsanto-Myriad Contract), (Exhibit USA-351); (2) Sponsored Research Agreement\nbetween Pfizer, Inc. and T Cell Sciences, Inc. (1 August 1989) (Pfizer-T Cell Sciences Contract), (Exhibit\nUSA-353); (3) Collaboration Agreement between American Home Products Corporation and Athena\nNeurosciences, Inc. (1 April 1995) (American Home-Athena Neurosciences Contract), (Exhibit USA-355); (4)\nAgreement between Bayer AG and Oxford GlycoSciences (UK), Inc. (7 March 2000) (Bayer-Oxford Glyco\nSciences Contract), (Exhibit USA-352); (5) Research Collaboration and Option Agreement between Emisphere\nTechnologies, Inc. and Eli Lilly and Company (26 February 1997) (Lilly-Emisphere Contract), (Exhibit\nUSA-356); (6) Plug Power-GE Contract, (Exhibit USA-354). Mr Razgaitis identified an additional 12: (1) License\nAgreement between Sangamo BioSciences, Inc. and Sigma-Aldrich Co. (10 July 2007) (Sigma-Sangamo\nContract), (Exhibit USA-376); (2) Collaboration and License Agreement between Isis Pharmaceuticals, Inc. and\nBristol-Myers Squibb Company (8 May 2007) (BMS-Isis Contract), (Exhibit USA-378); (3) Research\nDevelopment and License Agreement between Aveo Pharmaceuticals, Inc. and Schering Corporation (23 March\n2007) (Schering-Aveo Contract), (Exhibit USA-377); (4) Co-Development and Commercialization Agreement\nbetween Astellas Pharma, Inc. and Maxygen, Inc. (18 September 2008) (Astellas-Maxygen Contract), (Exhibit\nEU-1328); (5) License and Collaboration Agreement between Aventis Pharmaceuticals, Inc., Sanofi-Aventis\nAmerique du Nord and Regeneron Pharmaceuticals, Inc. (28 November 2007) (Aventis-Regeneron Contract),\n(Exhibit USA-497); (6) Collaborative Research and License Agreement between Archemix Corp. and Merck,\nKGaA (17 January 2007) (Merck-Archemix Contract), (Exhibit USA-379); (7) Collaboration and License\nAgreement between Synta Pharmaceuticals Corp and F. Hoffmann-La Roche, Ltd. (23 December 2008)\n(Roche-Synta Contract), (Exhibit USA-375); (8) Collaborative Research and License Agreement between\n\nexperts appear to agree generally that overall, these private collaborative R&D agreements\nreflect commissioning and commissioned parties bargaining at arm's length to reach a\nmarket-based apportionment of relevant technology and intellectual property rights as well as\nassociated licence rights in their contracts.39\n29. Mr Berneman opines, with respect to the six private, commercial collaborative R&D\nagreements that he discusses, that there is no single competitive or market outcome with\nrespect to the intellectual p roperty allocation terms of collaborative R&D agreements. 40\nMoreover, he notes that rights to make, use and sell products covered by inventions and\nknowledge conceived and reduced to practice in the course of R&D collaboration (i.e.\ncommercial use rights gr anted by licences) may be as important as the ownership of\nintellectual property. The scope of the rights granted by a licence will vary according to the\nR&D collaboration and the needs, wants, and situation of the parties, but can involve\nexclusivity, ter ritory, duration, as well as consideration such as up -front payments and\nroyalties. Collaborative R&D arrangements can also include provisions regarding rights to use\ndata resulting from the collaboration internally, and potentially for future research.41\n30. Mr Razgaitis considers, on the basis of the 12 private, collaborative R&D agreements that he\nidentifies in which the commissioning party is a commercial actor, that the \"market -typical\"\nR&D contracting arrangements range from the commissioning party owning all of the\nforeground intellectual property, to a right to receive multiples of the total R&D funding level,\nto a combination of non -exclusive and exclusive rights to the foreground intellectual property,\ntogether in some cases with the right to sublicense to third parties in exchange for intellectual\nproperty payments such as royalties.42\n31. Our review of the six private, commercial collaborative R&D agreements identified by Mr\nBerneman, and the 12 identified by Mr Razgaitis, indicates that the allocation of intellectual\nproperty rights varies from being exclusively held either by the commissioned or\ncommissioning party, to being held by the party whose employees made the invention or\njointly held in case of joint inventions. With respect to related licence ri ghts, where the\ncommissioning party does not already own the intellectual property rights 43, it automatically\nreceives in the overwhelming majority of cases an exclusive, royalty -bearing licence in\nforeground intellectual property for commercial use purpose s (typically including the right to\nsublicense).44 In addition to the above, many contracts also provide for the grant of a\n\nIcagen, Inc. and Pfizer, Inc. (13 August 2007) (Pfizer-Icagen Contract), (Exhibit EU-1330); (9) License and\nCollaboration Agreement between Gilead Sciences, Inc., Gilead Sciences Limited and Tibotec Pharmaceuticals\n(16 July 2009) (Gilead-Tibotec Contract), (Exhibit USA-374); (10) Collaboration and License Agreement\nbetween Acadia Pharmaceuticals, Inc. and Meiji Seika Kaisha, Ltd. (24 March 2009) (Meiji-Acadia Contract),\n(Exhibit EU-1292); (11) Collaboration and License Agreement between Hoffman-La Roche, Inc. and Metabasis\nTherapeutics, Inc. (7 August 2008) (Roche-Metabasis Contract), (Exhibit EU-1331); (12) Master Laboratory\nServices Agreement between Intercept Pharmaceuticals and WIL Research Laboratories LLC (2 October 2007),\nattachment C to Razgaitis Declaration, (Exhibit EU-1262) (BCI).\n39 Berneman Declaration, (Exhibit USA-322) (BCI), para. 18; and Razgaitis Declaration, (Exhibit\nEU-1262) (BCI), para. 49.\n40 Berneman Declaration, (Exhibit USA-322) (BCI), para. 64.\n41 Berneman Declaration, (Exhibit USA-322) (BCI), paras. 10-17.\n42 Razgaitis Declaration, (Exhibit EU-1262) (BCI), para. 61.\n43 That is all 18 contracts discussed in this Section except the Intercept Pharmaceuticals-WIL Contract\n(Razgaitis Declaration, (Exhibit EU-1262) (BCI), attachment c), in which the commissioning party owns all\ncollected data, discoveries, inventions and improvements arising from any commissioned research and the\ncommissioned party retains only its background intellectual property rights related to testing methods,\npractices, and procedures. (Ibid. section 8(a)).\n44 Gilead-Tibotec Contract, (Exhibit USA-374), section 9.1(a) – commissioning party automatically\nreceives co-exclusive, royalty-free licence to commercialize combination product, and exclusive, royalty-free\nlicence to exploit certain other products; Pfizer-T Cell Sciences Contract, (Exhibit USA-353), Exclusive patent\nlicence agreement, pdf p. 38, section 2, and Exclusive technology licence agreement, pdf p. 62, section 2; Plug\nPower-GE Contract, (Exhibit USA-354), section 4(b); Sigma-Sangamo Contract, (Exhibit USA-376), section 2;\nBayer-Oxford Glyco Sciences Contract, (Exhibit USA-352), section 3.1; BMS-Isis Contract, (Exhibit USA-378),\nsections 2.1 and 5.4; Schering-Aveo Contract, (Exhibit USA-377), section 6.1; Merck-Archemix Contract,\n(Exhibit USA-379), sections 7.2 and 7.1.1; Roche-Synta Contract, (Exhibit USA-375), section 6.2;\nPfizer-Icagen Contract, (Exhibit EU-1330), section 3.4; Astellas-Maxygen Contract, (Exhibit EU-1328),\nsection 9.1.3; Aventis-Regeneron Contract, (Exhibit USA-497), sections 4.1 and 4.3; Meiji-Acadia Contract,\n(Exhibit EU-1292), section 4.1(a); Roche-Metabasis Contract, (Exhibit EU-1331), section 4.2; and Monsanto-\nMyriad Contract, (Exhibit USA-351), sections 3.3 and 2.3(b) – option to gain exclusive, royalty-bearing,\n\nnon-exclusive, royalty free licence in relevant intellectual property for research and\ndevelopment purposes. The few contracts that d o not mandate the automatic grant of such\nlicences include, at minimum, an option to negotiate for an exclusive licence 45, and/or a right\nof first refusal to such a licence.46\n32. In other words, regardless of the allocation of ownership over inventions arising from\ncollaborative R&D, the overwhelming majority of the 18 private, commercial collaborative R&D\nagreements identified by Messrs Berneman and Razgaitis grant the commissioning party the\nexclusive right to commerciali ze foreground intellectual property, an d conversely exclude the\ncommissioned party from commercially exploiting such intellectual property. [***].\n33. The United States also notes that certain of the private, commercial collaborative R&D\nagreements identified by Mr Razgaitis contain significant fie ld of use restrictions on the\ncommissioning party's ability to commercialize the foreground intellectual property. 47\nAccording to the United States, this demonstrates that commercial commissioning parties\nsometimes face more significant limitations on the u se of their licences than does the U.S.\nGovernment under the NASA and DOD contracts and agreements at issue in this proceeding.\nAs Mr Razgaitis observes in response, field of use and territorial limitations represent the\nprimary commercial opportunity that the commissioning party (and licensee) anticipates, given\nthe subject R&D and its business capabilities and priorities. As the vast majority of the 18\ncontracts under review demonstrate, field of use and territorial limitations appear to be typical\nin tec hnology licences, and are the result of negotiation between the parties. 48 Despite the\ninclusion of such limitations, we observe that, unlike for the government use licences retained\nby NASA and DOD, in the vast majority of the private, commercial collabora tive R&D\nagreements before us , the commissioned party's capability of commercially exploiting an\ninvention will be considerably affected by the fact that the commissioning party usually obtains\neither the patent or an exclusive licence or, at minimum, an o ption to negotiate an exclusive\nlicence to the foreground intellectual property that allows for its commercial exploitation by the\ncommissioning party in a given field and territory.\nCollaborative R&D agreements involving non-commercial actors\n34. Among the ex amples of collaborative R&D agreements from the biopharmaceutical industry\nidentified by Mr Razgaitis are two in which the commissioning parties are non -commercial\nentities. We discuss these separately from those discussed in the preceding subsection of th is\nAppendix because the commissioning parties are pursuing public interest -motivated objectives\nin commissioning the research without themselves being engaged in the commercialization of\nany resulting invention.\n35. The first is an agreement between a limited liability company49 formed by a not -for-profit\nfoundation as the commissioning party, in which a commissioned party is engaged to develop\na pharmaceutical treatment for a medical condition. 50 The commissioning party is not granted\nownership of any intellect ual property rights or licence rights. However, in the event that the\n\nworldwide, commercial use licence is subject to exercise of option by commissioning party and to payment of\npre-determined licence fees.\n45 American Home-Athena Neurosciences Contract, (Exhibit USA-355) – the option to acquire exclusive,\nroyalty-bearing, worldwide, commercial use licence is subject to parties negotiating any undefined terms in\ngood faith (section 6); and Lilly-Emisphere Contract, (Exhibit USA-356) – the option to acquire an exclusive,\nworldwide, commercial use licence appears to be subject to terms set out in a \"Form of License Agreement\" in\nExhibit B to the agreement, not included as evidence in this proceeding (section 2.1).\n46 American Home-Athena Neurosciences Contract, (Exhibit USA-355), section 6(k); and Lilly-Emisphere\nContract, (Exhibit USA-356), section 3.\n47 United States' response to Panel question No. 27, paras. 108-112. The United States refers to eight of\nthe private collaborative R&D agreements identified by Mr Razgaitis that appear to contain field of use\nlimitations: (1) Meiji-Acadia Contract, (Exhibit EU-1292); (2) Roche-Metabasis Contract, (Exhibit EU-1331); (3)\nGilead-Tibotec Contract, (Exhibit USA-374); (4) Roche-Synta Contract, (Exhibit USA-375); (5) Sigma-Sangamo\nContract, (Exhibit USA-376); (6) Schering-Aveo Contract, (Exhibit USA-377); (7) BMS-Isis Contract, (Exhibit\nUSA-378); and (8) Merck-Archemix Contract, (Exhibit USA-379).\n48 Razgaitis Declaration, (Exhibit EU-1262), (BCI) paras. 28 and 81.\n49 A limited liability company, or LLC, is a business entity that is a U.S.-specific form of private limited\ncompany, which is generally treated as a pass-through entity for federal income tax purposes.\n50 Sponsored Research Collaboration Agreement between Dart Therapeutics, LLC, and CombinatorX, Inc.\n(11 November 2007), attachment B to Razgaitis Declaration, (Exhibit EU-1262) (BCI).\n\ncommissioned party sells or licences a product resulting from the research, it must repay the\nR&D funds it received to the commissioning party. In addition, the commissioned party is\nobligated to make certain milestone payments at periodic intervals from its commercial sales.\nShould the commissioned party decide to discontinue the development of any candidate drug\nwithout licensing its rights to a third party, the commissioning party may exercise its rights to\nbe granted an exclusive, sublicensable fully paid licence in all intellectual property rights to\ndevelop, make, use and sell the discontinued drug candidate.51\n36. The second is a sponsored research agreement involving the same not -for-profit foundation,\nthis time as the commissioning party itself. Under this agreement, the commissioning party\nagain sponsors a commissioned party to search for a cure for a particular medical condition.\nThe agreement entitles the commissioning party to be re paid the R&D funds it expended in\nsponsoring the research in the event that the commissioned party successfully commercializes\nthe foreground intellectual property.52 In addition, should the commissioned party abandon its\ncommercialization efforts for reasons other than safety or efficacy, the commissioning party is\nentitled to obtain an exclusive licence to the foreground and background intellectual property\nand licence such rights on a royalty -bearing basis to third parties, subject to royalty -sharing\nwith the commissioned party.53\n37. Both of these agreements, while involving the same not-for-profit foundation as commissioning\nparty, nevertheless provide some evidence that a commissioning party that is acting for public\ninterest reasons and that: (a) does not itself have a commercial use for the foreground\nintellectual property; and (b) does not itself have a direct interest in commercializing the\nresults of the research for a commercial purpose, will still seek to include a provision that\nenables it to recover the funding that it provided. It will also retain an option to an exclusive,\nfully paid licence in order to enable the commercialization of the products resulting from the\nresearch collaboration. This puts the commissioning party in collaborative R&D agre ements\ninvolving non-commercial actors in a more favourable position from that of the commissioning\nparty in the NASA procurement contracts and DOD assistance instruments, as the\ncommissioning party in the former ensures a reimbursement of its investment i n case of\nsuccessful commercialisation of inventions resulting from the R&D, as well as an option to an\nexclusive, fully paid licence to any intellectual property resulting from the R&D, should the\ncommissioned party decide to discontinue the project.\n[***54 ***55 ***56 ***57 ***58 ***59 ***60 ***61 ***62 ***63 ***64 ***65 ***66 ***67 ***68\n***69 ***70 ***].\n\n51 Sponsored Research Agreement Dart LLC-CombinatorX Inc, Attachment B to Razgaitis Declaration,\n(Exhibit EU-1262) (BCI), article 7.\n52 Sponsored Research Agreement between Avi Biopharma Inc. and Charley's Fund, Inc.\n(12 October 2007), (Exhibit EU-1332), article 4.3.\n53 Sponsored Research Agreement between Avi Biopharma Inc. and Charley's Fund, Inc.\n(12 October 2007), (Exhibit EU-1332), article 9.1.\n54 [***\n55 ***\n56 ***\n57 ***\n58 ***\n59 ***\n60 ***\n61 ***\n62 ***\n63 ***\n64 ***\n65 ***\n66 ***\n67 ***\n68 ***\n69 ***\n70 ***]\n\nAPPENDIX 2\nHSBI APPENDIX\n\n[[HSBI]]"},"processing_date":{"kind":"string","value":"2026-03-15T15:51:39.920589"}}},{"rowIdx":5697,"cells":{"folder_number":{"kind":"string","value":"353"},"case_number":{"kind":"string","value":"353"},"original_filename":{"kind":"string","value":"DS353_SEQ41_Appellate_Body_Report_And_Panel_Report.pdf"},"new_filename":{"kind":"string","value":"DS353_SEQ41_Appellate_Body_Report_And_Panel_Report.pdf"},"doc_sequence":{"kind":"number","value":41,"string":"41"},"doc_type":{"kind":"string","value":"Appellate_Body_Report_And_Panel_Report"},"doc_type_raw":{"kind":"string","value":"Appellate Body Report and Panel Report Action by the Dispute Settlement Body"},"doc_class":{"kind":"string","value":"AB_REPORT"},"variant":{"kind":"null"},"part_number":{"kind":"null"},"case_title":{"kind":"string","value":"UNITED STATES – MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT (SECOND COMPLAINT)"},"date":{"kind":"string","value":"26 March 2012"},"header_codes":{"kind":"string","value":"WT/DS353/13; WT/DS353/AB/R; WT/DS353/R"},"agreement_indicators":{"kind":"string","value":""},"complainant":{"kind":"string","value":"['EU']"},"respondent":{"kind":"string","value":"['U.S.']"},"third_parties":{"kind":"string","value":"['Australia', 'Brazil', 'Canada', 'China', 'Japan', 'South Korea']"},"dispute_stage":{"kind":"string","value":"Implementation & Compliance"},"agreements_cited":{"kind":"string","value":"Art. 3.1, 3.2, 5, 6.3, 1.1, 2 Subsidies and Countervailing Measures (SCM)Art. III:4 GATT 1994"},"case_summary":{"kind":"string","value":"The summary below was up-to-date at\n\t\t26 November 2020\n\n See also: One-page summary of key findings of this dispute\nConsultations\nComplaint by the European Communities.\nOn 27 June 2005, the European Communities requested consultations with the United States concerning prohibited and actionable subsidies provided to US producers of large civil aircraft. (See also dispute DS317).\nThe European Communities considers that the measures cited in its request for consultations are inconsistent with:\n\nPanel and Appellate Body proceedings\nOn 20 January 2006, the European Communities requested the establishment of a panel. Having deferred the establishment of a panel on 2 February 2006, the DSB established a panel at its meeting on 17 February 2006. Australia, Brazil, Canada, China and Japan reserved their third-party rights at the meeting. Subsequently, Korea reserved its third-party rights. On 17 November 2006, the European Communities requested the Director-General to determine the composition of the Panel. On 22 November 2006, Deputy Director-General Alejandro Jara composed the Panel, on behalf of the Director-General.\nOn 18 May 2007, the Chairman of the Panel informed the DSB that it would not be possible for the Panel to complete its work within six months of the date of composition in light of the substantive and procedural complexities of this dispute. The Panel expected to complete its work in July 2008.\n\n\n On 11 July 2008, the Chairman of the Panel informed the DSB that it now expected to complete its work in 2009.\nOn 16 December 2009, the Chairman of the panel informed the DSB that it expected to issue its interim report to the parties in June 2010. On 7 July 2010, the Chairman of the panel informed the DSB that it now expects to issue its interim report by mid-September 2010, and expects to complete its work in the first half of 2011.\nOn 31 March 2011, the panel report was circulated to Members.\nOn 1 April 2011, the European Union notified the DSB of its decision to appeal to the Appellate Body certain issues of law covered in the panel report and certain legal interpretations developed by the Panel. On 28 April 2011, the United States notified the DSB of its decision to appeal to the Appellate Body certain issues of law covered in the panel report and certain legal interpretations developed by the Panel. On 4 July 2011, the Chair of the Appellate Body informed the DSB that due to the considerable size of the record and complexity of the appeal, the need to hold multiple sessions of the oral hearing, and taking into account the current overall workload of the Appellate Body, the Appellate Body would not be able to circulate its report within 60 days. The Appellate Body will hold a first session of the oral hearing in August and a second session in October 2011. Thereafter, the Appellate Body will provide an estimate for the circulation of its report.\nOn 12 March 2012, the Appellate Body report was circulated to Members.\nAt its meeting on 23 March 2012, the DSB adopted the Appellate Body report and the panel report, as modified by the Appellate Body report.\nAt the DSB meeting on 13 April 2012, the United States informed the DSB that it intended to implement the DSB recommendations and rulings in a manner that respects its WTO obligations and within the time-frame established in Article 7.9 of the SCM Agreement. The European Union welcomed the US intention and noted that the 6-month period stipulated in Article 7.9 of the SCM Agreement would expire on 23 September 2012. On 24 April 2012, the European Union and the United States informed the DSB of Agreed Procedures under Articles 21 and 22 of the DSU, and Article 7 of the SCM Agreement.\n\nReasonable period of time\nOn 23 September 2012, the United Stated notified the DSB of the withdrawal of subsidies and removal of adverse effects in this dispute. Through the steps identified in their notification, the United States stated it had fully complied with the DSB recommendations and rulings.\n\nCompliance proceedings\nOn 25 September 2012, the European Union requested consultations pursuant to Article 21.5 of the DSU. On 11 October 2012, the European Union requested the establishment of a compliance panel. At its meeting on 23 October 2012, the DSB agreed to refer the matter to the original panel if possible. Australia, Canada, China, Japan and Korea reserved their third-party rights. Subsequently, Brazil and the Russian Federation reserved their third party rights. On 30 October 2012, the compliance panel was composed. On 15 January 2013, the Chairman of the panel informed the DSB that the panel, after consultations with the parties, had adopted a timetable pursuant to which the case will be briefed and the substantive meeting of the parties and third parties with the panel will be completed before the summer break of 2013. The timetable does not specify a date for the circulation of its report. Taking into account the scale and complexity of the dispute, the panel expect ed that it would be in a position to circulate its report within the first half of 2014. On 27 May 2014, the Chairman of the panel informed the DSB that the panel did not expect to complete its work before mid‑2015. On 9 March 2015, the Chairman of the panel informed the DSB that due to the scale and complexity of the dispute, the panel did not expect that it will be in a position to complete its work before mid-2016. On 27 June 2016, the Chairman indicated that having further reviewed the work that remains to be completed, the panel expected to issue its final report to the parties no later than December 2016.\nOn 9 June 2017, the compliance panel report was circulated to Members.\nOn 29 June 2017, the European Union notified the DSB of its decision to appeal certain issues of law and legal interpretations developed by the compliance panel. On 10 August 2017, the United States notified the DSB of its decision to cross-appeal.\nOn 18 September 2017, upon expiry of the 60-day period provided for in Article 17.5 of the DSU, the Appellate Body informed the DSB that it would not be able to circulate the Appellate Body report in this appeal by the end of the 60-day period, nor within the 90-day time-frame provided for in Article 17.5 of the DSU. The Appellate Body referred to the exceptional size and complexity of these compliance proceedings, including the time needed for adopting and complying with additional procedures to protect business confidential information (BCI) and highly sensitive business information (HSBI), together with the consequential extensions of the deadlines for filing submissions. The Appellate Body also referred to the substantial workload it faced, the overlap in the composition of the Divisions hearing several concurrent appeals, and the shortage of staff in the Appellate Body Secretariat. In addition, the Appellate Body also informed the DSB that the circulation date of the Appellate Body report in this appeal would be communicated to the participants and third participants in due course. On 15 March 2019, the Appellate Body informed the DSB that it expected to circulate the Appellate Body report in this appeal on 28 March 2019.\nOn 28 March 2019, the compliance Appellate Body report was circulated to Members.\nAt its meeting on 11 April 2019, the DSB adopted the Appellate Body report and the panel report, as modified by the Appellate Body report.\n\nImplementation of adopted reports"},"page_count":{"kind":"number","value":1,"string":"1"},"clean_text":{"kind":"string","value":"UNITED STATES – MEASURES AFFECTING TRADE\nIN LARGE CIVIL AIRCRAFT\n(SECOND COMPLAINT)\n\nAppellate Body Report and Panel Report\n\nAction by the Dispute Settlement Body\n\n At its meeting on 23 March 2012, the Disput e Settlement Body adopted the Appellate Body\nreport on United States – Measures Affecting Trade in Large Civil Aircraft (Second Complaint )\n() and the Panel report (), as modified by the Appellate Body report.\nThe Panel report should be read in conjunction with the Appellate Body report.\n\nÉTATS-UNIS – MESURES AFFECTANT LE COMMERCE\n(DEUXIÈME PLAINTE)\n\nRapport de l'Organe d'appel et rapport du Groupe spécial\n\n À sa réunion du 23 mars 2012, l'Organe de règlement des différends a adopté le rapport de\nl'Organe d'appel sur l'affaire États-Unis – Mesures affectant le commerce des aéronefs civils gros\nqu'il a été modifié par le rapport de l'Organe d'appel. Le rapport du Groupe spécial doit être lu\nconjointement avec celui de l'Organe d'appel.