  WORLD TRADE  
ORGANIZATION  WT/DS267/17 
20 October 2004  
 (04-4441) 
 Original:   English 
 
 
 
UNITED STATES – SUBSIDIES ON UPLAND COTTON 
 
Notification of an Appeal by the United States  
under paragraph 4 of Article 16 of the Understanding on Rules  
and Procedures Governing the Settlement of Disputes ("DSU")  
 
 
 The following notification, dated 18 October 2004, from the Delegation of the United States, 
is being circulated to Members.    
_______________ 
 
Pursuant to Article 16 of the Understanding on Rules and Procedures Governing the 
Settlement of Disputes  ("DSU") and Rule 20 of the Working Procedures for Appellate Review, the 
United States hereby notifies its decision to app eal to the Appellate Body certain issues of law 
covered in the Report of the Panel on United States – Subsidies on Upland Cotton (WT/DS267/R) and 
certain legal interpretations develope d by the Panel in this dispute.  
 
1. The United States seeks review by the Appellate Body of the Panel's legal conclusion that 
certain U.S. decoupled income support measures – that is, production flexibility contract payments under the Federal Agricultural Impr ovement and Reform Act of 1996 ("1996 Act"), direct payments 
under the Farm Security and Rural Investment Ac t of 2002 ("2002 Act"), and "the legislative and 
regulatory provisions which establish and maintain  the [direct payments] programme" – are not 
exempt from actions under Article 13(a) of the Agreement on Agriculture .
1  This conclusion is in error 
and is based on erroneous findings on issues of law and related legal interpre tations.  These erroneous 
findings include, for example, that these dec oupled income support measures do not conform to 
Annex 2.  
2. The United States seeks review by the Appellate Body of the Panel's legal conclusion that 
certain U.S. domestic support measures
2 are not exempt from actions under Article 13(b) of the 
Agreement on Agriculture .3  This conclusion is in error and is  based on erroneous findings on issues 
of law and related legal interpre tations.  These erroneous findings include, for example, the Panel's 
finding that the challenged U.S. measures granted support to a specific commodity in excess of that 
decided in marketing year 1992 and therefore breached  the proviso of Article 13(b) in each year from 
marketing year 1999-2002.  3. The United States seeks review by the Appellate Body of the Panel's legal conclusion that 
U.S. export credit guarantees under the GSM 102, GSM 103, and SCGP export credit guarantee 
programs in respect of unscheduled agricultura l products supported unde r the programs and one 
scheduled commodity (rice) are "export subsidies app lied in a manner which results in circumvention 
of United States export subsidy commitments, within the meaning of Article 10.1 of the Agreement on 
                                                     
 
1See, e.g. , Panel Report, paras. 8.1(b), 7.337-7.414. 
2See Panel Report, para. 7.337. 
3See, e.g.,  Panel Report, paras. 8.1(c), 7.415-7.647. WT/DS267/17 
Page 2  
 
Agriculture ," are therefore inconsistent with Article 8 of the Agreement on Agriculture , and are not 
exempt from actions under Article 13(c) of the Agreement on Agriculture .
4  This conclusion is in error 
and is based on erroneous findings on issues of law and related legal interpre tations.  These erroneous 
findings, include, for example, the Panel's finding  that export credit guarantees, notwithstanding 
Article 10.2 of the Agreement on Agriculture , constitute measures subject to Article 10.1 of the 
Agreement on Agriculture . 
 4. The United States seeks review by the Appellate Body of the Panel's legal conclusion that 
U.S. export credit guarantees under the GSM 102, GSM 103, and SCGP export credit guarantee programs in respect of other scheduled agricultural products constitute export  subsidies within the 
meaning of Article 10.1 of the Agreement on Agriculture .
5  This conclusion is in  error and is based on 
erroneous findings on issues of law and relate d legal interpretations.  These erroneous findings, 
include, for example, the Panel's finding that e xport credit guarantees, notwithstanding Article 10.2 of 
the Agreement on Agriculture , constitute measures subject to Article 10.1 of the Agreement on 
Agriculture . 
 
