Report: WTO May Delay Ruling On FSC Sanctions

By Agence France-Presse The World Trade Organization's (WTO) independent arbitrators have asked for more time to fix the amount of retaliatory measures the European Union (EU) would be authorized to take against the U.S. in the dispute over U.S. tax breaks to foreign service corporations (FSC), diplomatic sources said on June 17. The arbitrators in the Disputes Settlement Body are expected to give a ruling in the second half of July because of the complexity of the case, the sources added. U.S. and European officials had been indicating in recent weeks that they were expecting a ruling -- which had already been put off twice since March -- on June 17. The WTO insisted it had not fixed a date for this month. The EU's Commission had asked in November 2000 to impose retaliatory sanctions of about US$4 billion a year, which it claimed corresponded to the damage to European companies by FSC's. The U.S. has estimated that the amount should be $900 million (968 million euros). The FSC system allows U.S. companies, through sales companies usually located in tax havens, to benefit from reduced export taxes. There are an estimated 4,000-5,000 foreign sales corporations, mostly based in tax havens, used by U.S. multinationals; about half of annual U.S. exports of $250 billion benefit from the regime, sources said. The WTO has ruled that FSC's break international trade rules because they amount to direct subsidies for exports, and last issued a ruling on the issue in January following a U.S. appeal. Copyright Agence France-Presse, 2002