\n\nESTADOS UNIDOS - MEDIDAS QUE AFECTAN AL COMERCIO DE\nGRANDES AERONAVES CIVILES (SEGUNDA RECLAMACIÓN)\n\nActuación del Órgano de Solución de Diferencias\n\n En su reunión de 23 de marzo de 2012, el Órgano de Solución de Diferencias adoptó el\nde grandes aeronaves civiles (Segunda reclamación) () y el informe del Grupo"},"processing_date":{"kind":"string","value":"2026-03-15T15:51:39.921206"}}},{"rowIdx":5698,"cells":{"folder_number":{"kind":"string","value":"353"},"case_number":{"kind":"string","value":"353"},"original_filename":{"kind":"string","value":"DS353_SEQ42_Report_Of_Appellate_Body_00.pdf"},"new_filename":{"kind":"string","value":"DS353_SEQ42_Report_Of_Appellate_Body_00.pdf"},"doc_sequence":{"kind":"number","value":42,"string":"42"},"doc_type":{"kind":"string","value":"Report_Of_Appellate_Body"},"doc_type_raw":{"kind":"string","value":"Appellate Body Report"},"doc_class":{"kind":"string","value":"AB_REPORT"},"variant":{"kind":"null"},"part_number":{"kind":"number","value":0,"string":"0"},"case_title":{"kind":"string","value":"UNITED STATES – MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT (SECOND COMPLAINT) RECOURSE TO ARTICLE 21.5 OF THE DSU BY THE EUROPEAN UNION COMMUNICATION FROM THE APPELLATE BODY"},"date":{"kind":"string","value":"19 March 2019"},"header_codes":{"kind":"string","value":"WT/DS353/30"},"agreement_indicators":{"kind":"string","value":""},"complainant":{"kind":"string","value":"['EU']"},"respondent":{"kind":"string","value":"['U.S.']"},"third_parties":{"kind":"string","value":"['Australia', 'Brazil', 'Canada', 'China', 'Japan', 'South Korea']"},"dispute_stage":{"kind":"string","value":"Implementation & Compliance"},"agreements_cited":{"kind":"string","value":"Art. 3.1, 3.2, 5, 6.3, 1.1, 2 Subsidies and Countervailing Measures (SCM)Art. III:4 GATT 1994"},"case_summary":{"kind":"string","value":"The summary below was up-to-date at\n\t\t26 November 2020\n\n See also: One-page summary of key findings of this dispute\nConsultations\nComplaint by the European Communities.\nOn 27 June 2005, the European Communities requested consultations with the United States concerning prohibited and actionable subsidies provided to US producers of large civil aircraft. (See also dispute DS317).\nThe European Communities considers that the measures cited in its request for consultations are inconsistent with:\n\nPanel and Appellate Body proceedings\nOn 20 January 2006, the European Communities requested the establishment of a panel. Having deferred the establishment of a panel on 2 February 2006, the DSB established a panel at its meeting on 17 February 2006. Australia, Brazil, Canada, China and Japan reserved their third-party rights at the meeting. Subsequently, Korea reserved its third-party rights. On 17 November 2006, the European Communities requested the Director-General to determine the composition of the Panel. On 22 November 2006, Deputy Director-General Alejandro Jara composed the Panel, on behalf of the Director-General.\nOn 18 May 2007, the Chairman of the Panel informed the DSB that it would not be possible for the Panel to complete its work within six months of the date of composition in light of the substantive and procedural complexities of this dispute. The Panel expected to complete its work in July 2008.\n\n\n On 11 July 2008, the Chairman of the Panel informed the DSB that it now expected to complete its work in 2009.\nOn 16 December 2009, the Chairman of the panel informed the DSB that it expected to issue its interim report to the parties in June 2010. On 7 July 2010, the Chairman of the panel informed the DSB that it now expects to issue its interim report by mid-September 2010, and expects to complete its work in the first half of 2011.\nOn 31 March 2011, the panel report was circulated to Members.\nOn 1 April 2011, the European Union notified the DSB of its decision to appeal to the Appellate Body certain issues of law covered in the panel report and certain legal interpretations developed by the Panel. On 28 April 2011, the United States notified the DSB of its decision to appeal to the Appellate Body certain issues of law covered in the panel report and certain legal interpretations developed by the Panel. On 4 July 2011, the Chair of the Appellate Body informed the DSB that due to the considerable size of the record and complexity of the appeal, the need to hold multiple sessions of the oral hearing, and taking into account the current overall workload of the Appellate Body, the Appellate Body would not be able to circulate its report within 60 days. The Appellate Body will hold a first session of the oral hearing in August and a second session in October 2011. Thereafter, the Appellate Body will provide an estimate for the circulation of its report.\nOn 12 March 2012, the Appellate Body report was circulated to Members.\nAt its meeting on 23 March 2012, the DSB adopted the Appellate Body report and the panel report, as modified by the Appellate Body report.\nAt the DSB meeting on 13 April 2012, the United States informed the DSB that it intended to implement the DSB recommendations and rulings in a manner that respects its WTO obligations and within the time-frame established in Article 7.9 of the SCM Agreement. The European Union welcomed the US intention and noted that the 6-month period stipulated in Article 7.9 of the SCM Agreement would expire on 23 September 2012. On 24 April 2012, the European Union and the United States informed the DSB of Agreed Procedures under Articles 21 and 22 of the DSU, and Article 7 of the SCM Agreement.\n\nReasonable period of time\nOn 23 September 2012, the United Stated notified the DSB of the withdrawal of subsidies and removal of adverse effects in this dispute. Through the steps identified in their notification, the United States stated it had fully complied with the DSB recommendations and rulings.\n\nCompliance proceedings\nOn 25 September 2012, the European Union requested consultations pursuant to Article 21.5 of the DSU. On 11 October 2012, the European Union requested the establishment of a compliance panel. At its meeting on 23 October 2012, the DSB agreed to refer the matter to the original panel if possible. Australia, Canada, China, Japan and Korea reserved their third-party rights. Subsequently, Brazil and the Russian Federation reserved their third party rights. On 30 October 2012, the compliance panel was composed. On 15 January 2013, the Chairman of the panel informed the DSB that the panel, after consultations with the parties, had adopted a timetable pursuant to which the case will be briefed and the substantive meeting of the parties and third parties with the panel will be completed before the summer break of 2013. The timetable does not specify a date for the circulation of its report. Taking into account the scale and complexity of the dispute, the panel expect ed that it would be in a position to circulate its report within the first half of 2014. On 27 May 2014, the Chairman of the panel informed the DSB that the panel did not expect to complete its work before mid‑2015. On 9 March 2015, the Chairman of the panel informed the DSB that due to the scale and complexity of the dispute, the panel did not expect that it will be in a position to complete its work before mid-2016. On 27 June 2016, the Chairman indicated that having further reviewed the work that remains to be completed, the panel expected to issue its final report to the parties no later than December 2016.\nOn 9 June 2017, the compliance panel report was circulated to Members.\nOn 29 June 2017, the European Union notified the DSB of its decision to appeal certain issues of law and legal interpretations developed by the compliance panel. On 10 August 2017, the United States notified the DSB of its decision to cross-appeal.\nOn 18 September 2017, upon expiry of the 60-day period provided for in Article 17.5 of the DSU, the Appellate Body informed the DSB that it would not be able to circulate the Appellate Body report in this appeal by the end of the 60-day period, nor within the 90-day time-frame provided for in Article 17.5 of the DSU. The Appellate Body referred to the exceptional size and complexity of these compliance proceedings, including the time needed for adopting and complying with additional procedures to protect business confidential information (BCI) and highly sensitive business information (HSBI), together with the consequential extensions of the deadlines for filing submissions. The Appellate Body also referred to the substantial workload it faced, the overlap in the composition of the Divisions hearing several concurrent appeals, and the shortage of staff in the Appellate Body Secretariat. In addition, the Appellate Body also informed the DSB that the circulation date of the Appellate Body report in this appeal would be communicated to the participants and third participants in due course. On 15 March 2019, the Appellate Body informed the DSB that it expected to circulate the Appellate Body report in this appeal on 28 March 2019.\nOn 28 March 2019, the compliance Appellate Body report was circulated to Members.\nAt its meeting on 11 April 2019, the DSB adopted the Appellate Body report and the panel report, as modified by the Appellate Body report.\n\nImplementation of adopted reports"},"page_count":{"kind":"number","value":1,"string":"1"},"clean_text":{"kind":"string","value":"UNITED STATES – MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT\n(SECOND COMPLAINT)\nRECOURSE TO ARTICLE 21.5 OF THE DSU BY THE EUROPEAN UNION\nCOMMUNICATION FROM THE APPELLATE BODY\nThe following communication, dated 15 March 2019, from the Chair of the Appellate Body\naddressed to the Chair of the Dispute Settlement Body, is circulated to Members in accordance\nwith Article 17.5 of the Understanding on Rules and Procedures Governing the Settlement of\nDisputes.\n\nI refer to our letter of 18 September 2017, setting out the reasons why the Appellate Body would\nnot be able to circulate its Report in these proceedings within the ti meframe provided for in\nArticle 17.5 of the DSU. We can now inform you that we e xpect to circulate the Appellate Body\nReport in this appeal on Thursday, 28 March 2019."},"processing_date":{"kind":"string","value":"2026-03-15T15:51:39.921500"}}},{"rowIdx":5699,"cells":{"folder_number":{"kind":"string","value":"353"},"case_number":{"kind":"string","value":"353"},"original_filename":{"kind":"string","value":"DS353_SEQ43_Report_Of_Appellate_Body_01.pdf"},"new_filename":{"kind":"string","value":"DS353_SEQ43_Report_Of_Appellate_Body_01.pdf"},"doc_sequence":{"kind":"number","value":43,"string":"43"},"doc_type":{"kind":"string","value":"Report_Of_Appellate_Body"},"doc_type_raw":{"kind":"string","value":"Report of the Appellate Body"},"doc_class":{"kind":"string","value":"AB_REPORT"},"variant":{"kind":"null"},"part_number":{"kind":"number","value":1,"string":"1"},"case_title":{"kind":"string","value":"UNITED STATES – MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT (SECOND COMPLAINT) RECOURSE TO ARTICLE 21.5 OF THE DSU BY THE EUROPEAN UNION COMMUNICATION FROM THE APPELLATE BODY"},"date":{"kind":"string","value":"28 March 2019"},"header_codes":{"kind":"string","value":"WT/DS353/31; WT/DS353/AB/RW."},"agreement_indicators":{"kind":"string","value":""},"complainant":{"kind":"string","value":"['EU']"},"respondent":{"kind":"string","value":"['U.S.']"},"third_parties":{"kind":"string","value":"['Australia', 'Brazil', 'Canada', 'China', 'Japan', 'South Korea']"},"dispute_stage":{"kind":"string","value":"Implementation & Compliance"},"agreements_cited":{"kind":"string","value":"Art. 3.1, 3.2, 5, 6.3, 1.1, 2 Subsidies and Countervailing Measures (SCM)Art. III:4 GATT 1994"},"case_summary":{"kind":"string","value":"The summary below was up-to-date at\n\t\t26 November 2020\n\n See also: One-page summary of key findings of this dispute\nConsultations\nComplaint by the European Communities.\nOn 27 June 2005, the European Communities requested consultations with the United States concerning prohibited and actionable subsidies provided to US producers of large civil aircraft. (See also dispute DS317).\nThe European Communities considers that the measures cited in its request for consultations are inconsistent with:\n\nPanel and Appellate Body proceedings\nOn 20 January 2006, the European Communities requested the establishment of a panel. Having deferred the establishment of a panel on 2 February 2006, the DSB established a panel at its meeting on 17 February 2006. Australia, Brazil, Canada, China and Japan reserved their third-party rights at the meeting. Subsequently, Korea reserved its third-party rights. On 17 November 2006, the European Communities requested the Director-General to determine the composition of the Panel. On 22 November 2006, Deputy Director-General Alejandro Jara composed the Panel, on behalf of the Director-General.\nOn 18 May 2007, the Chairman of the Panel informed the DSB that it would not be possible for the Panel to complete its work within six months of the date of composition in light of the substantive and procedural complexities of this dispute. The Panel expected to complete its work in July 2008.\n\n\n On 11 July 2008, the Chairman of the Panel informed the DSB that it now expected to complete its work in 2009.\nOn 16 December 2009, the Chairman of the panel informed the DSB that it expected to issue its interim report to the parties in June 2010. On 7 July 2010, the Chairman of the panel informed the DSB that it now expects to issue its interim report by mid-September 2010, and expects to complete its work in the first half of 2011.\nOn 31 March 2011, the panel report was circulated to Members.\nOn 1 April 2011, the European Union notified the DSB of its decision to appeal to the Appellate Body certain issues of law covered in the panel report and certain legal interpretations developed by the Panel. On 28 April 2011, the United States notified the DSB of its decision to appeal to the Appellate Body certain issues of law covered in the panel report and certain legal interpretations developed by the Panel. On 4 July 2011, the Chair of the Appellate Body informed the DSB that due to the considerable size of the record and complexity of the appeal, the need to hold multiple sessions of the oral hearing, and taking into account the current overall workload of the Appellate Body, the Appellate Body would not be able to circulate its report within 60 days. The Appellate Body will hold a first session of the oral hearing in August and a second session in October 2011. Thereafter, the Appellate Body will provide an estimate for the circulation of its report.\nOn 12 March 2012, the Appellate Body report was circulated to Members.\nAt its meeting on 23 March 2012, the DSB adopted the Appellate Body report and the panel report, as modified by the Appellate Body report.\nAt the DSB meeting on 13 April 2012, the United States informed the DSB that it intended to implement the DSB recommendations and rulings in a manner that respects its WTO obligations and within the time-frame established in Article 7.9 of the SCM Agreement. The European Union welcomed the US intention and noted that the 6-month period stipulated in Article 7.9 of the SCM Agreement would expire on 23 September 2012. On 24 April 2012, the European Union and the United States informed the DSB of Agreed Procedures under Articles 21 and 22 of the DSU, and Article 7 of the SCM Agreement.\n\nReasonable period of time\nOn 23 September 2012, the United Stated notified the DSB of the withdrawal of subsidies and removal of adverse effects in this dispute. Through the steps identified in their notification, the United States stated it had fully complied with the DSB recommendations and rulings.\n\nCompliance proceedings\nOn 25 September 2012, the European Union requested consultations pursuant to Article 21.5 of the DSU. On 11 October 2012, the European Union requested the establishment of a compliance panel. At its meeting on 23 October 2012, the DSB agreed to refer the matter to the original panel if possible. Australia, Canada, China, Japan and Korea reserved their third-party rights. Subsequently, Brazil and the Russian Federation reserved their third party rights. On 30 October 2012, the compliance panel was composed. On 15 January 2013, the Chairman of the panel informed the DSB that the panel, after consultations with the parties, had adopted a timetable pursuant to which the case will be briefed and the substantive meeting of the parties and third parties with the panel will be completed before the summer break of 2013. The timetable does not specify a date for the circulation of its report. Taking into account the scale and complexity of the dispute, the panel expect ed that it would be in a position to circulate its report within the first half of 2014. On 27 May 2014, the Chairman of the panel informed the DSB that the panel did not expect to complete its work before mid‑2015. On 9 March 2015, the Chairman of the panel informed the DSB that due to the scale and complexity of the dispute, the panel did not expect that it will be in a position to complete its work before mid-2016. On 27 June 2016, the Chairman indicated that having further reviewed the work that remains to be completed, the panel expected to issue its final report to the parties no later than December 2016.\nOn 9 June 2017, the compliance panel report was circulated to Members.\nOn 29 June 2017, the European Union notified the DSB of its decision to appeal certain issues of law and legal interpretations developed by the compliance panel. On 10 August 2017, the United States notified the DSB of its decision to cross-appeal.\nOn 18 September 2017, upon expiry of the 60-day period provided for in Article 17.5 of the DSU, the Appellate Body informed the DSB that it would not be able to circulate the Appellate Body report in this appeal by the end of the 60-day period, nor within the 90-day time-frame provided for in Article 17.5 of the DSU. The Appellate Body referred to the exceptional size and complexity of these compliance proceedings, including the time needed for adopting and complying with additional procedures to protect business confidential information (BCI) and highly sensitive business information (HSBI), together with the consequential extensions of the deadlines for filing submissions. The Appellate Body also referred to the substantial workload it faced, the overlap in the composition of the Divisions hearing several concurrent appeals, and the shortage of staff in the Appellate Body Secretariat. In addition, the Appellate Body also informed the DSB that the circulation date of the Appellate Body report in this appeal would be communicated to the participants and third participants in due course. On 15 March 2019, the Appellate Body informed the DSB that it expected to circulate the Appellate Body report in this appeal on 28 March 2019.\nOn 28 March 2019, the compliance Appellate Body report was circulated to Members.\nAt its meeting on 11 April 2019, the DSB adopted the Appellate Body report and the panel report, as modified by the Appellate Body report.\n\nImplementation of adopted reports"},"page_count":{"kind":"number","value":1,"string":"1"},"clean_text":{"kind":"string","value":"UNITED STATES – MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT\n(SECOND COMPLAINT)\nRECOURSE TO ARTICLE 21.5 OF THE DSU BY THE EUROPEAN UNION\nCOMMUNICATION FROM THE APPELLATE BODY\nThe following communication, dated 28 March 2019, from the Chair of the Appellate Body to the\nChair of the Dispute Settlement Body, is being circulated to Members.\n\nIt is my honour to provide to you the Report of the Appellate Body in United States – Measures\nAffecting Trade in Large Civil Aircraft (Second Complaint) – Recourse to Article 21.5 of the DSU by\nthe European Union , It will be circulated to Members of the at 5 p.m. today, in accordance with Article 17.5 of the Understanding on Rules and\nProcedures Governing the Settlement of Disputes. It is a confidential document until its circulation.\nThe three Members of the Appellate Body who served on this appeal were Mr Peter Van den\nBossche, as Presiding Member, and Mr Thomas Graham and Mr Shree B.C. Servan sing, as\nMembers."},"processing_date":{"kind":"string","value":"2026-03-15T15:51:39.921822"}}}],"truncated":false,"partial":false},"paginationData":{"pageIndex":56,"numItemsPerPage":100,"numTotalItems":9414,"offset":5600,"length":100}},"jwt":"eyJhbGciOiJFZERTQSJ9.eyJyZWFkIjp0cnVlLCJwZXJtaXNzaW9ucyI6eyJyZXBvLmNvbnRlbnQucmVhZCI6dHJ1ZX0sImlhdCI6MTc3OTYyNjI2MCwic3ViIjoiL2RhdGFzZXRzL2RlYW4yMjAyOS9XVE9fRG9jcyIsImV4cCI6MTc3OTYyOTg2MCwiaXNzIjoiaHR0cHM6Ly9odWdnaW5nZmFjZS5jbyJ9.v1TkJ4wLOYTqYpwRdNp5vPLWL9oVE2SbFyKCGqk_wWgh-Rb6dIPrnRWG4BEYY8HlW_8E1Yx_SPIzvc8FQuMRDA","displayUrls":true,"splitSizeSummaries":[{"config":"default","split":"train","numRows":9414,"numBytesParquet":235278256}]},"discussionsStats":{"closed":0,"open":1,"total":1},"fullWidth":true,"hasGatedAccess":true,"hasFullAccess":true,"isEmbedded":false,"savedQueries":{"community":[],"user":[]}}">
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|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
350 | 350 | DS350_SEQ13_Communication_02.pdf | DS350_SEQ13_Communication_02.pdf | 13 | Communication | Communication from the Appellate Body | NUMBERED | null | 2 | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION OF ZEROING METHODOLOGY | 23 December 2008 | WT/DS350/13 | ['EU'] | ['U.S.'] | ['Brazil', 'China', 'Egypt', 'India', 'Japan', 'South Korea', 'Mexico', 'Norway', 'Taiwan', 'Thailand'] | Appellate Body | Art. 2.1, 2.4, 2.4.2, 5.8, 9.1, 9.3, 9.5, 11, 1, 11.1, 11.3, 11.2, 2 Anti-dumpingArt. VI:1, VI:2 GATT 1994Art. 18.4 Anti-dumpingArt. XVI:4 Agreement Establishing the World Trade Organization | The summary below was up-to-date at
16 February 2012
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 2 October 2006, the European Communities requested consultations with the United States concerning its continued application of the “zeroin... | 1 | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION
OF ZEROING METHODOLOGY
Communication from the Appellate Body
The following communication, dated 22 December 2008, from the Chairman of the Appellate
Body addressed to the Chairman of the Dispute Settlement Body, is circulated in accordance with
Article 17.5 of the ... | 2026-03-15T15:50:56.117267 | |
350 | 350 | DS350_SEQ14_Communication_03.pdf | DS350_SEQ14_Communication_03.pdf | 14 | Communication | Communication from the Appellate Body | NUMBERED | null | 3 | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION OF ZEROING METHODOLOGY | 6 February 2009 | WT/DS350/14; WT/DS350/AB/R. | ['EU'] | ['U.S.'] | ['Brazil', 'China', 'Egypt', 'India', 'Japan', 'South Korea', 'Mexico', 'Norway', 'Taiwan', 'Thailand'] | Appellate Body | Art. 2.1, 2.4, 2.4.2, 5.8, 9.1, 9.3, 9.5, 11, 1, 11.1, 11.3, 11.2, 2 Anti-dumpingArt. VI:1, VI:2 GATT 1994Art. 18.4 Anti-dumpingArt. XVI:4 Agreement Establishing the World Trade Organization | The summary below was up-to-date at
16 February 2012
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 2 October 2006, the European Communities requested consultations with the United States concerning its continued application of the “zeroin... | 1 | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION
OF ZEROING METHODOLOGY
Communication from the Appellate Body
The following communication, dated 4 February 2009, from the Chairman of the Appellate
Body addressed to the Chairman of the Dispute Settlement Body, is circulated in accordance with
Article 17.5 of the U... | 2026-03-15T15:50:56.117583 | |
350 | 350 | DS350_SEQ15_Communication_04.pdf | DS350_SEQ15_Communication_04.pdf | 15 | Communication | Communication from the United States and the European Communities concerning Article 21.3(c) of the DSU | NUMBERED | null | 4 | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION OF ZEROING METHODOLOGY | 8 April 2009 | WT/DS350/16 | ['EU'] | ['U.S.'] | ['Brazil', 'China', 'Egypt', 'India', 'Japan', 'South Korea', 'Mexico', 'Norway', 'Taiwan', 'Thailand'] | Appellate Body | Art. 2.1, 2.4, 2.4.2, 5.8, 9.1, 9.3, 9.5, 11, 1, 11.1, 11.3, 11.2, 2 Anti-dumpingArt. VI:1, VI:2 GATT 1994Art. 18.4 Anti-dumpingArt. XVI:4 Agreement Establishing the World Trade Organization | The summary below was up-to-date at
16 February 2012
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 2 October 2006, the European Communities requested consultations with the United States concerning its continued application of the “zeroin... | 1 | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION
OF ZEROING METHODOLOGY
Communication from the United States and the European Communities
concerning Article 21.3(c) of the DSU
The following communication, dated 6 April 2009, from the delegation of the United States
and the delegation of the European Communities ... | 2026-03-15T15:50:56.118207 | |
350 | 350 | DS350_SEQ16_Agreement_Art_21_3.pdf | DS350_SEQ16_Agreement_Art_21_3.pdf | 16 | Agreement_Art_21_3 | Agreement under Article 21.3(b) of the DSU | NUMBERED | null | null | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION OF ZEROING METHODOLOGY | 4 June 2009 | WT/DS350/17 | ['EU'] | ['U.S.'] | ['Brazil', 'China', 'Egypt', 'India', 'Japan', 'South Korea', 'Mexico', 'Norway', 'Taiwan', 'Thailand'] | Appellate Body | Art. 2.1, 2.4, 2.4.2, 5.8, 9.1, 9.3, 9.5, 11, 1, 11.1, 11.3, 11.2, 2 Anti-dumpingArt. VI:1, VI:2 GATT 1994Art. 18.4 Anti-dumpingArt. XVI:4 Agreement Establishing the World Trade Organization | The summary below was up-to-date at
16 February 2012
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 2 October 2006, the European Communities requested consultations with the United States concerning its continued application of the “zeroin... | 1 | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION
OF ZEROING METHODOLOGY
Agreement under Article 21.3(b) of the DSU
The following communication, dated 2 June 2009, from the delegation of the United States
and the delegation of the European Communities to the Chairman of the Dispute Settlement Body, is
circulated i... | 2026-03-15T15:50:56.118642 | |
350 | 350 | DS350_SEQ17_Status_Report.pdf | DS350_SEQ17_Status_Report.pdf | 17 | Status_Report | Status Report by the United States | NUMBERED | null | null | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION OF ZEROING METHODOLOGY | 11 December 2009 | WT/DS350/18 | ['EU'] | ['U.S.'] | ['Brazil', 'China', 'Egypt', 'India', 'Japan', 'South Korea', 'Mexico', 'Norway', 'Taiwan', 'Thailand'] | Appellate Body | Art. 2.1, 2.4, 2.4.2, 5.8, 9.1, 9.3, 9.5, 11, 1, 11.1, 11.3, 11.2, 2 Anti-dumpingArt. VI:1, VI:2 GATT 1994Art. 18.4 Anti-dumpingArt. XVI:4 Agreement Establishing the World Trade Organization | The summary below was up-to-date at
16 February 2012
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 2 October 2006, the European Communities requested consultations with the United States concerning its continued application of the “zeroin... | 1 | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION
OF ZEROING METHODOLOGY
Status Report by the United States
The following communication, dated 10 December 2009, from the delegation of the
United States to the Chairman of the Dispute Settleme nt Body, is circulated pursuant to Article 21.6
of the DSU.
