PROCEDURAL BACKGROUND

The original Panel and Appellate Body Reports in this dispute were adopted by the Dispute Settlement Body (the “DSB“) on 20 March 2000. In its recommendations and rulings, the DSB requested the United States to bring the FSC measure that was found, in the Panel and Appellate Body Reports, to be inconsistent with its obligations under Articles 3.1(a) and 3.2 of the Agreement on Subsidies and Countervailing Measures (the “SCM Agreement”) and under Articles 10.1 and 8 of the Agreement on Agriculture, into conformity with its obligations under those Agreements. Adopting the recommendation of the original Panel made under Article 4.7 of the SCM Agreement, the DSB specified that the prohibited FSC subsidies had to be withdrawn “at the latest with effect from 1 October 2000”. On 12 October 2000, at a special session, the DSB agreed to the United States’ request to allow it a time period expiring on 1 November 2000 to implement the DSB recommendations and rulings.

On 15 November 2000, the United States enacted the “FSC Repeal and Extraterritorial Income Exclusion Act of 2000” (the “ETI Act”). With the enactment of this legislation, the United States considered that it had implemented the DSB's recommendations and rulings in the dispute and that the legislation was consistent with the United States’ WTO obligations.

Following consultations requested by the European Communities on 17 November 2000, the DSB, acting under Article 21.5 of the DSU, referred the matter back to the original Panel on 20 December 2000. On 29 January 2002, the DSB adopted the Article 21.5 Panel and Appellate Body reports. The Article 21.5 Panel found the ETI Act to be inconsistent with Articles 3.1(a), 3.2 of the SCM Agreement, 10.1 and 8 of the Agreement on Agriculture and III:4 of the GATT 1994. It further found: