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Recourse to Article 21.5 of the DSU by the European Union - AB-2017-4 - Report of the Appellate Body

ABBREVIATIONS

AbbreviationDescription
2006 IRS Memorandum Internal Revenue Service Memorandum No. AM 2007‑001
AJCA American Jobs Creation Act of 2004
B&O business and occupation
BCI business confidential information
Boeing The Boeing Company
CLEEN Continuous Lower Energy Emissions, and Noise
DSB dispute settlement body
DSU Understanding on Rules and Procedures Governing the Settlement of Disputes
EDBs economic development bonds
ETI Act FSC Repeal and Extraterritorial Income Exclusion Act of 2000
FAA Federal Aviation Administration
FILOT fee-in-lieu-of-taxes
FSC foreign sales corporation
GATT 1994 General Agreement on Tariffs and Trade 1994
HSBI highly sensitive business information
HSBI Appendix Appendix 2 to the Panel Report (HSBI)
IR&D independent research and development
IRBs industrial revenue bonds
ITAR International Traffic in Arms Regulations
KSA Kansas Statutes Annotated
LCA large civil aircraft
MCIP multi‑county industrial park
NASA National Aeronautics and Space Administration
NPV net present value
Original Panel Report Panel Report, United States – Measures Affecting Trade in Large Civil Aircraft (Second Complaint), WT/DS353/R
Panel Report Panel Report, United States – Measures Affecting Trade in Large Civil Aircraft (Second Complaint) – Recourse to Article 21.5 of the DSU by the European Union, WT/DS353/RW
R&D research and development
RDT&E research, development, test, & evaluation
S&T science and technology
SCM Agreement Agreement on Subsidies and Countervailing Measures
Space Act National Aeronautics and Space Act of 1958, as amended
Spirit Spirit Aerosystems
TIPRA Tax Increase Prevention and Reconciliation Act of 2005
TRL technology readiness level
USDOD United States Department of Defense
USDOD procurement contracts pre-2007 and post-2006 RDT&E procurement contracts between USDOD and Boeing
Working Procedures Working Procedures for Appellate Review

CASES CITED IN THIS REPORT

Short TitleFull Case Title and Citation
Argentina – Import Measures Appellate Body Reports, Argentina – Measures Affecting the Importation of Goods, WT/DS438/AB/R / WT/DS444/AB/R / WT/DS445/AB/R, adopted 26 January 2015, DSR 2015:II, p. 579
Australia – Salmon Appellate Body Report, Australia – Measures Affecting Importation of Salmon, WT/DS18/AB/R, adopted 6 November 1998, DSR 1998:VIII, p. 3327
Brazil – Retreaded Tyres Appellate Body Report, Brazil – Measures Affecting Imports of Retreaded Tyres, WT/DS332/AB/R, adopted 17 December 2007, DSR 2007:IV, p. 1527
Canada – Aircraft Appellate Body Report, Canada – Measures Affecting the Export of Civilian Aircraft, WT/DS70/AB/R, adopted 20 August 1999, DSR 1999:III, p. 1377
Canada – Aircraft (Article 21.5 – Brazil) Appellate Body Report, Canada – Measures Affecting the Export of Civilian Aircraft – Recourse by Brazil to Article 21.5 of the DSU, WT/DS70/AB/RW, adopted 4 August 2000, DSR 2000:IX, p. 4299
Canada – Autos Panel Report, Canada – Certain Measures Affecting the Automotive Industry, WT/DS139/R, WT/DS142/R, adopted 19 June 2000, as modified by Appellate Body Report WT/DS139/AB/R, WT/DS142/AB/R, DSR 2000:VII, p. 3043
Canada – Periodicals Appellate Body Report, Canada – Certain Measures Concerning Periodicals, WT/DS31/AB/R, adopted 30 July 1997, DSR 1997:I, p. 449
China – Auto Parts Appellate Body Reports, China – Measures Affecting Imports of Automobile Parts, WT/DS339/AB/R / WT/DS340/AB/R / WT/DS342/AB/R, adopted 12 January 2009, DSR 2009:I, p. 3
China – GOES Appellate Body Report, China – Countervailing and Anti-Dumping Duties on Grain Oriented Flat-Rolled Electrical Steel from the United States, WT/DS414/AB/R, adopted 16 November 2012, DSR 2012:XII, p. 6251
Colombia – Textiles Appellate Body Report, Colombia – Measures Relating to the Importation of Textiles, Apparel and Footwear, WT/DS461/AB/R and Add.1, adopted 22 June 2016, DSR 2016:III, p. 1131
EC – Asbestos Appellate Body Report, European Communities – Measures Affecting Asbestos and Asbestos-Containing Products, WT/DS135/AB/R, adopted 5 April 2001, DSR 2001:VII, p. 3243
EC – Bed Linen (Article 21.5 – India) Appellate Body Report, European Communities – Anti-Dumping Duties on Imports of Cotton-Type Bed Linen from India – Recourse to Article 21.5 of the DSUby India, WT/DS141/AB/RW, adopted 24 April 2003, DSR 2003:III, p. 965
EC – Export Subsidies on Sugar Appellate Body Report, European Communities – Export Subsidies on Sugar, WT/DS265/AB/R, WT/DS266/AB/R, WT/DS283/AB/R, adopted 19 May 2005, DSR 2005:XIII, p. 6365
EC – Fasteners (China) Appellate Body Report, European Communities – Definitive Anti-Dumping Measures on Certain Iron or Steel Fasteners from China, WT/DS397/AB/R, adopted 28 July 2011, DSR 2011:VII, p. 3995
EC – Hormones Appellate Body Report, EC Measures Concerning Meat and Meat Products (Hormones), WT/DS26/AB/R, WT/DS48/AB/R, adopted 13 February 1998, DSR 1998:I, p. 135
EC – Poultry Appellate Body Report, European Communities – Measures Affecting the Importation of Certain Poultry Products, WT/DS69/AB/R, adopted 23 July 1998, DSR 1998:V, p. 2031
EC ‒ Seal Products Appellate Body Reports, European Communities – Measures Prohibiting the Importation and Marketing of Seal Products, WT/DS400/AB/R / WT/DS401/AB/R, adopted 18 June 2014, DSR 2014:I, p. 7
EC and certain member States – Large Civil Aircraft Appellate Body Report, European Communities and Certain Member States – Measures Affecting Trade in Large Civil Aircraft, WT/DS316/AB/R, adopted 1 June 2011, DSR 2011:I, p. 7
EC and certain member States – Large Civil Aircraft (Article 21.5 – US) Appellate Body Report, European Communities and Certain Member States – Measures Affecting Trade in Large Civil Aircraft – Recourse to Article 21.5 of the DSU by the United States, WT/DS316/AB/RW and Add.1, adopted 28 May 2018
EC and certain member States – Large Civil Aircraft (Article 21.5 – US) Panel Report, European Communities and Certain Member States – Measures Affecting Trade in Large Civil Aircraft – Recourse to Article 21.5 of the DSU by the United States, WT/DS316/RW and Add.1, adopted 28 May 2018, as modified by Appellate Body Report WT/DS316/AB/RW
Korea – Dairy Appellate Body Report, Korea – Definitive Safeguard Measure on Imports of Certain Dairy Products, WT/DS98/AB/R, adopted 12 January 2000, DSR 2000:I, p. 3
Mexico – Corn Syrup (Article 21.5 – US) Appellate Body Report, Mexico – Anti-Dumping Investigation of High Fructose Corn Syrup (HFCS) from the United States – Recourse to Article 21.5 of the DSUby the United States, WT/DS132/AB/RW, adopted 21 November 2001, DSR 2001:XIII, p. 6675
Russia – Commercial Vehicles Appellate Body Report, Russia – Anti-Dumping Duties on Light Commercial Vehicles from Germany and Italy, WT/DS479/AB/R and Add.1, adopted 9 April 2018
Russia – Pigs (EU) Appellate Body Report, Russian Federation – Measures on the Importation of Live Pigs, Pork and Other Pig Products from the European Union, WT/DS475/AB/R and Add.1, adopted 21 March 2017
US – Anti‑Dumping and Countervailing Duties (China) Appellate Body Report, United States – Definitive Anti-Dumping and Countervailing Duties on Certain Products from China, WT/DS379/AB/R, adopted 25 March 2011, DSR 2011:V, p. 2869
US – Anti-Dumping and Countervailing Duties (China) Panel Report, United States – Definitive Anti-Dumping and Countervailing Duties on Certain Products from China, WT/DS379/R, adopted 25 March 2011, as modified by Appellate Body Report WT/DS379/AB/R, DSR 2011:VI, p. 3143
US – Anti-Dumping Methodologies (China) Appellate Body Report, United States – Certain Methodologies and Their Application to Anti-Dumping Proceedings Involving China, WT/DS471/AB/R and Add.1, adopted 22 May 2017
US – Carbon Steel Appellate Body Report, United States – Countervailing Duties on Certain Corrosion-Resistant Carbon Steel Flat Products from Germany, WT/DS213/AB/R and Corr.1, adopted 19 December 2002, DSR 2002:IX, p. 3779
US – Carbon Steel (India) Appellate Body Report, United States – Countervailing Measures on Certain Hot-Rolled Carbon Steel Flat Products from India, WT/DS436/AB/R, adopted 19 December 2014, DSR 2014:V, p. 1727
US – Countervailing Measures (China) Appellate Body Report, United States – Countervailing Duty Measures on Certain Products from China, WT/DS437/AB/R, adopted 16 January 2015, DSR 2015:1, p. 7
US – Countervailing Measures (China) Panel Report, United States – Countervailing Duty Measures on Certain Products from China, WT/DS437/R and Add.1, adopted 16 January 2015, as modified by Appellate Body Report WT/DS437/AB/R, DSR 2015:1, p. 183
US – FSC Appellate Body Report, United States – Tax Treatment for "Foreign Sales Corporations", WT/DS108/AB/R, adopted 20 March 2000, DSR 2000:III, p. 1619
US – FSC Panel Report, United States – Tax Treatment for "Foreign Sales Corporations", WT/DS108/R, adopted 20 March 2000, as modified by Appellate Body Report WT/DS108/AB/R, DSR 2000:IV, p. 1675
US – FSC (Article 21.5 – EC II) Appellate Body Report, United States – Tax Treatment for "Foreign Sales Corporations" – Second Recourse to Article 21.5 of the DSU by the European Communities, WT/DS108/AB/RW2, adopted 14 March 2006, DSR 2006:XI, p. 4721
US – FSC (Article 21.5 – EC II) Panel Report, United States – Tax Treatment for "Foreign Sales Corporations" – Second Recourse to Article 21.5 of the DSU by the European Communities, WT/DS108/RW2, adopted 14 March 2006, upheld by Appellate Body Report WT/DS108/AB/RW2, DSR 2006:XI, p. 4761
US – FSC (Article 21.5 – EC) Appellate Body Report, United States – Tax Treatment for "Foreign Sales Corporations" – Recourse to Article 21.5 of the DSU by the European Communities, WT/DS108/AB/RW, adopted 29 January 2002, DSR 2002:I, p. 55
US – Gasoline Appellate Body Report, United States – Standards for Reformulated and Conventional Gasoline, WT/DS2/AB/R, adopted 20 May 1996, DSR 1996:I, p. 3
US – Hot-Rolled Steel Appellate Body Report, United States – Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan, WT/DS184/AB/R, adopted 23 August 2001, DSR 2001:X, p. 4697
US – Lamb Appellate Body Report, United States – Safeguard Measures on Imports of Fresh, Chilled or Frozen Lamb Meat from New Zealand and Australia, WT/DS177/AB/R, WT/DS178/AB/R, adopted 16 May 2001, DSR 2001:IX, p. 4051
US – Large Civil Aircraft (2nd complaint) Appellate Body Report, United States – Measures Affecting Trade in Large Civil Aircraft (Second Complaint), WT/DS353/AB/R, adopted 23 March 2012, DSR 2012:I, p. 7
US – Large Civil Aircraft (2nd complaint) Panel Report, United States – Measures Affecting Trade in Large Civil Aircraft (Second Complaint), WT/DS353/R, adopted 23 March 2012, as modified by Appellate Body Report WT/DS353/AB/R, DSR 2012:II, p. 649
US – Large Civil Aircraft (2nd complaint) (Article 21.5 – EU) Panel Report, United States – Measures Affecting Trade in Large Civil Aircraft (Second Complaint) – Recourse to Article 21.5 of the DSU by the European Union, WT/DS353/RW and Add.1
US – Offset Act (Byrd Amendment) Appellate Body Report, United States – Continued Dumping and Subsidy Offset Act of 2000, WT/DS217/AB/R, WT/DS234/AB/R, adopted 27 January 2003, DSR 2003:I, p. 375
US – Oil Country Tubular Goods Sunset Reviews (Article 21.5 – Argentina) Appellate Body Report, United States – Sunset Reviews of Anti-Dumping Measures on Oil Country Tubular Goods from Argentina – Recourse to Article 21.5 of the DSU by Argentina, WT/DS268/AB/RW, adopted 11 May 2007, DSR 2007:IX, p. 3523
US – Section 211 Appropriations Act Appellate Body Report, United States – Section 211 Omnibus Appropriations Act of 1998, WT/DS176/AB/R, adopted 1 February 2002, DSR 2002:II, p. 589
US – Shrimp Appellate Body Report, United States – Import Prohibition of Certain Shrimp and Shrimp Products, WT/DS58/AB/R, adopted 6 November 1998, DSR 1998:VII, p. 2755
US – Shrimp (Article 21.5 – Malaysia) Appellate Body Report, United States – Import Prohibition of Certain Shrimp and Shrimp Products – Recourse to Article 21.5 of the DSU by Malaysia, WT/DS58/AB/RW, adopted 21 November 2001, DSR 2001:XIII, p. 6481
US – Softwood Lumber VI (Article 21.5 – Canada) Appellate Body Report, United States – Investigation of the International Trade Commission in Softwood Lumber from Canada – Recourse to Article 21.5 of the DSU by Canada, WT/DS277/AB/RW, adopted 9 May 2006, and Corr.1, DSR 2006:XI, p. 4865
US – Steel Safeguards Appellate Body Report, United States – Definitive Safeguard Measures on Imports of Certain Steel Products, WT/DS248/AB/R, WT/DS249/AB/R, WT/DS251/AB/R, WT/DS252/AB/R, WT/DS253/AB/R, WT/DS254/AB/R, WT/DS258/AB/R, WT/DS259/AB/R, adopted 10 December 2003, DSR 2003:VII, p. 3117
US – Tax Incentives Appellate Body Report, United States – Conditional Tax Incentives for Large Civil Aircraft, WT/DS487/AB/R and Add.1, adopted 22 September 2017
US – Tax Incentives Panel Report, United States – Conditional Tax Incentives for Large Civil Aircraft, WT/DS487/R and Add.1, adopted 22 September 2017, as modified by Appellate Body Report WT/DS487/AB/R
US – Tuna II (Mexico) (Article 21.5 – Mexico) Appellate Body Report, United States – Measures Concerning the Importation, Marketing and Sale of Tuna and Tuna Products – Recourse to Article 21.5 of the DSU by Mexico, WT/DS381/AB/RW and Add.1, adopted 3 December 2015, DSR 2015:X, p. 5133
US – Upland Cotton Appellate Body Report, United States – Subsidies on Upland Cotton, WT/DS267/AB/R, adopted 21 March 2005, DSR 2005:I, p. 3
US – Upland Cotton Panel Report, United States – Subsidies on Upland Cotton, WT/DS267/R, Add.1 to Add.3 and Corr.1, adopted 21 March 2005, as modified by Appellate Body Report WT/DS267/AB/R, DSR 2005:II, p. 299
US – Upland Cotton (Article 21.5 – Brazil) Appellate Body Report, United States – Subsidies on Upland Cotton – Recourse to Article 21.5 of the DSU by Brazil, WT/DS267/AB/RW, adopted 20 June 2008, DSR 2008:III, p. 809
US – Washing Machines Appellate Body Report, United States – Anti-Dumping and Countervailing Measures on Large Residential Washers from Korea, WT/DS464/AB/R and Add.1, adopted 26 September 2016, DSR 2016:V, p. 2275
US – Washing Machines Panel Report, United States – Anti-Dumping and Countervailing Measures on Large Residential Washers from Korea, WT/DS464/R and Add.1, adopted 26 September 2016, as modified by Appellate Body Report WT/DS464/AB/R, DSR 2016:V, p. 2505
US – Wheat Gluten Appellate Body Report, United States – Definitive Safeguard Measures on Imports of Wheat Gluten from the European Communities, WT/DS166/AB/R, adopted 19 January 2001, DSR 2001:II, p. 717
US – Zeroing (EC) (Article 21.5 – EC) Appellate Body Report, United States – Laws, Regulations and Methodology for Calculating Dumping Margins ("Zeroing"), WT/DS294/AB/R, adopted 9 May 2006, and Corr.1, DSR 2006:II, p. 417

1 Introduction

1.1.
The European Union1 and the United States each appeal certain issues of law and legal interpretations developed in the Panel Report, United States – Measures Affecting Trade in Large Civil Aircraft (Second Complaint) – Recourse to Article 21.5 of the DSU by the European Union2 (Panel Report). The Panel was established on 23 October 20123 pursuant to Article 21.5 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) to consider a complaint by the European Union4 regarding the alleged failure on the part of the United States to implement the recommendations and rulings of the Dispute Settlement Body (DSB) in the original proceedings in US – Large Civil Aircraft (2nd complaint).5

1.1 Original proceedings

1.2.
In the original proceedings in this dispute, the European Communities claimed that the United States had provided subsidies to US producers of large civil aircraft (LCA), namely, The Boeing Company (Boeing), and that such subsidies are prohibited and/or actionable under the Agreement on Subsidies and Countervailing Measures (SCM Agreement).
1.3.
The original panel, established on 17 February 20066, found that certain tax exemptions and tax exclusions provided to Boeing under the foreign sales corporation (FSC) legislation and the FSC Repeal and Extraterritorial Income Exclusion Act of 2000 (ETI Act), including the transition and grandfather provisions of the ETI Act and the American Jobs Creation Act of 2004 (AJCA), were prohibited export subsidies under Articles 3.1(a) and 3.2 of the SCM Agreement.7 This finding was not appealed.
1.4.
In addition, the original panel found that certain specific subsidies caused serious prejudice to the interests of the European Communities within the meaning of Articles 5(c) and 6.3(b)-(c) of the SCM Agreement. Specifically, the original panel found that:

a. payments provided to Boeing by the National Aeronautics and Space Administration (NASA) pursuant to procurement contracts entered into under eight aeronautics research and development (R&D) programmes and access to facilities, equipment, and employees, as well as payments and access to facilities provided to Boeing by the United States Department of Defense (USDOD)8 pursuant to assistance instruments entered into under the 23 research, development, test, and evaluation (RDT&E) programmes, through their effects on Boeing's development of technologies in relation to the 787, caused significant price suppression, significant lost sales, and a threat of displacement and impedance of exports from third country markets, with respect to the 200‑300 seat wide-body LCA product market9;

b. the FSC/ETI subsidies and the business and occupation (B&O) tax rate reduction provided by the State of Washington under House Bill (HB) 2294, through their effects on Boeing's pricing behaviour with respect to the 737NG, caused significant price suppression, significant lost sales, and displacement and impedance of exports from third country markets, with respect to the 100‑200 seat single‑aisle LCA market10; and

c. the FSC/ETI subsidies and the B&O tax rate reduction provided by the State of Washington under HB 2294 and by the City of Everett, through their effects on Boeing's pricing behaviour with respect to the 777 and 787, caused significant price suppression, significant lost sales, and displacement and impedance of exports from third country markets, with respect to the 300‑400 seat wide-body LCA product market.11

1.5.
On appeal, the Appellate Body upheld the original panel's finding that the aeronautics R&D subsidies caused serious prejudice to the interests of the European Communities with respect to the 200‑300 seat LCA market, within the meaning of Articles 5(c) and 6.3(b)-(c) of the SCM Agreement, except that it reversed the original panel's finding to the extent that it related to a threat of displacement and impedance of exports in the third country markets in Ethiopia, Iceland, and Kenya (but not Australia), within the meaning of Article 6.3(b) of the SCM Agreement.12
1.6.
In addition, the Appellate Body reversed the original panel's finding that the FSC/ETI subsidies and the B&O tax rate reduction caused serious prejudice to the interests of the European Communities within the meaning of Articles 5(c) and 6.3(b)-(c) of the SCM Agreement in the 100‑200 and 300‑400 seat LCA markets.13 The Appellate Body completed the legal analysis and found that, with respect to two sales campaigns involving 100‑200 seat LCA, the FSC/ETI subsidies and the Washington State B&O tax rate reduction caused, through their effects on Boeing's prices for the 737NG, significant lost sales within the meaning of Article 6.3(c).14 The Appellate Body also reversed the original panel's finding that the European Communities had failed to show that the remaining subsidies had affected Boeing's prices in a manner giving rise to serious prejudice with respect to the 100‑200 seat and 300-400 seat LCA markets.15 The Appellate Body completed the legal analysis and found that the effects of the property and sales tax abatements related to the industrial revenue bonds (IRBs) issued by the City of Wichita complemented and supplemented the price effects of the FSC/ETI subsidies and the Washington State B&O tax rate reduction, thereby causing serious prejudice, in the form of significant lost sales, within the meaning of Articles 5(c) and 6.3(c), in the 100‑200 seat LCA market.16
1.7.
The Appellate Body recommended that, pursuant to Article 7.8 of the SCM Agreement, the DSB request the United States to bring its measures, found in the Appellate Body report and in the original panel report, as modified by the Appellate Body report, to be inconsistent with the SCM Agreement, into conformity with its obligations under that Agreement.17
1.8.
On 23 March 2012, the DSB adopted the Appellate Body report and the original panel report, as modified by the Appellate Body report.18