Status Repor... | 2026-03-15T15:50:56.119209 | |
350 | 350 | DS350_SEQ18_Status_Report_Add.pdf | DS350_SEQ18_Status_Report_Add.pdf | 18 | Status_Report | Status Report by the United States Addendum | NUMBERED | Add | null | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION OF ZEROING METHODOLOGY | 8 January 2010 | WT/DS350/18/Add.1 | ['EU'] | ['U.S.'] | ['Brazil', 'China', 'Egypt', 'India', 'Japan', 'South Korea', 'Mexico', 'Norway', 'Taiwan', 'Thailand'] | Appellate Body | Art. 2.1, 2.4, 2.4.2, 5.8, 9.1, 9.3, 9.5, 11, 1, 11.1, 11.3, 11.2, 2 Anti-dumpingArt. VI:1, VI:2 GATT 1994Art. 18.4 Anti-dumpingArt. XVI:4 Agreement Establishing the World Trade Organization | The summary below was up-to-date at
16 February 2012
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 2 October 2006, the European Communities requested consultations with the United States concerning its continued application of the “zeroin... | 1 | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION
OF ZEROING METHODOLOGY
Status Report by the United States
Addendum
The following communication, dated 7 January 2010, from the delegation of the United States
to the Chairman of the Dispute Settlement Body, is circulated pursuant to Article 21.6 of the DSU.
Statu... | 2026-03-15T15:50:56.119809 | |
350 | 350 | DS350_SEQ19_Status_Report_Add2.pdf | DS350_SEQ19_Status_Report_Add2.pdf | 19 | Status_Report | Status Report by the United States Addendum | NUMBERED | Add | null | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION OF ZEROING METHODOLOGY | 8 February 2010 | WT/DS350/18/Add.2 | ['EU'] | ['U.S.'] | ['Brazil', 'China', 'Egypt', 'India', 'Japan', 'South Korea', 'Mexico', 'Norway', 'Taiwan', 'Thailand'] | Appellate Body | Art. 2.1, 2.4, 2.4.2, 5.8, 9.1, 9.3, 9.5, 11, 1, 11.1, 11.3, 11.2, 2 Anti-dumpingArt. VI:1, VI:2 GATT 1994Art. 18.4 Anti-dumpingArt. XVI:4 Agreement Establishing the World Trade Organization | The summary below was up-to-date at
16 February 2012
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 2 October 2006, the European Communities requested consultations with the United States concerning its continued application of the “zeroin... | 1 | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION
OF ZEROING METHODOLOGY
Status Report by the United States
Addendum
The following communication, dated 5 February 2010, from the delegation of the
United States to the Chairman of the Dispute Settleme nt Body, is circulated pursuant to Article 21.6
of the DSU.
Sta... | 2026-03-15T15:50:56.120412 | |
350 | 350 | DS350_SEQ20_Status_Report_Add3.pdf | DS350_SEQ20_Status_Report_Add3.pdf | 20 | Status_Report | Status Report by the United States Addendum | NUMBERED | Add | null | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION OF ZEROING METHODOLOGY | 9 March 2010 | WT/DS350/18/Add.3 | ['EU'] | ['U.S.'] | ['Brazil', 'China', 'Egypt', 'India', 'Japan', 'South Korea', 'Mexico', 'Norway', 'Taiwan', 'Thailand'] | Appellate Body | Art. 2.1, 2.4, 2.4.2, 5.8, 9.1, 9.3, 9.5, 11, 1, 11.1, 11.3, 11.2, 2 Anti-dumpingArt. VI:1, VI:2 GATT 1994Art. 18.4 Anti-dumpingArt. XVI:4 Agreement Establishing the World Trade Organization | The summary below was up-to-date at
16 February 2012
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 2 October 2006, the European Communities requested consultations with the United States concerning its continued application of the “zeroin... | 1 | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION
OF ZEROING METHODOLOGY
Status Report by the United States
Addendum
The following communication, dated 8 March 2010, from the delegation of the United States
to the Chairman of the Dispute Settlement Body, is circulated pursuant to Article 21.6 of the DSU.
Status ... | 2026-03-15T15:50:56.121012 | |
350 | 350 | DS350_SEQ21_Status_Report_Add4.pdf | DS350_SEQ21_Status_Report_Add4.pdf | 21 | Status_Report | Status Report by the United States Addendum | NUMBERED | Add | null | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION OF ZEROING METHODOLOGY | 9 April 2010 | WT/DS350/18/Add.4 | ['EU'] | ['U.S.'] | ['Brazil', 'China', 'Egypt', 'India', 'Japan', 'South Korea', 'Mexico', 'Norway', 'Taiwan', 'Thailand'] | Appellate Body | Art. 2.1, 2.4, 2.4.2, 5.8, 9.1, 9.3, 9.5, 11, 1, 11.1, 11.3, 11.2, 2 Anti-dumpingArt. VI:1, VI:2 GATT 1994Art. 18.4 Anti-dumpingArt. XVI:4 Agreement Establishing the World Trade Organization | The summary below was up-to-date at
16 February 2012
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 2 October 2006, the European Communities requested consultations with the United States concerning its continued application of the “zeroin... | 2 | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION
OF ZEROING METHODOLOGY
Status Report by the United States
Addendum
The following communication, dated 8 April 2010, from the delegation of the United States to
the Chairman of the Dispute Settlement Body, is circulated pursuant to Article 21.6 of the DSU.
Status ... | 2026-03-15T15:50:56.121655 | |
350 | 350 | DS350_SEQ22_Status_Report_Add5.pdf | DS350_SEQ22_Status_Report_Add5.pdf | 22 | Status_Report | Status Report by the United States Addendum | NUMBERED | Add | null | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION OF ZEROING METHODOLOGY | 7 May 2010 | WT/DS350/18/Add.5 | ['EU'] | ['U.S.'] | ['Brazil', 'China', 'Egypt', 'India', 'Japan', 'South Korea', 'Mexico', 'Norway', 'Taiwan', 'Thailand'] | Appellate Body | Art. 2.1, 2.4, 2.4.2, 5.8, 9.1, 9.3, 9.5, 11, 1, 11.1, 11.3, 11.2, 2 Anti-dumpingArt. VI:1, VI:2 GATT 1994Art. 18.4 Anti-dumpingArt. XVI:4 Agreement Establishing the World Trade Organization | The summary below was up-to-date at
16 February 2012
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 2 October 2006, the European Communities requested consultations with the United States concerning its continued application of the “zeroin... | 2 | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION
OF ZEROING METHODOLOGY
Status Report by the United States
Addendum
The following communication, dated 6 May 2010, from the delegation of the United States to
the Chairman of the Dispute Settlement Body, is circulated pursuant to Article 21.6 of the DSU.
Status Re... | 2026-03-15T15:50:56.122305 | |
350 | 350 | DS350_SEQ23_Status_Report_Add6.pdf | DS350_SEQ23_Status_Report_Add6.pdf | 23 | Status_Report | Status Report by the United States Addendum | NUMBERED | Add | null | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION OF ZEROING METHODOLOGY | 11 June 2010 | WT/DS350/18/Add.6 | ['EU'] | ['U.S.'] | ['Brazil', 'China', 'Egypt', 'India', 'Japan', 'South Korea', 'Mexico', 'Norway', 'Taiwan', 'Thailand'] | Appellate Body | Art. 2.1, 2.4, 2.4.2, 5.8, 9.1, 9.3, 9.5, 11, 1, 11.1, 11.3, 11.2, 2 Anti-dumpingArt. VI:1, VI:2 GATT 1994Art. 18.4 Anti-dumpingArt. XVI:4 Agreement Establishing the World Trade Organization | The summary below was up-to-date at
16 February 2012
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 2 October 2006, the European Communities requested consultations with the United States concerning its continued application of the “zeroin... | 2 | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION
OF ZEROING METHODOLOGY
Status Report by the United States
Addendum
The following communication, dated 10 June 2010, from the delegation of the United States
to the Chairman of the Dispute Settlement Body, is circulated pursuant to Article 21.6 of the DSU.
Status ... | 2026-03-15T15:50:56.122954 | |
350 | 350 | DS350_SEQ24_Status_Report_Add7.pdf | DS350_SEQ24_Status_Report_Add7.pdf | 24 | Status_Report | Status Report by the United States Addendum | NUMBERED | Add | null | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION OF ZEROING METHODOLOGY | 9 July 2010 | WT/DS350/18/Add.7 | ['EU'] | ['U.S.'] | ['Brazil', 'China', 'Egypt', 'India', 'Japan', 'South Korea', 'Mexico', 'Norway', 'Taiwan', 'Thailand'] | Appellate Body | Art. 2.1, 2.4, 2.4.2, 5.8, 9.1, 9.3, 9.5, 11, 1, 11.1, 11.3, 11.2, 2 Anti-dumpingArt. VI:1, VI:2 GATT 1994Art. 18.4 Anti-dumpingArt. XVI:4 Agreement Establishing the World Trade Organization | The summary below was up-to-date at
16 February 2012
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 2 October 2006, the European Communities requested consultations with the United States concerning its continued application of the “zeroin... | 2 | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION
OF ZEROING METHODOLOGY
Status Report by the United States
Addendum
The following communication, dated 8 July 2010, from the delegation of the United States to
the Chairman of the Dispute Settlement Body, is circulated pursuant to Article 21.6 of the DSU.
Status R... | 2026-03-15T15:50:56.123614 | |
350 | 350 | DS350_SEQ25_Status_Report_Add8.pdf | DS350_SEQ25_Status_Report_Add8.pdf | 25 | Status_Report | Status Report by the United States Addendum | NUMBERED | Add | null | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION OF ZEROING METHODOLOGY | 20 August 2010 | WT/DS350/18/Add.8 | ['EU'] | ['U.S.'] | ['Brazil', 'China', 'Egypt', 'India', 'Japan', 'South Korea', 'Mexico', 'Norway', 'Taiwan', 'Thailand'] | Appellate Body | Art. 2.1, 2.4, 2.4.2, 5.8, 9.1, 9.3, 9.5, 11, 1, 11.1, 11.3, 11.2, 2 Anti-dumpingArt. VI:1, VI:2 GATT 1994Art. 18.4 Anti-dumpingArt. XVI:4 Agreement Establishing the World Trade Organization | The summary below was up-to-date at
16 February 2012
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 2 October 2006, the European Communities requested consultations with the United States concerning its continued application of the “zeroin... | 2 | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION
OF ZEROING METHODOLOGY
Status Report by the United States
Addendum
The following communication, dated 19 August 2010, from the delegation of the UnitedStates
to the Chairman of the Dispute Settlement Body, is circulated pursuant to Article 21.6 of the DSU.
Status... | 2026-03-15T15:50:56.124271 | |
350 | 350 | DS350_SEQ26_Status_Report_Add9.pdf | DS350_SEQ26_Status_Report_Add9.pdf | 26 | Status_Report | Status Report by the United States Addendum | NUMBERED | Add | null | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION OF ZEROING METHODOLOGY | 8 September 2010 | WT/DS350/18/Add.9 | ['EU'] | ['U.S.'] | ['Brazil', 'China', 'Egypt', 'India', 'Japan', 'South Korea', 'Mexico', 'Norway', 'Taiwan', 'Thailand'] | Appellate Body | Art. 2.1, 2.4, 2.4.2, 5.8, 9.1, 9.3, 9.5, 11, 1, 11.1, 11.3, 11.2, 2 Anti-dumpingArt. VI:1, VI:2 GATT 1994Art. 18.4 Anti-dumpingArt. XVI:4 Agreement Establishing the World Trade Organization | The summary below was up-to-date at
16 February 2012
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 2 October 2006, the European Communities requested consultations with the United States concerning its continued application of the “zeroin... | 2 | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION
OF ZEROING METHODOLOGY
Status Report by the United States
Addendum
The following communication, dated 7 September 2010, from the delegation of the
UnitedStates to the Chairman of the Dispute Settlement Body, is circulated pursuant to Article 21.6 of
the DSU.
Stat... | 2026-03-15T15:50:56.124932 | |
350 | 350 | DS350_SEQ27_Status_Report_Add10.pdf | DS350_SEQ27_Status_Report_Add10.pdf | 27 | Status_Report | Status Report by the United States Addendum | NUMBERED | Add | null | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION OF ZEROING METHODOLOGY | 15 October 2010 | WT/DS350/18/Add.10 | ['EU'] | ['U.S.'] | ['Brazil', 'China', 'Egypt', 'India', 'Japan', 'South Korea', 'Mexico', 'Norway', 'Taiwan', 'Thailand'] | Appellate Body | Art. 2.1, 2.4, 2.4.2, 5.8, 9.1, 9.3, 9.5, 11, 1, 11.1, 11.3, 11.2, 2 Anti-dumpingArt. VI:1, VI:2 GATT 1994Art. 18.4 Anti-dumpingArt. XVI:4 Agreement Establishing the World Trade Organization | The summary below was up-to-date at
16 February 2012
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 2 October 2006, the European Communities requested consultations with the United States concerning its continued application of the “zeroin... | 2 | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION
OF ZEROING METHODOLOGY
Status Report by the United States
Addendum
The following communication, dated 14 Oc tober 2010, from the delegation of the
United States to the Chairman of the Dispute Settleme nt Body, is circulated pursuant to Article 21.6
of the DSU.
St... | 2026-03-15T15:50:56.125580 | |
350 | 350 | DS350_SEQ28_Status_Report_Add11.pdf | DS350_SEQ28_Status_Report_Add11.pdf | 28 | Status_Report | Status Report by the United States Addendum | NUMBERED | Add | null | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION OF ZEROING METHODOLOGY | 12 November 2010 | WT/DS350/18/Add.11 | ['EU'] | ['U.S.'] | ['Brazil', 'China', 'Egypt', 'India', 'Japan', 'South Korea', 'Mexico', 'Norway', 'Taiwan', 'Thailand'] | Appellate Body | Art. 2.1, 2.4, 2.4.2, 5.8, 9.1, 9.3, 9.5, 11, 1, 11.1, 11.3, 11.2, 2 Anti-dumpingArt. VI:1, VI:2 GATT 1994Art. 18.4 Anti-dumpingArt. XVI:4 Agreement Establishing the World Trade Organization | The summary below was up-to-date at
16 February 2012
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 2 October 2006, the European Communities requested consultations with the United States concerning its continued application of the “zeroin... | 2 | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION
OF ZEROING METHODOLOGY
Status Report by the United States
Addendum
The following communication, dated 11 November 2010, from the delegation of the United
States to the Chairman of the Dispute Settlement Bo dy, is circulated pursuant to Article 21.6 of the
DSU.
St... | 2026-03-15T15:50:56.126235 | |
350 | 350 | DS350_SEQ29_Status_Report_Add12.pdf | DS350_SEQ29_Status_Report_Add12.pdf | 29 | Status_Report | Status Report by the United States Addendum | NUMBERED | Add | null | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION OF ZEROING METHODOLOGY | 7 December 2010 | WT/DS350/18/Add.12 | ['EU'] | ['U.S.'] | ['Brazil', 'China', 'Egypt', 'India', 'Japan', 'South Korea', 'Mexico', 'Norway', 'Taiwan', 'Thailand'] | Appellate Body | Art. 2.1, 2.4, 2.4.2, 5.8, 9.1, 9.3, 9.5, 11, 1, 11.1, 11.3, 11.2, 2 Anti-dumpingArt. VI:1, VI:2 GATT 1994Art. 18.4 Anti-dumpingArt. XVI:4 Agreement Establishing the World Trade Organization | The summary below was up-to-date at
16 February 2012
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 2 October 2006, the European Communities requested consultations with the United States concerning its continued application of the “zeroin... | 2 | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION
OF ZEROING METHODOLOGY
Status Report by the United States
Addendum
The following communication, dated 6 Decemb er 2010, from the delegation of the United
States to the Chairman of the Dispute Settlement Bo dy, is circulated pursuant to Article 21.6 of the
DSU.
St... | 2026-03-15T15:50:56.126894 | |
350 | 350 | DS350_SEQ30_Status_Report_Add13.pdf | DS350_SEQ30_Status_Report_Add13.pdf | 30 | Status_Report | Status Report by the United States Addendum | NUMBERED | Add | null | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION OF ZEROING METHODOLOGY | 14 January 2011 | WT/DS350/18/Add.13 | ['EU'] | ['U.S.'] | ['Brazil', 'China', 'Egypt', 'India', 'Japan', 'South Korea', 'Mexico', 'Norway', 'Taiwan', 'Thailand'] | Appellate Body | Art. 2.1, 2.4, 2.4.2, 5.8, 9.1, 9.3, 9.5, 11, 1, 11.1, 11.3, 11.2, 2 Anti-dumpingArt. VI:1, VI:2 GATT 1994Art. 18.4 Anti-dumpingArt. XVI:4 Agreement Establishing the World Trade Organization | The summary below was up-to-date at
16 February 2012
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 2 October 2006, the European Communities requested consultations with the United States concerning its continued application of the “zeroin... | 2 | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION
OF ZEROING METHODOLOGY
Status Report by the United States
Addendum
The following communication, dated 13 January 2011, from the delegation of the
United States to the Chairman of the Dispute Settleme nt Body, is circulated pursuant to Article 21.6
of the DSU.