5. The United States seeks review by the Appellate Body of the Panel's legal conclusion that 
U.S. export credit guarantees under the GSM 102, GSM 103, and SCGP export credit guarantee programs in respect of unscheduled agricultura l products supported unde r the programs and one 
scheduled commodity (rice) are per se  export subsidies prohibited by Articles 3.1(a) and 3.2 of the 
Agreement on Subsidies and Countervailing Measures  ("SCM Agreement").
6  This conclusion is in 
error and is based on erroneous fi ndings on issues of law and relate d legal interpretations.  These 
erroneous findings include, for example, the Panel's finding that the program for each product 
constitutes an export subsidy for purposes of th e WTO Agreements and is provided by the United 
States at premium rates which are inadequate to cover long-term operating costs and losses of the 
programs within the meaning of item (j) of the Illust rative List of Export Subsidies in Annex I of the 
SCM Agreement. 
 6. The United States seeks review by the Appellate Body of the Panel's legal conclusion that 
section 1207(a) of the 2002 Act, which provides for user  marketing (Step 2) payments to exporters of 
upland cotton, is an export subsidy that  is listed in Article 9.1(a) of the Agreement on Agriculture  that 
is inconsistent with U.S. obligati ons under Articles 3.3 and 8 of the Agreement on Agriculture , is not 
exempt from actions under Article 13(c) of the Agreement on Agriculture , and is inconsistent with 
Articles 3.1(a) and 3.2 of the SCM Agreement.
7  This conclusion is in error and is based on erroneous 
findings on issues of law and rela ted legal interpretations.  These erroneous findings include, for 
example, the Panel's finding that payments under th e user marketing (Step 2) program are contingent 
on export performance.   
 
7. The United States seeks review by the Appellate Body of the Panel's legal conclusion that 
section 1207(a) of the 2002 Act providing for user mark eting (Step 2) payments to domestic users of 
upland cotton is an import substitution subsidy prohibited under Articles 3.1(b) and 3.2 of the 
Agreement on Subsidies and Countervailing Measures .8  This conclusion is in error and is based on 
erroneous findings on issues of la w and related legal interpretati ons.  These erroneous findings 
include, for example, the Panel's finding that dome stic support payments that are consistent with a 
Member's domestic support reduction commitments under the Agreement on Agriculture  may 
nonetheless be prohibited under the SCM Agreement. 
                                                      
4See, e.g.,  Panel Report, paras. 8.1(d)(1), 7.762-7.945. 
5See, e.g.,  Panel Report, paras. 8.1(d)(2), 7.762-7.945. 
6See, e.g.,  Panel Report, paras. 8.1(d)(1), 7.787-7.869, 7.946-7.948. 
7See, e.g.,  Panel Report, paras. 7.678-7.761, 8.1(e). 
8See, e.g.,  Panel Report, paras. 7.1018-7.1098, 8.1(f).  WT/DS267/17 
 Page 3 
 
 
 8. The United States seeks review by the Appellate Body of the Panel's legal conclusion that 
"the effect of the mandatory, price contingent United States subsidies at issue – that is, marketing loan 
programme payments, user marketing (Step 2) paym ents and MLA payments and CCP payments – is 
significant price suppression in the same world market for upland cotton in the period MY 1999-2002 
within the meaning of Articles 6.3(c) and 5(c)" of the SCM Agreement.
9  This conclusion is in error 
and is based on erroneous findings on issues of law and related legal interpre tations.  These erroneous 
findings include, for example, the following:   
(a) the Panel's finding that Brazil need not de monstrate, and the Panel need not find, the 
amount of the challenged subsidy that benefits  the subsidized product, upland cotton;  
 
(b) the Panel's finding that subsidies not directly tied to current production of upland cotton (decoupled payments) need not be allocated  to all products produced and sold by  the 
firms receiving such subsidies;  
 
(c) that the Panel could make findings concer ning subsidies that no longer existed at the 
time of panel establishment and that present ser ious prejudice could be, and was, caused by 
such subsidies; 
 
(d) the Panel's finding that the challenged s ubsidies provided to cotton producers "passed 
through" to cotton exporters; 
 
(e) the Panel's finding that there was price suppression "in the same market"; 
 (f) the Panel's finding that significant price suppression existed; 
 
(g) the Panel's finding that the price suppression it found under an erroneous legal 
standard was "significant";  
 