1.2 Compliance proceedings

1.2.1 Panel proceedings

1.9.
Subsequent to the adoption of the original panel report and the Appellate Body report, the United States provided a notification to the DSB on 23 September 201219, identifying "a number of actions to withdraw the subsidies found to have caused adverse effects or to remove their adverse effects", in light of which the United States considered that it "ha{d} fully complied with the recommendations and rulings of the Dispute Settlement Body in this dispute".20
1.10.
On 25 September 2012, the European Union requested consultations with the United States, explaining that "{t}he actions and events listed by the United States in its 23 September 2012 notification do not withdraw the subsidies or remove their adverse effects, as required by Articles 4.7 and 7.8 of the SCM Agreement", and that "the United States has failed to achieve compliance with the recommendations and rulings of the DSB."21 The European Union and the United States held consultations on 10 October 2012, but the consultations failed to resolve the dispute.22
1.11.
On 11 October 2012, the European Union requested the establishment of a panel, in accordance with, inter alia, Article 21.5 of the DSU, with standard terms of reference.23 At its meeting on 23 October 2012, the DSB referred this dispute to the original panel, if possible, in accordance with Article 21.5 of the DSU.24 The Panel was composed on 30 October 2012 accordingly.25
1.12.
Before the Panel, the European Union argued that the United States had failed to implement the recommendations and rulings of the DSB in the original proceedings towithdraw the subsidies or take appropriate steps to remove the adverse effects, pursuant to Article 7.8 of the SCM Agreement. In particular, the European Union claimed that, subsequent to the end of the implementation period26, the United States grants or maintains subsidies to the US LCA industry through the following programmes and measures: (i) NASA aeronautics R&D measures; (ii) the Federal Aviation Administration's (FAA) Continuous Lower Energy Emissions, and Noise (CLEEN) Program; (iii) the USDOD RDT&E programme; (iv) income tax exemptions/exclusions pursuant to the FSC/ETI legislation and successor acts; (v) property and sales tax concessions for LCA component production facilities associated with IRBs issued by the City of Wichita; (vi) certain tax and other measures applied by the State of Washington and municipalities therein; and (vii) measures applied by the State of South Carolina and municipalities therein in the context of "Project Gemini" and "Project Emerald", as well as "Phase II".27 The European Union further asserted that these subsidies are also inconsistent with Articles 3.1(a)-(b) and 3.2 of the SCM Agreementand Article III of the GATT 1994.28
1.13.
In addition, the European Union claimed that the subsidies collectively cause present adverse effects to LCA-related interests of the European Union in violation of the SCM Agreement. In particular, the European Union argued that the subsidies are a genuine and substantial cause of: (i) displacement and impedance, or a threat thereof, in the LCA product markets of the United States, within the meaning of Article 6.3(a) of the SCM Agreement; (ii) displacement and impedance, or a threat thereof, in the LCA product markets of several third countries, within the meaning of Article 6.3(b) of the SCM Agreement; (iii) significant price suppression, or threat thereof, in the LCA product markets, within the meaning of Article 6.3(c) of the SCM Agreement; and (iv) significant lost sales, or threat thereof, in the LCA product markets, within the meaning of Article 6.3(c) of the SCM Agreement.29
1.14.
The Panel circulated its Report to Members of the World Trade Organization (WTO) on 9 June 2017. The factual aspects of the Panel proceedings are summarized in detail in paragraphs 1.16 through 1.32 of the Panel Report.
1.15.
The Panel made the following findings in its Report.
1.16.
With respect to whether certain measures, and claims with regard to certain measures, are outside the Panel's terms of reference for purposes of Article 6.2 of the DSU or the scope of these compliance proceedings:

a. The European Union's claims under Articles 3.1(a)-(b) and 3.2 of the SCM Agreement, and under Article III of the GATT 1994, are within the Panel's terms of reference30, but the South Carolina Phase II measures, and the Washington State tax measures, as amended by Washington State Substitute Senate Bill (SSB) 5952, are outside the Panel's terms of reference, owing to the failure of the European Union's panel request to meet the requirements of Article 6.2 of the DSU with respect to such measures.31

b. The following measures are within the scope of these compliance proceedings:

i. the Washington State B&O tax credits for preproduction/aerospace product development32; the Washington State B&O tax credit for property taxes and leasehold excise taxes33; the Washington State sales and use tax exemptions for computer software, hardware, and peripherals; and the City of Everett B&O tax rate reduction;

ii. pre-2007 and post-2006 RDT&E procurement contracts between USDOD and Boeing (USDOD procurement contracts) funded through the 23 original RDT&E programme elements;

iii. USDOD procurement contracts HR0011-06-C-0073 and HR-0011-08-C-0044 SOW and assistance instruments HR0011-06-2-0008, FA8650-07-2-7716, and HR0011-10-2-0001 funded through the Materials Processing Technology Project of the Materials and Biological Technology programme element;

iv. the provision of access to USDOD equipment and employees with respect to the post‑2006 USDOD procurement contracts and assistance instruments funded under the 23 original RDT&E programme elements and the "additional" programme elements that the Panel found to be within the scope of these proceedings;

v. the FAA aeronautics R&D measure; and

vi. the South Carolina Project Gemini measures and Project Emerald measures.34

c. The following measures are outside the scope of these compliance proceedings:

i. the Washington State Joint Center for Aerospace Technology Innovation (JCATI) measure;

ii. Air Force Contract F19628-01-D-0016 funded under the DRAGON Project of the Airborne Warning and Control System (PE 0207417F) programme element; Air Force Contract FA8625-11-C-6600 funded under the KC-46, Next Generation Aerial Refueling Aircraft (PE 0605221F) programme element; and measures funded under the Multi‑Mission Maritime Aircraft (P-8A) (PE 0605500N) programme element, including Navy Contracts N00019-04-C-3146, N00019-09-C-0022, and N00019-12-C-0112; and

iii. the provision of access to USDOD equipment and employees with respect to the pre‑2007 NASA procurement contracts and USDOD assistance instruments funded under the 23 original RDT&E programme elements.35

d. The European Union is precluded from bringing claims under Articles 3.1(a) and 3.2 of the SCM Agreement against the following four original Washington State tax measures enacted under HB 2294: (i) the Washington State B&O tax rate reduction; (ii) the Washington State B&O tax credits for preproduction/aerospace product development36; (iii) the Washington State B&O tax credit for property taxes37; and (iv) the Washington State sales and use tax exemptions for computer software, hardware, and peripherals.38

e. The European Union is precluded from bringing claims under Articles 3.1(b) and 3.2 of the SCM Agreement, and under Article III:4 of the GATT 1994, with respect to the following four original Washington State tax measures enacted under HB 2294: (i) the Washington State B&O tax rate reduction; (ii) the Washington State sales and use tax exemptions for computer software, hardware, and peripherals; (iii) the Washington State B&O tax credits for preproduction/aerospace product development39; and (iv) the Washington State B&O tax credit for property taxes40; as well as the FSC/ETI measures.41

f. The European Union is precluded from bringing claims under Articles 3.1(a)-(b) and 3.2 of the SCM Agreement, and under Article III:4 of the GATT 1994, with respect to: (i) the City of Everett B&O tax rate reduction, the tax abatements related to the City of Wichita IRBs, and the pre-2007 NASA Space Act Agreements and USDOD procurement contracts at issue in the original proceedings; and (ii) the pre-2007 NASA procurement contracts and USDOD assistance instruments at issue in the original proceedings, as amended by the respective Boeing Patent Licence Agreements.42

1.17.
With respect to whether the United States has failed to withdraw the subsidy within the meaning of Article 7.8 of the SCM Agreement:

a. With regard to the pre-2007 NASA and USDOD aeronautics R&D subsidies that were the subject of the recommendations and rulings of the DSB, the European Union established that the modifications made by the United States through the Boeing Patent Licence Agreements to the terms of the pre-2007 NASA procurement contracts and USDOD assistance instruments do not constitute a withdrawal of the subsidy within the meaning of Article 7.8 of the SCM Agreement and that the United States, having taken no action with respect to pre-2007 Space Act Agreements, has failed to withdraw the subsidy within the meaning of Article 7.8 of the SCM Agreement.43

b. With regard to the post-2006 measures of the United States challenged in these proceedings, the European Union established that the following measures involve specific subsidies within the meaning of Articles 1 and 2 of the SCM Agreement, and that by granting or maintaining these specific subsidies after the end of the implementation period, the United States has failed to withdraw the subsidy within the meaning of Article 7.8 of the SCM Agreement:

i. certain transactions between NASA and Boeing pursuant to the post-2006 NASA procurement contracts, cooperative agreements, and Space Act Agreements, with respect to which the Panel was unable to estimate the amount of the subsidy on the basis of the evidence on the record, but considered the United States' estimate of the amount of the financial contribution at [BCI] between 2007 and 2012 to be credible;

ii. certain transactions between USDOD and Boeing pursuant to post-2006 USDOD assistance instruments, with respect to which the Panel was unable to estimate the amount of the subsidy on the basis of the evidence on the record, but considered the United States' estimate of the amount of the financial contribution at [BCI] between 2007 and 2012 to be credible;

iii. transactions pursuant to the FAA-Boeing CLEEN Agreement with respect to which the Panel was unable to estimate the amount of the subsidy on the basis of the evidence on the record, but considered the European Union's estimate of the amount of the financial contribution at US$27.99 million between 2010 and 2014 to be credible;

iv. Washington State B&O tax rate reduction for the aerospace industry, in the amount of US$325 million between 2013 and 2015;

v. Washington State B&O tax credits for preproduction/aerospace product development, as amended by Section 7 of Washington State SSB 6828, in the amount of [BCI] between 2013 and 2015;

vi. Washington State B&O tax credit for property taxes, as amended by HB 2466 to include leasehold excise taxes, in the amount of [BCI] between 2013 and 2015;

vii. Washington State sales and use tax exemptions for computer software, hardware, and peripherals, in the amount of [BCI] between 2013 and 2015;

viii. City of Everett B&O tax rate reduction, in the amount of US$54.1 million between 2013 and 2015;

ix. payments made by the State of South Carolina pursuant to commitments made in the Project Gemini Agreement44 to compensate Boeing for a portion of the costs incurred by Boeing with respect to the construction of the Gemini facilities and infrastructure through air hub bond proceeds, in the amount of US$50 million;

x. the State of South Carolina property tax exemption for Boeing's large cargo freighters, in the amount of US$25.82 million between 2013 and 2015; and

xi. the State of South Carolina sales and use tax exemptions for aircraft fuel, computer equipment, and construction materials, in the amount of US$2.25 million between 2013 and 2015.45

c. The European Union failed to establish that the following measures involve specific subsidies within the meaning of Articles 1 and 2 of the SCM Agreement, and therefore failed to establish that, by granting or maintaining these specific subsidies after the end of the implementation period, the United States has failed to withdraw the subsidy within the meaning of Article 7.8 of the SCM Agreement:

i. certain transactions between USDOD and Boeing pursuant to pre-2007 and post-2006 USDOD procurement contracts, on the grounds that, assuming arguendo that these measures were to involve financial contributions within the meaning of Article 1.1(a)(1) of the SCM Agreement, they do not confer a benefit on Boeing within the meaning of Article 1.1(b) of the SCM Agreement;

ii. tax exemptions and exclusions under the FSC/ETI legislation and successor legislation, on the grounds that the European Union has failed to establish that Boeing actually received the FSC/ETI tax benefits after 2006, and that the measure therefore involves a financial contribution within the meaning of Article 1.1(a)(1)(ii) of the SCM Agreement;

iii. tax abatements provided through IRBs issued by the City of Wichita, on the grounds that these tax abatements are no longer specific within the meaning of Article 2.1(c) of the SCM Agreement and, as a result, the measure is no longer subject to the provisions of the SCM Agreement on actionable subsidies;

iv. the State of South Carolina's sublease of the Project Site, on the grounds that the European Union has failed to establish that the sublease involves a subsidy to Boeing;

v. the State of South Carolina's provision of Project Gemini and Project Emerald facilities and infrastructure, on the grounds that the European Union has failed to establish that these measures involve financial contributions within the meaning of Article 1.1(a)(1)(iii) of the SCM Agreement;

vi. the State of South Carolina's fee-in-lieu-of taxes (FILOT) arrangements, set forth in the Boeing FILOT Agreement46 and Project Emerald FILOT Agreement, on the grounds that these arrangements are not specific within the meaning of Article 2 of the SCM Agreement;

vii. the State of South Carolina's corporate income tax credits in connection with the designation of the Project Gemini and Project Emerald portions of the Project Site as part of the same multi-county industrial park (MCIP), on the grounds that the tax credits are not specific within the meaning of Article 2 of the SCM Agreement;

viii. the State of South Carolina's Income Allocation and Apportionment Agreement, on the grounds that the European Union has failed to establish that the agreement involves a financial contribution within the meaning of Article 1.1(a)(1)(ii) of the SCM Agreement; and

ix. the State of South Carolina's workforce recruitment, training, and development programme, on the grounds that the programme is not specific within the meaning of Article 2 of the SCM Agreement.47

1.18.
With respect to whether the United States has failed to take appropriate steps to remove the adverse effects within the meaning of Article 7.8 of the SCM Agreement:

a. The European Union failed to establish that the effects of certain aeronautics R&D subsidies and other subsidies are a genuine and substantial cause of significant lost sales, significant price suppression, impedance of imports to the US market or impedance of exports to various third country markets, or threats of any of the foregoing, within the meaning of Articles 5(c) and 6.3(a)-(c) of the SCM Agreement with respect to the A350XWB in the post-implementation period.48

b. The European Union failed to establish that the original adverse effects of the pre-2007 aeronautics R&D subsidies with respect to the A330 and Original A350 continue in the post‑implementation period as significant price suppression of the A330 and A350XWB, significant lost sales of the A350XWB, or a threat of impedance of exports of the A350XWB in the twin-aisle LCA market, within the meaning of Articles 5(c) and 6.3(a)-(c) of the SCM Agreement in the post-implementation period.49

c. The European Union established that the effects of the Washington State B&O tax rate reduction are a genuine and substantial cause of significant lost sales within the meaning of Articles 5(c) and 6.3(c) of the SCM Agreement of the A320neo and A320ceo families of LCA in the single-aisle LCA market, with respect to the sales campaigns for Fly Dubai in 2014, Icelandair in 2013, and Air Canada in 2013, in the post-implementation period.50

d. The European Union established that the effects of the Washington State B&O tax rate reduction are a genuine and substantial cause of a threat of impedance of imports of the A320ceo to the United States single-aisle LCA market, and a threat of impedance of exports of Airbus single-aisle LCA in the United Arab Emirates third country market, within the meaning of Articles 5(c) and 6.3(a)-(b) of the SCM Agreement in the post‑implementation period.51

e. The European Union failed to establish that the effects of the pre-2007 aeronautics R&D subsidies and the post-2006 subsidies are a genuine and substantial cause of significant price suppression of the A320neo or A320ceo, impedance of imports of the A320neo or A320ceo to the US market, or displacement and impedance of exports of the A320neo or A320ceo to the third country markets of Australia, Brazil, Canada, Iceland, Indonesia, Malaysia, Mexico, Norway, Russia, and Singapore, within the meaning of Articles 5(c) and 6.3(a)-(c) of the SCM Agreement, or threats of any of the foregoing, in the post‑implementation period.52

1.19.
With respect to the European Union's claims under Articles 3.1 and 3.2 of the SCM Agreement, and Article III:4 of the GATT 1994, the Panel found that the European Union failed to establish that the subsidies are inconsistent with these provisions.53
1.20.
In light of the foregoing, the Panel concluded that, by continuing to be in violation of Articles 5(c) and 6.3(a)-(c) of the SCM Agreement, the United States has failed to comply with the recommendations and rulings of the DSB and, in particular, the obligation under Article 7.8 of the SCM Agreement to "take appropriate steps to remove the adverse effects or … withdraw the subsidy".54 The Panel accordingly found that, to the extent that the United States has failed to comply with the recommendations and rulings of the DSB in the original dispute, those recommendations and rulings remain operative.55