Sta... | 2026-03-15T15:50:56.127735 | |
350 | 350 | DS350_SEQ31_Status_Report_Add14.pdf | DS350_SEQ31_Status_Report_Add14.pdf | 31 | Status_Report | Status Report by the United States Addendum | NUMBERED | Add | null | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION OF ZEROING METHODOLOGY | 14 February 2011 | WT/DS350/18/Add.14 | ['EU'] | ['U.S.'] | ['Brazil', 'China', 'Egypt', 'India', 'Japan', 'South Korea', 'Mexico', 'Norway', 'Taiwan', 'Thailand'] | Appellate Body | Art. 2.1, 2.4, 2.4.2, 5.8, 9.1, 9.3, 9.5, 11, 1, 11.1, 11.3, 11.2, 2 Anti-dumpingArt. VI:1, VI:2 GATT 1994Art. 18.4 Anti-dumpingArt. XVI:4 Agreement Establishing the World Trade Organization | The summary below was up-to-date at
16 February 2012
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 2 October 2006, the European Communities requested consultations with the United States concerning its continued application of the “zeroin... | 2 | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION
OF ZEROING METHODOLOGY
Status Report by the United States
Addendum
The following communication, dated 11 Febr uary 2011, from the delegation of the
United States to the Chairman of the Dispute Settleme nt Body, is circulated pursuant to Article 21.6
of the DSU.
S... | 2026-03-15T15:50:56.128555 | |
350 | 350 | DS350_SEQ32_Status_Report_Add15.pdf | DS350_SEQ32_Status_Report_Add15.pdf | 32 | Status_Report | Status Report by the United States Addendum | NUMBERED | Add | null | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION OF ZEROING METHODOLOGY | 15 March 2011 | WT/DS350/18/Add.15 | ['EU'] | ['U.S.'] | ['Brazil', 'China', 'Egypt', 'India', 'Japan', 'South Korea', 'Mexico', 'Norway', 'Taiwan', 'Thailand'] | Appellate Body | Art. 2.1, 2.4, 2.4.2, 5.8, 9.1, 9.3, 9.5, 11, 1, 11.1, 11.3, 11.2, 2 Anti-dumpingArt. VI:1, VI:2 GATT 1994Art. 18.4 Anti-dumpingArt. XVI:4 Agreement Establishing the World Trade Organization | The summary below was up-to-date at
16 February 2012
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 2 October 2006, the European Communities requested consultations with the United States concerning its continued application of the “zeroin... | 2 | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION
OF ZEROING METHODOLOGY
Status Report by the United States
Addendum
The following communication, dated 14 March 2011, from the delegation of the United States
to the Chairperson of the Dispute Settlement Body, is circulated pursuant to Article 21.6 of the DSU.
Sta... | 2026-03-15T15:50:56.129361 | |
350 | 350 | DS350_SEQ33_Status_Report_Add16.pdf | DS350_SEQ33_Status_Report_Add16.pdf | 33 | Status_Report | Status Report by the United States Addendum | NUMBERED | Add | null | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION OF ZEROING METHODOLOGY | 11 April 2011 | WT/DS350/18/Add.16 | ['EU'] | ['U.S.'] | ['Brazil', 'China', 'Egypt', 'India', 'Japan', 'South Korea', 'Mexico', 'Norway', 'Taiwan', 'Thailand'] | Appellate Body | Art. 2.1, 2.4, 2.4.2, 5.8, 9.1, 9.3, 9.5, 11, 1, 11.1, 11.3, 11.2, 2 Anti-dumpingArt. VI:1, VI:2 GATT 1994Art. 18.4 Anti-dumpingArt. XVI:4 Agreement Establishing the World Trade Organization | The summary below was up-to-date at
16 February 2012
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 2 October 2006, the European Communities requested consultations with the United States concerning its continued application of the “zeroin... | 2 | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION
OF ZEROING METHODOLOGY
Status Report by the United States
Addendum
The following communication, dated 8 April 2011, from the delegation of the United States to
the Chairperson of the Dispute Settlement Body, is circulated pursuant to Article 21.6 of the DSU.
Stat... | 2026-03-15T15:50:56.130204 | |
350 | 350 | DS350_SEQ34_Status_Report_Add17.pdf | DS350_SEQ34_Status_Report_Add17.pdf | 34 | Status_Report | Status Report by the United States Addendum | NUMBERED | Add | null | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION OF ZEROING METHODOLOGY | 13 May 2011 | WT/DS350/18/Add.17 | ['EU'] | ['U.S.'] | ['Brazil', 'China', 'Egypt', 'India', 'Japan', 'South Korea', 'Mexico', 'Norway', 'Taiwan', 'Thailand'] | Appellate Body | Art. 2.1, 2.4, 2.4.2, 5.8, 9.1, 9.3, 9.5, 11, 1, 11.1, 11.3, 11.2, 2 Anti-dumpingArt. VI:1, VI:2 GATT 1994Art. 18.4 Anti-dumpingArt. XVI:4 Agreement Establishing the World Trade Organization | The summary below was up-to-date at
16 February 2012
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 2 October 2006, the European Communities requested consultations with the United States concerning its continued application of the “zeroin... | 2 | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION
OF ZEROING METHODOLOGY
Status Report by the United States
Addendum
The following communication, dated 12 May 2011, from the delegation of the United States
to the Chairperson of the Dispute Settlement Body, is circulated pursuant to Article 21.6 of the DSU.
Statu... | 2026-03-15T15:50:56.131003 | |
350 | 350 | DS350_SEQ35_Status_Report_Add18.pdf | DS350_SEQ35_Status_Report_Add18.pdf | 35 | Status_Report | Status Report by the United States Addendum | NUMBERED | Add | null | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION OF ZEROING METHODOLOGY | 7 June 2011 | WT/DS350/18/Add.18 | ['EU'] | ['U.S.'] | ['Brazil', 'China', 'Egypt', 'India', 'Japan', 'South Korea', 'Mexico', 'Norway', 'Taiwan', 'Thailand'] | Appellate Body | Art. 2.1, 2.4, 2.4.2, 5.8, 9.1, 9.3, 9.5, 11, 1, 11.1, 11.3, 11.2, 2 Anti-dumpingArt. VI:1, VI:2 GATT 1994Art. 18.4 Anti-dumpingArt. XVI:4 Agreement Establishing the World Trade Organization | The summary below was up-to-date at
16 February 2012
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 2 October 2006, the European Communities requested consultations with the United States concerning its continued application of the “zeroin... | 2 | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION
OF ZEROING METHODOLOGY
Status Report by the United States
Addendum
The following communication, dated 6 June 2011, from the delegation of the United States to
the Chairperson of the Dispute Settlement Body, is circulated pursuant to Article 21.6 of the DSU.
Statu... | 2026-03-15T15:50:56.131807 | |
350 | 350 | DS350_SEQ36_Status_Report_Add19.pdf | DS350_SEQ36_Status_Report_Add19.pdf | 36 | Status_Report | Status Report by the United States Addendum | NUMBERED | Add | null | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION OF ZEROING METHODOLOGY | 8 July 2011 | WT/DS350/18/Add.19 | ['EU'] | ['U.S.'] | ['Brazil', 'China', 'Egypt', 'India', 'Japan', 'South Korea', 'Mexico', 'Norway', 'Taiwan', 'Thailand'] | Appellate Body | Art. 2.1, 2.4, 2.4.2, 5.8, 9.1, 9.3, 9.5, 11, 1, 11.1, 11.3, 11.2, 2 Anti-dumpingArt. VI:1, VI:2 GATT 1994Art. 18.4 Anti-dumpingArt. XVI:4 Agreement Establishing the World Trade Organization | The summary below was up-to-date at
16 February 2012
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 2 October 2006, the European Communities requested consultations with the United States concerning its continued application of the “zeroin... | 2 | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION
OF ZEROING METHODOLOGY
Status Report by the United States
Addendum
The following communication, dated 7 July 2011, from the delegation of the United States to
the Chairperson of the Dispute Settlement Body, is circulated pursuant to Article 21.6 of the DSU.
Statu... | 2026-03-15T15:50:56.132609 | |
350 | 350 | DS350_SEQ37_Status_Report_Add20.pdf | DS350_SEQ37_Status_Report_Add20.pdf | 37 | Status_Report | Status Report by the United States Addendum | NUMBERED | Add | null | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION OF ZEROING METHODOLOGY | 23 August 2011 | WT/DS350/18/Add.20 | ['EU'] | ['U.S.'] | ['Brazil', 'China', 'Egypt', 'India', 'Japan', 'South Korea', 'Mexico', 'Norway', 'Taiwan', 'Thailand'] | Appellate Body | Art. 2.1, 2.4, 2.4.2, 5.8, 9.1, 9.3, 9.5, 11, 1, 11.1, 11.3, 11.2, 2 Anti-dumpingArt. VI:1, VI:2 GATT 1994Art. 18.4 Anti-dumpingArt. XVI:4 Agreement Establishing the World Trade Organization | The summary below was up-to-date at
16 February 2012
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 2 October 2006, the European Communities requested consultations with the United States concerning its continued application of the “zeroin... | 2 | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION
OF ZEROING METHODOLOGY
Status Report by the United States
Addendum
The following communication, dated 22 August 2011, from the delegation of the
United States to the Chairperson of the Dispute Settlement Body, is circulated pursuant to Article 21.6
of the DSU.
St... | 2026-03-15T15:50:56.133416 | |
350 | 350 | DS350_SEQ38_Status_Report_Add21.pdf | DS350_SEQ38_Status_Report_Add21.pdf | 38 | Status_Report | Status Report by the United States Addendum | NUMBERED | Add | null | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION OF ZEROING METHODOLOGY | 16 September 2011 | WT/DS350/18/Add.21 | ['EU'] | ['U.S.'] | ['Brazil', 'China', 'Egypt', 'India', 'Japan', 'South Korea', 'Mexico', 'Norway', 'Taiwan', 'Thailand'] | Appellate Body | Art. 2.1, 2.4, 2.4.2, 5.8, 9.1, 9.3, 9.5, 11, 1, 11.1, 11.3, 11.2, 2 Anti-dumpingArt. VI:1, VI:2 GATT 1994Art. 18.4 Anti-dumpingArt. XVI:4 Agreement Establishing the World Trade Organization | The summary below was up-to-date at
16 February 2012
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 2 October 2006, the European Communities requested consultations with the United States concerning its continued application of the “zeroin... | 2 | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION
OF ZEROING METHODOLOGY
Status Report by the United States
Addendum
The following communication, dated 15 Sept ember 2011, from the delegation of the
United States to the Chairperson of the Dispute Settlement Body, is circulated pursuant to Article 21.6
of the DSU.... | 2026-03-15T15:50:56.134205 | |
350 | 350 | DS350_SEQ39_Status_Report_Add22.pdf | DS350_SEQ39_Status_Report_Add22.pdf | 39 | Status_Report | Status Report by the United States Addendum | NUMBERED | Add | null | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION OF ZEROING METHODOLOGY | 14 October 2011 | WT/DS350/18/Add.22 | ['EU'] | ['U.S.'] | ['Brazil', 'China', 'Egypt', 'India', 'Japan', 'South Korea', 'Mexico', 'Norway', 'Taiwan', 'Thailand'] | Appellate Body | Art. 2.1, 2.4, 2.4.2, 5.8, 9.1, 9.3, 9.5, 11, 1, 11.1, 11.3, 11.2, 2 Anti-dumpingArt. VI:1, VI:2 GATT 1994Art. 18.4 Anti-dumpingArt. XVI:4 Agreement Establishing the World Trade Organization | The summary below was up-to-date at
16 February 2012
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 2 October 2006, the European Communities requested consultations with the United States concerning its continued application of the “zeroin... | 2 | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION
OF ZEROING METHODOLOGY
Status Report by the United States
Addendum
The following communication, dated 14 Oc tober 2011, from the delegation of the
United States to the Chairperson of the Dispute Settlement Body, is circulated pursuant to Article 21.6
of the DSU.
... | 2026-03-15T15:50:56.135013 | |
350 | 350 | DS350_SEQ40_Status_Report_Add23.pdf | DS350_SEQ40_Status_Report_Add23.pdf | 40 | Status_Report | Status Report by the United States Addendum | NUMBERED | Add | null | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION OF ZEROING METHODOLOGY | 8 November 2011 | WT/DS350/18/Add.23 | ['EU'] | ['U.S.'] | ['Brazil', 'China', 'Egypt', 'India', 'Japan', 'South Korea', 'Mexico', 'Norway', 'Taiwan', 'Thailand'] | Appellate Body | Art. 2.1, 2.4, 2.4.2, 5.8, 9.1, 9.3, 9.5, 11, 1, 11.1, 11.3, 11.2, 2 Anti-dumpingArt. VI:1, VI:2 GATT 1994Art. 18.4 Anti-dumpingArt. XVI:4 Agreement Establishing the World Trade Organization | The summary below was up-to-date at
16 February 2012
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 2 October 2006, the European Communities requested consultations with the United States concerning its continued application of the “zeroin... | 2 | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION
OF ZEROING METHODOLOGY
Status Report by the United States
Addendum
The following communication, dated 7 November 2011, from the delegation of the
United States to the Chairperson of the Dispute Settlement Body, is circulated pursuant to Article 21.6
of the DSU.
S... | 2026-03-15T15:50:56.135817 | |
350 | 350 | DS350_SEQ41_Status_Report_Add24.pdf | DS350_SEQ41_Status_Report_Add24.pdf | 41 | Status_Report | Status Report by the United States Addendum | NUMBERED | Add | null | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION OF ZEROING METHODOLOGY | 9 December 2011 | WT/DS350/18/Add.24 | ['EU'] | ['U.S.'] | ['Brazil', 'China', 'Egypt', 'India', 'Japan', 'South Korea', 'Mexico', 'Norway', 'Taiwan', 'Thailand'] | Appellate Body | Art. 2.1, 2.4, 2.4.2, 5.8, 9.1, 9.3, 9.5, 11, 1, 11.1, 11.3, 11.2, 2 Anti-dumpingArt. VI:1, VI:2 GATT 1994Art. 18.4 Anti-dumpingArt. XVI:4 Agreement Establishing the World Trade Organization | The summary below was up-to-date at
16 February 2012
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 2 October 2006, the European Communities requested consultations with the United States concerning its continued application of the “zeroin... | 2 | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION
OF ZEROING METHODOLOGY
Status Report by the United States
Addendum
The following communication, dated 8 December 2011, from the delegation of the
United States to the Chairperson of the Dispute Settlement Body, is circulated pursuant to Article 21.6
of the DSU.
S... | 2026-03-15T15:50:56.136622 | |
350 | 350 | DS350_SEQ42_Status_Report_Add25.pdf | DS350_SEQ42_Status_Report_Add25.pdf | 42 | Status_Report | Status Report by the United States Addendum | NUMBERED | Add | null | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION OF ZEROING METHODOLOGY | 10 January 2012 | WT/DS350/18/Add.25 | ['EU'] | ['U.S.'] | ['Brazil', 'China', 'Egypt', 'India', 'Japan', 'South Korea', 'Mexico', 'Norway', 'Taiwan', 'Thailand'] | Appellate Body | Art. 2.1, 2.4, 2.4.2, 5.8, 9.1, 9.3, 9.5, 11, 1, 11.1, 11.3, 11.2, 2 Anti-dumpingArt. VI:1, VI:2 GATT 1994Art. 18.4 Anti-dumpingArt. XVI:4 Agreement Establishing the World Trade Organization | The summary below was up-to-date at
16 February 2012
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 2 October 2006, the European Communities requested consultations with the United States concerning its continued application of the “zeroin... | 2 | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION
OF ZEROING METHODOLOGY
Status Report by the United States
Addendum
The following communication, dated 9 January 2012, from the delegation of the United States
to the Chairperson of the Dispute Settlement Body, is circulated pursuant to Article 21.6 of the DSU.
St... | 2026-03-15T15:50:56.137418 | |
350 | 350 | DS350_SEQ43_Status_Report_Add26.pdf | DS350_SEQ43_Status_Report_Add26.pdf | 43 | Status_Report | Status Report by the United States Addendum | NUMBERED | Add | null | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION OF ZEROING METHODOLOGY | 10 February 2012 | WT/DS350/18/Add.26 | ['EU'] | ['U.S.'] | ['Brazil', 'China', 'Egypt', 'India', 'Japan', 'South Korea', 'Mexico', 'Norway', 'Taiwan', 'Thailand'] | Appellate Body | Art. 2.1, 2.4, 2.4.2, 5.8, 9.1, 9.3, 9.5, 11, 1, 11.1, 11.3, 11.2, 2 Anti-dumpingArt. VI:1, VI:2 GATT 1994Art. 18.4 Anti-dumpingArt. XVI:4 Agreement Establishing the World Trade Organization | The summary below was up-to-date at
16 February 2012
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 2 October 2006, the European Communities requested consultations with the United States concerning its continued application of the “zeroin... | 2 | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION
OF ZEROING METHODOLOGY
Status Report by the United States
Addendum
The following communication, dated 9 February 2012, from the delegation of the
United States to the Chairperson of the Dispute Settlement Body, is circulated pursuant to Article 21.6
of the DSU.