(h) the Panel's finding that "the effect of" the U.S. subsidies "is" significant price suppression; 
 
(i) the Panel's finding that "significant price suppression" is sufficient to establish "serious prejudice" for purposes of Articles 5(c) and 6.3 of the SCM Agreement; and 
 
(j) the Panel's finding that its "'present' serious prejudice findings include findings of 
inconsistency that deal with the FSRI Act of  2002 and subsidies granted thereunder in MY 
2002."
10 
 9. The United States seeks review by the Appellate  Body of the Panel's finding that decoupled 
payments made with respect to non-upland cotton base acres were within its terms of reference.
11  
This finding is in error and is based on errone ous findings on issues of law and related legal 
interpretations.  These erroneous findings incl ude, for example, the Panel's finding that these 
payments were measures at issue within the m eaning of Articles 4.4 and 6.2 of the DSU.   
 
                                                      
9Panel Report, paras. 7.1416, 7.1107-7.1416, 8.1(g)(i). 
10See, e.g. , Panel Report, para. 7.1501. 
11See, e.g. , Panel Report, paras. 7.129-7.136. WT/DS267/17 
Page 4  
 
10. The United States requests the Appellate Body to  find that the Panel failed to set out the 
findings of fact, the applicability of the relevant pr ovisions, and the basic ra tionale behind its findings 
and recommendations, as required by Article 12.7 of the DSU.  The Panel's failure to set these out include, for example, the findings or lack of findings concerning the following areas: the amount of the challenged subsidies, including the amount of paym ents not directly tied to current production of 
upland cotton (decoupled payments); that significan t price suppression existed; the degree of price 
suppression it deemed "significant"; that "the effect  of" the U.S. subsidies "is" significant price 
suppression; that decoupled payments made with r espect to non-upland cotton base acres were within 
its terms of reference; and the basis for its ability to make findings with respect to subsidies that no 
longer existed at the time of panel establishment. 
 
11. The United States seeks review by the Appellate Bo dy of the Panel's finding that export credit 
guarantees to facilitate the export of "other eligib le agricultural commodities" besides upland cotton 
were within its terms of reference.
12  This finding is in error and is  based on erroneous  findings on 
issues of law and related legal in terpretations.  These erroneous fi ndings include, for example, the 
Panel's finding that such export credit guarantees were  included in Brazil's consultation request and its 
finding that, contrary to Articles 4.2, 4.4, and 6.2 of the DSU, it could examine measures that were not 
included in Brazil's request for consultations.  12. The United States seeks review by the Appellate Body of the Panel's finding that Brazil 
provided the statement of available evidence requi red by Article 4.2 of the SCM Agreement with 
respect to export credit guarantee measures relating to eligible United States agricultural products 
other than upland cotton, and that accordingly, Br azil's claims concerning these measures were within 
the terms of reference of this dispute.
13  This finding is in error and is based on erroneous findings on 
issues of law and relate d legal interpretations. 
 
13. In the event Brazil appeals the Panel's exercise of judicial economy with respect to Brazil's 
claims concerning the compatibility of U.S. export credit guarantee measures with Part III of the SCM 
Agreement,14 in this U.S. appeal the United States co nditionally requests the Appellate Body to find 
that Brazil also failed to provide a statement of av ailable evidence as required by Article 7.2 of the 
SCM Agreement, and that accordingly, Brazil's claims concerning these measures would not be within the terms of reference of this dispute. 
 
14. The United States seeks review by the Appellate Body of the Panel's legal conclusion that two 
types of expired measures, production flexibility c ontract payments and market loss assistance 
payments, were within the Panel's terms of referen ce.  This conclusion is in error and is based on 
erroneous findings on issues of la w and related legal interpretati ons.  These erroneous findings 
include, for example, the Panel's finding that measures that are no longer in existence as of the date of 
establishment of a panel are nonetheless within a panel's terms of reference.
15 
 
_______________ 
 
                                                      
12See, e.g. , Panel Report, para. 7.69. 
13See, e.g. , Panel Report, para. 7.103. 
14See, e.g. , Panel Report, para. 7.78. 
15See, e.g. , Panel Report, para. 7.104-7.122. 