1.2.2 Appellate proceedings and procedural issues

1.21.
On 5 December 2016, the Appellate Body received a letter from the European Union referring to an anticipated appeal in this dispute, to the ongoing appeal in EC and certain member States – Large Civil Aircraft (Article 21.5 – US), and to an imminent appeal in US – Tax Incentives. Referring to Rule 16(1)-(2) of the Working Procedures for Appellate Review56 (Working Procedures) and Article 9 of the DSU, the European Union requested that the schedules for these three appeals be harmonized and that the hearings be sufficiently proximate in time, so that a particular matter would not be effectively disposed of in one appeal before the related matter is heard in the other appeals. The Chair of the Appellate Body invited the United States and the third parties to submit comments on the European Union's request by 9 December 2016. The United States argued that the European Union's request was not supported by the DSU or the Working Procedures and would result in delays in the proceedings. The United States stated that it remained open to proposals to set deadlines for written submissions and dates for oral hearings in a way that would allow the participants and third participants in each dispute to advocate effectively their positions on appeal and for the Appellate Body to consider fully the issues raised.57 The participants and third parties were invited to submit additional comments by 16 December 2016. The European Union reiterated its request that any oral hearings in these appeals be sufficiently proximate in time, but noted that it was content to leave it to the Appellate Body to determine what that would mean in practice.58 By letter dated 22 December 2016, the Appellate Body indicated that it would bear in mind the European Union's request, as well as the comments received, during the appellate proceedings in these three disputes.59
1.22.
On 29 June 2017, the European Union notified the DSB, pursuant to Articles 16.4 and 17 of the DSU, of its intention to appeal certain issues of law covered in the Panel Report and certain legal interpretations developed by the Panel, and filed a Notice of Appeal60 and an appellant's submission pursuant to Rule 20 and Rule 21, respectively, of the Working Procedures.
1.23.
On that same date, the Chair of the Appellate Body also received a letter from the European Union requesting the Appellate Body Division hearing this appeal to adopt additional procedures to protect business confidential information (BCI) and highly sensitive business information (HSBI) in these appellate proceedings. In its letter, the European Union proposed that additional procedures that track those adopted by the Appellate Body in the appeal in EC and certain member States – Large Civil Aircraft (Article 21.5 – US) be adopted. The European Union argued that, inter alia, disclosure of certain sensitive information on the record of the Panel proceedings would be severely prejudicial to the LCA manufacturers concerned, and possibly to their customers and suppliers.
1.24.
Also on 29 June 2017, on behalf of the Division hearing this appeal, the Chair of the Appellate Body sent a letter to the participants and third parties and invited the United States and the third parties to comment in writing on the request by the European Union by 5 July 2017. The Chair also informed the participants and the third parties that, pending a ruling by the Division on the request to adopt additional procedures to protect BCI and HSBI, the deadlines for the filing of the appellant's submission, the Notice of Other Appeal, and the other appellant's, appellees', and third participants' submissions in this appeal were suspended. The participants and the third parties were also informed that, pending a final decision on the European Union's request, interim additional protection was to be granted to all BCI and HSBI transmitted to the Appellate Body in this appeal.
1.25.
On 5 July 2017, written comments were received from the United States, Australia, and Canada. The United States broadly agreed with the European Union's request that the BCI and HSBI procedures adopted in the appeal in EC and certain member States – Large Civil Aircraft (Article 21.5 – US) should serve as the basis for BCI and HSBI procedures in this appeal. It requested, however, a change regarding the deadline to submit an HSBI appendix to any written submission, suggesting that, if an HSBI appendix is sent by an expedited courier service, that it be deemed filed and served on the date it is sent, instead of on the date it is delivered. Australia stated that it did not object to the European Union's request but commented that support of both of the participants would be important in ensuring fairness and orderly procedure in these appellate proceedings. Canada stated that, while it agreed with the European Union's request that additional procedures to protect BCI and HSBI track the procedures adopted in EC and certain member States – Large Civil Aircraft (Article 21.5 – US), it considered that the requirement that note‑taking by third participants in the designated reading room be handwritten was unnecessarily burdensome, and requested that the procedures be modified so as to provide for a stand-alone computer and printer to be made available to third participant BCI‑approved persons in the designated reading room.
1.26.
On 7 July 2017, the Chair of the Appellate Body, on behalf of the Division, invited the participants and third parties to provide, by 11 July 2017, any further views on the request by the European Union, taking into account the changes proposed by the United States and Canada. On 11 July 2017, comments were received from the European Union and the United States. The European Union objected to the United States' proposal that an HSBI appendix sent by expedited courier should be deemed filed the day it is sent. For the European Union, Article 18 of the Working Procedures makes clear that the "filing" of a submission is not a clerical formality, but an event of legal significance, because the very status of the participants to an appeal derives from the act of filing the required documents. For the European Union, the Working Procedures clearly envisage a filing being made in Geneva, under the supervision of the Secretariat, and being completed upon the receipt of the relevant documents by the Secretariat. The European Union also stated that, while it understands that having to transmit an HSBI appendix to Geneva poses certain practical challenges, such challenges are not unique to the United States. The European Union urged that any measures taken to address the United States' concerns should be even-handed. In addition, the European Union stated that it did not, in principle, object to Canada's proposal to allow taking notes on a computer keyboard in the designated reading room, provided that it can be done in a manner that ensures the adequate protection of BCIThe European Union noted that the reason for excluding computers or other electronic devices from the designated reading room was to enhance the security of BCI, and that the risks of disclosure are heightened if computers or other electronic devices are allowedThe European Union also noted that the participants and their stakeholders agreed to the provision of BCI under the express understanding that computers or electronic devices would not be permitted in the designated reading room. For these reasons, the European Union considered that Canada's proposal would be acceptable only if certain heightened protections were put in place. The United States indicated that it did not favour Canada's request to allow note-taking on a computer with an attached printer. The United States considered that permitting voluminous reproduction of BCI with relative ease increases the risk of disclosure. According to the United States, the relative difficulty of copying large amounts of information, rather than more limited notes to summarize information, is an appropriate feature of the proposed procedures. The United States added that extensive notes on the facts seem particularly unnecessary in the context of this appeal, given that the purpose of access to BCI at this stage is to help participants understand the legal arguments.
1.27.
On 21 July 2017, the Chair of the Appellate Body, on behalf of the Division hearing this appeal, issued a Procedural Ruling61 adopting additional procedures to protect the confidentiality of BCI and HSBI in these appellate proceedings. The Division did not adopt the modification requested by the United States to the additional procedures proposed by the European Union regarding the filing of an HSBI appendix but decided that it would endeavour to set filing dates for the participants such that the filing date for the HSBI appendix would be set three days following the deadline for the remainder of the submission itself. The Division accepted Canada's proposal that third participant BCI‑approved persons be allowed to take notes on a stand-alone computer and printer in the designated reading room. The Division also noted that it would make every effort to draft its Report without including sensitive information and that, if it considers it necessary to do so, it would provide the participants a timely opportunity to comment and indicate whether any BCI or HSBI was inadvertently included in the Report.
1.28.
On 25 July 2017, the Division provided the participants and third parties with a Working Schedule for Appeal, setting out the dates for the filing of the appellant's submission and an eventual Notice of Other Appeal and other appellant's submission.
1.29.
On 3 August 2017, the European Union filed an appellant's submission pursuant to Rule 21 of the Working Procedures.
1.30.
On 7 August 2017, the Appellate Body received a communication from the United States requesting that the Division hearing this appeal extend the deadline, from 7 to 9 August 2017, for the United States to object to the inclusion of any BCI in the European Union's appellant's submission. The United States indicated that, due to the volume of the European Union's submission, it needed two additional days to conduct the necessary review. On 8 August 2017, the Chair of the Appellate Body, on behalf of the Division hearing this appeal, invited the European Union and the third participants to provide any comments on the United States' request by 9 August 2017. The European Union responded that it had no objections to the request by the United States.
1.31.
On 9 August 2017, the Chair of the Appellate Body, on behalf of the Division hearing this appeal, issued a Procedural Ruling62 granting the extension by two days of the time period set out in the Procedural Ruling of 21 July 2017 for the United States to file an objection to the inclusion of any BCI. The Division also decided, in the interest of fairness, to extend by two days the time period set out in the Procedural Ruling of 21 July 2017 for the European Union to file an objection to the inclusion of any BCI in the United States' other appellant's submission.
1.32.
On 10 August 2017, the United States notified the DSB, pursuant to Articles 16.4 and 17 of the DSU, of its intention to appeal certain issues of law covered in the Panel Report and certain legal interpretations developed by the Panel and filed a Notice of Other Appeal63 and an other appellant's submission pursuant to Rule 23 of the Working Procedures.
1.33.
On 14 August 2017, the Appellate Body received a request from the United States to extend the deadline to file the HSBI appendix to its other appellant's submission from 14 to 15 August 2017. The United States explained that, on 10 August 2017, it had commenced transfer of the HSBI appendix to the Appellate Body and the European Union via expedited international courier service, with the expectation that it would arrive at the United States' Permanent Mission in Geneva by 14 August 2017. As the shipment had not arrived before the deadline, the United States sought this extension to complete the transfer of the HSBI appendix. On 15 August 2017, the United States submitted the HSBI appendix to the Appellate Body. On 17 August 2017, the Chair of the Appellate Body, on behalf of the Division hearing this appeal, invited the European Union and the third parties to comment on whether the Division should accept the late-filed HSBI appendix of the United States. On 21 August 2017, the European Union responded that the United States request did not place before the Appellate Body all the information that the Appellate Body would require in order to make a procedural ruling on the matter, and that it would welcome additional explanation and evidence, including proof of the date and time of shipment of the HSBI appendix.
1.34.
On 24 August 2017, the Division requested that the United States provide relevant documentation relating to the time and date on which the HSBI appendix was delivered to the courier service for transmission to Geneva. On 28 August 2017, the United States responded by providing a printout of the tracking information for shipment of the HSBI appendix, together with additional details regarding the shipment. The United States explained that physical delivery of the package to the courier service occurred on 10 August 2017, and that, although the package arrived in Switzerland early in the morning on 14 August 2017, unexplained difficulties on the part of the courier service delayed delivery until the following day. The United States further maintained that, while it was unfortunate that the package arrived a day later than expected, a decision to grant its extension request would not result in prejudice.
1.35.
On 30 August 2017, the Division issued a Procedural Ruling64 accepting the late‑filed HSBI appendix to the United States' other appellant's submission.
1.36.
On 5 September 2017, the Division provided the participants and third parties a revised Working Schedule for Appeal, setting out the dates for filing the appellees' and third participants' submissions. The Division added that the dates for the oral hearing would be communicated in due course.
1.37.
By letter dated 18 September 2017, the Chair of the Appellate Body notified the Chair of the DSB that the Appellate Body would not be able to circulate its Report in this appeal within the 60‑day period pursuant to Article 17.5 of the DSU, or within the 90-day period pursuant to the same provision.65 The Chair indicated that this was due to a number of factors, including the exceptional size and complexity of these compliance proceedings, the substantial workload faced by the Appellate Body, the overlap in the composition of the Divisions hearing several concurrent appeals, and the shortage of staff in the Appellate Body Secretariat.
1.38.
On 10 October 2017, the European Union and the United States each filed an appellee's submission.66
1.39.
On 11 October 2017, the Appellate Body received a communication from the European Union requesting the Division hearing this appeal to extend, from 12 to 13 October 2017, the deadline for the European Union to object to the inclusion of any BCI in the United States' appellee's submission. The European Union indicated that, due to the volume of the United States' submission, it needed one additional day to complete the necessary review regarding BCI. On the same day, the Division invited the United States and the third parties to provide any comments on the European Union's request by 12 October 2017. The United States responded that it would have no objection to an extension of the deadline for both participants to object to the inclusion of any BCI in the other participant's appellee's submission. Brazil, China, and Russia also stated that they do not object to the extension request, but Brazil and China indicated that third parties should be granted an extension of the deadline for their submissions.
1.40.
On 12 October 2017, the Division issued a Procedural Ruling67 granting an extension by one day of the time period for the European Union and the United States each to file an objection to the inclusion of any BCI in the other participant's appellee's submission. In addition, the Division decided to extend the deadline for the filing of third participants' submissions and executive summaries, and notifications by third parties under Rule 24(2) of the Working Procedures, until 30 October 2017.
1.41.
On 13 October 2017, the Appellate Body received a communication from the European Union, in which the European Union objected to the inclusion of certain HSBI in the HSBI-redacted version of the United States' appellee's submission, without proper designation of that information as HSBI. On the same day, the Division invited the United States to comment on the European Union's request. On 17 October 2017, the United States responded that the relevant information should be treated as HSBI, and requested that it be allowed to submit replacement pages for the BCI version (HSBI‑redacted) and non-BCI version (BCI- and HSBI-redacted) of its appellee's submission, and a corrected HSBI appendix.
1.42.
On 18 October 2017, the Division issued a Procedural Ruling68 granting the United States until 23 October 2017 to submit the replacement pages for the BCI and non‑BCI versions of its appellee's submission, and until 26 October 2017 to submit its corrected HSBI appendix. The Division also decided to extend the deadline for the filing of third participants' submissions and executive summaries, and notifications by third parties under Rule 24(2) of the Working Procedures, until 7 November 2017.
1.43.
Pursuant to the Procedural Ruling of 18 October 2017, on 23 October 2017, the United States filed the replacement pages for the BCI and non‑BCI versions of its appellee's submission. On 26 October 2017, the United States filed the corrected HSBI appendix to its appellee's submission.
1.44.
On 26 October, Korea notified its intention to appear at the oral hearing as a third participant.69 On 7 November 2017, Brazil, Canada, China, and Japan each filed a third participant's submission.70 On the same day, Australia notified its intention to appear at the oral hearing as a third participant.71 On 13 November 2017, Russia notified its intention to appear at the oral hearing as a third participant.72
1.45.
By letter dated 15 November 2017, the Division informed the participants and third participants that the first session of the oral hearing would take place from 17 to 20 April 2018.
1.46.
By letter dated 24 November 2017, the participants and third participants were informed that, in accordance with Rule 15 of the Working Procedures, the Chair of the Appellate Body had notified the Chair of the DSB of the Appellate Body's decision to authorize Appellate Body Member Mr Peter Van den Bossche to complete the disposition of this appeal, even though his second term of office was due to expire before the completion of these appellate proceedings.
1.47.
By letter dated 12 March 2018, the Division invited the participants to indicate by 21 March 2018 whether they wished to request the sessions of the oral hearing in this appeal to be open to public observation, and, if so, to propose specific modalities in this respect. The Division also invited the third participants to provide comments by 23 March 2018 on any request made by the participants.
1.48.
By a joint letter dated 21 March 2018, the participants proposed additional procedures to protect BCI and HSBI during the oral hearing in this appeal and requested that the Division allow observation by the public of the oral hearing. The participants proposed that the Division adopt the same additional procedures that the Appellate Body adopted in EC and certain member States – Large Civil Aircraft (Article 21.5 – US).
1.49.
On 23 March 2018, Canada and China each submitted comments on the participants' requestCanada expressed its agreement with the joint proposal by the participants that the Appellate Body allow observation by the public of the oral hearing, while acknowledging that suitable protection for BCI is required. China stressed the importance of striking an appropriate balance between the risks of disclosure of sensitive information, on the one hand, and the rights and duties of the third participants and the WTO membership at large, on the other hand. China requested that its oral statement and its responses to questions at the oral hearing be treated as confidential.
1.50.
On 5 April 2018, the Division issued a Procedural Ruling73 authorizing the participants' request to open the segments of the oral hearing dedicated to the delivery of opening and closing statements to public observation, subject to additional procedures for the conduct of the oral hearing that are essentially the same as those adopted by the Appellate Body in EC and certain member States – Large Civil Aircraft (Article 21.5 – US).
1.51.
The first session of the oral hearing was held from 17 to 20 April 2018. During this session, the Division informed the participants and third participants that the second session of the oral hearing would take place in the latter part of September 2018. On 30 May 2018, the Division received a communication from the United States noting certain scheduling constraints regarding its participation in the second session of the oral hearing. By letter dated 31 May 2018, the Division informed the participants and third participants that the second session of the oral hearing would be held from 18 to 21 September 2018.
1.52.
On 1 August 2018, the Division received a communication from the United States requesting that the Division, in organizing the second session of the oral hearing, take account of the absence of a key member of the US delegation on 19 September 2018. The United States suggested, as a first option, that the Division reserve questioning regarding technology effects for 19 September 2018, or, as a second option, alter the schedule so that the hearing begins on 17 September 2018, and does not take place on 19 September 2018. On 3 August 2018, the Division invited the European Union and the third participants to provide any comments on the United States' request, if they so wished, by 8 August 2018. On 7 August 2018, the European Union responded that it preferred the second option proposed by the United States. The European Union indicated that reserving questioning regarding technology effects on 19 September would create a scheduling conflict for a member of the EU delegation.
1.53.
By letter dated 9 August 2018, the Division notified the participants and third participants that it had decided to change the dates of the second session of the oral hearing. Specifically, the Division informed the participants and third participants that the second session of the oral hearing would begin on 17 September 2018 and continue through 18 September 2018, and, after a suspension on 19 September 2018, resume on 20 September 2018 and continue through 21 September 2018. The second session of the oral hearing was held accordingly.
1.54.
The participants and third participants did not refer to BCI or HSBI in their opening or closing statements in either session of the oral hearing, except for the European Union in its closing statement in the second session of the oral hearing, which did include BCI. Pursuant to the Procedural Ruling of 5 April 2018, public observation of both sessions of the oral hearing was limited to the opening and closing statements of the participants and third participants, with the exception of China, who had requested that its oral statements be treated as confidential, and the European Union's closing statement of the second session of the oral hearing, which included BCI. The public observation took place on 8 May 2018 and 9 October 2018 by means of a delayed broadcast of a video recording of such statements, after the participants had been given an opportunity to confirm that no BCI or HSBI had been inadvertently uttered.
1.55.
By letter dated 15 February 2019, the Division informed the participants that, pursuant to paragraph 17(xiii) of the Procedural Ruling of 21 July 2017, the participants would be provided on 6 March 2019 with a confidential advance copy of the Appellate Body Report intended for circulation to WTO Members.The Division also invited the participants to indicate, by 13 March 2019, whether any BCI or HSBI was inadvertently included in the Report, and to request removal of such information. The Division further provided the participants with an opportunity to respond to each other's comments, if any, by 15 March 2019. On 13 March 2019, the United States requested certain additional BCI redactions in the Report. On that same date, the European Union stated that it had no comments on the bracketing of BCI or HSBI in the Report, and on 14 March 2019, indicated that it had no objection to the United States' request. On 15 March 2019, the Division informed the participants that it had redacted the BCI as identified by the United States.
1.56.
By letter dated 15 March 2019, the Chair of the Appellate Body informed the Chair of the DSB that the Report in these proceedings would be circulated on 28 March 2019.

2 Arguments of the Participants

2.1.
The claims and arguments of the participants are reflected in the executive summaries of their written submissions provided to the Appellate Body.74 The Notices of Appeal and Other Appeal, and the executive summaries of the participants' claims and arguments, are contained in Annexes A and B of the Addendum to this Report, WT/DS353/AB/RW/Add.1.

3 Arguments of the third participants

3.1.
The arguments of those third participants that filed a written submission are reflected in the executive summaries of their written submissions provided to the Appellate Body75, which are contained in Annex C of the Addendum to this Report, WT/DS353/AB/RW/Add.1.

4 Issues Raised in This Appeal

4.1.
The following issues are raised in this appeal:

a. whether the Panel erred in finding that the European Union's claims relating to the pre‑2007 USDOD procurement contracts were within its terms of reference (claim by the United States);

b. with respect to the Panel's analysis of the pre-2007 and post-2006 USDOD procurement contracts:

i. whether the Panel acted inconsistently with Article 11 of the DSU when finding that the payments and access to USDOD facilities, equipment, and employees provided to Boeing through USDOD procurement contracts should be characterized as "purchases of services", rather than as a direct transfer of funds within the meaning of Article 1.1(a)(1)(i) of the SCM Agreement and the provision of goods and services within the meaning of Article 1.1(a)(1)(iii) of the SCM Agreement (claim by the European Union); and

ii. whether the Panel acted inconsistently with Article 11 of the DSU when finding that the distribution of intellectual property (IP) rights under USDOD procurement contracts does not confer a benefit within the meaning of Article 1.1(b) of the SCM Agreement (claim by the European Union);

c. whether the Panel erred in finding that, in order to establish the existence of a financial contribution in the form of revenue foregone under Article 1.1(a)(1)(ii) of the SCM Agreement, the European Union was required to demonstrate that Boeing used the FSC/ETI tax concessions, and that the European Union had not established the United States' failure to comply with its obligation under Article 7.8 of the SCM Agreement to withdraw the FSC/ETI subsidies to Boeing (claim by the European Union);

d. whether, with respect to the Panel's analysis of the post‑2006 NASA procurement contracts and cooperative agreements, the post-2006 USDOD assistance instruments, and the FAA-Boeing CLEEN Agreement, the Panel erred in its application of Article 1.1(b) of the SCM Agreement, or acted inconsistently with Article 11 of the DSU, by disregarding certain terms and evidence (conditional claim by the United States);

e. whether the Panel acted inconsistently with Article 11 of the DSU in finding that South Carolina's payments to Boeing with respect to the Project Gemini facilities and infrastructure confer a benefit within the meaning of Article 1.1(b) of the SCM Agreement (conditional claim by the United States);

f. whether the Panel erred in its interpretation and application of Article 2.1(c) of the SCM Agreement, or acted inconsistently with Article 11 of the DSU, when limiting its assessment of de facto specificity of the City of Wichita IRB subsidy programme to the period of time after the end of the United States' implementation period, and finding that the IRB programme is no longer specific within the meaning of Article 2.1(c) (claim by the European Union);

g. whether the Panel erred in its interpretation and application of Article 2.1(c) of the SCM Agreement, or acted inconsistently with Article 11 of the DSU, when finding that the subsidy provided by the State of South Carolina to Boeing through economic development bond (EDB) proceeds, used to fund Project Gemini facilities and infrastructure, is not specific within the meaning of Article 2.1(c) of the SCM Agreement (claim by the European Union);

h. whether the Panel erred in its application of Article 2.2 of the SCM Agreement, or acted inconsistently with Article 11 of the DSU, when finding that the subsidy provided by the State of South Carolina to Boeing through the MCIP job tax credits is not specific within the meaning of Article 2.2 of the SCM Agreement (claim by the European Union);

i. whether the Panel erred in the interpretation and application of Article 2.1(a) of the SCM Agreement in finding that the USDOD procurement contracts are specific within the meaning of that provision (conditional claim by the United States);

j. whether the Panel acted inconsistently with Article 11 of the DSU in finding that the subsidy provided by the State of South Carolina to Boeing through the EDB and Air Hub Bond proceeds conferred a benefit within the meaning of Article 1.1(b) of the SCM Agreement (conditional claim by the United States);

k. whether the Panel erred in the interpretation of Articles 5, 6.3, and 7.8 of the SCM Agreement in considering, in relation to significant price suppression, significant price depression, and significant lost sales, that a subsidized product can cause serious prejudice to another product only if the two products in question compete in the same market (claim by the European Union);

l. whether the Panel erred in the interpretation and application of Articles 5, 6.3, and 7.8 of the SCM Agreement, or acted inconsistently with Article 11 of the DSU, in its treatment of claims of continuing adverse effects from the original proceedings (claim by the European Union);

m. whether the Panel erred in the interpretation and application of Article 6.3(c) of the SCM Agreement, or acted inconsistently with Article 11 of the DSU, in finding that the European Union had not failed to make a prima facie case of significant price suppression with respect to the A330 LCA (conditional claim by the United States);

n. whether, in its assessment of adverse effects through a technology causal mechanism, the Panel erred in its application of Articles 5, 6.3, and 7.8 of the SCM Agreement, or acted inconsistently with Article 11 of the DSU, when finding that the European Union failed to demonstrate the existence of original subsidy technology effects and spill-over technology effects of the pre-2007 aeronautics R&D subsidies in the post-implementation period (claim by the European Union);

o. whether the Panel erred under Articles 5, 6.3, and 7.8 of the SCM Agreement in allegedly stating that, in order to find significant lost sales through a price causal mechanism, there must be no non-price factors that potentially contributed to Boeing having won those sales (claim by the European Union);

p. whether the Panel erred in the interpretation and application of Articles 5 and 6.3 of the SCM Agreement, or acted inconsistently with Article 11 of the DSU, in its assessment of the relative significance of the amount of the tied tax subsidies when reaching its findings that the tied tax subsidies cause serious prejudice in the single‑aisle LCA market in the post‑implementation period (claim by the United States); and

q. whether the Panel erred in the interpretation and application of Articles 5 and 6.3 of the SCM Agreement, or acted inconsistently with Article 11 of the DSU, by requiring that the European Union demonstrate that the untied subsidies actually altered Boeing's pricing behaviour (claim by the European Union).

5 Analysis of the Appellate Body

5.1 United States' claim relating to the Panel's terms of reference

5.1.
The United States requests us to reverse the Panel's finding that its terms of reference include the European Union's claims relating to the pre-2007 USDOD procurement contracts.76 The United States contends that the Panel erred in allowing the European Union to reassert in these compliance proceedings its claims that the USDOD procurement contracts involved financial contributions that confer a benefit.77 The United States argues that these claims had been rejected in the original proceedings and that they cannot be relitigated in these compliance proceedings.78 The European Union requests us to uphold the Panel's finding that its claims relating to the USDOD procurement contracts are within the scope of the compliance proceedings.79 The European Union contends that, because the Appellate Body declared moot the original panel's finding that the USDOD procurement contracts were not financial contributions, there were no recommendations or rulings relating to the USDOD procurement contracts that the European Union would be relitigating.80

5.1.1 The Panel's findings

5.2.
Before the Panel, the United States requested a ruling that the European Union's claims relating to the USDOD procurement contracts, which had also been at issue in the original proceedings, fell outside the scope of these compliance proceedings.81 Noting that there was no finding of WTO‑inconsistency with respect to these measures at the conclusion of the original proceedings82, the United States claimed that this was because the European Union had specifically requested that the Appellate Body not complete the legal analysis in the event that it found fault with the original panel's legal interpretation.83
5.3.
In response, the European Union argued that in the original proceedings it had pursued the matter before the Appellate Body to the greatest extent possible.84 In particular, it had appealed the legal findings on which the panel had based its conclusion that the USDOD procurement contracts were not subsidies.85 The European Union explained that the Appellate Body had declared "moot and without legal effect" the original panel's interpretation that transactions properly characterized as purchases of services are excluded from Article 1.1(a)(1) of the SCM Agreement, and the panel's finding that the USDOD procurement contracts were properly characterized as purchases of services and were not financial contributions.86 However, given the lack of factual findings and uncontested facts related to the questions of benefit and adverse effects, it would have been impossible for the Appellate Body to complete the legal analysis of whether the USDOD procurement contracts constituted specific subsidies that cause adverse effects.87
5.4.
The Panel began by noting that complaining parties had been permitted to reassert claims in compliance proceedings against aspects of measures that were unchanged from those unsuccessfully challenged in the original proceedings, provided that the finality of the recommendations and rulings of the DSB was not compromised, in particular where: (i) the original panel had exercised judicial economy with respect to one challenged aspect of an original measure, that aspect had become an integral part of the measure taken to comply, and the challenge was to that same aspect of the measure taken to comply88; and (ii) in original proceedings the Appellate Body had reversed a finding by the panel, but had subsequently been unable to complete the legal analysis due to insufficient factual findings or undisputed facts on the panel record.89
5.5.
The Panel then reviewed how the panel and the Appellate Body in the original proceedings had dealt with the European Union's claims relating to the USDOD procurement contracts. The Panel noted the original panel's findings that work performed by Boeing for the USDOD under the USDOD procurement contracts was properly characterized as a "purchase of services"; transactions characterized as purchases of services are excluded from the scope of Article 1.1(a)(1)(i) of the SCM Agreement, and therefore the USDOD procurement contracts did not involve financial contributions within the meaning of that provision.90
5.6.
The Panel further noted that in the original proceedings the European Union had appealed the panel's interpretation of Article 1.1(a)(1) of the SCM Agreement, in particular the panel's finding that transactions properly characterized as purchases of services are excluded from the scope of Article 1.1(a)(1) of the SCM Agreement91, and that the European Union had not appealed the application of the original panel's interpretation of Article 1.1(a)(1) to any specific measures.92 Moreover, the Panel noted the European Union's position that the Appellate Body's reversal of the panel's legal interpretation had implications for the panel's finding regarding the USDOD procurement contracts, and that the European Union considered itself entitled to request the Appellate Body to complete the legal analysis concerning these contracts, even though the European Union ultimately elected not to do so on the grounds that there were insufficient factual findings by the panel or undisputed facts.93
5.7.
Ultimately, the Panel concluded that, because the original panel had ended its analysis at the stage of financial contribution, it would have been impossible for the Appellate Body in the original proceedings to complete the legal analysis of benefit and specificity regarding the USDOD procurement contracts.94 In these circumstances, the Panel held that consideration of the USDOD procurement contracts in these compliance proceedings should not be precluded only because the European Union had not requested completion of the legal analysis in the original proceedings.95 The Panel also pointed to the time and resources that had been expended in this dispute, as well as to the aim of dispute settlement, as expressed in Article 3.7 of the DSU, to secure a positive resolution to a dispute.96 On this basis, the Panel found that by reasserting claims with respect to the USDOD procurement contracts the European Union would not be "'unfairly' getting a second chance" to make a case that it failed to make in the original proceedings, and the Panel thus concluded that the European Union's claims relating to the USDOD procurement contracts fell within the scope of these compliance proceedings.97