S... | 2026-03-15T15:50:56.138248 | |
350 | 350 | DS350_SEQ44_Understanding.pdf | DS350_SEQ44_Understanding.pdf | 44 | Understanding | Understanding between the European Union and the United States Regarding Procedures under Articles 21 and 22 of the DSU | NUMBERED | null | null | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION OF ZEROING METHODOLOGY | 6 January 2010 | WT/DS350/19 | ['EU'] | ['U.S.'] | ['Brazil', 'China', 'Egypt', 'India', 'Japan', 'South Korea', 'Mexico', 'Norway', 'Taiwan', 'Thailand'] | Appellate Body | Art. 2.1, 2.4, 2.4.2, 5.8, 9.1, 9.3, 9.5, 11, 1, 11.1, 11.3, 11.2, 2 Anti-dumpingArt. VI:1, VI:2 GATT 1994Art. 18.4 Anti-dumpingArt. XVI:4 Agreement Establishing the World Trade Organization | The summary below was up-to-date at
16 February 2012
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 2 October 2006, the European Communities requested consultations with the United States concerning its continued application of the “zeroin... | 3 | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION
OF ZEROING METHODOLOGY
Understanding between the European Union and the United States
Regarding Procedures under Articles 21 and 22 of the DSU
The following communication, dated 4 Ja nuary 2010, from the delegation of the
European Union and the delegation of the U... | 2026-03-15T15:50:56.139598 | |
350 | 350 | DS350_SEQ45_Communication_05.pdf | DS350_SEQ45_Communication_05.pdf | 45 | Communication | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION OF ZEROING METHODOLOGY Joint Communication from the European Union and the United States | NUMBERED | null | 5 | UNITED STATES – LAWS, REGULATIONS AND METHODOLOGY FOR CALCULATING DUMPING MARGINS ("ZEROING") | 8 February 2012 | WT/DS294/43; WT/DS350/20 | ['EU'] | ['U.S.'] | ['Brazil', 'China', 'Egypt', 'India', 'Japan', 'South Korea', 'Mexico', 'Norway', 'Taiwan', 'Thailand'] | Appellate Body | Art. 2.1, 2.4, 2.4.2, 5.8, 9.1, 9.3, 9.5, 11, 1, 11.1, 11.3, 11.2, 2 Anti-dumpingArt. VI:1, VI:2 GATT 1994Art. 18.4 Anti-dumpingArt. XVI:4 Agreement Establishing the World Trade Organization | The summary below was up-to-date at
16 February 2012
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 2 October 2006, the European Communities requested consultations with the United States concerning its continued application of the “zeroin... | 7 | UNITED STATES – LAWS, REGULATIONS AND METHODOLOGY
FOR CALCULATING DUMPING MARGINS ("ZEROING")
UNITED STATES – CONTINUED EXISTENCE AND APPLICATION
OF ZEROING METHODOLOGY
Joint Communication from the European Union and the United States
The following communication, dated 6 February 2012, from the delegation of the
Eu... | 2026-03-15T15:50:56.141659 | |
350 | 350 | DS350_SEQ46_Submission_01.pdf | DS350_SEQ46_Submission_01.pdf | 46 | Submission | WT/DS350/R Page A-1 ANNEX A FIRST WRITTEN SUBMISSIONS BY THE PARTIES Contents Page Annex A-1 First Written Submission of the European Communities A-2 Annex A-2 First Written Submission of the United States A-70 | NUMBERED | null | 1 | null | WT/DS350/R | ['EU'] | ['U.S.'] | ['Brazil', 'China', 'Egypt', 'India', 'Japan', 'South Korea', 'Mexico', 'Norway', 'Taiwan', 'Thailand'] | Appellate Body | Art. 2.1, 2.4, 2.4.2, 5.8, 9.1, 9.3, 9.5, 11, 1, 11.1, 11.3, 11.2, 2 Anti-dumpingArt. VI:1, VI:2 GATT 1994Art. 18.4 Anti-dumpingArt. XVI:4 Agreement Establishing the World Trade Organization | The summary below was up-to-date at
16 February 2012
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 2 October 2006, the European Communities requested consultations with the United States concerning its continued application of the “zeroin... | 129 | ANNEX A
FIRST WRITTEN SUBMISSIONS BY
THE PARTIES
Contents Page
Annex A-1 First Written Submission of the European Communities A-2
Annex A-2 First Written Submission of the United States A-70
Annex A-3 Response to the United States' Request for Preliminary Rulings by
the European Communities A-116
TABLE OF CASES
Sho... | 2026-03-15T15:50:56.222112 | ||
350 | 350 | DS350_SEQ47_Submission_03.pdf | DS350_SEQ47_Submission_03.pdf | 47 | Submission | WT/DS350/R Page C-1 ANNEX C SECOND WRITTEN SUBMISSIONS BY THE PARTIES Contents Page Annex C-1 Second Written Submission of the European Communities C-2 Annex C-2 Second Written Submission of the United States C-58 | NUMBERED | null | 3 | null | WT/DS350/R | ['EU'] | ['U.S.'] | ['Brazil', 'China', 'Egypt', 'India', 'Japan', 'South Korea', 'Mexico', 'Norway', 'Taiwan', 'Thailand'] | Appellate Body | Art. 2.1, 2.4, 2.4.2, 5.8, 9.1, 9.3, 9.5, 11, 1, 11.1, 11.3, 11.2, 2 Anti-dumpingArt. VI:1, VI:2 GATT 1994Art. 18.4 Anti-dumpingArt. XVI:4 Agreement Establishing the World Trade Organization | The summary below was up-to-date at
16 February 2012
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 2 October 2006, the European Communities requested consultations with the United States concerning its continued application of the “zeroin... | 84 | ANNEX C
SECOND WRITTEN SUBMISSIONS BY
THE PARTIES
Contents Page
Annex C-1 Second Written Submission of the European Communities C-2
Annex C-2 Second Written Submission of the United States C-58
TABLE OF CASES
Short Title Full Case Title and Citation
Argentina – Poultry Panel Report, Argentina – Definitive An ti-Dum... | 2026-03-15T15:50:56.278213 | ||
350 | 350 | DS350_SEQ48_Submission_04.pdf | DS350_SEQ48_Submission_04.pdf | 48 | Submission | WT/DS350/R Page D-1 ANNEX D ORAL STATEMENTS OF THE PARTIES AND THIRD PARTIES AT THE FIRST AND SECOND MEETINGS OF THE PANEL Contents Page Annex D-1 Opening Statement of the United States at the First Meeting of the Panel D-2 | NUMBERED | null | 4 | null | WT/DS350/R | ['EU'] | ['U.S.'] | ['Brazil', 'China', 'Egypt', 'India', 'Japan', 'South Korea', 'Mexico', 'Norway', 'Taiwan', 'Thailand'] | Appellate Body | Art. 2.1, 2.4, 2.4.2, 5.8, 9.1, 9.3, 9.5, 11, 1, 11.1, 11.3, 11.2, 2 Anti-dumpingArt. VI:1, VI:2 GATT 1994Art. 18.4 Anti-dumpingArt. XVI:4 Agreement Establishing the World Trade Organization | The summary below was up-to-date at
16 February 2012
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 2 October 2006, the European Communities requested consultations with the United States concerning its continued application of the “zeroin... | 50 | ANNEX D
ORAL STATEMENTS OF THE PARTIES AND THIRD PARTIES AT THE
FIRST AND SECOND MEETINGS OF THE PANEL
Contents Page
Annex D-1 Opening Statement of the United States at the First Meeting of the
Panel D-2
Annex D-2 Opening Statement of the European Communities at the First
Meeting of the Panel D-10
Annex D-3 Closing S... | 2026-03-15T15:50:56.309514 | ||
350 | 350 | DS350_SEQ49_Request_For_Establishment_Of_Panel_06.pdf | DS350_SEQ49_Request_For_Establishment_Of_Panel_06.pdf | 49 | Request_For_Establishment_Of_Panel | WT/DS350/R Page F-1 ANNEX F REQUEST FOR THE ESTABLISHMENT OF A PANEL Contents Page Annex F-1 Request for the Establishment of a Panel by the European Communities F-2 | NUMBERED | null | 6 | null | WT/DS350/R | ['EU'] | ['U.S.'] | ['Brazil', 'China', 'Egypt', 'India', 'Japan', 'South Korea', 'Mexico', 'Norway', 'Taiwan', 'Thailand'] | Appellate Body | Art. 2.1, 2.4, 2.4.2, 5.8, 9.1, 9.3, 9.5, 11, 1, 11.1, 11.3, 11.2, 2 Anti-dumpingArt. VI:1, VI:2 GATT 1994Art. 18.4 Anti-dumpingArt. XVI:4 Agreement Establishing the World Trade Organization | The summary below was up-to-date at
16 February 2012
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 2 October 2006, the European Communities requested consultations with the United States concerning its continued application of the “zeroin... | 15 | ANNEX F
REQUEST FOR THE ESTABLISHMENT OF A PANEL
Contents Page
Annex F-1 Request for the Establishment of a Panel by the European
Communities F-2
ANNEX F-1
REQUEST FOR THE ESTABLISHMENT OF A PANEL
BY THE EUROPEAN COMMUNITIES
UNITED STATES – CONTINUED EXISTENCE AND APPLICATION
OF ZEROING METHODOLOGY
Request for th... | 2026-03-15T15:50:56.315559 | ||
350 | 350 | DS350_SEQ50_Addendum.pdf | DS350_SEQ50_Addendum.pdf | 50 | Addendum | Request for Further Consultations by the European Communities Addendum | NUMBERED | null | null | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION OF ZEROING METHODOLOGY | 11 October 2006 | WT/DS350/1/Add.1; G/L/786/Add.1; G/ADP/D70/1/Add.1 | Anti-Dumping Practices (ADP); General Council | ['EU'] | ['U.S.'] | ['Brazil', 'China', 'Egypt', 'India', 'Japan', 'South Korea', 'Mexico', 'Norway', 'Taiwan', 'Thailand'] | Appellate Body | Art. 2.1, 2.4, 2.4.2, 5.8, 9.1, 9.3, 9.5, 11, 1, 11.1, 11.3, 11.2, 2 Anti-dumpingArt. VI:1, VI:2 GATT 1994Art. 18.4 Anti-dumpingArt. XVI:4 Agreement Establishing the World Trade Organization | The summary below was up-to-date at
16 February 2012
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 2 October 2006, the European Communities requested consultations with the United States concerning its continued application of the “zeroin... | 2 | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION
OF ZEROING METHODOLOGY
Request for Further Consultations by the European Communities
Addendum
The following communication, dated 9 October 2006, from the delegation of the European
Communities to the delegation of the United States and to the Chairman of the Dispu... | 2026-03-15T15:50:56.316227 |
350 | 350 | DS350_SEQ51_Report_Of_Panel_00.pdf | DS350_SEQ51_Report_Of_Panel_00.pdf | 51 | Report_Of_Panel | Report of the Panel | PANEL_REPORT | null | 0 | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION OF ZEROING METHODOLOGY | 1 October 2008 | WT/DS350/R | ['EU'] | ['U.S.'] | ['Brazil', 'China', 'Egypt', 'India', 'Japan', 'South Korea', 'Mexico', 'Norway', 'Taiwan', 'Thailand'] | Appellate Body | Art. 2.1, 2.4, 2.4.2, 5.8, 9.1, 9.3, 9.5, 11, 1, 11.1, 11.3, 11.2, 2 Anti-dumpingArt. VI:1, VI:2 GATT 1994Art. 18.4 Anti-dumpingArt. XVI:4 Agreement Establishing the World Trade Organization | The summary below was up-to-date at
16 February 2012
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 2 October 2006, the European Communities requested consultations with the United States concerning its continued application of the “zeroin... | 85 | UNITED STATES – CONTINUED EXISTENCE AND
APPLICATION OF ZEROING METHODOLOGY
Report of the Panel
I. INTRODUCTION
1.1 On 2 October 2006, the European Comm unities ("EC") requested consultations 1 with the
United States of America ("United States" or "US" ) pursuant to Article 4 of the Understanding on
Rules and Procedur... | 2026-03-15T15:50:56.369304 | |
350 | 350 | DS350_SEQ52_Report_Of_Panel_02.pdf | DS350_SEQ52_Report_Of_Panel_02.pdf | 52 | Report_Of_Panel | WT/DS350/R Page B-1 ANNEX B THIRD PARTIES' WRITTEN SUBMISSIONS Contents Page Annex B-1 Third Party Written Submission of Japan B-2 Annex B-2 Third Party Written Submi ssion of the Republic of Korea B-23 Annex B-3 Third Party Written Submission of Norway B-29 | PANEL_REPORT | null | 2 | null | WT/DS350/R | ['EU'] | ['U.S.'] | ['Brazil', 'China', 'Egypt', 'India', 'Japan', 'South Korea', 'Mexico', 'Norway', 'Taiwan', 'Thailand'] | Appellate Body | Art. 2.1, 2.4, 2.4.2, 5.8, 9.1, 9.3, 9.5, 11, 1, 11.1, 11.3, 11.2, 2 Anti-dumpingArt. VI:1, VI:2 GATT 1994Art. 18.4 Anti-dumpingArt. XVI:4 Agreement Establishing the World Trade Organization | The summary below was up-to-date at
16 February 2012
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 2 October 2006, the European Communities requested consultations with the United States concerning its continued application of the “zeroin... | 50 | ANNEX B
THIRD PARTIES' WRITTEN SUBMISSIONS
Contents Page
Annex B-1 Third Party Written Submission of Japan B-2
Annex B-2 Third Party Written Submi ssion of the Republic of Korea B-23
Annex B-3 Third Party Written Submission of Norway B-29
Annex B-4 Third Party Written Submission of the Separate Customs Territory
of T... | 2026-03-15T15:50:56.397813 | ||
350 | 350 | DS350_SEQ53_Appellate_Body_Report_And_Panel_Report.pdf | DS350_SEQ53_Appellate_Body_Report_And_Panel_Report.pdf | 53 | Appellate_Body_Report_And_Panel_Report | Appellate Body Report and Panel Report Action by the Dispute Settlement Body | AB_REPORT | null | null | UNITED STATES - CONTINUED EXISTENCE AND APPLICATION OF ZEROING METHODOLOGY | 25 February 2009 | WT/DS350/15; WT/DS350/AB/R; WT/DS350/R | ['EU'] | ['U.S.'] | ['Brazil', 'China', 'Egypt', 'India', 'Japan', 'South Korea', 'Mexico', 'Norway', 'Taiwan', 'Thailand'] | Appellate Body | Art. 2.1, 2.4, 2.4.2, 5.8, 9.1, 9.3, 9.5, 11, 1, 11.1, 11.3, 11.2, 2 Anti-dumpingArt. VI:1, VI:2 GATT 1994Art. 18.4 Anti-dumpingArt. XVI:4 Agreement Establishing the World Trade Organization | The summary below was up-to-date at
16 February 2012
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 2 October 2006, the European Communities requested consultations with the United States concerning its continued application of the “zeroin... | 1 | UNITED STATES - CONTINUED EXISTENCE AND APPLICATION
OF ZEROING METHODOLOGY
Appellate Body Report and Panel Report
Action by the Dispute Settlement Body
At its meeting on 19 February 2009, the Dis pute Settlement Body adopted the Appellate Body
report on
() and the Panel report (), as modified by the Appellate Body ... | 2026-03-15T15:50:56.398506 | |
350 | 350 | DS350_SEQ54_Report_Of_Appellate_Body_05.pdf | DS350_SEQ54_Report_Of_Appellate_Body_05.pdf | 54 | Report_Of_Appellate_Body | Contents Page Annex E-1 Comments of the European Communities on the Appellate Body Report in US – Stainless Steel (Mexico) (DS344) E-2 Annex E-2 Comments of the United Stat es on the Appellate Body Report in US – Stainless Steel (Mexico) (DS344) E-3 Annex E-3 Comments of the European Communities on the United States' ... | AB_REPORT | null | 5 | IN US – STAINLESS STEEL (MEXICO) (DS344) | null | WT/DS350/R | ['EU'] | ['U.S.'] | ['Brazil', 'China', 'Egypt', 'India', 'Japan', 'South Korea', 'Mexico', 'Norway', 'Taiwan', 'Thailand'] | Appellate Body | Art. 2.1, 2.4, 2.4.2, 5.8, 9.1, 9.3, 9.5, 11, 1, 11.1, 11.3, 11.2, 2 Anti-dumpingArt. VI:1, VI:2 GATT 1994Art. 18.4 Anti-dumpingArt. XVI:4 Agreement Establishing the World Trade Organization | The summary below was up-to-date at
16 February 2012
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 2 October 2006, the European Communities requested consultations with the United States concerning its continued application of the “zeroin... | 30 | ANNEX E
PARTIES' COMMENTS ON THE APPELLATE BODY REPORT
IN US – STAINLESS STEEL (MEXICO) (DS344)
Contents Page
Annex E-1 Comments of the European Communities on the Appellate Body
Report E-2
Annex E-2 Comments of the United Stat es on the Appellate Body Report E-3
Annex E-3 Comments of the European Communities on the ... | 2026-03-15T15:50:56.417403 | |
350 | 350 | DS350_SEQ55_Report_Of_Appellate_Body.pdf | DS350_SEQ55_Report_Of_Appellate_Body.pdf | 55 | Report_Of_Appellate_Body | Report of the Appellate Body | AB_REPORT | null | null | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION OF ZEROING METHODOLOGY | 4 February 2009 | WT/DS350/AB/R | ['EU'] | ['U.S.'] | ['Brazil', 'China', 'Egypt', 'India', 'Japan', 'South Korea', 'Mexico', 'Norway', 'Taiwan', 'Thailand'] | Appellate Body | Art. 2.1, 2.4, 2.4.2, 5.8, 9.1, 9.3, 9.5, 11, 1, 11.1, 11.3, 11.2, 2 Anti-dumpingArt. VI:1, VI:2 GATT 1994Art. 18.4 Anti-dumpingArt. XVI:4 Agreement Establishing the World Trade Organization | The summary below was up-to-date at
16 February 2012
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 2 October 2006, the European Communities requested consultations with the United States concerning its continued application of the “zeroin... | 176 | UNITED STATES – CONTINUED EXISTENCE AND APPLICATION OF ZEROING
METHODOLOGY
AB-2008-11
Report of the Appellate Body
APPELLATE BODY
European Communities, Appellant / Appellee
United States, Other Appellant / Appellee
Brazil, Third Participant
China, Third Participant
Egypt, Third Participant
India, Third Participant... | 2026-03-15T15:50:56.510368 | |
351 | 351 | DS351_SEQ01_Request_For_Consultations_01.pdf | DS351_SEQ01_Request_For_Consultations_01.pdf | 1 | Request_For_Consultations | Request for Consultations by Argentina | NUMBERED | null | 1 | CHILE – PROVISIONAL SAFEGUARD MEASURE ON CERTAIN MILK PRODUCTS | 30 October 2006 | WT/DS351/1; G/L/789; G/SG/D34/1 | General Council; Safeguards (SG) | ['Argentina'] | ['Chile'] | ['U.S.'] | Panel | Art. I:1, XIX:1, XIX:2 GATT 1994Art. 2, 3, 4, 5, 6, 7, 12 Safeguards | The summary below was up-to-date at
3 December 2020
Consultations
Complaint by Argentina.
On 25 October 2006, Argentina requested consultations with Chile concerning the imposition by Chile of a provisional safeguard measure on imports of certain milk products. The measure in question includes Exempt Decree No. 278, pu... | 3 | CHILE – PROVISIONAL SAFEGUARD MEASURE
ON CERTAIN MILK PRODUCTS
Request for Consultations by Argentina
The following communication, dated 25 Oct ober 2006, from the delegation of Argentina to
the delegation of Chile and to the Chairman of the Dispute Settlement Body, is circulated in
accordance with Article 4.4 of th... | 2026-03-15T15:50:56.523802 |
351 | 356 | DS356_SEQ01_Request_For_Establishment_Of_Panel.pdf | DS356_SEQ01_Request_For_Establishment_Of_Panel.pdf | 1 | Request_For_Establishment_Of_Panel | Request for the Establishment of a Panel by Argentina | NUMBERED | null | null | CHILE – PROVISIONAL SAFEGUARD MEASURE ON CERTAIN MILK PRODUCTS/ CHILE – DEFINITIVE SAFEGUARD MEASURE ON CERTAIN MILK PRODUCTS | 9 March 2007 | WT/DS351/2; WT/DS356/2 | ['Argentina'] | ['Chile'] | ['U.S.'] | Panel | Art. I, XIX GATT 1994Art. 2, 3.1, 4, 5.1, 7.1, 12.2 SafeguardsArt. XVI:4 Agreement Establishing the World Trade Organization | The summary below was up-to-date at
3 December 2020
Consultations
Complaint by Argentina.
On 28 December 2006, Argentina requested consultations with Chile concerning the definitive safeguard measure imposed by Chile on imports of certain milk products from Argentina. Argentina considers that the definitive safeguard m... | 4 | CHILE – PROVISIONAL SAFEGUARD MEASURE
ON CERTAIN MILK PRODUCTS/
CHILE – DEFINITIVE SAFEGUARD MEASURE
ON CERTAIN MILK PRODUCTS
Request for the Establishment of a Panel by Argentina
The following communication, dated 8 March 2007, from the delegation of Argentina to the
Chairman of the Dispute Settlement Body, is circ... | 2026-03-15T15:50:56.556530 | |
351 | 356 | DS356_SEQ02_Note_By_Secretariat_00.pdf | DS356_SEQ02_Note_By_Secretariat_00.pdf | 2 | Note_By_Secretariat | Constitution of the Panel Established at the Request of Argentina Note by the Secretariat | NUMBERED | null | 0 | CHILE – PROVISIONAL SAFEGUARD MEASURE ON CERTAIN MILK PRODUCTS/ CHILE – DEFINITIVE SAFEGUARD MEASURE ON CERTAIN MILK PRODUCTS | 21 June 2007 | WT/DS351/3; WT/DS356/3; WT/DS351/2-WT/DS356/2; WT/DS351/2-WT/DS356/2 | ['Argentina'] | ['Chile'] | ['U.S.'] | Panel | Art. I, XIX GATT 1994Art. 2, 3.1, 4, 5.1, 7.1, 12.2 SafeguardsArt. XVI:4 Agreement Establishing the World Trade Organization | The summary below was up-to-date at
3 December 2020
Consultations
Complaint by Argentina.
On 28 December 2006, Argentina requested consultations with Chile concerning the definitive safeguard measure imposed by Chile on imports of certain milk products from Argentina. Argentina considers that the definitive safeguard m... | 1 | CHILE – PROVISIONAL SAFEGUARD MEASURE
ON CERTAIN MILK PRODUCTS/
CHILE – DEFINITIVE SAFEGUARD MEASURE
ON CERTAIN MILK PRODUCTS
Constitution of the Panel Established at the Request of Argentina
Note by the Secretariat
1. At its meeting on 24 April 2007, the Disput e Settlement Body (DSB) established a Panel
pursuant t... | 2026-03-15T15:50:56.556896 | |
351 | 356 | DS356_SEQ03_Communication.pdf | DS356_SEQ03_Communication.pdf | 3 | Communication | Communication from the Chairman of the Panel | NUMBERED | null | null | CHILE – PROVISIONAL SAFEGUARD MEASURE ON CERTAIN MILK PRODUCTS/ CHILE – DEFINITIVE SAFEGUARD MEASURE ON CERTAIN MILK PRODUCTS | 6 August 2007 | WT/DS351/4; WT/DS356/4 | ['Argentina'] | ['Chile'] | ['U.S.'] | Panel | Art. I, XIX GATT 1994Art. 2, 3.1, 4, 5.1, 7.1, 12.2 SafeguardsArt. XVI:4 Agreement Establishing the World Trade Organization | The summary below was up-to-date at
3 December 2020
Consultations
Complaint by Argentina.
On 28 December 2006, Argentina requested consultations with Chile concerning the definitive safeguard measure imposed by Chile on imports of certain milk products from Argentina. Argentina considers that the definitive safeguard m... | 1 | CHILE – PROVISIONAL SAFEGUARD MEASURE
ON CERTAIN MILK PRODUCTS/
CHILE – DEFINITIVE SAFEGUARD MEASURE
ON CERTAIN MILK PRODUCTS
Communication from the Chairman of the Panel
The following communication, dated 3 August 20 07, and addressed to the Dispute Settlement
Body, is circulated in accordan ce with Article 12.12 of... | 2026-03-15T15:50:56.557146 | |
351 | 356 | DS356_SEQ04_Note_By_Secretariat_01.pdf | DS356_SEQ04_Note_By_Secretariat_01.pdf | 4 | Note_By_Secretariat | Lapse of Authority for the Establishment of the Panel Note by the Secretariat At the request of Argentina, the Panel su spended its work on 31 July 2007 (WT/DS351/4 and WT/DS356/4). Since the Panel has not been request ed to resume its work, pursuant to Article 12.12 of the DSU, the authority for the establishment of ... | NUMBERED | null | 1 | CHILE - PROVISIONAL SAFEGUARD MEASURE ON CERTAIN MILK PRODUCTS/ CHILE - DEFINITIVE SAFEGUARD MEASURE ON CERTAIN MILK PRODUCTS | 1 August 2008 | WT/DS351/5; WT/DS356/5; WT/DS351/4; WT/DS356/4 | ['Argentina'] | ['Chile'] | ['U.S.'] | Panel | Art. I, XIX GATT 1994Art. 2, 3.1, 4, 5.1, 7.1, 12.2 SafeguardsArt. XVI:4 Agreement Establishing the World Trade Organization | The summary below was up-to-date at
3 December 2020
Consultations
Complaint by Argentina.
On 28 December 2006, Argentina requested consultations with Chile concerning the definitive safeguard measure imposed by Chile on imports of certain milk products from Argentina. Argentina considers that the definitive safeguard m... | 1 | CHILE - PROVISIONAL SAFEGUARD MEASURE
ON CERTAIN MILK PRODUCTS/
CHILE - DEFINITIVE SAFEGUARD MEASURE
ON CERTAIN MILK PRODUCTS
Lapse of Authority for the Establishment of the Panel
Note by the Secretariat
At the request of Argentina, the Panel su spended its work on 31 July 2007 ( and
). Since the Panel has not been... | 2026-03-15T15:50:56.557770 | |
352 | 352 | DS352_SEQ01_Request_To_Join_Consultations_00.pdf | DS352_SEQ01_Request_To_Join_Consultations_00.pdf | 1 | Request_To_Join_Consultations | Request to Join Consultations Communication from the United States | NUMBERED | null | 0 | INDIA – MEASURES AFFECTING THE IMPORTATION AND SALE OF WINES AND SPIRITS FROM THE EUROPEAN COMMUNITIES | 5 December 2006 | WT/DS352/2 | ['EU'] | ['India'] | ['Australia', 'Chile', 'Japan', 'U.S.'] | Panel | Art. II:1, II:2 GATT 1994 | The summary below was up-to-date at
3 December 2020
Consultations
Complaint by the European Communities.
On 20 November 2006, the European Communities requested consultations with India regarding duties applied by India and restrictions on retail sale applied by the Indian State of Tamil Nadu which, in the European Com... | 1 | INDIA – MEASURES AFFECTING THE IMPORTATION AND SALE
OF WINES AND SPIRITS FROM THE EUROPEAN COMMUNITIES
Request to Join Consultations
Communication from the United States
The following communication, dated 1 December 2006, from the delegation of the
United States to the delegation of India, the de legation of the Eu... | 2026-03-15T15:50:56.603175 | |
352 | 352 | DS352_SEQ02_Request_To_Join_Consultations_01.pdf | DS352_SEQ02_Request_To_Join_Consultations_01.pdf | 2 | Request_To_Join_Consultations | Request to Join Consultations Communication from Australia | NUMBERED | null | 1 | INDIA – MEASURES AFFECTING THE IMPORTATION AND SALE OF WINES AND SPIRITS FROM THE EUROPEAN COMMUNITIES | 6 December 2006 | WT/DS352/3 | ['EU'] | ['India'] | ['Australia', 'Chile', 'Japan', 'U.S.'] | Panel | Art. II:1, II:2 GATT 1994 | The summary below was up-to-date at
3 December 2020
Consultations
Complaint by the European Communities.
