US Government To Appeal WTO Ruling

by Mike Godfrey, Tax-News.com, Washington

05 October 2005

United States Trade Representative Rob Portman let it be known on Tuesday that the US government will appeal against last week's ruling by the World Trade Organisation, which found that new US company tax legislation continues to break world trade rules.

Mr Portman reportedly stated yesterday that the triggering of an appeal process by the United States would help delay by a few months the probable imposition of trade sanctions by the European Union on goods imported from the US. The reports were later confirmed by a spokeswoman from the trade office, who stated that the government will indeed appeal Friday's ruling by a WTO disputes panel against the American Jobs Creation Act (AJCA).

The ruling states that Section 101 of the AJCA of 2004 does not comply with WTO trade rules. The EU had claimed that companies like Boeing, Caterpillar, and Microsoft will continue to benefit from illegal export tax-breaks amounting to more than $4 billion this year and more than $3 billion next year.

The 2004 AJCA repealed the Foreign Sales Corporation (FSC) and Extraterritorial Income (ETI) Regime Acts, which the WTO had previously ruled were illegal export subsidies. Section 101 of the AJCA, however, enables U.S. companies to claim 100% of their FSC/ETI benefits in 2004, 80% in 2005, 60% in 2006, and zero percent thereafter.

When asked whether the EU intends to press for the imposition of tariffs on US goods, European Commission spokesman Peter Power indicated that the bloc would make its decision in the light of Washington's response to the WTO ruling.

In a decision against the original FSC/ETI legislation in 2002, the WTO gave the EU the go-ahead to apply sanctions on $4 billion worth of US imports.

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