5.1.2 Claims and arguments on appeal

5.8.
The United States requests us to reverse the Panel's finding that its terms of reference included the European Union's claims that the USDOD procurement contracts were financial contributions that confer a benefit.98 First, the United States contends that the Panel erred in allowing the European Union to reassert in these compliance proceedings claims regarding the USDOD procurement contracts that had been rejected in the original proceedings.99 While acknowledging "exceptions" to the principle that a party may not "relitigate" a claim on which it did not prevail in original proceedings, the United States asserts that such exceptions do not apply in these compliance proceedings.100 The United States asserts that the European Union did not appeal in the original proceedings whether the USDOD procurement contracts were purchases of services or whether they conferred a benefit.101 Accordingly, the United States asserts that the European Union decided to "leave in place" the original panel's finding that the USDOD procurement contracts were purchases of services and to "leave unanswered" the question of whether they conferred a benefit.102 For the United States, the failure to achieve a definitive resolution of the issue in the original proceedings must be "laid at the feet" of the European Union, and therefore the European Union is not entitled to pursue in these compliance proceedings a claim that the USDOD procurement contracts were not purchases of services that conferred a benefit.103
5.9.
Second, the United States contends that the Panel erred in finding that the European Union could pursue in these compliance proceedings its claim that the USDOD procurement contracts confer a benefit.104 In particular, the United States alleges that the Panel erred in attributing significance to the fact that the original panel had not analysed whether the USDOD procurement contracts conferred a benefit or caused adverse effects, and in finding that "it would have been impossible for the Appellate Body to complete the analysis regarding the DOD procurement contracts."105 For the United States, the Appellate Body did not consider whether it could complete the legal analysis in the original dispute, because the European Union had explicitly stated that it was not seeking completion of the legal analysis.106 For the United States, this is what bars the European Union from including claims relating to the USDOD procurement contracts in these compliance proceedings.107
5.10.
Finally, the United States maintains that the Panel's reference to the "time and resources" devoted to an issue in litigation and to the aim of the dispute settlement system is "legally irrelevant" to whether the European Union's claims against the USDOD procurement contracts fell within the Panel's terms of reference.108 For the United States, these considerations should have no bearing on the determination of the scope of compliance proceedings pursuant to Article 21.5 of the DSU.
5.11.
In response, the European Union requests us to uphold the Panel's finding that the USDOD procurement contracts are within the scope of the compliance proceedings.109 First, in response to the United States' argument that the European Union should not be permitted to relitigate its claims relating to the USDOD procurement contracts, the European Union contends that, because the Appellate Body had declared moot the original panel's finding that the USDOD procurement contracts were not financial contributions, there were no recommendations or rulings in the original case relating to the USDOD procurement contracts that the European Union would be relitigating.110 Moreover, the European Union argues that the Panel was correct in considering that the Appellate Body has permitted complaining parties in compliance proceedings to reassert claims against aspects of measures where such claims were "unsuccessfully asserted" in the original proceedings in situations where the finality of the recommendations and rulings of the DSB would not thereby be compromised.111
5.12.
Second, the European Union maintains that its decision not to request the Appellate Body in the original proceedings to complete the legal analysis does not preclude the European Union from demonstrating that the USDOD procurement contracts confer a "benefit" to Boeing in the current compliance proceedings.112 The European Union points out that, because the original panel did not evaluate whether the USDOD procurement contracts conferred a benefit, there were no factual findings or uncontested facts related to these contracts with which the Appellate Body in the original proceedings could complete the legal analysis on "benefit". The European Union further stresses that, as the Panel correctly understood, the European Union cannot be penalised for refraining from asking the Appellate Body to do something that falls outside of the Appellate Body's competence.113 The European Union explains that the Appellate Body can complete legal analyses "only if the factual findings of the panel, or the undisputed facts in the panel record" provide a sufficient basis for the Appellate Body to do so.114 The European Union further contends that, because the Appellate Body may complete the analysis regardless of whether a party requests it or objects to it, the question of whether the European Union requested the Appellate Body to complete the legal analysis is not relevant for determining whether the European Union's claims are within the scope of these compliance proceedings.115
5.13.
Finally, the European Union agrees with the Panel's reasoning that the efficiency and effectiveness of the dispute settlement process are relevant contextual considerations in evaluating the scope of compliance proceedings under Article 21.5 of the DSU.116 In this regard, according to the European Union, the Panel properly considered relevant that the aim of the dispute settlement mechanism is to secure a positive solution to a dispute.117

5.1.3 Whether the Panel erred in finding that claims relating to the USDOD procurement contracts were within the scope of these compliance proceedings

5.14.
We now turn to assess whether the Panel erred in finding that claims relating to the USDOD procurement contracts were within the scope of these compliance proceedings. We begin by addressing the question of when a Member may reassert in compliance proceedings, pursuant to Article 21.5 of the DSU, claims that were not resolved on the merits in original proceedings. Thereafter we review the Panel's analysis of whether the European Union's claims relating to the USDOD procurement contracts fell within the scope of these compliance proceedings.
5.15.
At the outset, we note that the first sentence of Article 21.5 of the DSU provides:

Where there is disagreement as to the existence or consistency with a covered agreement of measures taken to comply with the recommendations and rulings such dispute shall be decided through recourse to these dispute settlement procedures, including wherever possible resort to the original panel.

5.16.
Article 21.5 provides the basis for disputes concerning Members' compliance with recommendations and rulings of the DSB. Both original disputes and compliance disputes consist of a matter referred to the DSB, which in turn comprises two elements: (i) the specific measures at issue; and (ii) the legal basis of the complaint (that is, the claims).118 In defining the scope of compliance proceedings, the Appellate Body has consistently distinguished between these two elements, and it has found certain limitations, both regarding the measures that can be challenged in compliance proceedings and the claims that can be raised in such proceedings.
5.17.
In the present case, the participants' disagreement relates to limitations on the claims that can be raised in Article 21.5 proceedings. The participants disagree as to whether claims relating to the USDOD procurement contracts fall within the scope of these compliance proceedings. With respect to limitations regarding claims that can be pursued in compliance proceedings pursuant to Article 21.5, the Appellate Body has distinguished between new claims asserted for the first time in compliance proceedings and claims pursued in original proceedings and reasserted in compliance proceedings.
5.18.
First, with respect to new claims, ordinarily, a complainant is not allowed to raise claims in Article 21.5 proceedings that it could have pursued in original proceedings, but did not.119 However, this is not so for new claims against a measure taken to comply when such measure "incorporates components of the original measure that are unchanged, but are not separable from other aspects of the measure taken to comply".120 Therefore, the possibility to challenge an element of the measure at issue for the first time in compliance proceedings, even if that element may not have changed, hinges on the "critical question" of whether such an element forms "an integral part of the measure taken to comply".121
5.19.
Second, concerning limitations on claims pursued in original proceedings and reasserted in compliance proceedings, we refer to the title of Article 21 of the DSU, which suggests that Article 21.5 proceedings are part of the process of "Surveillance of Implementation of Recommendations and Rulings" of the DSB, and to the fact that Article 17.14 of the DSU provides that adopted Appellate Body reports "shall be … unconditionally accepted by the parties to the dispute".122 In this regard we also note that Article 3.3 of the DSU states that the "prompt settlement" of disputes "is essential to the effective functioning of the WTO".123 These considerations support the view that compliance proceedings cannot be used to "re-open" issues decided on the merits in the original proceedings, because that would allow a party in Article 21.5 proceedings a "second chance" to reargue a claim that has been decided in an adopted report.124
5.20.
The Appellate Body has treated differently, however, cases in which claims against aspects of a measure were not decided on the merits in the original proceedings, because such claims are not covered by the recommendations and rulings of the DSB.125 Accordingly, the Appellate Body has entertained in compliance proceedings certain claims that had been raised in original proceedings but on which no ruling on the meritsof the claims had been rendered. One example is where the Appellate Body has reversed panel findings but has not been able to complete the legal analysis.126 Similarly, the Appellate Body has permitted claims to be reasserted in compliance proceedings when the exercise of judicial economy has caused a claim to remain unresolved in the original proceedings without a decision on the merits having been rendered.127
5.21.
In sum, compliance proceedings cannot be used to "re-open" issues that were decided on the merits in the original proceedings.128 But claims against aspects of a measure that are not decided on the merits in the original proceedings are not covered by recommendations and rulings of the DSB and thus can be reasserted in compliance proceedings.129
5.22.
With these considerations in mind, we now turn to review whether the Panel erred in finding that claims concerning the USDOD procurement contracts fell within its terms of reference. The United States asserts that these claims fall outside the Panel's terms of reference, because the European Union had already pursued these claims in the original proceedings.
5.23.
The Panel explained that whether the European Union may reassert claims relating to the USDOD procurement contracts depended on the way in which these claims had been resolved in the original proceedings. More specifically, the Panel found that it had to consider whether the original measure had been "unsuccessfully" challenged on the merits in the original proceedings, such that it could not be raised again without compromising the finality of the recommendations and rulings of the DSB.130
5.24.
We consider that the approach articulated by the Panel comports with the approach we have outlined above. The Panel was correct in considering whether the original measure had been "unsuccessfully" challenged on the merits in the original proceedings, such that it could not be raised again without compromising the finality of the recommendations and rulings of the DSB.131 We also note that both the European Union and the United States agree with the Panel's reasoning that, in principle, a complainant is not precluded from reasserting a claim in compliance proceedings when there has been no decision on the merits of that claim in the original proceedings.132
5.25.
The United States asserts, however, that in the particular circumstances of this case, the failure to achieve a definitive resolution in the original proceedings must be "laid at the feet" of the European Union and that the European Union must therefore be barred from pursuing claims relating to the USDOD procurement contracts in these compliance proceedings.133 For the United States, this is so because the European Union requested in the original proceedings that the Appellate Body not complete the legal analysis with respect to its claims relating to the USDOD procurement contracts.
5.26.
We observe that the European Union's claims relating to the USDOD procurement contracts were pursued in the original proceedings. In this respect, we note the Panel's finding that these claims were before the Appellate Body in the original proceedings.134 The Panel further found that the original panel's analysis had been limited to the question of a "financial contribution" and that the original panel had made no findings with respect to the question of whether the USDOD procurement contracts conferred a benefit or caused adverse effects.135 Accordingly, these claims were not resolved on the merits, and we consider that the Panel was correct in relying on that fact in resolving the issue.
5.27.
We disagree with the United States' contention that the European Union must be barred from pursuing claims relating to the USDOD procurement contracts in these compliance proceedings because the failure to achieve a definitive resolution in the original proceedings must be "laid at the feet" of the European Union. We also disagree with the Panel's statement that the Appellate Body has been careful not to permit complaining parties to relitigate issues that were resolved adversely to them in original proceedings, except "where the failure to achieve a definitive resolution of a claim cannot reasonably … be laid at the feet of the complaining party".136 The Appellate Body has not relied on "fault" or the lack of it as a criterion to determine whether claims fall within the scope of Article 21.5 proceedings. Instead, the Appellate Body has focused on whether certain claims were or were not decided on the merits in the original proceedings and were thus covered by the recommendations and rulings of the DSB.137
5.28.
In keeping with this approach, whether the European Union requested that the Appellate Body complete the legal analysis or whether the European Union requested that the Appellate Body not complete the legal analysis is not determinative for whether claims relating to the USDOD procurement contracts fell within the Panel's terms of reference. While it is true that in the original proceedings in the present dispute the Appellate Body referred to the absence of a request that it complete the legal analysis138, the Appellate Body has completed the legal analysis regardless of the fact that neither participant had specifically requested it to do so.139
5.29.
In the context of the present case, we also note the Panel's finding that it would have been impossible for the Appellate Body in the original proceedings to complete the legal analysis relating to claims concerning the USDOD procurement contracts.140 Thus, even if the European Union had requested completion of the legal analysis in the original proceedings, absent factual findings by the original panel or undisputed facts on the record with respect to benefit and specificity, the Appellate Body would not have been in a position to complete the legal analysis.
5.30.
Accordingly, the Panel was correct not to attribute, in the particular circumstances of this dispute, significance to the question of whether, or to what extent, the European Union bore responsibility for the lack of resolution of its claims relating to the USDOD procurement contracts. We consider that instead the Panel correctly focused on whether the European Union's claims relating to the USDOD procurement contracts had been resolved on the merits in the original proceedings.
5.31.
Finally, we note that the United States takes issue with the Panel's reliance on considerations relating to the time and resources devoted to an issue in litigation and the aim of the dispute settlement system.141 The United States argues that such considerations are "legally irrelevant" to assess whether the European Union's claims against the USDOD procurement contracts fell within the Panel's terms of reference.142
5.32.
In this respect, we note that the Panel concluded in paragraph 7,128 of its Report that, in the circumstances of this case, it did not consider the European Union's failure to request completion of the legal analysis in the original proceedings to preclude its consideration of the European Union's claims relating to the USDOD procurement contracts. The United States is taking issue with the Panel's statement in the next paragraph, introduced by the word "{a}dditionally".143 The structure of the Panel's analysis suggests that this "additional" consideration is not part of the reasoning its conclusion was based on. It is an afterthought by the Panel. As such it does not require further consideration in this appellate proceeding.

5.1.4 Conclusion

5.33.
In sum, the question of whether a claim falls within the scope of Article 21.5 proceedings is to be decided based on whether the claim has been resolved on the merits in the original proceedings and was thus covered by the recommendations and rulings of the DSB. A party's "fault" for the non‑resolution of a claim, or the lack of such fault, is not determinative of whether a claim can be reasserted in compliance proceedings. Accordingly, we find that the Panel did not err in admitting the European Union's claims relating to the pre-2007 USDOD procurement contracts in these compliance proceedings.
5.34.
We therefore uphold the Panel's finding, in paragraphs 7,131 and 11.5.a.ii of the Panel Report, that the European Union's claims relating to the pre-2007 USDOD procurement contracts were within its terms of reference.

5.2 European Union's claims relating to the Panel's findings concerning the USDOD procurement contracts

5.35.
The European Union requests us to reverse the Panel's finding that the payments and access to USDOD facilities, equipment, and employees provided to Boeing through the USDOD RDT&E programme, and in particular through USDOD procurement contracts, are not subsidies within the meaning of Article 1.1 of the SCM Agreement.144 The European Union alleges that the Panel failed to make an objective assessment of the matter, including the facts, in violation of Article 11 of the DSU both with respect to its findings on financial contribution under Article 1.1(a)(1) of the SCM Agreement and on benefit under Article 1.1(b) of that Agreement.145
5.36.
Specifically, the European Union contends that the Panel failed to make an objective assessment of the matter in characterizing the payments and access to USDOD facilities, equipment, and employees provided to Boeing through the USDOD procurement contracts as "purchases of services" for purposes of Article 1.1(a)(1) of the SCM Agreement. In the European Union's view, had the Panel properly assessed the evidence before it, it would have found that the USDOD procurement contracts establish a joint-venture-type relationship in which USDOD provides financial contributions to Boeing akin to equity infusions, and in which USDOD provides Boeing with goods and services.146 According to the European Union, the Panel failed to engage with the European Union's arguments and evidence, and failed to provide reasoned and adequate explanations and coherent reasoning in support of its findings.147 The European Union further argues that, in assessing whether the USDOD procurement contracts confer a benefit on Boeing within the meaning of Article 1.1(b) of the SCM Agreement, the Panel "built upon the same errors" as in its analysis relating to financial contribution under Article 1.1(a)(1) of the SCM Agreement.148
5.37.
The United States responds that the Panel analysed the USDOD procurement contracts, including their texts, the descriptions of the programme elements funding the contracts, and other evidence of how USDOD administered the contracts.149 The United States considers that the European Union has not established a lack of an objective assessment by the Panel. Instead, according to the United States, the European Union disagrees with the weight assigned by the Panel to certain evidence.150 In addition, in the event that we reverse the Panel's conclusion and complete the legal analysis and find that the payments and access provided to Boeing under the USDOD procurement contracts constitute financial contributions and confer a benefit, the United States conditionally appeals the Panel's findings relating to the specificity of the post-2006 NASA procurement contracts, cooperative instruments, and Space Act Agreements; the post-2006 USDOD assistance instruments; and the FAA-Boeing CLEEN Agreement.151
5.38.
We begin by setting out the relevant aspects of the measures at issue and describing the approach of the panel and the Appellate Body in the original proceedings. We then assess whether in these compliance proceedings the Panel failed to make an objective assessment of the matter under Article 11 of the DSU in its analysis of whether the USDOD procurement contracts provide a financial contribution within the meaning of Article 1.1(a)(1) of the SCM Agreement. Finally, we turn to the European Union's claim under Article 11 of the DSU relating to benefit and the United States' conditional appeal relating to specificity.
5.39.
USDOD commissions Boeing to perform certain kinds of R&D work funded through RDT&E programme elements152 by means of specific legal instruments, namely "contracts", "cooperative agreements", "grants", and "technology investment agreements".153 Both in the original proceedings and in the compliance proceedings, the latter three legal instruments (cooperative agreements, grants, and technology investment agreements) were referred to collectively as the "DOD assistance instruments". The Panel distinguished these instruments from the category of "contracts"154, explaining that US procurement laws and regulations require that specific legal instruments be used in particular defined situations.155
5.40.
Assistance instruments are used to provide "assistance", defined in the USDOD Grant and Agreement Regulations as the "transfer of a thing of value to a recipient to carry out a public purpose of support or stimulation authorized by a law of the United States".156 The recipient is required to contribute its own funds to the R&D on a cost-sharing basis. Moreover, at least as concerns cooperative agreements, the US Government is required to have substantial involvement in the work performed, including through collaboration, participation, or intervention.157 In contrast, a procurement contract is a legal instrument that "reflects a relationship between the Federal Government and a State, a local government, or other recipient when the principal purpose of the instrument is to acquire property or services for the direct benefit or use of the Federal Government".158 A procurement contract, rather than an assistance instrument, should be used in all cases where a fee or profit is to be paid or the instrument is to be used to carry out a programme where a fee or profit is necessary to achieve programme objectives.159
5.41.
The R&D commissioned by USDOD through the RDT&E programme falls into two general categories.160 The first one consists of R&D commissioned under programme elements that fund basic research, applied research, and advanced technology developments to meet a variety of current and future military needs (science and technology (S&T) or "general aircraft" programme elements).161 The second comprises R&D commissioned under programme elements that fund development of technologies for specific new weapon systems or components (systems acquisition or "military aircraft" programme elements).162
5.42.
Before the original panel, the European Communities claimed that payments and access to USDOD facilities provided to Boeing under the 23 original RDT&E programme elements to conduct research into "dual-use" technologies163, in the sense of technologies having both military and civil applications164, were specific subsidies that caused adverse effects to the interests of the European Communities.165 Furthermore, the European Communities challenged the payments and access to NASA facilities, equipment, and employees that NASA provided to Boeing through R&D contracts and agreements entered into with Boeing under a number of aeronautics R&D programmes.166
5.43.
The original panel concluded that transactions properly characterized as purchases of services are excluded from the scope of Article 1.1(a)(1)(i) of the SCM Agreement.167 The panel then considered that whether the payments and access provided to Boeing could be properly characterized as purchases of services depended on whether the R&D that Boeing was required to conduct was principally for its own benefit and use, or whether it was principally for the benefit and use of the US Government (or unrelated third parties).168 Ultimately, the panel found that the work that Boeing performed under the USDOD procurement contracts was principally for the benefit of USDOD, it was therefore to be characterized as a "purchase of services", and the payments and access to facilities provided to Boeing under these contracts were therefore not financial contributions within the meaning of Article 1.1(a)(1).169 The panel also found that the work Boeing performed under the USDOD assistance instruments and the NASA aeronautics R&D measures was principally for the benefit of Boeing, and, accordingly, that the payments and access provided to Boeing under these instruments constituted financial contributions pursuant to Article 1.1(a)(1)(i) and (iii).170
5.44.
On appeal, the Appellate Body found fault with the original panel's analytical approach of interpreting Article 1.1(a)(1) of the SCM Agreement based on the assumption that the NASA procurement contracts and the USDOD assistance instruments are purchases of services, and only thereafter examining the proper characterization of these measures.171 The Appellate Body observed that, in assessing the applicability of specific provisions of the covered agreements to a measure properly before it, a panel must "identify all relevant characteristics of the measure, and recognize which features are the most central to that measure itself, and which are to be accorded the most significance for purposes of characterizing the relevant {measure}".172 This will allow the panel to determine the discipline(s) to which the measure is subject under the covered agreements. The Appellate Body also noted that the original panel had not arrived at a definitive characterization of the NASA procurement contracts and the USDOD assistance instruments.173 Instead, the panel had arrived at the conclusion that the payments and other support are financial contributions by exclusion, proceeding mechanically from its conclusion that the NASA procurement contracts and the USDOD assistance instruments were not purchases of services.174 Furthermore, the Appellate Body observed that the European Communities had presented arguments that the payments under the contracts fall within the scope of Article 1.1(a)(1)(i) because they are grants, a category of financial contributions expressly mentioned in that provision. In this light, it was not clear to the Appellate Body why the original panel had started from the premise that it was required to determine whether purchases of services, a category that is not mentioned in that provision, are excluded from its scope.175 The Appellate Body pointed out that the original panel should first have examined relevant characteristics of the NASA procurement contracts and the USDOD assistance instruments, and then considered whether, in light of a proper interpretation of Article 1.1(a)(1), these measures fall within the scope of that provision.176
5.45.
Finally, the Appellate Body expressed concerns about the original panel's test for determining whether the measures could properly be characterized as purchases of services. For the Appellate Body, the legal basis of the original panel's test did not appear to be grounded in the terms of Article 1.1(a)(1) of the SCM Agreement. Moreover, the Appellate Body considered that requiring an inquiry into the degree to which either party (Boeing or the government/unrelated third parties) derives a disproportionate "benefit" from the transaction risked conflating the financial contribution and benefit elements of a subsidy analysis.177
5.46.
Regarding the characteristics of the NASA procurement contracts, the Appellate Body found that the transactions between Boeing and NASA comprise a number of interlinked elements and are collaborative in nature, and that these collaborative arrangements are akin to a species of joint venture.178 The Appellate Body explained that these transactions involve a provision of funds from NASA and a pooling of non-monetary resources (such as access to equipment, facilities, and employees) on the input side, while involving some sharing of the fruits of the research on the output side.179 Concerning the USDOD assistance instruments, the Appellate Body held that the transactions under these instruments, similar to those under the NASA procurement contracts, are composite and collaborative in nature, and that these features resemble a joint venture arrangement.180 The Appellate Body concluded that the transactions under the NASA procurement contracts and under the USDOD assistance instruments are akin to a species of joint venture.181
5.47.
In analysing the types of financial contributions covered by Article 1.1(a)(1) of the SCM Agreement, the Appellate Body recalled that the panel had interpreted the omission of the term "services" from the second sub‑clause of subparagraph (iii) as an indication that the drafters of the SCM Agreement did not intend measures constituting government purchases of services to be covered as financial contributions under Article 1.1(a)(1)(i).182 Since this interpretative issue was not relevant for the purpose of resolving the dispute before the Appellate Body, it declared moot the original panel's interpretation that "transactions properly characterized as purchases of services are excluded from the scope of Article 1.1(a)(1)(i) of the SCM Agreement."183 The Appellate Body also declared moot the original panel's finding that the USDOD procurement contracts are properly characterized as "purchases of services" and thus are not financial contributions under Article 1.1(a)(1).184 The Appellate Body did not complete the legal analysis regarding the USDOD procurement contracts.
5.48.
As to whether the NASA procurement contracts and the USDOD assistance instruments fall under one of the subparagraphs of Article 1.1(a)(1) of the SCM Agreement, the Appellate Body observed that these joint venture arrangements between NASA/USDOD and Boeing have characteristics analogous to equity infusions, one of the examples of financial contributions included in Article 1.1(a)(1)(i).185 According to the Appellate Body, this commonality indicated that the NASA procurement contracts and the USDOD assistance instruments fall within the concept of "direct transfers of funds" in Article 1.1(a)(1)(i). Thus, the Appellate Body held that payments provided by NASA and USDOD to Boeing to undertake the research constitute a "direct transfer of funds" within the meaning of Article 1.1(a)(1)(i).186 In addition, the Appellate Body found that, because Boeing was given access to NASA facilities, equipment, and employees and to USDOD facilities, these contributions constitute "the provision of goods or services" within the meaning of Article 1.1(a)(1)(iii).187