On 20 November 2006, the European Communities requested consultations with India regarding duties applied by India and restrictions on retail sale applied by the Indian State of Tamil Nadu which, in the European Com... | 1 | INDIA – MEASURES AFFECTING THE IMPORTATION AND SALE
OF WINES AND SPIRITS FROM THE EUROPEAN COMMUNITIES
Request to Join Consultations
Communication from Australia
The following communication, dated 4 December 2006, from the delegation of Australia to
the delegation of India, the delegation of the Eu ropean Communiti... | 2026-03-15T15:50:56.603756 | |
352 | 352 | DS352_SEQ03_Request_For_Establishment_Of_Panel.pdf | DS352_SEQ03_Request_For_Establishment_Of_Panel.pdf | 3 | Request_For_Establishment_Of_Panel | Request for the Establishment of a Panel by the European Communities | NUMBERED | null | null | INDIA – MEASURES AFFECTING THE IMPORTATION AND SALE OF WINES AND SPIRITS FROM THE EUROPEAN COMMUNITIES | 27 March 2007 | WT/DS352/4 | ['EU'] | ['India'] | ['Australia', 'Chile', 'Japan', 'U.S.'] | Panel | Art. II:1, II:2 GATT 1994 | The summary below was up-to-date at
3 December 2020
Consultations
Complaint by the European Communities.
On 20 November 2006, the European Communities requested consultations with India regarding duties applied by India and restrictions on retail sale applied by the Indian State of Tamil Nadu which, in the European Com... | 2 | INDIA – MEASURES AFFECTING THE IMPORTATION AND SALE
OF WINES AND SPIRITS FROM THE EUROPEAN COMMUNITIES
Request for the Establishment of a Panel by the European Communities
The following communication, dated 23 March 2007, from the delegation of the European
Communities to the Chairman of the Dispute Settlement Body,... | 2026-03-15T15:50:56.605013 | |
352 | 352 | DS352_SEQ04_Note_By_Secretariat_00.pdf | DS352_SEQ04_Note_By_Secretariat_00.pdf | 4 | Note_By_Secretariat | Constitution of the Panel Established at the Request of the European Communities Note by the Secretariat | NUMBERED | null | 0 | INDIA – MEASURES AFFECTING THE IMPORTATION AND SALE OF WINES AND SPIRITS FROM THE EUROPEAN COMMUNITIES | 21 June 2007 | WT/DS352/5; WT/DS352/4; WT/DS352/4 | ['EU'] | ['India'] | ['Australia', 'Chile', 'Japan', 'U.S.'] | Panel | Art. II:1, II:2 GATT 1994 | The summary below was up-to-date at
3 December 2020
Consultations
Complaint by the European Communities.
On 20 November 2006, the European Communities requested consultations with India regarding duties applied by India and restrictions on retail sale applied by the Indian State of Tamil Nadu which, in the European Com... | 1 | INDIA – MEASURES AFFECTING THE IMPORTATION AND SALE
OF WINES AND SPIRITS FROM THE EUROPEAN COMMUNITIES
Constitution of the Panel Established at the Request of the European Communities
Note by the Secretariat
1. At its meeting on 24 April 2007, the Dis pute Settlement Body (DSB) established a Panel
pursuant to the re... | 2026-03-15T15:50:56.605614 | |
352 | 352 | DS352_SEQ05_Communication.pdf | DS352_SEQ05_Communication.pdf | 5 | Communication | Communication from the Chairman of the Panel | NUMBERED | null | null | INDIA – MEASURES AFFECTING THE IMPORTATION AND SALE OF WINES AND SPIRITS FROM THE EUROPEAN COMMUNITIES | 17 July 2007 | WT/DS352/6 | ['EU'] | ['India'] | ['Australia', 'Chile', 'Japan', 'U.S.'] | Panel | Art. II:1, II:2 GATT 1994 | The summary below was up-to-date at
3 December 2020
Consultations
Complaint by the European Communities.
On 20 November 2006, the European Communities requested consultations with India regarding duties applied by India and restrictions on retail sale applied by the Indian State of Tamil Nadu which, in the European Com... | 1 | INDIA – MEASURES AFFECTING THE IMPORTATION AND SALE
OF WINES AND SPIRITS FROM THE EUROPEAN COMMUNITIES
Communication from the Chairman of the Panel
The following communication, dated 16 July 2 007, addressed to the Chairman of the Dispute
Settlement Body, is circulated in accordance with Article 12.12 of the DSU.
... | 2026-03-15T15:50:56.605882 | |
352 | 352 | DS352_SEQ06_Note_By_Secretariat_01.pdf | DS352_SEQ06_Note_By_Secretariat_01.pdf | 6 | Note_By_Secretariat | Lapse of Authority for Establishment of the Panel Note by the Secretariat At the request of the European Communities, the Panel suspended its work from 16 July 2007 (WT/DS352/6). Since the Panel has not been requested to resume its work, pursuant to Article 12.12 of the DSU, the authority for establishment of the Pan... | NUMBERED | null | 1 | INDIA - MEASURES AFFECTING THE IMPORTATION AND SALE OF WINES AND SPIRITS FROM THE EUROPEAN COMMUNITIES | 17 July 2008 | WT/DS352/7; WT/DS352/6 | ['EU'] | ['India'] | ['Australia', 'Chile', 'Japan', 'U.S.'] | Panel | Art. II:1, II:2 GATT 1994 | The summary below was up-to-date at
3 December 2020
Consultations
Complaint by the European Communities.
On 20 November 2006, the European Communities requested consultations with India regarding duties applied by India and restrictions on retail sale applied by the Indian State of Tamil Nadu which, in the European Com... | 1 | INDIA - MEASURES AFFECTING THE IMPORTATION AND SALE
OF WINES AND SPIRITS FROM THE EUROPEAN COMMUNITIES
Lapse of Authority for Establishment of the Panel
Note by the Secretariat
At the request of the European Communities, the Panel suspended its work from 16 July 2007
(). Since the Panel has not been requested to re... | 2026-03-15T15:50:56.606453 | |
352 | 352 | DS352_SEQ07_Request_For_Consultations.pdf | DS352_SEQ07_Request_For_Consultations.pdf | 7 | Request_For_Consultations | Request for Consultations by the European Communities | NUMBERED | null | null | INDIA – MEASURES AFFECTING THE IMPORTATION AND SALE OF WINES AND SPIRITS FROM THE EUROPEAN COMMUNITIES | 23 November 2006 | WT/DS352/1; G/L/804 | General Council | ['EU'] | ['India'] | ['Australia', 'Chile', 'Japan', 'U.S.'] | Panel | Art. II:1, II:2 GATT 1994 | The summary below was up-to-date at
3 December 2020
Consultations
Complaint by the European Communities.
On 20 November 2006, the European Communities requested consultations with India regarding duties applied by India and restrictions on retail sale applied by the Indian State of Tamil Nadu which, in the European Com... | 3 | INDIA – MEASURES AFFECTING THE IMPORTATION AND SALE
OF WINES AND SPIRITS FROM THE EUROPEAN COMMUNITIES
Request for Consultations by the European Communities
The following communication, dated 20 November 2006, from the delegation of the
European Communities to the delegation of India and to the Chairman of the Dispu... | 2026-03-15T15:50:56.607985 |
353 | 317 | DS317_SEQ01_Request_For_Consultations_Add.pdf | DS317_SEQ01_Request_For_Consultations_Add.pdf | 1 | Request_For_Consultations | Request for Consultations by the European Communities | NUMBERED | Add | null | UNITED STATES – MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT (SECOND COMPLAINT) | 4 December 2006 | WT/DS353/2; WT/DS317/5/Add.1; WT/DS353/2; WT/DS317/5 | ['EU'] | ['U.S.'] | ['Australia', 'Brazil', 'Canada', 'China', 'Japan', 'South Korea'] | Panel | Art. 3.1, 3.2, 5, 6.3 Subsidies and Countervailing Measures (SCM)Art. III:4 GATT 1994 | The summary below was up-to-date at
24 February 2010
Consultations
Complaint by the European Communities. (See also dispute DS353)
On 6 October 2004, the European Communities
requested consultations with the United States concerning prohibited and
actionable subsidies provided to US producers ... | 1 | UNITED STATES – MEASURES AFFECTING TRADE
IN LARGE CIVIL AIRCRAFT
(SECOND COMPLAINT)
Request for Consultations by the European Communities
This document is circulated to add "" to the document number as well as to add
"second complaint" at the end of the title to the doc ument originally circulated as dated
23 Januar... | 2026-03-15T15:50:56.619940 | |
353 | 317 | DS317_SEQ02_Request_For_Establishment_Of_Panel_Corr.pdf | DS317_SEQ02_Request_For_Establishment_Of_Panel_Corr.pdf | 2 | Request_For_Establishment_Of_Panel | Request for Consultations by the European Communities Corrigendum The title of document WT/DS353/2-WT/DS317/5/Add.1 should read as follows: UNITED STATES - MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT (SECOND COMPLAINT) Request for the Establishment of a Panel by the European Communities | NUMBERED | Corr | null | UNITED STATES - MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT (SECOND COMPLAINT) | 8 December 2006 | WT/DS353/2/Corr.1; WT/DS317/5/Add.1/Corr.1; WT/DS353/2-WT/DS317/5/Add.1 | ['EU'] | ['U.S.'] | ['Australia', 'Brazil', 'Canada', 'China', 'Japan', 'South Korea'] | Panel | Art. 3.1, 3.2, 5, 6.3 Subsidies and Countervailing Measures (SCM)Art. III:4 GATT 1994 | The summary below was up-to-date at
24 February 2010
Consultations
Complaint by the European Communities. (See also dispute DS353)
On 6 October 2004, the European Communities
requested consultations with the United States concerning prohibited and
actionable subsidies provided to US producers ... | 1 | UNITED STATES - MEASURES AFFECTING TRADE
IN LARGE CIVIL AIRCRAFT
(SECOND COMPLAINT)
Request for Consultations by the European Communities
Corrigendum
The title of document should read as follows:
Request for the Establishment of a Panel by the European Communities
AÉRONEFS CIVILS GROS PORTEURS
(DEUXIÈME PLAINTE)
Cor... | 2026-03-15T15:50:56.620382 | |
353 | 353 | DS353_SEQ01_Note_By_Secretariat_00.pdf | DS353_SEQ01_Note_By_Secretariat_00.pdf | 1 | Note_By_Secretariat | Constitution of the Panel Established at the Request of the European Communities Note by the Secretariat | NUMBERED | null | 0 | UNITED STATES – MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT (SECOND COMPLAINT) | 4 December 2006 | WT/DS353/3; WT/DS353/2; WT/DS353/2 | ['EU'] | ['U.S.'] | ['Australia', 'Brazil', 'Canada', 'China', 'Japan', 'South Korea'] | Implementation & Compliance | Art. 3.1, 3.2, 5, 6.3, 1.1, 2 Subsidies and Countervailing Measures (SCM)Art. III:4 GATT 1994 | The summary below was up-to-date at
26 November 2020
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 27 June 2005, the European Communities requested consultations with the United States concerning prohibited and actionable subsidies provided to US... | 2 | UNITED STATES – MEASURES AFFECTING TRADE
IN LARGE CIVIL AIRCRAFT
(SECOND COMPLAINT)
Constitution of the Panel Established at the
Request of the European Communities
Note by the Secretariat
1. At its meeting on 17 February 2006, the Di spute Settlement Body (D SB) established a Panel
pursuant to the request of the E... | 2026-03-15T15:51:38.609881 | |
353 | 353 | DS353_SEQ02_Note_By_Secretariat_Add.pdf | DS353_SEQ02_Note_By_Secretariat_Add.pdf | 2 | Note_By_Secretariat | NOTE BY THE SECRETARIAT Addendum On 20 May 2019, the European Union requested the Director -General to compose the Arbitrator due to the unavailability of the original appointees to serve as members of the Arbitrator. On 3 June 2019, the Director- General composed the Arbitrator as follows: Chairperson: Ms Andrea Mari... | NUMBERED | Add | null | UNITED STATES – MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT (SECOND COMPLAINT) RECOURSE TO ARTICLE 22.6 OF THE DSU BY THE UNITED STATES CONSTITUTION OF THE ARBITRATOR NOTE BY THE SECRETARIAT | 4 June 2019 | WT/DS353/3/Add.1 | ['EU'] | ['U.S.'] | ['Australia', 'Brazil', 'Canada', 'China', 'Japan', 'South Korea'] | Implementation & Compliance | Art. 3.1, 3.2, 5, 6.3, 1.1, 2 Subsidies and Countervailing Measures (SCM)Art. III:4 GATT 1994 | The summary below was up-to-date at
26 November 2020
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 27 June 2005, the European Communities requested consultations with the United States concerning prohibited and actionable subsidies provided to US... | 1 | UNITED STATES – MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT
(SECOND COMPLAINT)
RECOURSE TO ARTICLE 22.6 OF THE DSU BY THE UNITED STATES
CONSTITUTION OF THE ARBITRATOR
NOTE BY THE SECRETARIAT
Addendum
On 20 May 2019, the European Union requested the Director -General to compose the Arbitrator due to the
unavailabil... | 2026-03-15T15:51:38.610669 | |
353 | 353 | DS353_SEQ03_Note_By_Secretariat_Corr.pdf | DS353_SEQ03_Note_By_Secretariat_Corr.pdf | 3 | Note_By_Secretariat | Constitution of the Panel Established at the Request of the European Communities Note by the Secretariat Corrigendum Paragraph 5 of document WT/DS353/3 should read as follows: "5. Australia, Brazil, Canada, China, Japan and Korea have reserved their rights to participate in the Panel proceedings as third parties." | NUMBERED | Corr | null | UNITED STATES – MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT (SECOND COMPLAINT) | 8 December 2006 | WT/DS353/3/Corr.1; WT/DS353/3 | ['EU'] | ['U.S.'] | ['Australia', 'Brazil', 'Canada', 'China', 'Japan', 'South Korea'] | Implementation & Compliance | Art. 3.1, 3.2, 5, 6.3, 1.1, 2 Subsidies and Countervailing Measures (SCM)Art. III:4 GATT 1994 | The summary below was up-to-date at
26 November 2020
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 27 June 2005, the European Communities requested consultations with the United States concerning prohibited and actionable subsidies provided to US... | 1 | UNITED STATES – MEASURES AFFECTING TRADE
IN LARGE CIVIL AIRCRAFT
(SECOND COMPLAINT)
Constitution of the Panel Established at the
Request of the European Communities
Note by the Secretariat
Corrigendum
Paragraph 5 of document should read as follows:
"5. Australia, Brazil, Canada, China, Japan and Korea have reser... | 2026-03-15T15:51:38.611096 | |
353 | 353 | DS353_SEQ04_Communication_00.pdf | DS353_SEQ04_Communication_00.pdf | 4 | Communication | Communication from the Chairman of the Panel | NUMBERED | null | 0 | UNITED STATES – MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT (SECOND COMPLAINT) | 18 May 2007 | WT/DS353/4 | ['EU'] | ['U.S.'] | ['Australia', 'Brazil', 'Canada', 'China', 'Japan', 'South Korea'] | Implementation & Compliance | Art. 3.1, 3.2, 5, 6.3, 1.1, 2 Subsidies and Countervailing Measures (SCM)Art. III:4 GATT 1994 | The summary below was up-to-date at
26 November 2020
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 27 June 2005, the European Communities requested consultations with the United States concerning prohibited and actionable subsidies provided to US... | 1 | UNITED STATES – MEASURES AFFECTING TRADE
IN LARGE CIVIL AIRCRAFT
(SECOND COMPLAINT)
Communication from the Chairman of the Panel
The following communication, dated 18 May 2007 , addressed to the Chairman of the Dispute
Settlement Body (DSB), is circulated in accordan ce with Article 12.9 of the Dispute Settlement
Un... | 2026-03-15T15:51:38.611534 | |
353 | 353 | DS353_SEQ05_Communication_01.pdf | DS353_SEQ05_Communication_01.pdf | 5 | Communication | Communication from the Chairman of the Panel | NUMBERED | null | 1 | UNITED STATES – MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT (SECOND COMPLAINT) | 14 July 2008 | WT/DS353/5 | ['EU'] | ['U.S.'] | ['Australia', 'Brazil', 'Canada', 'China', 'Japan', 'South Korea'] | Implementation & Compliance | Art. 3.1, 3.2, 5, 6.3, 1.1, 2 Subsidies and Countervailing Measures (SCM)Art. III:4 GATT 1994 | The summary below was up-to-date at
26 November 2020
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 27 June 2005, the European Communities requested consultations with the United States concerning prohibited and actionable subsidies provided to US... | 1 | UNITED STATES – MEASURES AFFECTING TRADE
IN LARGE CIVIL AIRCRAFT
(SECOND COMPLAINT)
Communication from the Chairman of the Panel
The following communication, dated 11 July 2 008, addressed to the Chairman of the Dispute
Settlement Body (DSB), is circulated in accordan ce with Article 12.9 of the Dispute Settlement
U... | 2026-03-15T15:51:38.611951 | |
353 | 353 | DS353_SEQ06_Communication_02.pdf | DS353_SEQ06_Communication_02.pdf | 6 | Communication | Communication from the Chairman of the Panel | NUMBERED | null | 2 | UNITED STATES – MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT (SECOND COMPLAINT) | 17 December 2009 | WT/DS353/6 | ['EU'] | ['U.S.'] | ['Australia', 'Brazil', 'Canada', 'China', 'Japan', 'South Korea'] | Implementation & Compliance | Art. 3.1, 3.2, 5, 6.3, 1.1, 2 Subsidies and Countervailing Measures (SCM)Art. III:4 GATT 1994 | The summary below was up-to-date at
26 November 2020
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 27 June 2005, the European Communities requested consultations with the United States concerning prohibited and actionable subsidies provided to US... | 1 | UNITED STATES – MEASURES AFFECTING TRADE
IN LARGE CIVIL AIRCRAFT
(SECOND COMPLAINT)
Communication from the Chairman of the Panel
The following communication, dated 16 Dece mber 2009, addressed to the Chairman of the
Dispute Settlement Body ("DSB"), is circulated in accordance with Article 12.9 of the Understanding
o... | 2026-03-15T15:51:38.612419 | |
353 | 353 | DS353_SEQ07_Communication_03.pdf | DS353_SEQ07_Communication_03.pdf | 7 | Communication | Communication from the Chairman of the Panel | NUMBERED | null | 3 | UNITED STATES – MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT (SECOND COMPLAINT) | 8 July 2010 | WT/DS353/7 | ['EU'] | ['U.S.'] | ['Australia', 'Brazil', 'Canada', 'China', 'Japan', 'South Korea'] | Implementation & Compliance | Art. 3.1, 3.2, 5, 6.3, 1.1, 2 Subsidies and Countervailing Measures (SCM)Art. III:4 GATT 1994 | The summary below was up-to-date at
26 November 2020
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 27 June 2005, the European Communities requested consultations with the United States concerning prohibited and actionable subsidies provided to US... | 1 | UNITED STATES – MEASURES AFFECTING TRADE
IN LARGE CIVIL AIRCRAFT
(SECOND COMPLAINT)
Communication from the Chairman of the Panel
The following communication, dated 7 July 2010, addressed to the Chairman of the Dispute
Settlement Body ("DSB"), is circulated in acco rdance with Article 12.9 of the Understanding on
Rul... | 2026-03-15T15:51:38.612863 | |
353 | 353 | DS353_SEQ08_Notification_Of_Appeal.pdf | DS353_SEQ08_Notification_Of_Appeal.pdf | 8 | Notification_Of_Appeal | Notification of an Appeal by the European Union under Article 16.4 and Article 17 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU), and under Rule 20(1) of the Working Procedures for Appellate Review | NUMBERED | null | null | UNITED STATES – MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT (SECOND COMPLAINT) | 4 April 2011 | WT/DS353/8 | ['EU'] | ['U.S.'] | ['Australia', 'Brazil', 'Canada', 'China', 'Japan', 'South Korea'] | Implementation & Compliance | Art. 3.1, 3.2, 5, 6.3, 1.1, 2 Subsidies and Countervailing Measures (SCM)Art. III:4 GATT 1994 | The summary below was up-to-date at
26 November 2020
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 27 June 2005, the European Communities requested consultations with the United States concerning prohibited and actionable subsidies provided to US... | 2 | UNITED STATES – MEASURES AFFECTING TRADE
IN LARGE CIVIL AIRCRAFT
(SECOND COMPLAINT)
Notification of an Appeal by the European Union
under Article 16.4 and Article 17 of the Understanding on Rules
and Procedures Governing the Settlement of Disputes (DSU),
and under Rule 20(1) of the Working Procedures for Appellate Re... | 2026-03-15T15:51:38.614134 | |
353 | 353 | DS353_SEQ09_Communication_04.pdf | DS353_SEQ09_Communication_04.pdf | 9 | Communication | Communication from the European Union | NUMBERED | null | 4 | UNITED STATES – MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT (SECOND COMPLAINT) | 8 April 2011 | WT/DS353/9 | ['EU'] | ['U.S.'] | ['Australia', 'Brazil', 'Canada', 'China', 'Japan', 'South Korea'] | Implementation & Compliance | Art. 3.1, 3.2, 5, 6.3, 1.1, 2 Subsidies and Countervailing Measures (SCM)Art. III:4 GATT 1994 | The summary below was up-to-date at
26 November 2020
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 27 June 2005, the European Communities requested consultations with the United States concerning prohibited and actionable subsidies provided to US... | 2 | UNITED STATES – MEASURES AFFECTING TRADE
IN LARGE CIVIL AIRCRAFT
(SECOND COMPLAINT)
Communication from the European Union
The following communication, dated 1 April 201 1, from the European Union addressed to the
Chair of the Dispute Settlement Body, is being circulated to Members.