5.2.1 The Panel's findings under Article 1.1(a)(1) of the SCM Agreement

5.49.
The European Union's claim that the Panel failed to make an objective assessment of the matter in its financial contribution analysis under Article 1.1(a)(1) of the SCM Agreement is focused on certain arguments and evidence, which, in the European Union's view, the Panel disregarded or failed to sufficiently engage with. Specifically, the European Union argues that the Panel failed to engage with its evidence and arguments related to: (i) Boeing's contribution of its background IP, including that resulting from non-reimbursed independent research and development (IR&D) spending, to the joint venture between USDOD and Boeing; (ii) Boeing's ability to share in the rewards of the R&D conducted under the USDOD procurement contracts; and (iii) the nature and purpose of the USDOD procurement contracts.188
5.50.
At the outset of our analysis, we note that in assessing whether the USDOD procurement contracts constitute financial contributions, the Panel examined "the relevant characteristics of the DOD procurement contracts with a view to determining whether, like the NASA procurement contracts and DOD assistance instruments before the Appellate Body {in the original proceedings}, the relationship between DOD and Boeing in the particular context is one of partnership, involving collaboration in pursuit of a common goal for the mutual benefit of DOD and Boeing".189 Ultimately, the Panel found itself "unable to characterize the DOD procurement contracts in a similar manner" to the way in which the Appellate Body characterized the NASA procurement contracts and the USDOD assistance instruments, namely as joint venture arrangements between NASA/USDOD and Boeing with characteristics analogous to equity infusions.190
5.51.
We note that the Panel's analysis was focused on examining the features of the USDOD procurement contracts by reference to the characteristics of instruments found to constitute financial contributions in the original proceedings rather than by reference to the legal standard for assessing the existence of financial contribution in Article 1.1(a)(1)(i) and (iii). In this respect, we recall the Appellate Body's observation that a panel's analysis of the relevant characteristics of the measure should be undertaken for the purpose of properly determining the discipline(s) to which the measure is subject under the covered agreements.191 In our view, therefore, the examination of the relevant characteristics of a measure and the consideration of whether a measure with such characteristics falls within the scope of Article 1.1(a)(1) must form part of one holistic assessment, in light of the aim to determine properly the applicability of the relevant provisions of the covered agreements with respect to that measure. Thus, the Panel in this case was tasked with analysing the key features of the USDOD procurement contracts from the perspective of the elements set out in both subparagraphs (i) and (iii) of Article 1.1(a)(1), in order to ascertain under which category of financial contributions these measures fell, or whether they fell outside of the scope of Article 1.1(a)(1) altogether.
5.52.
We recognize that the focus of the Panel's analysis was shaped by the parties' arguments192 and the approach of the Appellate Body in the original proceedings.193 In its analysis of the relevant characteristics of the NASA procurement contracts and the USDOD assistance instruments in the original proceedings, the Appellate Body relied on the characteristics of the categories of measures listed in the subparagraphs of Article 1.1(a)(1), in particular (i) and (iii).194 While it was not inappropriate for the Panel to begin its analysis by considering the relevant characteristics of the USDOD procurement contracts from the perspective of whether they resemble collaborative arrangements, in a second step the Panel should have addressed expressly the legal question of whether measures with characteristics such as the USDOD procurement contracts fall within the scope of one of the categories of Article 1.1(a)(1) of the SCM Agreement.
5.53.
We further note that, having found that the USDOD procurement contracts are most appropriately characterized as purchases of services, the Panel found it unnecessary to address the interpretative issue of whether such transactions fall within the scope of Article 1.1(a)(1) of the SCM Agreement, given its ultimate conclusion that the European Union had failed to establish that the USDOD procurement contracts confer a benefit within the meaning of Article 1.1(b).195 We observe in this regard that, pursuant to Article 1.1, a subsidy shall be deemed to exist if there is a financial contribution and "a benefit is thereby conferred."196 Furthermore, whether a "benefit" has been conferred is determined by reference to the trade-distorting potential of the "financial contribution" and can be identified by assessing whether the recipient has received a "financial contribution" on terms more favourable than those available in the market.197 Thus, a finding with respect to the specific type of financial contribution under Article 1.1(a)(1) may be necessary in order to conduct a proper analysis of benefit as it relates to that category of financial contribution.198
5.54.
With these considerations in mind, we now turn to assess the question of whether the Panel failed to make an objective assessment of the matter before it under Article 11 of the DSU by characterizing the payments and access to USDOD facilities, equipment, and employees under the USDOD procurement contracts as "purchases of services".

5.2.1.1 The Panel's analysis regarding Boeing's contribution to a joint venture between USDOD and Boeing

5.55.
The European Union takes issue with the Panel's finding that the privately funded and non‑reimbursed IR&D expenditures incurred by Boeing in developing its background IP cannot be considered a contribution of "financial resources" to a "joint undertaking" with USDOD.199 According to the European Union, "{t}he Panel correctly noted that these expenditures are internal costs Boeing incurs in order to maintain the technological competence and expertise necessary to perform the obligations in the R&D procurement contracts."200 However, the Panel then concluded that "in making use of its own intellectual property and know-how in order to carry out the R&D work for DOD, Boeing can{not} be said to be 'contributing' its intellectual property to a joint venture with DOD."201 The European Union considers that, in arriving at this conclusion, the Panel failed to engage with relevant evidence, insofar as the procurement contracts "provide for partial reimbursement of IR&D expenditures by DOD"202, and "Boeing's civil technologies (funded with Boeing's own resources) may have potential military applications, such that civil to military flows can benefit DOD as well."203 Thus, "the non-reimbursed portion of Boeing's DOD-related IR&D expenditures should be seen as Boeing's contribution to the joint venture."204
5.56.
The United States responds that the European Union's argument is contrary to the original panel's finding that "U.S. law requires Boeing to allocate a share of the costs of any IR&D{} projects benefiting both its military segment (IDS) and its commercial segment (Boeing's LCA division) to each of those segments on a 'pro rata' basis."205 Thus, "to the extent that any Boeing IR&D activity is 'DoD-related,' Boeing allocates it to the relevant procurement contracts, and DoD reimburses Boeing's expenditures for that activity through the contracts."206 The United States also alleges that the European Union "cite{s} no evidence that Boeing 'contributed' IR&D expenditures to its work under DoD procurement contracts".207
5.57.
We note that, before the Panel, the European Union clarified that it does not argue that Boeing's non‑reimbursed, internal IR&D expenditures are a contribution of financial resources under the USDOD procurement contracts in the same way as Boeing's contribution of financial resources under the USDOD assistance instruments.208 Rather, according to the European Union, in the case of the USDOD procurement contracts, there is a time lag between when Boeing funds its own IR&D and when it uses the background IP created from that IR&D as its "contribution" to the "joint undertaking" pursuant to a particular procurement contract.209 We therefore understand the European Union to argue that Boeing contributes to a joint venture with USDOD its own general professional expertise in the form of background IP that Boeing has accumulated over time, either in the context of research pursuant to governmental contracts, or independently through its own internal R&D expenditures.210
5.58.
Turning to the European Union's contention that the Panel failed to engage with relevant evidence, namely with the fact that USDOD only partially reimburses Boeing for its independently conducted R&D, we recall the Appellate Body's observation in the original proceedings that one feature of the NASA procurement contracts and the USDOD assistance instruments that pointed to their collaborative nature was that both parties commit resources to the research project.211 Specifically, under the NASA procurement contracts, both NASA and Boeing contributed their facilities, equipment, and employees, and, under the USDOD assistance instruments, both USDOD and Boeing contributed financial resources to the research project.212 As we understand it, in the European Union's view, to the extent that Boeing is only partially reimbursed for its own background IP under the USDOD procurement contracts, the non‑reimbursed investments constitute Boeing's contribution to a collaborative project that would be more akin to a species of joint venture, and thus relevant to an analysis of a financial contribution under subparagraph (i) of Article 1.1(a)(1) of the SCM Agreement.
5.59.
In this regard, the Panel observed that the non-reimbursed IR&D expenditures referred to by the European Union are "internal costs that contractors like Boeing incur in order to maintain the technological competence and expertise that enable them to provide the R&D services for which they are contracted".213 The Panel reasoned that "{t}hese expenditures are not specified in the procurement contracts as contributions to be made by Boeing" and did not consider that "Boeing's privately funded IR&D expenditures can be considered a contribution of 'financial resources' to a 'joint undertaking' with DOD", or "that, in making use of its own intellectual property and know‑how in order to carry out the R&D work for DOD, Boeing can be said to be 'contributing' its intellectual property to a joint venture with DOD".214
5.60.
As we see it, rather than failing to engage with relevant evidence, the Panel disagreed with the European Union's argument. In particular, the Panel appears to have viewed Boeing's use of its own background IP and know-how in the context of the USDOD procurement contracts as an element not characteristic of a collaborative arrangement. It is in this light that we understand the Panel's statements that the IR&D expenditures are not specified in the procurement contracts as contributions to be made by Boeing, and that Boeing cannot be said to be "contributing" financial resources or IP to a joint venture with USDOD.215 We further note that Boeing's use of privately funded IR&D is qualitatively different from Boeing's participation under the USDOD assistance instruments, where the contracts themselves "commit{ted} Boeing to contribute financial resources", and therefore provided for "joint funding of the research projects".216 The USDOD assistance instruments are also different, insofar as in that case both parties commit non‑monetary resources (facilities, equipment, and employees) to the research project.217 Therefore, we do not see that the Panel failed to engage with relevant evidence.
5.61.
The European Union also argues that the Panel failed to provide "reasoned and adequate explanations" to support its conclusions that Boeing's contribution of IR&D expenditures used to develop background IP does not constitute a contribution of resources to a collaborative project akin to a species of joint venture.218 Further, the European Union submits that "the Panel failed to explain why Boeing's making use of its own background IP … in the course of performing the research funded under the DOD procurement contracts does not constitute a contribution of resources by Boeing to a joint venture."219 As we see it, the Panel did explain its rationale when stating that "{t}hese expenditures are internal costs that contractors like Boeing incur in order to maintain the technological competence and expertise that enable them to provide the R&D services for which they are contracted."220 In other words, as the United States points out, the Panel viewed Boeing's background IP and know-how as "threshold qualifications" required in order for a company to be able to engage competently in aeronautics research for USDOD, and not as something that Boeing "conveys as part of the effort" under the procurement contracts themselves.221 We are therefore not convinced that the Panel failed to explain sufficiently its rationale for rejecting the European Union's argument.
5.62.
In view of the above, we do not consider that the Panel failed to engage with relevant evidence, or failed to provide a reasoned and adequate explanation, in reaching its conclusions regarding the question of whether Boeing's non-reimbursed IR&D expenditures can be considered as a contribution to a collaborative arrangement with USDOD.

5.2.1.2 The Panel's analysis of whether Boeing shares with USDOD the rewards of the R&D it conducts under the USDOD procurement contracts

5.63.
The European Union submits that, in arriving at the conclusion that USDOD and Boeing cannot be said to share the fruits of the research under the USDOD procurement contracts, as they do under the NASA procurement contracts and the USDOD assistance instruments, the Panel failed to base its findings in evidence and failed to engage with the European Union's arguments and evidence that: (i) export controls, including the International Traffic in Arms Regulations (ITAR), have not prevented Boeing from using technologies developed under the USDOD procurement contracts for its own commercial purposes, and (ii) Boeing sells military aircraft to foreign governments.222
5.64.
The European Union's first line of argument concerns the Panel's conclusions on the question of whether export controls, including the ITAR, have prevented Boeing from using technologies developed under the USDOD procurement contracts for commercial purposes. The European Union points to a press report it provided to the Panel stating that Boeing has benefited from ITAR‑controlled data in designing the 787 by "recreat{ing}" that data.223 The European Union explains that this evidence confirms that "Boeing finds ways to utilize military technology for its LCA, regardless of ITAR controls" and "is able to benefit from critical know-how and technology derived from DOD-supported R&D".224 Moreover, the European Union relies on the conclusion of the original panel that the ITAR does not make it effectively impossible for Boeing to utilize the R&D performed under the USDOD R&D instruments towards LCA.225 Finally, the European Union submits that it "provided extensive evidence that patents arising from R&D performed pursuant to DOD procurement contracts have explicit applications to commercial aircraft (as Boeing, itself, explained in its own patent applications)" and that these registered patents are publicly available.226 For the European Union, "contrary to the Panel's findings, the evidence demonstrates that technologies developed by Boeing employees in the course of conducting R&D under the DOD procurement contracts, for which Boeing owns registered patents, are not subject to export controls or classification at all, such that Boeing (and only Boeing) is freely able to use these technologies for its LCA."227
5.65.
For its part, the United States contends that the Panel's conclusion that Boeing's ability to exploit commercially the results of research conducted under the USDOD procurement contracts is "restricted" or "limited" by US export controls and that the classification of national security information is consistent with the original panel's findings with respect to US export controls, since the Panel's conclusion "implicitly recogniz{es} that such exploitation is not completely impossible".228 According to the United States, "{i}t is, in fact, quite rare for Boeing's research under contract with DoD to result in a patentable invention", and the European Union's examples of situations in which the ITAR and classification rules did not preclude Boeing's public disclosure of the results of research under the USDOD procurement contracts are consistent with the Panel's conclusion that such use is quite restricted and limited.229
5.66.
We note that the European Union's argument relates to the Appellate Body's reasoning in the original proceedings that one feature of the NASA procurement contracts and the USDOD assistance instruments, which characterized them as collaborative arrangements, was that, from the perspective of the outputs, "the fruits of the research are shared" between Boeing and NASA/USDOD.230 This conclusion was drawn by the Appellate Body on the basis of the distribution of IP rights and rights to data between Boeing and NASA/USDOD, resulting from the research performed under those contracts and instruments, namely the fact that Boeing obtained title to its inventions and rights to data, and NASA/USDOD received a royalty-free government-use licence.231
5.67.
In these compliance proceedings, the Panel found that, although, by operation of US law, there is a "sharing" of IP rights resulting from Boeing's performance of R&D work under all US Government contracts, "the 'balance' of that sharing is substantially more in DOD's favour and less in Boeing's favour than under the DOD assistance instruments, or NASA procurement contracts."232 The Panel considered that "{t}his different 'balance' of allocation of intellectual property rights that results from the performance of work under a DOD procurement contract" also affected its assessment of whether USDOD and Boeing can be said to share in the "risks and rewards" of the commissioned R&D.233 Specifically, the Panel recognized that "Boeing's ownership of the patents to inventions made by its employees in the course of work under a DOD procurement contract does give Boeing the legal right to exploit the military technologies in question for commercial purposes" and that "some of the military technologies may also have potential civil applications."234 At the same time, the Panel considered that "Boeing's practical ability to exploit those technologies for civil applications {was} limited by legal restrictions on the use of information and technologies developed under the DOD procurement contracts outside the military context."235
5.68.
With regard to whether the Panel's conclusion is contradicted by the original panel's findings, we note the original panel's conclusion that the United States had failed to substantiate its assertion that the ITAR made it "effectively impossible for Boeing to utilize any of the R&D performed under DOD R&D contracts and agreements towards LCA".236 Specifically, while the original panel "accept{ed} the United States' assertions that the ITAR restrict Boeing's ability to use certain R&D performed for DOD towards its civil aircraft", it also found that the United States "ha{d} failed to explain how its assertions regarding the ITAR can be reconciled with the fact that some of the R&D funded by DOD – including R&D performed by Boeing under assistance instruments entered into under the ManTech and DUS&T Programs, which were subject to the ITAR – had the explicit objective of being applied towards civil aircraft".237
5.69.
The original panel's finding does not directly contradict the Panel's conclusion that "{a}lthough some of the military technologies may also have potential civil applications, Boeing's practical ability to exploit those technologies for civil applications is limited by legal restrictions on the use of information and technologies developed under the DOD procurement contracts outside the military context."238 Contrary to what the European Union argues, the Panel did not find that "export controls prevent Boeing from applying R&D conducted pursuant to DOD procurement contracts"239, but recognized that Boeing has some practical ability, albeit restricted, to use military technologies for civil purposes.
5.70.
Next, we turn to the two specific categories of arguments and evidence referred to by the European Union, relating to how Boeing has, in practice, benefited from ITAR-controlled data by re‑creating it for purposes of designing the 787, and to the examples of patents arising from R&D performed pursuant to the USDOD procurement contracts.240 We note that, in the context of its financial contribution analysis, the Panel stated that "Boeing's practical ability to exploit {the military technologies developed under the USDOD procurement contracts} for civil applications is limited by legal restrictions."241 The Panel did not provide a basis for this conclusion in its financial contribution assessment. Nor did the Panel refer in this regard to the evidence presented by the European Union in order to demonstrate that Boeing had made use of some ITAR‑controlled data and had patented technology developed pursuant to the USDOD procurement contracts. We observe that the Panel referred to the relevant section of its Report setting out the principal legal restrictions on the dissemination of military technologies and data, including the ITAR.242 However, this section does not address the question of how such legal restrictions apply in the context of either the USDOD procurement contracts, or the NASA procurement contracts and the USDOD assistance instruments.
5.71.
The Panel thus failed to engage in an analysis of the impact on Boeing of the legal restrictions on the use of military technologies on the basis of the European Union's evidence. Specifically, the Panel did not explain how the legal restrictions on the use of military technology under US law relate to the European Union's assertion that at least some part of the research under the USDOD procurement contracts has translated into USDOD‑funded patents.
5.72.
In support of its conclusion that Boeing's legal right to exploit military technologies developed under the USDOD procurement contracts for commercial purposes "is in practice restricted", the Panel also referred to its analysis of benefit.243 In this analysis, the Panel reiterated that "Boeing's practical ability to exploit any military technologies for commercial purposes outside the military context is circumscribed by U.S. legal restrictions on the use of military technologies and data."244 In that context, the Panel then explained what it considered to be the difference between the USDOD assistance instruments and the USDOD procurement contracts.245 The Panel reasoned that the "DOD assistance instruments by definition involve 'assistance' in the sense of a transfer of a thing of value to a recipient."246 The Panel therefore considered it "reasonable to assume that the nature of R&D undertaken in such a collaborative context would be expected by the parties to yield outcomes that Boeing would have the practical ability to commercially exploit".247 Otherwise, according to the Panel, "a commercial actor like Boeing would be unlikely to contribute to the costs of performing the R&D" and there would be no legal basis for the selection of "an assistance instrument as the appropriate instrument for the transaction with Boeing".248 In our view, this conclusion is based on the label given to the relevant legal instruments under municipal law rather than on a proper analysis of the characteristics of the instrument. However, such a label cannot be dispositive, and the analysis cannot be limited to consideration of the label.249
5.73.
The Panel further observed that "the fact that many of the assistance instruments were funded through program elements with explicitly dual-use objectives would tend to support this conclusion."250 We note, however, that only two of the RDT&E programme elements funding the USDOD assistance instruments challenged by the European Union had explicit dual-use objectives.251 Furthermore, the existence of explicit dual-use objectives in some of the USDOD assistance instruments, and not in others, was not among the relevant considerations taken into account by the Appellate Body in finding that these instruments constitute collaborative arrangements with characteristics analogous to equity infusions. Therefore, the fact that the USDOD procurement contracts do not fund research with explicit dual-use objectives does not determine the extent of limitations on Boeing's ability to exploit USDOD-funded research for civil applications.
5.74.
Finally, the Panel contrasted the USDOD assistance instruments with the USDOD procurement contracts, as follows:

DOD and Boeing engage with each other on a different footing in the context of the DOD procurement contracts. As we have explained above, in this context, the government use licence would, as a practical matter, occupy the field of possibilities for commercial exploitation of the military technologies, and Boeing's practical ability to commercially exploit its patented technologies, whether in a military or non-military context, is consequently more limited.252

5.75.
We note that this is the very reason the Panel provided in support of its conclusion that "Boeing's practical ability to commercially exploit patents that it owns as a result of performing R&D work for DOD, and the practical consequences of the government use licence granted to DOD, differ in the context of DOD assistance instruments and DOD procurement contracts."253 In other words, the Panel considered that the differences between these two types of legal instruments provided support for the proposition that Boeing's practical ability to exploit commercially R&D and patents from the USDOD procurement contracts is more limited than its ability to exploit R&D and patents from the USDOD assistance instruments. However, the Panel's observation relating to the reasons for differences between the USDOD procurement contracts and the USDOD assistance instruments was itself based on the underlying contention that Boeing's practical ability to exploit commercially R&D stemming from the USDOD procurement contracts is limited. The Panel's reasoning appears somewhat circular and therefore does not provide sufficient explanation of the difference between Boeing's practical ability to exploit R&D and patents granted in the context of the USDOD procurement contracts and the USDOD assistance instruments.
5.76.
In this respect, we observe that both the USDOD procurement contracts and the USDOD assistance instruments concern research primarily of a military nature that, however, has been, or at least has the potential of being, exploited for civil purposes in certain cases. Thus, the outcomes of the research under both categories of legal instruments could be expected to be covered under the ITAR thus leading to restrictions on Boeing's ability to use this research for civil purposes. In this light, it remains unclear on what basis the Panel concluded that Boeing's practical ability to exploit commercially its patented technologies in a non-military context under the USDOD procurement contracts was "more limited" than that under the USDOD assistance instruments.254 In particular, the Panel did not engage with the European Union's evidence that patents arising from R&D performed pursuant to certain USDOD procurement contracts have explicit applications to commercial aircraft, as evidenced by registered patents and examples of how Boeing has in practice benefited from ITAR-controlled data.255 Moreover, the Panel failed to address the question of whether Boeing's use of USDOD-funded research under the USDOD procurement contracts, albeit more limited than the use of such research under the USDOD assistance instruments, may result in "sharing" of the fruits of the research and entail a relationship of collaboration between USDOD and Boeing.
5.77.
We observe that the United States presented arguments and evidence that the European Union's examples of situations in which the ITAR did not preclude Boeing's use of research conducted under the USDOD procurement contracts only confirm that Boeing quite rarely benefits from USDOD-related research.256 The United States argued that "fewer than 1 in 100 DoD contracts results in a patentable invention that the EU considers worth highlighting" and "patents arising as a result of work under DoD contracts are not a significant part of Boeing's intellectual property portfolio."257 Faced with such conflicting propositions, the Panel should have further explored the matter and provided a reasoned explanation for rejecting the European Union's argument relating to the sharing of the fruits of the research under the USDOD procurement contracts.
5.78.
In light of the above, we consider that the Panel failed to assess properly the European Union's evidence relating to the actual use of ITAR‑controlled data and technology developed pursuant to the USDOD procurement contracts. Furthermore, the Panel did not provide a reasoned and adequate explanation for its conclusion that Boeing's practical ability to exploit military technologies developed under the USDOD procurement contracts for civil purposes is more limited than under the USDOD assistance instruments.
5.79.
The European Union's second line of argument concerns the Panel's conclusion as to Boeing's sales of military aircraft to foreign governments. The European Union contends that "the Panel did not cite to a single piece of evidence in support of its assertion that 'the rewards of the successful outcome of the research are primarily and in practical terms captured by the government use licence, owing to the fact that the technologies in question are military and DOD is Boeing's only customer for such technologies'."258 The European Union refers to evidence demonstrating that "{w}hile the United States does have the largest defence budget in the world, … the combined 2013 defence budgets of the next 15 highest-spenders is more than that of the United States."259 The European Union further refers to a news article, stating that "{i}nternational sales at Boeing's (BA) defense division made up 24 percent of the company's $33 billion in defense revenue last year, up from 7 percent in 2004."260
5.80.
The United States responds that the evidence referred to by the European Union does not indicate whether Boeing made sales to any of the purchasers of military equipment listed there. Furthermore, the United States contends that "as Boeing's defense division also sells satellites and commercial satellite launch vehicles, these data do not support any firm conclusion about Boeing's sales of military equipment to foreign governments."261 Moreover, according to the United States the European Union's assertions "address only the source of revenues, and do not establish that it was Boeing that sold military equipment to foreign purchasers".262
5.81.
The Panel's statement in paragraph 8,368 of its Report that "DOD is Boeing's only customer for {military} technologies"263 is inaccurate, insofar as the evidence indicates that Boeing does make sales of military technologies to foreign governments.264 However, we note that the statement in question is only one of several Panel statements concerning the customer base of Boeing, and in all other statements the Panel consistently observed that USDOD is the predominant buyer of modern air weaponry and weapons technology in the world and the exclusive buyer of such weaponry and technology in the United States.265 We note that the Panel did not distinguish the statement in paragraph 8,368 from all other statements relating to the customer base of Boeing. Considering jointly all statements made by the Panel with respect to Boeing's customer base, we do not understand the Panel to have found that USDOD is Boeing's only customer for military technologies in the world.
5.82.
Beyond these statements, the Panel did not discuss the European Union's evidence, which essentially establishes that (i) countries other than the United States also have significant defence budgets, and (ii) Boeing's defence division makes a certain, not insignificant, percentage of sales internationally. As we see it, the Panel's statement that the US government is the sole purchaser of modern air weaponry in the United States is compatible with the argument that Boeing also sells some military equipment to governments other than that of the United States. Moreover, the European Union's evidence does not demonstrate how the fact that Boeing may have foreign military customers contradicts the Panel's observation that Boeing would be limited in exploiting technology developed under the USDOD procurement contracts for military purposes outside the United States, especially in light of the existing US legal restrictions on the dissemination of military technology and data. At the same time, we recall our observation above that, even though Boeing's use of research funded under the USDOD procurement contracts may be more limited than its use of research funded under the USDOD assistance instruments, that in itself does not mean that there could be no "sharing" of the fruits of the research between USDOD and Boeing in the context of the USDOD procurement contracts.
5.83.
We also note that the European Union's evidence relating to Boeing's military customers outside the United States was introduced in comments to the United States' answer to a Panel question, in which the United States discussed "military applications of an invention invented during work under a NASA or DoD contract".266 The European Union's financial contribution argument before the Panel was focused more on the potential civil applications of the R&D performed under the USDOD procurement contracts than on the military applications of this R&D to Boeing's other customers. In any event, the figures put forward by the European Union on the defence budgets of foreign governments and the percentage of Boeing's military sales outside the United States do not appear to establish a clear link between Boeing and salesto any of those governments. Thus, we consider that the European Union has not demonstrated that the Panel's failure to address explicitly and rely upon its evidence and arguments relating to Boeing's military customers outside the United States has a bearing on the objectivity of its factual assessment.

5.2.1.3 The Panel's analysis of the collaborative nature and purpose of the USDOD procurement contracts

5.84.
According to the European Union, in distinguishing "the nature and purpose of the DOD procurement contracts from that of the NASA procurement contracts and DOD assistance instruments"267, and in concluding that the nature and purpose of the interaction between USDOD and Boeing "is not the same as when two partners work together to set research topics based on their aligned interests in the outcomes"268, "the Panel failed to base its findings in the evidence, failed to engage with or properly consider EU arguments and evidence, disregarded key evidence, and failed to explain its findings in light of the evidence, in violation of Article 11 of the DSU."269
5.85.
First, with regard to the nature of the USDOD procurement contracts, the European Union submits that "a primarily military technological purpose is not determinative of whether these programmes have the effect of developing technologies and knowledge that could be applicable to Boeing LCA."270 The European Union alleges that the Panel failed to consider the following evidence:

a. examples of civil applications of R&D developed by Boeing pursuant to the USDOD procurement contracts, including271:

i. "data from the B-2 stealth bomber {utilized} to develop a manufacturing process used on the 787"272;

ii. "advanced 3-D modelling and simulation techniques developed on the F-22 programme played on the 777"273; and

iii. "the US Air Force … supporting research into Boeing's blended-wing body configuration, which is expected to be used for both military and civil application".274

b. the Charles River Associates (CRA) and Rumpf expert opinions275 detailing how each of the RDT&E programme elements "provide{s} funding and support to Boeing for R&D that is potentially applicable to LCA (or 'dual-use')"276; and

c. a list of "examples of DOD-funded patents owned by Boeing (with the language therein drafted by Boeing engineers and/or patent attorneys) that explicitly indicate, on the face of the patents themselves, that they have a potential LCA‑related application".277 The European Union contends that, in addition, the proposition that the USDOD procurement contracts with a military objective result in developing patented technologies applicable to civil aircraft "is also supported by Boeing's 'One Boeing' concept, which is 'intended to share lessons between the distinct Boeing Military Aircraft and Boeing Commercial Airplanes sectors'", including "'the sharing of design tools and testing procedures', as well as collaborative work on materials, processes, physics and manufacturing technologies".278

5.86.
The United States submits that the evidence cited by the European Union is insufficient to establish that the USDOD procurement contracts had the effect of producing research with civil applications to any meaningful degree, that USDOD or Boeing expected research under the challenged USDOD procurement contracts to produce civil applications, or that any such expectation is similar to the NASA procurement contracts and the USDOD assistance instruments.279 The United States argues that: (i) the press accounts are "strictly anecdotal" and do not provide any support for the European Union's assertion that USDOD or Boeing expected that research under the USDOD procurement contracts would have civil applications280; (ii) "the Panel addressed {the Rumpf expert opinion} in its evaluation of its terms of reference, and found that its 'generalized allegations regarding the potential applicability to LCA of certain broad technology areas' were not 'sufficient to demonstrate a close nexus between a new program element and the ones covered by the original proceeding'"281; and (iii) four of the ten patents referred to by the European Union are irrelevant, insofar as the inventions in question resulted from research that was not funded by the USDOD procurement contracts under the programme elements challenged by the European Union.282
5.87.
We note that the European Union's argument that USDOD and Boeing "entered into the {USDOD procurement contracts} with some expectation that Boeing's LCA (or other commercial) division would benefit despite the primary military objective"283 relates to the Appellate Body's observation in the original proceedings that one feature of the NASA procurement contracts and the USDOD assistance instruments that characterized them as collaborative arrangements was that "looking at the output side of the transactions, {there is no} straightforward exchange of monetary resources for some kind of non-monetary consideration", but instead "the fruits of the research are shared" between Boeing and NASA/USDOD.284
5.88.
With respect to the European Union's allegation that the Panel failed to consider certain evidence presented before the Panel, we note that the Panel did not refer to any of the three categories of evidence presented by the European Union in the context of its analysis of financial contribution relating to the USDOD procurement contracts. In light of the detailed nature of the European Union's arguments before the Panel relating to the Rumpf expert opinion, we begin our analysis with this category of evidence. The Panel referred to this expert opinion mainly in the context of its analysis relating to its terms of reference.285 For instance, the Panel observed that:

Mr Rumpf's assessment of the R&D involved in {the KC-46} program element that is potentially dual-use to LCA … refers in a very generalized way to technological areas such as the use of performance based logistics incorporating micro-sensors in the KC‑46 airframe, avionics R&D related to communications, navigation and adverse weather capabilities, physics-based modelling and simulation activities for improved design of the test and evaluation flight and ground tests, and multiple systems management technologies and processes.

… We are not satisfied that generalized allegations regarding the potential applicability to LCA of certain broad technology areas, without an explanation of how those technology areas overlap with the technology areas that were the focus of the NASA and DOD aeronautics R&D subsidies {that are} the subject of the DSB recommendations and rulings, are sufficient to demonstrate the required close nexus, in terms of nature or effect, between the measures identified with respect to the KC‑46, Next Generation Aerial Refueling Aircraft program element and the NASA and DOD aeronautics R&D subsidies {that are} the subject of the DSB recommendations and rulings.286

5.89.
These statements are reflective of the Panel's view as to the relevance of the Rumpf expert opinion in the context of its analysis relating to the Panel's terms of reference assessment. However, the relevant question before the Panel in that context was different from the legal question in the context of its financial contribution analysis. Notably, in its terms of reference assessment, the Panel considered the Rumpf expert opinion in its analysis of whether there were "sufficiently close links, in terms of nature, effects, and timing", between, on the one hand, certain programme elements that came into existence after the date of the panel request in the original proceedings and, on the other hand, the aeronautics R&D measures, which are the subject of the recommendations and rulings of the DSB.287 By contrast, in the context of the Panel's financial contribution analysis, the European Union argued that the Rumpf expert opinion demonstrated the potential applicability to Boeing's civil technologies of the research undertaken by Boeing under the USDOD procurement contracts. The fact that the Panel referred to the Rumpf expert opinion in the context of its terms of reference analysis is thus not relevant for determining whether the Panel properly considered this evidence in the context of its financial contribution analysis.
5.90.
We note that the Panel also addressed the Rumpf expert opinion in describing the European Union's understanding of "dual-use" in the context of its evaluation of the European Union's challenge relating to the USDOD procurement contracts and assistance instruments. The Panel observed that the European Union used the term "dual-use" to "refer to the military technologies developed by Boeing under the various RDT&E program elements that the European Union considers, based on the opinions of its experts, have potential applicability to Boeing LCA."288 The Panel contrasted this use of the term with the "concept of 'dual-use', which describes the explicit objectives of certain of the DOD RDT&E program elements {and} encompasses both the application to military needs of technology solutions developed by industry for civilian application (military in-bound) and the flow of technologies from military-developed contexts to commercially useful application in civilian contexts".289
5.91.
The Panel's reference to the Rumpf expert opinion in this context indicates that the Panel did not overlook or ignore the Rumpf expert opinion. At the same time, the Panel did not properly engage with this evidence in conducting its substantive analysis of whether the USDOD procurement contracts involve financial contributions within the meaning of Article 1.1(a)(1) of the SCM Agreement. Specifically, the Panel's observation regarding differences in the way the term "dual-use" is employed by the European Union and in the RDT&E programme elements is descriptive and does not demonstrate that the Panel assessed the pertinence of the European Union's evidence in determining the existence of a relationship of collaboration between USDOD and Boeing in the context of certain USDOD procurement contracts.
5.92.
In its analysis of whether the USDOD procurement contracts involved financial contributions, the Panel stated that "{a}lthough some of the military technologies may also have potential civil applications, Boeing's practical ability to exploit those technologies for civil applications is limited."290 This statement appears to refer to the European Union's evidence in the Rumpf expert opinion, which the Panel had earlier described as "the process by which the European Union identified the specific aspects of the various RDT&E program elements that it considers could potentially have application to Boeing's LCA development".291 However, the Panel did not engage in an analysis of this evidence put forward by the European Union or address the significance it may have for the European Union's argument that the USDOD procurement contracts were in the nature of collaborative arrangements with characteristics analogous to equity infusions.
5.93.
Moreover, the Panel did not refer to the other two categories of evidence presented by the European Union, namely the examples of civil applications of R&D developed by Boeing pursuant to the USDOD procurement contracts and the list of the USDOD-funded patents owned by Boeing with potential LCA‑related applications. In this regard, we observe that the United States argued before the Panel that this evidence demonstrated that "the chance of a given DoD procurement contract, task order, or assistance instrument producing an invention that the {European Union} considered applicable to large civil aircraft was … essentially zero."292 The United States also pointed out to the Panel that the examples given by the European Union reflect very rare instances in which USDOD‑related research has translated into patents with civil applications.293 Where a panel faces such conflicting propositions in relation to a key element of a claim before it based on the evidence submitted to it by the parties, it is difficult to see how it can comply with the obligation to undertake an objective assessment of the matter without engaging with that evidence and reflecting the results of its assessment of the evidence in its report. In the present case, we consider that the absence of any substantive assessment of the examples of Boeing's actual use of research conducted pursuant to the USDOD procurement contracts meant that the Panel did not sufficiently explore the evidence before it for purposes of its ultimate conclusion. Furthermore, as noted, the fact that Boeing's practical use of USDOD-funded research under the USDOD procurement contracts was more limited than under the USDOD assistance instruments does not answer the question of whether a relationship of collaboration existed between USDOD and Boeing under the USDOD procurement contracts.
5.94.
The European Union further argues that the Panel failed to address its arguments that the "actual and anticipated technological outcomes, rather than the stated objectives, of the R&D are most indicative of the collaborative character of the DOD procurement contracts."294 According to the European Union, the Panel's conclusion that the USDOD procurement contracts have military objectives such that Boeing's ability to exploit those military technologies for commercial purposes is in practice restricted is not based in evidence, and the Panel failed to provide reasoned and adequate explanations and coherent reasoning in this regard.295
5.95.
We note that, in its financial contribution analysis, the Panel assessed the "particular commercial context" in which payments by USDOD are provided in exchange for the performance of R&D by Boeing.296 The Panel, distinguished this commercial context from that of the NASA procurement contracts on the basis that "the R&D commissioned under DOD procurement contracts is solely directed to meeting DOD's military needs, independent of enhancing the competitive position of contractors such as Boeing."297 Therefore, the Panel found that "the nature and purpose of this interaction is not the same as when two partners work together to set research topics based on their aligned interests in the outcomes."298 Furthermore, the Panel considered "contextual factors" suggesting that the balance of sharing of IP rights under the USDOD procurement contracts is "substantially more in DOD's favour and less in Boeing's favour than under the DOD assistance instruments, or NASA procurement contracts".299 Notably, the Panel relied on the fact that "DOD is commissioning R&D services to support the development of military systems for DOD's own distinct purposes" and "{u}nlike the DOD assistance instruments, or NASA procurement contracts, DOD's objectives do not include, or align with, advancing Boeing's development of technologies applicable to LCA."300
5.96.
The Panel's conclusion that there is not enough "in the relationship between DOD and Boeing under the DOD procurement contracts that points to it being one of 'partnership', 'collaboration' or 'joint-venture', in which both parties act in pursuit of a common goal for their mutual benefit" was also based on additional reasons.301 For example, the Panel recognized that "the provision of facilities, equipment, and employees {under the USDOD procurement contracts} is … marginal"302, and that "{u}nder the vast majority of the DOD procurement contracts, Boeing is paid its costs for performing the R&D and earns a negotiated fee or profit, which is a smaller proportion of the overall cost."303 The Panel thus considered that "the risks and rewards {under the USDOD procurement contracts} are borne principally by DOD."304
5.97.
At the same time, it is true that the Panel did not address the European Union's argument that, despite the military objectives of the R&D commissioned under these contracts, the nature of the interaction between USDOD and Boeing as one of collaboration was reflected in the actual and anticipated technological outcomes, rather than in the stated objectives of the R&D.305 Indeed, the Panel's analysis focused on the objectives of the USDOD procurement contracts and the military nature of the research, rather than on the actual effects of those contracts. We recall in this regard that, in order to identify the principal characteristics of a measure for the purpose of determining the obligations attaching to it, a panel must conduct a thorough scrutiny of the measure at issue, both in terms of its design and operation.306 Given that the research under both the USDOD procurement contracts and the USDOD assistance instruments is undertaken for military purposes, the Panel should have properly explained the reasons for distinguishing between the two categories of contracts. The Panel's reliance on how R&D is commissioned and conducted under the RDT&E programme elements only in the context of the USDOD procurement contracts therefore remains unclear, to the extent that these processes apply to both the USDOD procurement contracts and the USDOD assistance instruments.307 In the absence of such an explanation, the Panel was not in a position to provide reasoned and adequate explanations in reaching its conclusion as to the characterization of the USDOD procurement contracts. Furthermore, in light of the fact that this was the primary argument put forward by the European Union, as supported by the three categories of evidence outlined above, and given the conflicting propositions based on the evidence submitted to the Panel, it was necessary for the Panel to undertake a more detailed analysis of the European Union's evidence and arguments.
5.98.
Second, with regard to the purpose of the USDOD procurement contracts, the European Union contends that "the Panel did not consider key EU arguments and evidence and failed to provide reasoned and adequate explanations to support its finding that 'the R&D commissioned under DOD procurement contracts is solely directed to meeting DOD's military needs, independent of enhancing the competitive position of contractors such as Boeing'."308 The European Union refers to evidence demonstrating that the United States intends for, and encourages, USDOD contractors to extract commercial benefit from their work under the RDT&E programmes. In particular, the European Union refers to "the DOD's decision to end its previous policy of recouping 'a fair share of its investment in nonrecurring costs related to products, and/or a fair price for its contribution to the development of related technologies, when the products are sold, and/or when technology is transferred'".309
5.99.
The United States responds that the European Union "never alleged that any of the Boeing products covered by this dispute would have given rise to fees under the policy, which DoD terminated in 1992", and "{i}ndeed, given the Panel's findings as to the amount of funding Boeing received under the challenged program elements, it is inconceivable that DoD procurement contracts would have led to such fees."310 The United States further considers that "the existence of the recoupment policy 25 years ago"311 does not prove that "DoD could have recouped its investment in commercial{ised} technologies."312
5.100.
We note that the Panel did not address the European Union's argument in its analysis of financial contribution. At the same time, we observe that, as evident from its submissions before the Panel, the European Union did not rely on this argument specifically in its financial contribution argumentation.313 In the context of its benefit assessment, the Panel reflected the parties' arguments on this issue314 and noted that it was "satisfied that the termination of the 1992 recoupment policy suggests that {the} U.S. Government recognizes 'the potential for crossover into development and production of civilian aircraft of benefits that may result from government support of research and development (R&D) on military items'".315 However, the Panel considered that this recognition was expressed "in very general terms" and was not persuaded that "DOD's previous recoupment policy would have applied to the DOD-sponsored R&D at issue in this proceeding", insofar as there was insufficient evidence "to conclude that Boeing LCA would have fallen within the definition of a 'derivative' of a DOD developed item under the previous recoupment rules".316 The Panel therefore did not regard "DOD's termination of the recoupment policy in 1992 as providing probative evidence in support of an inference that the DOD procurement contracts (or assistance instruments)" confer a benefit on Boeing.317
5.101.
In our view, the Panel was not persuaded that the European Union's argument regarding the termination of the USDOD recoupment policy in 1992, or the abstract possibility for USDOD to recoup any potential investments in commercialised technologies, had that policy stayed in place, established a sufficient link with the nature and functioning of the specific USDOD procurement contracts challenged by the European Union in these proceedings. In the absence of such link, the fact that the recoupment policy was terminated could not have an impact on the characterization of the USDOD procurement contracts as collaborative arrangements with characteristics analogous to equity infusions.
5.102.
In any event, we note that the Appellate Body has observed that "the intent, stated or otherwise, of the legislators is not conclusive" as to the characterization of a measure under WTO law.318 While the intent of USDOD could have to a certain extent informed the understanding of the context of the USDOD procurement contracts, this alone could not have altered the Panel's ultimate conclusion as to the characterization of the measures. Therefore, we consider that the Panel adequately addressed the European Union's argument regarding the relevance of the 1992 recoupment policy and disagreed with it.
5.103.
In sum, we make the following conclusions with respect to the European Union's claim that the Panel failed to make an objective assessment of the matter under Article 11 of the DSU in its analysis of whether the USDOD procurement contracts provide a financial contribution within the meaning of Article 1.1(a)(1) of the SCM Agreement. We have found that the Panel did not fail to engage with relevant evidence, or to provide a reasoned and adequate explanation, in reaching its conclusions regarding the question of whether Boeing's non-reimbursed IR&D expenditures can be considered as a contribution to a collaborative arrangement with USDOD. We further found that the European Union has not demonstrated that the Panel's failure to address explicitly and rely upon its evidence and arguments relating to Boeing's military customers outside the United States has a bearing on the objectivity of its factual assessment. Moreover, we considered that the Panel adequately addressed the European Union's argument regarding the relevance of the 1992 recoupment policy.
5.104.
At the same time, we have found certain deficiencies in the Panel's assessment of the European Union's claim that the USDOD procurement contracts involve financial contributions. We concluded that the Panel failed to assess properly the European Union's evidence relating to actual use of ITAR‑controlled data and technology developed pursuant to the USDOD procurement contracts. Furthermore, the Panel did not provide a reasoned and adequate explanation for its conclusion that Boeing's practical ability to exploit military technologies developed under the USDOD procurement contracts for civil purposes is more limited than under the USDOD assistance instruments. We also found that the Panel failed to assess the European Union's evidence in the Rumpf expert opinion in the context of its financial contribution analysis relating to the USDOD procurement contracts, as well as the European Union's argument that the actual and anticipated technological outcomes of the R&D under these contracts are more indicative of their collaborative nature than their stated objectives. The Panel also failed to address the European Union's evidence relating to examples of actual use by Boeing of the research under the USDOD procurement contracts, namely the cases of civil applications of R&D developed by Boeing pursuant to the USDOD procurement contracts and the list of the USDOD-funded patents owned by Boeing with potential LCA‑related applications.
5.105.
We recall that Article 11 of the DSU requires panels to consider all the evidence presented to them, assess the credibility of that evidence, determine its weight, and ensure that their factual findings have a proper basis in that evidence.319 Panels have the discretion to address only those arguments that they deem necessary to resolve a particular claim320 and are not required to accord to factual evidence of the parties the same meaning and weight as do the parties.321 At the same time, panels may not make affirmative findings that lack a basis in the evidence contained on the panel record.322 The Panel in these proceedings failed to address several pieces of evidence and arguments put forward by the European Union in support of its claim that the USDOD procurement contracts involved financial contributions under Article 1.1(a)(1)(i) of the SCM Agreement, because they were collaborative arrangements with characteristics analogous to equity infusions. Specifically, given that the Panel was faced with conflicting evidence submitted by both parties, in order to comply with the obligation to undertake an objective assessment of the matter before it, the Panel should have explained its conclusion with regard to the existence of a financial contribution in light of that evidence. In our view, taken together, these errors undermine the objectivity of the Panel's assessment of the matter before it.
5.106.
In view of the above, we find that the Panel failed to make an objective assessment of the matter before it within the meaning of Article 11 of the DSU in its financial contribution analysis under Article 1.1(a)(1) of the SCM Agreement by not engaging sufficiently with the European Union's evidence and arguments, and by failing to provide reasoned and adequate explanations for its findings.