Pursuant to Article 16.4 and Art... | 2026-03-15T15:51:38.615073 | |
353 | 353 | DS353_SEQ10_Working_Procedures_00.pdf | DS353_SEQ10_Working_Procedures_00.pdf | 10 | Working_Procedures | Notification of an Other Appeal by the United States under Article 16.4 and Article 17 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU), and under Rule 23(1) of the Working Procedures for Appellate Review | NUMBERED | null | 0 | UNITED STATES – MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT (SECOND COMPLAINT) | 29 April 2011 | WT/DS353/10 | ['EU'] | ['U.S.'] | ['Australia', 'Brazil', 'Canada', 'China', 'Japan', 'South Korea'] | Implementation & Compliance | Art. 3.1, 3.2, 5, 6.3, 1.1, 2 Subsidies and Countervailing Measures (SCM)Art. III:4 GATT 1994 | The summary below was up-to-date at
26 November 2020
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 27 June 2005, the European Communities requested consultations with the United States concerning prohibited and actionable subsidies provided to US... | 4 | UNITED STATES – MEASURES AFFECTING TRADE
IN LARGE CIVIL AIRCRAFT
(SECOND COMPLAINT)
Notification of an Other Appeal by the United States
under Article 16.4 and Article 17 of the Understanding on Rules
and Procedures Governing the Settlement of Disputes (DSU),
and under Rule 23(1) of the Working Procedures for Appella... | 2026-03-15T15:51:38.617390 | |
353 | 353 | DS353_SEQ11_Communication_05.pdf | DS353_SEQ11_Communication_05.pdf | 11 | Communication | Communication from the Appellate Body | NUMBERED | null | 5 | UNITED STATES – MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT (SECOND COMPLAINT) | 6 July 2011 | WT/DS353/11 | ['EU'] | ['U.S.'] | ['Australia', 'Brazil', 'Canada', 'China', 'Japan', 'South Korea'] | Implementation & Compliance | Art. 3.1, 3.2, 5, 6.3, 1.1, 2 Subsidies and Countervailing Measures (SCM)Art. III:4 GATT 1994 | The summary below was up-to-date at
26 November 2020
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 27 June 2005, the European Communities requested consultations with the United States concerning prohibited and actionable subsidies provided to US... | 1 | UNITED STATES – MEASURES AFFECTING TRADE
IN LARGE CIVIL AIRCRAFT
(SECOND COMPLAINT)
Communication from the Appellate Body
The following communication, dated 4 July 2011, from the Chair of the Appellate Body
addressed to the Chair of the Dispute Settlement Bo dy, is circulated in accordance with Article 17.5
of the U... | 2026-03-15T15:51:38.617909 | |
353 | 353 | DS353_SEQ12_Communication_06.pdf | DS353_SEQ12_Communication_06.pdf | 12 | Communication | Communication from the Appellate Body | NUMBERED | null | 6 | UNITED STATES – MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT (SECOND COMPLAINT) | 13 March 2012 | WT/DS353/12; WT/DS353/AB/R. | ['EU'] | ['U.S.'] | ['Australia', 'Brazil', 'Canada', 'China', 'Japan', 'South Korea'] | Implementation & Compliance | Art. 3.1, 3.2, 5, 6.3, 1.1, 2 Subsidies and Countervailing Measures (SCM)Art. III:4 GATT 1994 | The summary below was up-to-date at
26 November 2020
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 27 June 2005, the European Communities requested consultations with the United States concerning prohibited and actionable subsidies provided to US... | 1 | UNITED STATES – MEASURES AFFECTING TRADE
IN LARGE CIVIL AIRCRAFT
(SECOND COMPLAINT)
Communication from the Appellate Body
The following communication, dated 12 Marc h 2012, from the Chair of the Appellate Body
addressed to the Chair of the Dispute Settlement Bo dy, is circulated in accordance with Article 17.5
of th... | 2026-03-15T15:51:38.618232 | |
353 | 353 | DS353_SEQ13_Understanding.pdf | DS353_SEQ13_Understanding.pdf | 13 | Understanding | Understanding between the European Union and the United States Regarding Procedures under Articles 21 and 22 of the DSU | NUMBERED | null | null | UNITED STATES – MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT (SECOND COMPLAINT) | 27 April 2012 | WT/DS353/14 | ['EU'] | ['U.S.'] | ['Australia', 'Brazil', 'Canada', 'China', 'Japan', 'South Korea'] | Implementation & Compliance | Art. 3.1, 3.2, 5, 6.3, 1.1, 2 Subsidies and Countervailing Measures (SCM)Art. III:4 GATT 1994 | The summary below was up-to-date at
26 November 2020
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 27 June 2005, the European Communities requested consultations with the United States concerning prohibited and actionable subsidies provided to US... | 3 | UNITED STATES – MEASURES AFFECTING TRADE
IN LARGE CIVIL AIRCRAFT
(SECOND COMPLAINT)
Understanding between the European Union and the United States
Regarding Procedures under Articles 21 and 22 of the DSU
The following communication, dated 24 April 2012, from the delegation of the
European Union and the delegation of... | 2026-03-15T15:51:38.619854 | |
353 | 353 | DS353_SEQ14_Communication_07.pdf | DS353_SEQ14_Communication_07.pdf | 14 | Communication | Communication from the United States | NUMBERED | null | 7 | UNITED STATES – MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT (SECOND COMPLAINT) | 26 September 2012 | WT/DS353/15 | ['EU'] | ['U.S.'] | ['Australia', 'Brazil', 'Canada', 'China', 'Japan', 'South Korea'] | Implementation & Compliance | Art. 3.1, 3.2, 5, 6.3, 1.1, 2 Subsidies and Countervailing Measures (SCM)Art. III:4 GATT 1994 | The summary below was up-to-date at
26 November 2020
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 27 June 2005, the European Communities requested consultations with the United States concerning prohibited and actionable subsidies provided to US... | 5 | UNITED STATES – MEASURES AFFECTING TRADE
IN LARGE CIVIL AIRCRAFT
(SECOND COMPLAINT)
Communication from the United States
The following communication, dated 23 Sept ember 2012, from the delegation of the
United States to the Chairperson of the Dispute Settle ment Body, is circulated at the request of that
delegation.... | 2026-03-15T15:51:38.621937 | |
353 | 353 | DS353_SEQ15_Request_For_Consultations_00.pdf | DS353_SEQ15_Request_For_Consultations_00.pdf | 15 | Request_For_Consultations | Recourse to Article 21.5 of the DSU by the European Union Request for Consultations | NUMBERED | null | 0 | UNITED STATES – MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT (SECOND COMPLAINT) | 2 October 2012 | WT/DS353/16 | ['EU'] | ['U.S.'] | ['Australia', 'Brazil', 'Canada', 'China', 'Japan', 'South Korea'] | Implementation & Compliance | Art. 3.1, 3.2, 5, 6.3, 1.1, 2 Subsidies and Countervailing Measures (SCM)Art. III:4 GATT 1994 | The summary below was up-to-date at
26 November 2020
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 27 June 2005, the European Communities requested consultations with the United States concerning prohibited and actionable subsidies provided to US... | 10 | UNITED STATES – MEASURES AFFECTING TRADE
IN LARGE CIVIL AIRCRAFT
(SECOND COMPLAINT)
Recourse to Article 21.5 of the DSU by the European Union
Request for Consultations
The following communication, dated 25 Sept ember 2012, from the delegation of the
European Union to the delegation of the United States and to the C... | 2026-03-15T15:51:38.627205 | |
353 | 353 | DS353_SEQ16_Request_For_Establishment_Of_Panel.pdf | DS353_SEQ16_Request_For_Establishment_Of_Panel.pdf | 16 | Request_For_Establishment_Of_Panel | Recourse to Article 21.5 of the DSU by the European Union Request for the Establishment of a Panel | NUMBERED | null | null | UNITED STATES – MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT (SECOND COMPLAINT) | 12 October 2012 | WT/DS353/18 | ['EU'] | ['U.S.'] | ['Australia', 'Brazil', 'Canada', 'China', 'Japan', 'South Korea'] | Implementation & Compliance | Art. 3.1, 3.2, 5, 6.3, 1.1, 2 Subsidies and Countervailing Measures (SCM)Art. III:4 GATT 1994 | The summary below was up-to-date at
26 November 2020
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 27 June 2005, the European Communities requested consultations with the United States concerning prohibited and actionable subsidies provided to US... | 12 | UNITED STATES – MEASURES AFFECTING TRADE
IN LARGE CIVIL AIRCRAFT
(SECOND COMPLAINT)
Recourse to Article 21.5 of the DSU by the European Union
Request for the Establishment of a Panel
The following communication, dated 11 October 2012, from the delegation of the European
Union to the Chairperson of the Dispute Settl... | 2026-03-15T15:51:38.634270 | |
353 | 353 | DS353_SEQ17_Note_By_Secretariat_01.pdf | DS353_SEQ17_Note_By_Secretariat_01.pdf | 17 | Note_By_Secretariat | Recourse to Article 22.6 of the DSU by the United States Constitution of the Arbitrator Note by the Secretariat | NUMBERED | null | 1 | UNITED STATES – MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT (SECOND COMPLAINT) | 5 November 2012 | WT/DS353/20 | ['EU'] | ['U.S.'] | ['Australia', 'Brazil', 'Canada', 'China', 'Japan', 'South Korea'] | Implementation & Compliance | Art. 3.1, 3.2, 5, 6.3, 1.1, 2 Subsidies and Countervailing Measures (SCM)Art. III:4 GATT 1994 | The summary below was up-to-date at
26 November 2020
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 27 June 2005, the European Communities requested consultations with the United States concerning prohibited and actionable subsidies provided to US... | 2 | UNITED STATES – MEASURES AFFECTING TRADE
IN LARGE CIVIL AIRCRAFT
(SECOND COMPLAINT)
Recourse to Article 22.6 of the DSU by the United States
Constitution of the Arbitrator
Note by the Secretariat
1. At the meeting of the Dispute Settlement Body (DSB) on 23 October 2012, the
European Union stated that the United Sta... | 2026-03-15T15:51:38.635304 | |
353 | 353 | DS353_SEQ18_Note_By_Secretariat_Rev.pdf | DS353_SEQ18_Note_By_Secretariat_Rev.pdf | 18 | Note_By_Secretariat | Recourse to Article 22.6 of the DSU by the United States Constitution of the Arbitrator Note by the Secretariat Revision | NUMBERED | Rev | null | UNITED STATES – MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT (SECOND COMPLAINT) | 16 November 2012 | WT/DS353/20/Rev.1 | ['EU'] | ['U.S.'] | ['Australia', 'Brazil', 'Canada', 'China', 'Japan', 'South Korea'] | Implementation & Compliance | Art. 3.1, 3.2, 5, 6.3, 1.1, 2 Subsidies and Countervailing Measures (SCM)Art. III:4 GATT 1994 | The summary below was up-to-date at
26 November 2020
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 27 June 2005, the European Communities requested consultations with the United States concerning prohibited and actionable subsidies provided to US... | 2 | UNITED STATES – MEASURES AFFECTING TRADE
IN LARGE CIVIL AIRCRAFT
(SECOND COMPLAINT)
Recourse to Article 22.6 of the DSU by the United States
Constitution of the Arbitrator
Note by the Secretariat
Revision
1. At the meeting of the Dispute Settlement Body (DSB) on 23 October 2012, the
European Union stated that the ... | 2026-03-15T15:51:38.636316 | |
353 | 353 | DS353_SEQ19_Note_By_Secretariat_02.pdf | DS353_SEQ19_Note_By_Secretariat_02.pdf | 19 | Note_By_Secretariat | Recourse to Article 21.5 of the DSU by the European Union Constitution of the Panel Note by the Secretariat | NUMBERED | null | 2 | UNITED STATES – MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT (SECOND COMPLAINT) | 5 November 2012 | WT/DS353/21; WT/DS353/18. | ['EU'] | ['U.S.'] | ['Australia', 'Brazil', 'Canada', 'China', 'Japan', 'South Korea'] | Implementation & Compliance | Art. 3.1, 3.2, 5, 6.3, 1.1, 2 Subsidies and Countervailing Measures (SCM)Art. III:4 GATT 1994 | The summary below was up-to-date at
26 November 2020
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 27 June 2005, the European Communities requested consultations with the United States concerning prohibited and actionable subsidies provided to US... | 1 | UNITED STATES – MEASURES AFFECTING TRADE
IN LARGE CIVIL AIRCRAFT
(SECOND COMPLAINT)
Recourse to Article 21.5 of the DSU by the European Union
Constitution of the Panel
Note by the Secretariat
1. At its meeting on 23 October 2012, the Dispute Se ttlement Body (DSB) referred this dispute,
if possible, to the original... | 2026-03-15T15:51:38.636700 | |
353 | 353 | DS353_SEQ20_Communication_08.pdf | DS353_SEQ20_Communication_08.pdf | 20 | Communication | Recourse to Article 22.6 of the DSU by the United States Communication from the Arbitrator | NUMBERED | null | 8 | UNITED STATES – MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT (SECOND COMPLAINT) | 3 December 2012 | WT/DS353/22 | ['EU'] | ['U.S.'] | ['Australia', 'Brazil', 'Canada', 'China', 'Japan', 'South Korea'] | Implementation & Compliance | Art. 3.1, 3.2, 5, 6.3, 1.1, 2 Subsidies and Countervailing Measures (SCM)Art. III:4 GATT 1994 | The summary below was up-to-date at
26 November 2020
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 27 June 2005, the European Communities requested consultations with the United States concerning prohibited and actionable subsidies provided to US... | 3 | UNITED STATES – MEASURES AFFECTING TRADE
IN LARGE CIVIL AIRCRAFT
(SECOND COMPLAINT)
Recourse to Article 22.6 of the DSU by the United States
Communication from the Arbitrator
The following communication, dated 29 N ovember 2012, has been received from the
Chairperson of the Arbitrator with the request that it be ci... | 2026-03-15T15:51:38.637695 | |
353 | 353 | DS353_SEQ21_Communication_09.pdf | DS353_SEQ21_Communication_09.pdf | 21 | Communication | Communication from the Panel | NUMBERED | null | 9 | UNITED STATES - MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT (SECOND COMPLAINT) RECOURSE TO ARTICLE 21.5 OF THE DSU BY THE EUROPEAN UNION | 17 January 2013 | WT/DS353/23 | ['EU'] | ['U.S.'] | ['Australia', 'Brazil', 'Canada', 'China', 'Japan', 'South Korea'] | Implementation & Compliance | Art. 3.1, 3.2, 5, 6.3, 1.1, 2 Subsidies and Countervailing Measures (SCM)Art. III:4 GATT 1994 | The summary below was up-to-date at
26 November 2020
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 27 June 2005, the European Communities requested consultations with the United States concerning prohibited and actionable subsidies provided to US... | 1 | UNITED STATES - MEASURES AFFECTING TRADE
IN LARGE CIVIL AIRCRAFT
(SECOND COMPLAINT)
RECOURSE TO ARTICLE 21.5 OF THE DSU BY THE EUROPEAN UNION
Communication from the Panel
The following communication, dated 15 January 2013, was received from the Chairman of
the Panel with the request that it be circulated to the Disput... | 2026-03-15T15:51:38.638457 | |
353 | 353 | DS353_SEQ22_Communication_10.pdf | DS353_SEQ22_Communication_10.pdf | 22 | Communication | Communication from the Panel | NUMBERED | null | 10 | UNITED STATES - MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT (SECOND COMPLAINT) RECOURSE TO ARTICLE 21.5 OF THE DSU BY THE EUROPEAN UNION | 28 May 2014 | WT/DS353/24 | ['EU'] | ['U.S.'] | ['Australia', 'Brazil', 'Canada', 'China', 'Japan', 'South Korea'] | Implementation & Compliance | Art. 3.1, 3.2, 5, 6.3, 1.1, 2 Subsidies and Countervailing Measures (SCM)Art. III:4 GATT 1994 | The summary below was up-to-date at
26 November 2020
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 27 June 2005, the European Communities requested consultations with the United States concerning prohibited and actionable subsidies provided to US... | 1 | UNITED STATES - MEASURES AFFECTING TRADE
IN LARGE CIVIL AIRCRAFT
(SECOND COMPLAINT)
RECOURSE TO ARTICLE 21.5 OF THE DSU BY THE EUROPEAN UNION
Communication from the Panel
The following communication, dated 27 May 2014, was received from the Chairman of the Panel
with the request that it be circulated to the Dispute Set... | 2026-03-15T15:51:38.638995 | |
353 | 353 | DS353_SEQ23_Communication_11.pdf | DS353_SEQ23_Communication_11.pdf | 23 | Communication | Communication from the Panel | NUMBERED | null | 11 | UNITED STATES - MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT (SECOND COMPLAINT) RECOURSE TO ARTICLE 21.5 OF THE DSU BY THE EUROPEAN UNION | 10 March 2015 | WT/DS353/25 | ['EU'] | ['U.S.'] | ['Australia', 'Brazil', 'Canada', 'China', 'Japan', 'South Korea'] | Implementation & Compliance | Art. 3.1, 3.2, 5, 6.3, 1.1, 2 Subsidies and Countervailing Measures (SCM)Art. III:4 GATT 1994 | The summary below was up-to-date at
26 November 2020
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 27 June 2005, the European Communities requested consultations with the United States concerning prohibited and actionable subsidies provided to US... | 1 | UNITED STATES - MEASURES AFFECTING TRADE
IN LARGE CIVIL AIRCRAFT
(SECOND COMPLAINT)
RECOURSE TO ARTICLE 21.5 OF THE DSU BY THE EUROPEAN UNION
Communication from the Panel
The following communication, dated 9 March 2015, was received from the Chairman of the Panel
with the request that it be circulated to the Dispute Se... | 2026-03-15T15:51:38.639570 | |
353 | 353 | DS353_SEQ24_Communication_12.pdf | DS353_SEQ24_Communication_12.pdf | 24 | Communication | Communication from the Panel | NUMBERED | null | 12 | UNITED STATES – MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT (SECOND COMPLAINT) RECOURSE TO ARTICLE 21.5 OF THE DSU BY THE EUROPEAN UNION | 27 June 2016 | WT/DS353/26 | ['EU'] | ['U.S.'] | ['Australia', 'Brazil', 'Canada', 'China', 'Japan', 'South Korea'] | Implementation & Compliance | Art. 3.1, 3.2, 5, 6.3, 1.1, 2 Subsidies and Countervailing Measures (SCM)Art. III:4 GATT 1994 | The summary below was up-to-date at
26 November 2020
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 27 June 2005, the European Communities requested consultations with the United States concerning prohibited and actionable subsidies provided to US... | 1 | UNITED STATES – MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT
(SECOND COMPLAINT)
RECOURSE TO ARTICLE 21.5 OF THE DSU BY THE EUROPEAN UNION
Communication from the Panel
The following communication, dated 27 June 2016, was received from the Chairman of the Panel
with the request that it be circulated to the Dispute Se... | 2026-03-15T15:51:38.640278 | |
353 | 353 | DS353_SEQ25_Working_Procedures_01.pdf | DS353_SEQ25_Working_Procedures_01.pdf | 25 | Working_Procedures | OF THE UNDERSTANDING ON RULES AND PROCEDURES GOVERNING THE SETTLEMENT OF DISPUTES ("DSU"), ARTICLE 7.6 OF THE AGREEMENT ON SUBSIDIES AND COUNTERVAILING MEASURES ("SCM AGREEMENT"), AND UNDER RULE 20(1) OF THE WORKING PROCEDURES FOR APPELLATE REVIEW | NUMBERED | null | 1 | UNITED STATES – MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT (SECOND COMPLAINT) RECOURSE TO ARTICLE 21.5 OF THE DSU BY THE EUROPEAN UNION NOTIFICATION OF AN APPEAL BY THE EUROPEAN UNION UNDER ARTICLE 16.4 AND ARTICLE 17 OF THE UNDERSTANDING ON RULES AND PROCEDURES GOVERNING THE SETTLEMENT OF DISPUTES ("DSU"), ARTIC... | 6 July 2017 | WT/DS353/27 | ['EU'] | ['U.S.'] | ['Australia', 'Brazil', 'Canada', 'China', 'Japan', 'South Korea'] | Implementation & Compliance | Art. 3.1, 3.2, 5, 6.3, 1.1, 2 Subsidies and Countervailing Measures (SCM)Art. III:4 GATT 1994 | The summary below was up-to-date at
26 November 2020
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 27 June 2005, the European Communities requested consultations with the United States concerning prohibited and actionable subsidies provided to US... | 6 | UNITED STATES – MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT
(SECOND COMPLAINT)
RECOURSE TO ARTICLE 21.5 OF THE DSU BY THE EUROPEAN UNION
NOTIFICATION OF AN APPEAL BY THE EUROPEAN UNION UNDER ARTICLE 16.4 AND ARTICLE 17
OF THE UNDERSTANDING ON RULES AND PROCEDURES GOVERNING THE SETTLEMENT
OF DISPUTES ("DSU"), ARTIC... | 2026-03-15T15:51:38.644460 | |
353 | 353 | DS353_SEQ26_Working_Procedures_02.pdf | DS353_SEQ26_Working_Procedures_02.pdf | 26 | Working_Procedures | ARTICLE 17 OF THE UNDERSTANDING ON RULES AND PROCEDURES GOVERNING THE SETTLEMENT OF DISPUTES ("DSU"), AND UNDER RULE 20(1) OF THE WORKING PROCEDURES FOR APPELLATE REVIEW | NUMBERED | null | 2 | UNITED STATES – MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT (SECOND COMPLAINT) RECOURSE TO ARTICLE 21.5 OF THE DSU BY THE EUROPEAN UNION NOTIFICATION OF AN OTHER APPEAL BY THE UNITED STATES UNDER ARTICLE 16.4 AND ARTICLE 17 OF THE UNDERSTANDING ON RULES AND PROCEDURES GOVERNING THE SETTLEMENT OF DISPUTES ("DSU"), ... | 18 September 2017 | WT/DS353/28 | ['EU'] | ['U.S.'] | ['Australia', 'Brazil', 'Canada', 'China', 'Japan', 'South Korea'] | Implementation & Compliance | Art. 3.1, 3.2, 5, 6.3, 1.1, 2 Subsidies and Countervailing Measures (SCM)Art. III:4 GATT 1994 | The summary below was up-to-date at
26 November 2020
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 27 June 2005, the European Communities requested consultations with the United States concerning prohibited and actionable subsidies provided to US... | 3 | UNITED STATES – MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT
(SECOND COMPLAINT)
RECOURSE TO ARTICLE 21.5 OF THE DSU BY THE EUROPEAN UNION
NOTIFICATION OF AN OTHER APPEAL BY THE UNITED STATES UNDER ARTICLE 16.4 AND
ARTICLE 17 OF THE UNDERSTANDING ON RULES AND PROCEDURES GOVERNING THE
SETTLEMENT OF DISPUTES ("DSU"), ... | 2026-03-15T15:51:38.646590 | |
353 | 353 | DS353_SEQ27_Communication_13.pdf | DS353_SEQ27_Communication_13.pdf | 27 | Communication | COMMUNICATION FROM | NUMBERED | null | 13 | UNITED STATES – MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT (SECOND COMPLAINT) RECOURSE TO ARTICLE 21.5 OF THE DSU BY THE EUROPEAN UNION COMMUNICATION FROM THE APPELLATE BODY | 20 September 2017 | WT/DS353/29 | ['EU'] | ['U.S.'] | ['Australia', 'Brazil', 'Canada', 'China', 'Japan', 'South Korea'] | Implementation & Compliance | Art. 3.1, 3.2, 5, 6.3, 1.1, 2 Subsidies and Countervailing Measures (SCM)Art. III:4 GATT 1994 | The summary below was up-to-date at
26 November 2020
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 27 June 2005, the European Communities requested consultations with the United States concerning prohibited and actionable subsidies provided to US... | 1 | UNITED STATES – MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT
(SECOND COMPLAINT)
RECOURSE TO ARTICLE 21.5 OF THE DSU BY THE EUROPEAN UNION
COMMUNICATION FROM THE APPELLATE BODY
The following communication, dated 18 September 2017 , from the Chair of the Appellate Body
addressed to the Chair of the Dispute Settlement... | 2026-03-15T15:51:38.647448 | |
353 | 353 | DS353_SEQ28_DSB_Action.pdf | DS353_SEQ28_DSB_Action.pdf | 28 | DSB_Action | Action by the Dispute Settlement Body | NUMBERED | null | null | UNITED STATES – MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT (SECOND COMPLAINT) APPELLATE BODY REPORT AND PANEL REPORT PURSUANT TO ARTICLE 21.5 OF THE DSU | 12 April 2019 | WT/DS353/32; WT/DS353/AB/RW; WT/DS353/AB/RW/Add.1; WT/DS353/RW; WT/DS353/RW/Add.1 | ['EU'] | ['U.S.'] | ['Australia', 'Brazil', 'Canada', 'China', 'Japan', 'South Korea'] | Implementation & Compliance | Art. 3.1, 3.2, 5, 6.3, 1.1, 2 Subsidies and Countervailing Measures (SCM)Art. III:4 GATT 1994 | The summary below was up-to-date at
26 November 2020
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 27 June 2005, the European Communities requested consultations with the United States concerning prohibited and actionable subsidies provided to US... | 1 | UNITED STATES – MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT
(SECOND COMPLAINT)
APPELLATE BODY REPORT AND PANEL REPORT PURSUANT TO ARTICLE 21.5 OF THE DSU
Action by the Dispute Settlement Body
At its meeting on 11 April 2019, the Dispute Settlement Body adopted the Appellate Body report on
United States – Measures ... | 2026-03-15T15:51:38.648163 | |
353 | 353 | DS353_SEQ29_Communication_14.pdf | DS353_SEQ29_Communication_14.pdf | 29 | Communication | Communication from the Arbitrator | NUMBERED | null | 14 | UNITED STATES – MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT (SECOND COMPLAINT) RECOURSE TO ARTICLE 22.6 OF THE DSU BY THE UNITED STATES | 21 June 2019 | WT/DS353/33 | ['EU'] | ['U.S.'] | ['Australia', 'Brazil', 'Canada', 'China', 'Japan', 'South Korea'] | Implementation & Compliance | Art. 3.1, 3.2, 5, 6.3, 1.1, 2 Subsidies and Countervailing Measures (SCM)Art. III:4 GATT 1994 | The summary below was up-to-date at
26 November 2020
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 27 June 2005, the European Communities requested consultations with the United States concerning prohibited and actionable subsidies provided to US... | 1 | UNITED STATES – MEASURES AFFECTING TRADE
IN LARGE CIVIL AIRCRAFT
(SECOND COMPLAINT)
RECOURSE TO ARTICLE 22.6 OF THE DSU BY THE UNITED STATES
Communication from the Arbitrator
The following communication, dated 20 June 2019 , was received from the Chairperson of the
Arbitrator with the request that it be circulated to t... | 2026-03-15T15:51:38.648570 | |
353 | 353 | DS353_SEQ30_Communication_15.pdf | DS353_SEQ30_Communication_15.pdf | 30 | Communication | COMMUNICATION FROM | NUMBERED | null | 15 | UNITED STATES – MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT (SECOND COMPLAINT) COMMUNICATION FROM THE UNITED STATES | 8 May 2020 | WT/DS353/34 | ['EU'] | ['U.S.'] | ['Australia', 'Brazil', 'Canada', 'China', 'Japan', 'South Korea'] | Implementation & Compliance | Art. 3.1, 3.2, 5, 6.3, 1.1, 2 Subsidies and Countervailing Measures (SCM)Art. III:4 GATT 1994 | The summary below was up-to-date at
26 November 2020
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 27 June 2005, the European Communities requested consultations with the United States concerning prohibited and actionable subsidies provided to US... | 2 | UNITED STATES – MEASURES AFFECTING TRADE
IN LARGE CIVIL AIRCRAFT
(SECOND COMPLAINT)
COMMUNICATION FROM THE UNITED STATES
The following communication, dated 6 May 2020 , was received from the delegation of the
United States with the request that it be circulated to the Dispute Settlement Body (DSB).