5.2.2 The Panel's findings under Article 1.1(b) of the SCM Agreement

5.107.
The European Union argues that in assessing whether the USDOD procurement contracts confer a benefit on Boeing within the meaning of Article 1.1(b) of the SCM Agreement, "the Panel built upon the same errors" as in its analysis relating to financial contribution under Article 1.1(a)(1) of the SCM Agreement.323 According to the European Union, "{t}he Panel's benefit findings therefore require consequential reversal."324
5.108.
We recall that, having found that the USDOD procurement contracts are most appropriately characterized as purchases of services, the Panel found it unnecessary to address definitively the issue of whether these transactions, properly characterized, involve financial contributions within the meaning of Article 1.1(a)(1).325 This was in view of the Panel's ultimate conclusion that the European Union failed to establish that the USDOD procurement contracts confer a benefit within the meaning of Article 1.1(b).326 In assessing the existence of benefit, the Panel recalled that it had not characterized the USDOD procurement contracts as collaborative R&D arrangements. Therefore, the Panel did not consider that a focus on the allocation of IP rights, consistently with the approach of the Appellate Body in the original proceedings, was "an appropriate means of determining whether DOD as the purchaser of R&D services from Boeing, paid too much for what it acquired".327 Rather, for the Panel, "{t}he question of whether Boeing was paid adequate remuneration for performing the R&D work for DOD requires a consideration of all of the terms of the transaction, including how much DOD paid in relation to the work that Boeing performed."328 The Panel nevertheless continued its analysis and concluded that, even if the assessment of benefit under the USDOD procurement contracts focused solely on the allocation of the IP rights arising from the performance of the R&D, in isolation from the other terms of the transaction, it would not regard as appropriate benchmarks the evidence put forward by the European Union in the form of private collaborative R&D agreements.329
5.109.
In reaching this conclusion, the Panel built on the same arguments and factual findings relating to the USDOD procurement contracts that the European Union takes issue with in its financial contribution claim. Thus, the Panel recalled its understanding that "the DOD procurement contracts involve complex, long-term purchases of R&D services by DOD from Boeing for the development of weapon systems", and considered that the examples of private collaborative R&D agreements submitted as evidence sufficiently resemble the relevant characteristics of the NASA procurement contracts and the USDOD assistance instruments, but not those of the USDOD procurement contracts.330 The Panel explained that:

Unlike DOD assistance instruments, there is no cost-sharing between DOD and Boeing, and no relationship of collaboration between DOD and Boeing wherein they can be said to undertake a project of mutual interest. Unlike the NASA procurement contracts, the objectives of the commissioned R&D do not include enhancing the competitiveness of the U.S. aerospace industry. Rather, as we have said, the fundamental nature of the DOD-Boeing relationship under the DOD procurement contracts is one of purchaser of R&D services for DOD and supplier of those services for Boeing.331

5.110.
The Panel also considered that "the government use licence granted to DOD in respect of Boeing-owned patents that may result from the performance of the R&D work captures the economic value of the R&D for DOD", because "DOD is the sole purchaser of modern air weaponry in the United States" and "Boeing's practical ability to exploit any military technologies for commercial purposes outside the military context is circumscribed by U.S. legal restrictions on the use of military technologies and data."332
5.111.
Above we found that, in its financial contribution analysis, the Panel did not sufficiently address several pieces of evidence and arguments put forward by the European Union, and it failed to explain its conclusion in light of the evidence before it. The Panel rejected the European Union's evidence of the allocation of IP rights under the private actor collaborative R&D arrangements based on the same deficiencies with respect to which we found that the Panel failed to make an objective assessment of the matter under Article 11 of the DSU. We therefore consider that the Panel's benefit analysis suffers from the same shortcomings as its analysis of financial contribution, and we therefore find, for the same reasons, that the Panel erred in finding that the distribution of IP rights under the USDOD procurement contracts does not confer a benefit pursuant to Article 1.1(b) of the SCM Agreement.

5.2.3 Completion of the legal analysis

5.112.
The European Union argues that the Appellate Body can complete the legal analysis, based on uncontested evidence and factual findings, and confirm that the USDOD procurement contracts involve joint ventures in which USDOD provides funding analogous to equity infusions similar to the NASA procurement contracts and the USDOD assistance instruments.333 The United States responds that the European Union does not identify evidence sufficient to justify its argument that the USDOD procurement contracts are best viewed as joint ventures.334
5.113.
We recall that the Appellate Body may complete the legal analysis with a view to facilitating the prompt settlement and effective resolution of the dispute where the factual findings by the panel335 and/or undisputed facts on the panel record336 provide a sufficient factual basis for doing so.337 We thus turn to assess whether there are sufficient factual findings by the Panel or undisputed facts on the Panel record on which we can rely in completing the analysis.
5.114.
Above we found that the Panel did not fail to engage with relevant evidence, and it did not fail to provide a reasoned and adequate explanation, in concluding that the privately funded and non‑reimbursed IR&D expenditures incurred by Boeing in developing its background IP cannot be considered a contribution of "financial resources" to a "joint undertaking" with USDOD.338 We also found that the European Union has not demonstrated that the Panel's failure to address explicitly and rely upon its evidence and arguments relating to Boeing's sales of military aircraft to foreign governments has a bearing on the objectivity of its factual assessment. Finally, we found that the Panel adequately considered the European Union's argument regarding the relevance of the 1992 recoupment policy and disagreed with it. In completing the analysis, we can rely on the factual findings reached by the Panel in the context of these arguments.
5.115.
There are other relevant factual findings by the Panel in its financial contribution analysis that are not covered by the European Union's Article 11 challenges and that we could also rely on in completing the analysis. For instance, the Panel found that USDOD commits to provide financial resources in the form of payments, which "for the most part represent Boeing's costs of performing the R&D work, plus a negotiated fee, representing Boeing's profit".339 The Panel also found that nothing on the Panel record suggested that the provision of facilities, equipment, and employees under the USDOD procurement contracts "is anything but marginal".340 Moreover, the participants do not dispute the Panel's factual description of the objectives of the USDOD procurement contracts.341
5.116.
At the same time, we found several deficiencies in the Panel's analysis of financial contribution. Thus, we concluded that the Panel failed to assess properly the European Union's evidence relating to actual use of ITAR‑controlled data and technology developed pursuant to the USDOD procurement contracts. Furthermore, the Panel did not provide a reasoned and adequate explanation for its conclusion that Boeing's practical ability to exploit military technologies developed under the USDOD procurement contracts for civil purposes is more limited than under the USDOD assistance instruments. We also found that the Panel failed to assess the European Union's evidence in the Rumpf expert opinion in the context of its financial contribution analysis relating to the USDOD procurement contracts, as well as the European Union's argument that the actual and anticipated technological outcomes of the R&D under these contracts are more indicative of their collaborative nature than their stated objectives. Finally, the Panel also failed to address the European Union's evidence relating to examples of actual use by Boeing of the research under the USDOD procurement contracts, namely the cases of civil applications of R&D developed by Boeing pursuant to the USDOD procurement contracts and the list of the USDOD-funded patents owned by Boeing with potential LCA‑related applications.
5.117.
Furthermore, multiple aspects of the relevant evidence supporting the participants' arguments remain contested. Notably, there are no factual findings by the Panel relating to the effects of the USDOD procurement contracts challenged by the European Union, which was a major point of disagreement between the parties. The United States argued that the declared purpose of the USDOD procurement contracts to obtain technologies for military purposes, or to obtain new weapon systems or upgrade existing ones, is highly relevant for the Panel's assessment of these instruments.342 By contrast, the European Union considered that an exclusively military purpose is not determinative of whether the research under the USDOD procurement contracts has the effect of providing dual-use benefits.343 The evidence presented to the Panel was shaped by the parties' views relating to the importance of the objectives and effects of the USDOD procurement contracts. Specifically, it appears from the European Union's submissions to the Panel that the conclusions in the CRA and Rumpf expert opinions were central to its argument that the payments and access provided to Boeing under the USDOD RDT&E programme elements constitute financial contributions within the meaning of Article 1.1(a)(1)(i) and (iii), regardless of whether they are provided under assistance instruments or procurement contracts.344 In turn, the United States challenged the pertinence of these expert opinions and in particular the definition of "dual-use" in the Rumpf expert opinion345, the expertise and methodology on which the expert opinion relied346, and the probative value of its conclusions.347 In this regard, the parties presented detailed arguments with respect to each RDT&E programme element, further subdividing them under the categories S&T or "general aircraft" programme elements and systems acquisition/military aircraft programme elements.348 The United States further contested the value and weight to be accorded to the European Union's examples of civil applications of R&D developed by Boeing pursuant to the USDOD procurement contracts and the list of the USDOD-funded patents owned by Boeing with potential LCA‑related applications.349 None of these arguments and related pieces of evidence was properly discussed by the Panel.350
5.118.
The elements outlined above are essential for the completion of the legal analysis. The determination of whether the funding and access provided to Boeing under the USDOD procurement contracts constitute collaborative arrangements with characteristics analogous to equity infusions within the meaning of Article 1.1(a)(1)(i) of the SCM Agreement involves a multifaceted analysis, which needs to take into account not only the objectives and nature of the USDOD procurement contracts, but also their actual and potential effects. In the absence of sufficient factual findings by the Panel or undisputed facts on the record relating to some essential elements characteristic of the nature and effect of the USDOD procurement contracts, we are not in a position to complete the analysis and determine whether the USDOD procurement contracts involve financial contributions within the meaning of Article 1.1(a)(1) of the SCM Agreement.

5.2.4 United States' conditional appeal on specificity

5.119.
We recall that, in its Notice of Other Appeal, the United States conditionally appeals the Panel's findings relating to the specificity of the post-2006 NASA procurement contracts, cooperative instruments, and Space Act Agreements; the post-2006 USDOD assistance instruments; and the FAA-Boeing CLEEN Agreement.351 The United States' claim is contingent upon us reversing the Panel and completing the legal analysis to find that the USDOD procurement contracts are collaborative R&D arrangements that result in the same financial contribution and confer benefit on the same basis as the other NASA, USDOD, and FAA instruments.352 Having found above that we are unable to complete the legal analysis with respect to the existence of financial contribution, the event triggering the United States' conditional appeal has not occurred.

5.2.5 Conclusion

5.120.
In sum, we find that the Panel acted inconsistently with Article 11 of the DSU in its financial contribution analysis under Article 1.1(a)(1) of the SCM Agreement by not engaging sufficiently with the European Union's evidence and arguments, and by failing to provide reasoned and adequate explanations for its findings. Furthermore, we find that the Panel's benefit analysis suffers from the same shortcomings.
5.121.
We therefore reverse the Panel's finding, in paragraphs 8,437.b and 11.7.c.i of the Panel Report, that, assuming arguendo the payments and access to USDOD facilities, equipment, and employees provided to Boeing through the pre-2007 and post-2006 USDOD procurement contracts were to involve financial contributions, the European Union has not established that they confer a benefit on Boeing within the meaning of Article 1.1(b) of the SCM Agreement. We also find that there are insufficient factual findings by the Panel or undisputed facts on the Panel record for us to complete the legal analysis in this respect.

5.3 European Union's claim relating to the Panel's finding concerning FSC/ETI tax concessions under Article 1.1(a)(1)(ii) of the SCM Agreement

5.122.
The European Union requests us to reverse the Panel's finding that the European Union had failed to establish that, after the expiry of the implementation period, the United States continues to grant or maintain subsidies to Boeing in the form of tax concessions pursuant to the Foreign Sales Corporation/Extraterritorial Income (FSC/ETI) measures.353 The European Union further requests that we complete the legal analysis and find that the United States continues to grant or maintain prohibited subsidies, in that the subsidy found to exist in the original proceedings has not been withdrawn within the meaning of Article 7.8 of the SCM Agreement.354
5.123.
The United States requests us to uphold the Panel's finding that the European Union had not established that, after the expiry of the implementation period, the United States continues to grant or maintain subsidies to Boeing in the form of FSC/ETI tax concessions.355 The United States also requests that we reject the European Union's request to complete the legal analysis because the European Union failed to identify the Panel's findings of fact or undisputed evidence that would allow us to complete the legal analysis.356

5.3.1 The Panel's findings

5.124.
We begin by recalling the FSC/ETI measures at issue and related findings made in the original proceedings. Next, we turn to the arguments of the participants before the Panel and the Panel's findings in the compliance proceedings. Subsequently, we assess whether the Panel erred in finding that the European Union had failed to establish that, after the expiry of the implementation period, the United States continues to grant or maintain subsidies to Boeing in the form of tax concessions pursuant to the FSC/ETI measures.
5.125.
The original panel found that, between 1989 and 2006, Boeing benefited from FSC/ETI tax concessions pursuant to the provisions of the US Internal Revenue Code relating to the income of FSCs and successor legislative acts.357 The legislative acts that allowed Boeing to receive FSC/ETI subsidies between 1989 and 2006 comprised certain provisions of the US Internal Revenue Code relating to Foreign Sales Corporations (the original FSC measure), the ETI Act, and the AJCA.358
5.126.
The original FSC measure359 granted FSCs a tax exemption on a portion of income generated by the sale or lease of "export property" – referred to as "exempt foreign income".360 It also allowed US parent companies of FSCs to defer paying taxes on certain "foreign trade income" that would normally be subject to immediate taxation and to avoid paying taxes on dividends received from their FSCs related to "foreign trade income".361 The United States repealed the original FSC measure by enacting the ETI Act.362 However, Section 5(c)(1) of the ETI Act grandfathered tax concessions, available under the original FSC measure, for certain transactions – in particular, transactions pursuant to a binding contract between an FSC and an unrelated person that was in effect on 30 September 2000.363 The ETI Act also introduced a new exclusion from taxation for income generated by certain qualifying transactions involving the sale or lease of "qualifying foreign trade property" ("extraterritorial income" exclusion).364 The United States repealed the ETI Act by enacting the AJCA on 22 October 2004.365 However, the AJCA provided for a transitional period between 1 January 2005 and 31 December 2006, during which the ETI tax concessions remained available to a limited extent for certain transactions.366 In addition, Section 101(f) of the AJCA, entitled "Binding Contracts", grandfathered the ETI Act exclusion of "extraterritorial income" from taxation for qualifying transactions pursuant to a binding contract in effect on 17 September 2003.367 The AJCA also left intact Section 5(c)(1) of the ETI Act, which grandfathered tax concessions under the original FSC measure with respect to certain qualifying transactions pursuant to a binding contract in effect on 30 September 2000.368
5.127.
The original panel found that the FSC/ETI tax concessions used by Boeing between 1989 and 2006 constituted export-contingent subsidies within the meaning of Article 3.1(a) of the SCM Agreement and found specificity of these subsidies on the basis of Article 2.3 of the SCM Agreement.369 As was also found in the original proceedings (first by the panel, and then, on different grounds, by the Appellate Body), the FSC/ETI subsidies received by Boeing caused serious prejudice to the interests of the European Communities in the LCA market within the meaning of Article 5(c) of the SCM Agreement.370
5.128.
On 17 May 2006, the United States enacted the Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA).371 Section 513 of the TIPRA is entitled "Repeal of FSC/ETI Binding Contract Relief".372 Section 513(a) of the TIPRA repeals the provision in Section 5(c)(1) of the ETI Act that grandfathered the original FSC tax concessions with respect to transactions pursuant to a binding contract in effect on 30 September 2000. Section 513(b) of the TIPRA repeals the provisions in Section 101(f) of the AJCA that grandfathered the ETI Act exclusion of "extraterritorial income" from taxation with respect to transactions pursuant to a binding contract in effect on 17 September 2003.373 Section 513(c) of the TIPRA provides that "{t}he amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act."374
5.129.
The European Union asserted in the original proceedings that the TIPRA did not fully repeal FSC/ETI tax concessions and argued on that basis that Boeing continued to benefit from FSC/ETI tax concessions after 31 December 2006.375 The original panel, however, considered that it was not necessary for it to decide whether Boeing would benefit from FSC/ETI tax concessions after 2006 and, consequently, made no finding on that issue.376
5.130.
Before the Panel in these compliance proceedings, the European Union argued that, despite the purported repeal of FSC/ETI tax concessions by the TIPRA, certain concessions continued to be available to Boeing after 31 December 2006. The European Union asserted that, under the TIPRA, Boeing is eligible for FSC/ETI tax concessions with respect to income derived from certain pre‑2006 transactions and received in the post-implementation period.377 In support of its arguments, the European Union relied on Internal Revenue Service Memorandum No. AM 2007‑001 (2006 IRS Memorandum), which provides that the TIPRA repeals FSC/ETI tax concessions prospectively for transactions entered into during a taxable year that begins after 17 May 2006.378
5.131.
According to the European Union, based on the 2006 IRS Memorandum, Boeing continues to be eligible for FSC/ETI tax concessions with respect to foreign income received after 31 December 2006 from: (i) a sale or lease entered into before 1 January 2005; and (ii) a sale or lease entered into before 1 January 2007, pursuant to a binding contract that was in place with an unrelated person on 17 September 2003 and at all times thereafter.379 The European Union further submitted to the Panel a list of Boeing's orders made pursuant to a sale or lease entered into before 1 January 2005 allegedly generating income after 2012 and qualifying for FSC/ETI tax concessions under the TIPRA.380
5.132.
The European Union contended that, because the TIPRA had not fully repealed FSC/ETI tax concessions with respect to transactions based on certain pre-existing long-term binding contracts, those transactions involve a financial contribution in the form of revenue "foregone" within the meaning of Article 1.1(a)(1)(ii) of the SCM Agreement.381 The European Union further argued that FSC/ETI tax concessions confer a benefit within the meaning of Article 1.1(b) of the SCM Agreement and constitute specific subsidies within the meaning of Article 2.3 of the SCM Agreement.382 Thus, for the European Union, the United States continues to grant or maintain FSC/ETI subsidies with respect to Boeing, and therefore, failed to "withdraw the subsidy" within the meaning of Article 7.8 of the SCM Agreement.
5.133.
In response, the United States argued that Boeing had not used FSC/ETI tax concessions after 2006 and that the mere availability of FSC/ETI tax concessions in the post-implementation period was insufficient to establish that the United States had not withdrawn the FSC/ETI subsidies with respect to Boeing.383 The United States further contended that the 2006 IRS Memorandum relied on by the European Union to show that Boeing did use FSC/ETI tax concessions in the post‑implementation period was the same 2006 IRS Memorandum it had relied on in the original proceedings.384 According to the United States, the original panel examined that evidence and declined to find that Boeing would continue to receive FSC/ETI tax concessions after 2006.385 Therefore, in the United States' view, the European Union had not established that FSC/ETI tax concessions were provided to Boeing after 2006 and in the post-implementation period.386
5.134.
The Panel considered that the issue it had to resolve in order to determine whether the United States had failed to withdraw the FSC/ETI subsidies to Boeing was whether the United States continued to provide such subsidies to Boeing after 2006. In resolving that issue, the Panel addressed the following three questions: (i) whether the original panel had already made a determination as to whether Boeing continued to use FSC/ETI tax concessions after 2006; (ii) whether it would be sufficient for the European Union to establish that, after 2006, FSC/ETI tax concessions continued to be available, or whether it was required to establish that Boeing used FSC/ETI tax concessions; and (iii) whether, based on the evidence submitted by the parties, Boeing did in fact continue to use FSC/ETI tax concessions.387
5.135.
With respect to the first question, the Panel noted that the original panel confirmed that between 1989 and 2006, FSC/ETI tax concessions constituted specific subsidies. However, the European Communities' estimate of the amount of those subsidies did not include the alleged post‑2006 tax concessions. Therefore, the original panel had found that it was not necessary for it to reach a conclusion as to whether Boeing continued to use FSC/ETI tax concessions after 2006.388 Accordingly, there was no determination by the original panel as to whether Boeing continued to use FSC/ETI tax concessions after 2006.389
5.136.
The Panel then turned to the second question, namely whether the European Union was required to establish that Boeing used the FSC/ETI tax concessions after 2006, or whether it was sufficient for the European Union to establish that the FSC/ETI tax concessions were available to Boeing, so that Boeing was eligible to use these concessions after 2006.390 The Panel concluded that, where a tax concession is made available – but a potential recipient does not take advantage of the concession – the recipient continues to pay government revenue that is otherwise due, and there is no act of "foregoing" or "failure to collect" revenue on the part of the government.391 Therefore, the Panel considered that the European Union was required to establish that Boeing received FSC/ETI tax concessions in order to demonstrate a financial contribution under Article 1.1(a)(1)(ii) of the SCM Agreement, and that it would be insufficient for the European Union to show only that FSC/ETI tax concessions were available to Boeing.392
5.137.
In addressing the third question, the Panel found that the evidence adduced by the European Union related to the question of whether FSC/ETI tax concessions were available to Boeing, and thus fell short of showing that Boeing used FSC/ETI tax concessions.393 In addition, the Panel found that the United States' evidence constituted a prima facie case that Boeing did notuse FSC/ETI tax concessions after 2006 and that the European Union's evidence was insufficient to rebut that.394
5.138.
The Panel thus concluded that the European Union had not established that, after the expiry of the implementation period, the United States continues to grant or maintain subsidies to Boeing in the form of tax concessions pursuant to the FSC/ETI measures, because the European Union had failed to demonstrate that those tax concessions involved a financial contribution within the meaning of Article 1.1(a)(1)(ii) of the SCM Agreement.395