The United States w... | 2026-03-15T15:51:38.649363 | |
353 | 353 | DS353_SEQ31_Request_For_Consultations_02.pdf | DS353_SEQ31_Request_For_Consultations_02.pdf | 31 | Request_For_Consultations | WT/DS353/R Page A-1 BCI deleted, as indicated [***] ANNEX A Contents Page Annex A United States — Measures Affecting Trade in Large Civil Aircraft , Request for Consultations by the European Communities, Addendum WT/DS353/1-WT/DS 317/1/Add.1-G/L/698/Add.1- G/SCM/D63/1/Add.1 A-2 | NUMBERED | null | 2 | null | WT/DS353/R; WT/DS353/1-WT/DS; G/L/698/Add.1-; G/SCM/D63/1/Add.1 | General Council; Subsidies and Countervailing Measures (SCM) | ['EU'] | ['U.S.'] | ['Australia', 'Brazil', 'Canada', 'China', 'Japan', 'South Korea'] | Implementation & Compliance | Art. 3.1, 3.2, 5, 6.3, 1.1, 2 Subsidies and Countervailing Measures (SCM)Art. III:4 GATT 1994 | The summary below was up-to-date at
26 November 2020
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 27 June 2005, the European Communities requested consultations with the United States concerning prohibited and actionable subsidies provided to US... | 24 | BCI deleted, as indicated [***]
ANNEX A
Contents Page
Annex A United States — Measures Affecting Trade in Large Civil Aircraft ,
Request for Consultations by the European Communities,
Addendum 317/1/Add.1-
A-2
BCI deleted, as indicated [***]
ANNEX A*
UNITED STATES — MEASURES AFFECTING TRADE IN
LARGE CIVIL AIRCRAF... | 2026-03-15T15:51:38.658707 | |
353 | 353 | DS353_SEQ32_Request_For_Establishment_Of_Panel_03.pdf | DS353_SEQ32_Request_For_Establishment_Of_Panel_03.pdf | 32 | Request_For_Establishment_Of_Panel | WT/DS353/R Page B-1 BCI deleted, as indicated [***] ANNEX B Contents Page Annex B United States — Measures Affecting Trade in Large Civil Aircraft , Request for the Establishment of a Panel by the European Communities, WT/DS353/2-WT/DS317/5/Add.1 B-2 | NUMBERED | null | 3 | null | WT/DS353/R; WT/DS353/2-WT/DS317/5/Add.1 | ['EU'] | ['U.S.'] | ['Australia', 'Brazil', 'Canada', 'China', 'Japan', 'South Korea'] | Implementation & Compliance | Art. 3.1, 3.2, 5, 6.3, 1.1, 2 Subsidies and Countervailing Measures (SCM)Art. III:4 GATT 1994 | The summary below was up-to-date at
26 November 2020
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 27 June 2005, the European Communities requested consultations with the United States concerning prohibited and actionable subsidies provided to US... | 16 | BCI deleted, as indicated [***]
ANNEX B
Contents Page
Annex B United States — Measures Affecting Trade in Large Civil Aircraft ,
Request for the Establishment of a Panel by the European
Communities,
B-2
BCI deleted, as indicated [***]
ANNEX B*
UNITED STATES — MEASURES AFFECTING TRADE
IN LARGE CIVIL AIRCRAFT
Reque... | 2026-03-15T15:51:38.664912 | ||
353 | 353 | DS353_SEQ33_Working_Procedures_04.pdf | DS353_SEQ33_Working_Procedures_04.pdf | 33 | Working_Procedures | WT/DS353/R Page C-1 BCI deleted, as indicated [***] ANNEX C WORKING PROCEDURES OF THE PANEL Contents Page Annex C United States — Measures Affecting Trade in Large Civil Aircraft — Second Complaint , (WT/DS353), Working Procedures of the Panel, 13 September 2007 | NUMBERED | null | 4 | 13 September 2007 | WT/DS353/R | ['EU'] | ['U.S.'] | ['Australia', 'Brazil', 'Canada', 'China', 'Japan', 'South Korea'] | Implementation & Compliance | Art. 3.1, 3.2, 5, 6.3, 1.1, 2 Subsidies and Countervailing Measures (SCM)Art. III:4 GATT 1994 | The summary below was up-to-date at
26 November 2020
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 27 June 2005, the European Communities requested consultations with the United States concerning prohibited and actionable subsidies provided to US... | 4 | BCI deleted, as indicated [***]
ANNEX C
WORKING PROCEDURES OF THE PANEL
Contents Page
Annex C United States — Measures Affecting Trade in Large Civil Aircraft
— Second Complaint , (WT/DS353), Working Procedures of the
Panel, 13 September 2007
C-2
BCI deleted, as indicated [***]
ANNEX C
UNITED STATES — MEASURES AF... | 2026-03-15T15:51:38.666833 | ||
353 | 353 | DS353_SEQ34_Working_Procedures_05.pdf | DS353_SEQ34_Working_Procedures_05.pdf | 34 | Working_Procedures | WT/DS353/R Page D-1 BCI deleted, as indicated [***] ANNEX D Contents Page Annex D United States — Measures Affecting Trade in Large Civil Aircraft — Second Complaint , (WT/DS353), Additional Working Procedures for DS353 – Procedures for the Protection of Business Confidential Information a nd Highly Sensitive Business ... | NUMBERED | null | 5 | 1 May 2009 | WT/DS353/R | ['EU'] | ['U.S.'] | ['Australia', 'Brazil', 'Canada', 'China', 'Japan', 'South Korea'] | Implementation & Compliance | Art. 3.1, 3.2, 5, 6.3, 1.1, 2 Subsidies and Countervailing Measures (SCM)Art. III:4 GATT 1994 | The summary below was up-to-date at
26 November 2020
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 27 June 2005, the European Communities requested consultations with the United States concerning prohibited and actionable subsidies provided to US... | 14 | BCI deleted, as indicated [***]
ANNEX D
Contents Page
Annex D United States — Measures Affecting Trade in Large Civil Aircraft
— Second Complaint , (WT/DS353), Additional Working
Procedures for DS353 – Procedures for the Protection of Business
Confidential Information a nd Highly Sensitive Business
Information, 1 May... | 2026-03-15T15:51:38.673381 | ||
353 | 353 | DS353_SEQ35_Addendum_Add.pdf | DS353_SEQ35_Addendum_Add.pdf | 35 | Addendum | Addendum | NUMBERED | Add | null | UNITED STATES – MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT (SECOND COMPLAINT) RECOURSE TO ARTICLE 21.5 OF THE DSU BY THE EUROPEAN UNION REPORT OF THE PANEL | 9 June 2017 | WT/DS353/RW/Add.1; WT/DS353/RW. | ['EU'] | ['U.S.'] | ['Australia', 'Brazil', 'Canada', 'China', 'Japan', 'South Korea'] | Implementation & Compliance | Art. 3.1, 3.2, 5, 6.3, 1.1, 2 Subsidies and Countervailing Measures (SCM)Art. III:4 GATT 1994 | The summary below was up-to-date at
26 November 2020
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 27 June 2005, the European Communities requested consultations with the United States concerning prohibited and actionable subsidies provided to US... | 141 | UNITED STATES – MEASURES AFFECTING TRADE IN
LARGE CIVIL AIRCRAFT (SECOND COMPLAINT)
RECOURSE TO ARTICLE 21.5 OF THE DSU BY THE EUROPEAN UNION
REPORT OF THE PANEL
Addendum
This addendum contains Annexes A to F to the Report of the Panel to be found in document
LIST OF ANNEXES
ANNEX A
WORKING PROCEDURES OF THE PANEL
Co... | 2026-03-15T15:51:38.762625 | |
353 | 353 | DS353_SEQ36_Addendum_Add.pdf | DS353_SEQ36_Addendum_Add.pdf | 36 | Addendum | Addendum BCI deleted, as indicated [[***]] | NUMBERED | Add | null | UNITED STATES – MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT (SECOND COMPLAINT) RECOURSE TO ARTICLE 22.6 OF THE DSU BY THE UNITED STATES DECISION BY THE ARBITRATOR | 13 October 2020 | WT/DS353/ARB/Add.1; WT/DS353/ARB. | ['EU'] | ['U.S.'] | ['Australia', 'Brazil', 'Canada', 'China', 'Japan', 'South Korea'] | Implementation & Compliance | Art. 3.1, 3.2, 5, 6.3, 1.1, 2 Subsidies and Countervailing Measures (SCM)Art. III:4 GATT 1994 | The summary below was up-to-date at
26 November 2020
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 27 June 2005, the European Communities requested consultations with the United States concerning prohibited and actionable subsidies provided to US... | 64 | UNITED STATES – MEASURES AFFECTING TRADE IN LARGE CIVIL
AIRCRAFT (SECOND COMPLAINT)
RECOURSE TO ARTICLE 22.6 OF THE DSU BY THE UNITED STATES
DECISION BY THE ARBITRATOR
Addendum
BCI deleted, as indicated [[***]]
This addendum contains Annexes A to C to the Decision of the Arbitrator to be found in document
LIST OF ANNE... | 2026-03-15T15:51:38.799850 | |
353 | 353 | DS353_SEQ37_Request_For_Consultations_01.pdf | DS353_SEQ37_Request_For_Consultations_01.pdf | 37 | Request_For_Consultations | Request for Consultations by the European Communities | NUMBERED | null | 1 | UNITED STATES - MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT (SECOND COMPLAINT) | 4 December 2006 | WT/DS353/1; WT/DS317/1/Add.2; WT/DS353/1; WT/DS317/1/Add.1-G/L/698/Add.1-G/SCM/D63/1/Add.1; G/L/698/Add.2; G/SCM/D63/1/Add.2; G/L/698/Add.1-G/SCM/D63/1/Add.1 | General Council; Subsidies and Countervailing Measures (SCM) | ['EU'] | ['U.S.'] | ['Australia', 'Brazil', 'Canada', 'China', 'Japan', 'South Korea'] | Implementation & Compliance | Art. 3.1, 3.2, 5, 6.3, 1.1, 2 Subsidies and Countervailing Measures (SCM)Art. III:4 GATT 1994 | The summary below was up-to-date at
26 November 2020
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 27 June 2005, the European Communities requested consultations with the United States concerning prohibited and actionable subsidies provided to US... | 1 | UNITED STATES - MEASURES AFFECTING TRADE
IN LARGE CIVIL AIRCRAFT
(SECOND COMPLAINT)
Request for Consultations by the European Communities
This document is circulated to add "" to the document number as well as to add
"second complaint" at the end of the title to the document originally circulated as
dated 1 July 20... | 2026-03-15T15:51:38.800327 |
353 | 353 | DS353_SEQ38_Report_Of_Panel_01.pdf | DS353_SEQ38_Report_Of_Panel_01.pdf | 38 | Report_Of_Panel | Report of the Panel BCI DELETED, AS INDICATED [***] | PANEL_REPORT | null | 1 | UNITED STATES – MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT (SECOND COMPLAINT) | 31 March 2011 | WT/DS353/R | ['EU'] | ['U.S.'] | ['Australia', 'Brazil', 'Canada', 'China', 'Japan', 'South Korea'] | Implementation & Compliance | Art. 3.1, 3.2, 5, 6.3, 1.1, 2 Subsidies and Countervailing Measures (SCM)Art. III:4 GATT 1994 | The summary below was up-to-date at
26 November 2020
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 27 June 2005, the European Communities requested consultations with the United States concerning prohibited and actionable subsidies provided to US... | 814 | UNITED STATES – MEASURES AFFECTING TRADE
IN LARGE CIVIL AIRCRAFT
(SECOND COMPLAINT)
Report of the Panel
BCI DELETED, AS INDICATED [***]
BCI deleted, as indicated [***]
I. INTRODUCTION
A. COMPLAINT OF THE EUROPEAN COMMUNITIES1
1.1 On 27 June 2005, the European Communities requ ested consultations with the United Sta... | 2026-03-15T15:51:39.388810 | |
353 | 353 | DS353_SEQ39_Report_Of_Panel_06.pdf | DS353_SEQ39_Report_Of_Panel_06.pdf | 39 | Report_Of_Panel | WT/DS353/R Page E-1 BCI deleted, as indicated [***] ANNEX E SELECTED RULINGS OF THE PANEL CONCERNING BCI/HSBI PROCEDURES AND THEIR APPLICATION Contents Page Annex E-1 Communication of 4 June 2007 E-2 | PANEL_REPORT | null | 6 | 4 June 2007 | WT/DS353/R | ['EU'] | ['U.S.'] | ['Australia', 'Brazil', 'Canada', 'China', 'Japan', 'South Korea'] | Implementation & Compliance | Art. 3.1, 3.2, 5, 6.3, 1.1, 2 Subsidies and Countervailing Measures (SCM)Art. III:4 GATT 1994 | The summary below was up-to-date at
26 November 2020
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 27 June 2005, the European Communities requested consultations with the United States concerning prohibited and actionable subsidies provided to US... | 7 | BCI deleted, as indicated [***]
ANNEX E
SELECTED RULINGS OF THE PANEL CONCERNING BCI/HSBI
PROCEDURES AND THEIR APPLICATION
Contents Page
Annex E-1 Communication of 4 June 2007 E-2
Annex E-2 Communication of 9 July 2007 E-6
Annex E-3 Communication of 16 July 2007 E-7
BCI deleted, as indicated [***]
ANNEX E-1
COMMU... | 2026-03-15T15:51:39.392817 | ||
353 | 353 | DS353_SEQ40_Report_Of_Panel.pdf | DS353_SEQ40_Report_Of_Panel.pdf | 40 | Report_Of_Panel | REPORT OF THE PANEL | PANEL_REPORT | null | null | UNITED STATES – MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT (SECOND COMPLAINT) RECOURSE TO ARTICLE 21.5 OF THE DSU BY THE EUROPEAN UNION REPORT OF THE PANEL | 9 June 2017 | WT/DS353/RW | ['EU'] | ['U.S.'] | ['Australia', 'Brazil', 'Canada', 'China', 'Japan', 'South Korea'] | Implementation & Compliance | Art. 3.1, 3.2, 5, 6.3, 1.1, 2 Subsidies and Countervailing Measures (SCM)Art. III:4 GATT 1994 | The summary below was up-to-date at
26 November 2020
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 27 June 2005, the European Communities requested consultations with the United States concerning prohibited and actionable subsidies provided to US... | 624 | UNITED STATES – MEASURES AFFECTING TRADE IN LARGE CIVIL
AIRCRAFT (SECOND COMPLAINT)
RECOURSE TO ARTICLE 21.5 OF THE DSU BY THE EUROPEAN UNION
REPORT OF THE PANEL
BCI deleted, as indicated [***]
HSBI omitted, as indicated [[HSBI]]
LIST OF ANNEXES
ANNEX A
WORKING PROCEDURES OF THE PANEL
Contents Page
Annex A-1 Working ... | 2026-03-15T15:51:39.920589 | |
353 | 353 | DS353_SEQ41_Appellate_Body_Report_And_Panel_Report.pdf | DS353_SEQ41_Appellate_Body_Report_And_Panel_Report.pdf | 41 | Appellate_Body_Report_And_Panel_Report | Appellate Body Report and Panel Report Action by the Dispute Settlement Body | AB_REPORT | null | null | UNITED STATES – MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT (SECOND COMPLAINT) | 26 March 2012 | WT/DS353/13; WT/DS353/AB/R; WT/DS353/R | ['EU'] | ['U.S.'] | ['Australia', 'Brazil', 'Canada', 'China', 'Japan', 'South Korea'] | Implementation & Compliance | Art. 3.1, 3.2, 5, 6.3, 1.1, 2 Subsidies and Countervailing Measures (SCM)Art. III:4 GATT 1994 | The summary below was up-to-date at
26 November 2020
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 27 June 2005, the European Communities requested consultations with the United States concerning prohibited and actionable subsidies provided to US... | 1 | UNITED STATES – MEASURES AFFECTING TRADE
IN LARGE CIVIL AIRCRAFT
(SECOND COMPLAINT)
Appellate Body Report and Panel Report
Action by the Dispute Settlement Body
At its meeting on 23 March 2012, the Disput e Settlement Body adopted the Appellate Body
report on United States – Measures Affecting Trade in Large Civil ... | 2026-03-15T15:51:39.921206 | |
353 | 353 | DS353_SEQ42_Report_Of_Appellate_Body_00.pdf | DS353_SEQ42_Report_Of_Appellate_Body_00.pdf | 42 | Report_Of_Appellate_Body | Appellate Body Report | AB_REPORT | null | 0 | UNITED STATES – MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT (SECOND COMPLAINT) RECOURSE TO ARTICLE 21.5 OF THE DSU BY THE EUROPEAN UNION COMMUNICATION FROM THE APPELLATE BODY | 19 March 2019 | WT/DS353/30 | ['EU'] | ['U.S.'] | ['Australia', 'Brazil', 'Canada', 'China', 'Japan', 'South Korea'] | Implementation & Compliance | Art. 3.1, 3.2, 5, 6.3, 1.1, 2 Subsidies and Countervailing Measures (SCM)Art. III:4 GATT 1994 | The summary below was up-to-date at
26 November 2020
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 27 June 2005, the European Communities requested consultations with the United States concerning prohibited and actionable subsidies provided to US... | 1 | UNITED STATES – MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT
(SECOND COMPLAINT)
RECOURSE TO ARTICLE 21.5 OF THE DSU BY THE EUROPEAN UNION
COMMUNICATION FROM THE APPELLATE BODY
The following communication, dated 15 March 2019, from the Chair of the Appellate Body
addressed to the Chair of the Dispute Settlement Body... | 2026-03-15T15:51:39.921500 | |
353 | 353 | DS353_SEQ43_Report_Of_Appellate_Body_01.pdf | DS353_SEQ43_Report_Of_Appellate_Body_01.pdf | 43 | Report_Of_Appellate_Body | Report of the Appellate Body | AB_REPORT | null | 1 | UNITED STATES – MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT (SECOND COMPLAINT) RECOURSE TO ARTICLE 21.5 OF THE DSU BY THE EUROPEAN UNION COMMUNICATION FROM THE APPELLATE BODY | 28 March 2019 | WT/DS353/31; WT/DS353/AB/RW. | ['EU'] | ['U.S.'] | ['Australia', 'Brazil', 'Canada', 'China', 'Japan', 'South Korea'] | Implementation & Compliance | Art. 3.1, 3.2, 5, 6.3, 1.1, 2 Subsidies and Countervailing Measures (SCM)Art. III:4 GATT 1994 | The summary below was up-to-date at
26 November 2020
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 27 June 2005, the European Communities requested consultations with the United States concerning prohibited and actionable subsidies provided to US... | 1 | UNITED STATES – MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT
(SECOND COMPLAINT)
RECOURSE TO ARTICLE 21.5 OF THE DSU BY THE EUROPEAN UNION
COMMUNICATION FROM THE APPELLATE BODY
The following communication, dated 28 March 2019, from the Chair of the Appellate Body to the
Chair of the Dispute Settlement Body, is being... | 2026-03-15T15:51:39.921822 |
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