5.3.2 Whether the Panel erred in its finding under Article 1.1(a)(1)(ii) of the SCM Agreement with respect to FSC/ETI tax concessions

5.139.
The European Union appeals the Panel's finding that the European Union had not established that, after the expiry of the implementation period, the United States continues to grant or maintain subsidies to Boeing in the form of FSC/ETI tax concessions.396 The European Union argues that this finding is based on the Panel's erroneous interpretation of Article 1.1(a)(1)(ii) of the SCM Agreement as requiring the European Union to demonstrate that Boeing used FSC/ETI tax concessions in order to establish a financial contribution in the form of revenue foregone.397
5.140.
The United States, for its part, submits that the Panel correctly found that the European Union had failed to establish that Boeing received FSC/ETI subsidies in the post‑implementation period.398 We begin by setting out our interpretation of Article 1.1(a)(1)(ii) of the SCM Agreement as relevant to the claim before us. Then, we turn to review the Panel's analysis and assess whether it erred in the interpretation of this provision.
5.141.
Article 1.1(a)(1)(ii) of the SCM Agreement provides that there is a financial contribution by a government where "government revenue that is otherwise due is foregone or not collected (e.gfiscal incentives such as tax credits)."399 The term "revenue" is defined as an "individual source or item of (private or public) income" or "the amount of income deriving from this".400 The term "government" qualifies the term "revenue" and indicates that Article 1.1(a)(1)(ii) is concerned with revenue to which a government is entitled. Article 1.1(a)(1)(ii) describes the relevant conduct that may constitute a financial contribution under this provision as the foregoing or not collecting of government revenue. The text of Article 1.1(a)(1)(ii) also indicates, by way of example, that government revenue may be "foregone" or "not collected" by means of fiscal incentives, such as tax credits.
5.142.
The Appellate Body has held that the word "foregone" in Article 1.1(a)(1)(ii), on the one hand, suggests that a government has given up an entitlement to raise revenue.401 The word "collect", on the other hand, indicates an action of gathering something, such as contributions of money or taxes.402 Government revenue "not collected" in Article 1.1(a)(1)(ii) thus concerns the omission to gather revenue, while government revenue "foregone" refers to the relinquishment of an entitlement to raise revenue.
5.143.
We recall that, in introducing the forms of financial contribution listed in subparagraphs (i) to (iv), Article 1.1(a)(1) of the SCM Agreement stipulates that "there is a financial contribution by a government". This indicates that each of the subparagraphs (i) to (iv) of Article 1.1(a)(1) of the SCM Agreement is concerned with a financial contribution made by a government.403 Thus, for a financial contribution to exist under Article 1.1(a)(1), it must be established that a type of conduct that matches the description in one of the subparagraphs (i) to (iv) has occurred and that this conduct has been carried out by a government. We note that the type of conduct that falls within the scope of subparagraph (ii) of Article 1.1(a)(1) includes foregoing or not collecting revenue. Accordingly, the analysis of whether there is a financial contribution within the meaning of Article 1.1(a)(1)(ii) of the SCM Agreement requires a determination of whether there has been conduct by a government that amounts to foregoing or not collecting revenue.
5.144.
As noted above, government revenue may be "foregone" or "not collected" through the provision of fiscal incentives to taxpayers. Taxpayers may either use or not use available tax concessions. However, because the introductory clause of Article 1.1(a)(1) of the SCM Agreement refers to "a financial contribution by a government", the determination of whether revenue is "foregone" or "not collected" within the meaning of Article 1.1(a)(1)(ii) must focus on the conduct of a government, rather than the use of tax concessions by the eligible taxpayers. This means that, in principle, "{e}vidence relied upon in such an analysis must be located in the 'rules of taxation that each Member, by its own choice, establishes for itself.'"404 At the same time, we are not suggesting that evidence relating to the use of available tax concessions by the eligible taxpayers cannot be relevant in the determination of whether a government has "foregone" or "not collected" revenue. While evidence concerning the responding Member's rules of taxation is most relevant in making such a determination, the use of available tax concessions by the eligible taxpayers may provide additional indications that a government has "foregone" or "not collected" its revenue.
5.145.
Article 1.1(a)(1)(ii) further refers to revenue that is "otherwise due".405 We note that the word "otherwise" is defined as "in another case" or "in other circumstances"406, while the word "due" denotes that something is owed or payable as an enforceable obligation or debt.407 Article 1.1(a)(1)(ii) thus refers to the foregoing of or not collecting revenue that would have been payable in other circumstances. Accordingly, Article 1.1(a)(1)(ii) does not cover any decision by a government not to tax certain income. The words "otherwise due" ensure that only revenue that would have been payable in other circumstances, that is revenue otherwise due, can constitute a financial contributionunder Article 1.1(a)(1)(ii). In US – FSC (Article 21.5 – EC), the Appellate Body underscored that a "financial contribution" under Article 1.1(a)(1)(ii) does not arise simply because a government does not tax income that it could have taxed.408 While, from a fiscalperspective, a government might be said to "forego" revenue when it chooses not to tax certain income, it does not mean that this revenue is "otherwise due" within the meaning of Article 1.1(a)(1)(ii) of the SCM Agreement.409
5.146.
As the Appellate Body observed in the past, the term "otherwise due" implies a comparison between the challenged measure and a "defined, normative benchmark".410 The Appellate Body considered that, because Members, in principle, have the sovereign authority to determine their own rules of taxation, the comparison under Article 1.1(a)(1)(ii) must necessarily be between the rules of taxation contained in the challenged measure and other rules of taxation of the Member concerned.411 The Appellate Body further recognized that it may be difficult to identify the appropriate benchmark for comparison under Article 1.1(a)(1)(ii), because domestic rules of taxation are varied and complex. The Appellate Body stated that, "'{i}n identifying the appropriate benchmark for comparison, panels must obviously ensure that they identify and examine fiscal situations which it is legitimate to compare', and that this will be the case when there is 'a rational basis for comparing the fiscal treatment of the income subject to the contested measure and the fiscal treatment of certain other income.'"412
5.147.
The Appellate Body in the original proceedings further elaborated on how a panel should conduct the analysis of financial contribution under Article 1.1(a)(1)(ii) of the SCM Agreement. The Appellate Body observed that this analysis requires a comparison between the tax treatment that applies to the alleged subsidy recipients and the tax treatment of comparable income of comparably situated taxpayers.413 Accordingly, a panel examining a claim under Article 1.1(a)(1)(ii) of the SCM Agreementshould first identify the tax treatment that applies to the income of the alleged recipients.414 As a second step, a panel should identify a benchmark for comparison, that is, the tax treatment of comparable income of comparably situated taxpayers.415 Identifying a benchmark involves an examination of the structure of the domestic tax regime and its organizing principles.416 As a third step, a panel should compare the reasons for the challenged tax treatment with the benchmark tax treatment it has identified after scrutinizing a Member's tax regime.417 Such a comparison will enable a panel to determine whether, in light of the treatment of the comparable income of comparably situated taxpayers, a government has foregone or not collected revenue that is otherwise due in relation to the income of the alleged recipients.418
5.148.
In the present case, the European Union argues that the Panel erred in the interpretation of Article 1.1(a)(1)(ii) of the SCM Agreement in finding that, in order to establish that revenue otherwise due is foregone, the European Union was required to demonstrate that Boeing actually used FSC/ETI tax concessions.419 For the European Union, the phrase "government revenue that is otherwise due is foregone" refers to the foregoing of an entitlementto government revenue, irrespective of whether that entitlement is actually exercised by the recipient.420 The European Union submits that, as found by the Appellate Body in US – FSC, "the term 'otherwise due' implies some kind of comparison between the revenues due under the contested measure and revenues that would be due in some other situation" and that "the basis of comparison must be the tax rules applied by the Member in question."421 Therefore, an enquiry of whether "government revenue that is otherwise due is foregone" does not require consideration of whether a tax concession provided to a recipient is used by an individual recipient, but it does require a comparison between what the challenged tax treatment provides and what the baseline tax treatment provides.422
5.149.
Furthermore, the European Union argues that the Panel's interpretation of Article 1.1(a)(1)(ii) would allow for an easy circumvention of the SCM Agreement, thereby defeating its object and purpose. In particular, the European Union contends that, under the Panel's interpretation, all that would be required to "withdraw" a subsidy would be for the recipient to stop unilaterally using the available tax break between the end of the implementation period and the closing of the factual record in the compliance dispute. In the European Union's view, however, this would not prevent the recipient from using the tax break again at any point in the future.423
5.150.
For its part, the United States argues that the European Union's claim before the Panel was that Boeing used FSC/ETI tax concessions after the implementation period. Therefore, the dispositive question before the Panel was whether Boeing received the alleged subsidies. The United States thus contends that the Panel was correct in focusing on that question, without addressing the question of whether a financial contribution was "available" to Boeing.424 The United States also considers that the Panel applied a correct approach to the assessment of the European Union's claim because the European Union challenged a subsidy recipient's use of a subsidy, rather than the measure at issue "as such".425
5.151.
The United States further submits that the European Union's concerns about the circumvention of the SCM Agreement are not relevant in the present case, because the Panel found that Boeing stopped using FSC/ETI tax concessions in 2006, had not used them since, and had no intention of using them in the future. Thus, according to the United States, nothing in the Panel's reasoning would prevent a future panel from addressing manipulations of the kind described by the European Union if evidenced by the facts before it.426
5.152.
Turning to our assessment of the Panel's analysis, we recall that the Panel addressed whether the European Union was required to establish that "Boeing in fact 'received' or 'used' the FSC/ETI benefits after 2006", or whether it was sufficient for the European Union to establish "that the FSC/ETI benefits were available to Boeing, or that Boeing was eligible to use the FSC/ETI benefit after 2006".427 The Panel did not consider that demonstrating that the "FSC/ETI benefits were available to Boeing is equivalent to demonstrating that Boeing receives a subsidy within the meaning of Article 1.1(a)(1)(ii) of the SCM Agreement".428 The Panel explained that if a tax concession is made available – but the recipient does not take advantage of the concession – the recipient continues to pay revenue that is otherwise due, and there is no act of "foregoing" or "failure to collect" revenue on the part of the government.429 The Panel thus considered that the European Union was required to demonstrate that Boeing used FSC/ETI tax concessions in order for a financial contribution under Article 1.1(a)(1)(ii) of the SCM Agreement to exist.430
5.153.
We recall that, according to our interpretation of Article 1.1(a)(1)(ii) of the SCM Agreement above, revenue "foregone", in the context of this provision, refers to a government relinquishing an entitlement to raise revenue. This means that the analysis of whether there is a financial contribution in the form of revenue "foregone" requires a determination of whether a government has relinquished an entitlement to raise revenue. In principle, evidence relied on in such an analysis will be located in a Member's taxation rules.431 In the present case, the Panel did not make that determination. The Panel's analysis focused on whether the European Union had demonstrated whether Boeing used FSC/ETI tax concessions. This does not comport with our interpretation of Article 1.1(a)(1)(ii) of the SCM Agreement. As noted above, the determination of whether there is a financial contribution within the meaning of Article 1.1(a)(1)(ii) must focus on the conduct of a government, rather than the use of tax concessions by the eligible taxpayers. The Panel's statement that there is no act of "foregoing" or "failure to collect" revenue on the part of the government if a tax concession is made available but the recipient does not take advantage of the concession reflects an erroneous understanding of Article 1.1(a)(1)(ii) of the SCM Agreement.432
5.154.
In view of the above, we find that the Panel erred in its interpretation of Article 1.1(a)(1)(ii) of the SCM Agreement and its assessment of whether FSC/ETI tax concessions constitute a financial contribution within the meaning of this provision. Therefore, we reverse the Panel's finding, in paragraphs 8,612 and 11.7(c)(ii) of the Panel Report, that the European Union had not established that, after the expiry of the implementation period, the United States continues to grant or maintain subsidies to Boeing in the form of FSC/ETI tax concessions because the European Union had failed to demonstrate that those tax concessions involved a financial contribution within the meaning of Article 1.1(a)(1)(ii) of the SCM Agreement.

5.3.3 Completion of the legal analysis

5.155.
We now turn to consider the European Union's request for the completion of the legal analysis. The European Union requests us to complete the legal analysis and find that the United States continues to grant or maintain prohibited FSC/ETI subsidies after the expiry of the implementation period and thus failed to "withdraw the subsidy" within the meaning of Article 7.8 of the SCM Agreement.433 The European Union has not requested the completion of the legal analysis with respect to whether the United States has taken "appropriate steps" to remove the adverse effects of FSC/ETI subsidies. The United States responds that the European Union has failed to identify findings of fact or undisputed evidence that would allow the Appellate Body to complete the legal analysis.434
5.156.
We recall the Panel's finding that the European Union had failed to establish that, after the expiry of the implementation period, the United States continues to grant or maintain subsidies to Boeing in the form of tax concessions pursuant to the FSC/ETI measures.435 We note, however, that the scope of the European Union's request for the completion of the legal analysis appears to be formulated broadly. On its face, it may be understood to encompass FSC/ETI subsidies at large, and not only FSC/ETI subsidies provided to Boeing. We emphasize that the recommendations and rulings of the DSB in this dispute concern only the FSC/ETI subsidies to Boeing. Accordingly, the scope of our completion of the legal analysis in this dispute is confined to FSC/ETI subsidies with respect to Boeing.
5.157.
The Appellate Body may complete the legal analysis, with a view to facilitating the prompt settlement and effective resolution of the dispute, when the factual findings by the panel436 and/or facts on the Panel record, which are uncontested by the disputing parties437, provide a sufficient factual basis for doing so.438 Accordingly, we proceed to assess whether there is a sufficient factual basis for us to complete the legal analysis in the present case and to determine whether the United States has complied with Article 7.8 of the SCM Agreement. We begin by noting that Article 7.8 sets out two options for the Member granting or maintaining a subsidy to comply with the recommendations and rulings of the DSB. The Member in question shall either: (i) take appropriate steps to remove the adverse effects; or (ii) withdraw the subsidy.439
5.158.
The Appellate Body underscored that the use of the word "or" in the text of Article 7.8 suggests that the Member concerned may implement the recommendations and rulings of the DSB under Part III of the SCM Agreement by choosing either of these alternative pathways to achieving compliance.440 The Member concerned is not required to "take appropriate steps to remove the adverse effects" of a subsidy and to "withdraw" the same subsidy. Rather, either of these actions can achieve compliance.441 The Appellate Body also recognized that the words "granting or maintaining" a subsidy indicate that Article 7.8 reflects an obligation of the Member concerned to cease any conduct amounting to the "granting or maintaining" of subsidies that cause adverse effects.442
5.159.
In US – Upland Cotton (Article 21.5 – Brazil),the Appellate Body explained that this obligation is "of a continuous nature, extending beyond subsidies granted in the past".443 Furthermore,the Appellate Body noted that the phrases "shall take" and "shall withdraw" indicate that compliance with Article 7.8 "will usually involve some action" or "affirmative action" by the subsidizing Member, such that it "would normally not be able to abstain from taking any action on the assumption that the subsidy will expire or that the adverse effects of the subsidy will dissipate on their own".444 However, this does not suggest that an implementing Member has a compliance obligation with respect to a subsidy or subsidies that no longer exist.445 Rather, it reflects that the obligation under Article 7.8 extends to recurring annual payments "maintained" by the respondent beyond the original reference period.446 As observed by the Appellate Body in EC and certain member States – Large Civil Aircraft (Article 21.5 – US), if a subsidy has ceased to exist, an implementing Member is not required to withdraw the subsidy or "take appropriate steps to remove the adverse effects" with respect to such a subsidy.447
5.160.
In the present dispute, the United States asserts that it has "enacted legislation terminating the Foreign Sales Corporation and Extraterritorial Income ('FSC/ETI') tax benefits".448 We understand the United States to argue that, by enacting the TIPRA, the United States has withdrawn the FSC/ETI subsidies with respect to Boeing by ceasing to provide the financial contribution forming the basis of those subsidies. Our analysis therefore focuses on whether, by enacting the TIPRA, the United States has ceased to provide the financial contribution underpinning the FSC/ETI subsidies to Boeing and, by that means, has withdrawn these subsidies with respect to Boeing.
5.161.
We have found above that the Panel erred in focusing on whether Boeing had used FSC/ETI concessions in its assessment of whether the United States continues to provide a financial contribution in the form of revenue foregone after the expiry of the implementation period. The analysis of whether there is a financial contribution in the form of revenue "foregone" should focus on whether a government has given up its entitlement to revenue, instead of whether the available tax concessions were used by the eligible taxpayers. Accordingly, we now examine whether uncontested evidence on the Panel record of these proceedings and the original proceedings allows us to determine if, by enacting the TIPRA, the United States has ceased to provide the financial contribution in a manner that the US government may no longer be considered to be giving up its entitlement to revenue vis-à-vis Boeing.
5.162.
We recall that the TIPRA was enacted on 17 May 2006 and is the latest legislative act concerning FSC/ETI tax concessions. Section 513 of the TIPRA seeks to repeal the two remaining FSC/ETI tax concessions – the original FSC tax concessions, grandfathered by the ETI Act, and the ETI Act exclusion of "extraterritorial income" from taxation, grandfathered by the AJCA. Section 513(c) of the TIPRA provides that "{t}he amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act."449
5.163.
On 22 December 2006, the IRS Office of Chief Counsel issued the 2006 IRS Memorandum clarifying that the TIPRA repeals FSC/ETI tax concessions prospectively on a transaction-by-transaction basis for transactions entered into during a taxable year that begins after 17 May 2006.450 Before the Panel, the European Union relied on the 2006 IRS Memorandum in support of its position that the TIPRA allows Boeing to claim concessions with respect to income derived from certain pre‑2006 transactions and received in the post‑implementation period.451 The United States did not specifically contest the proposition advanced by the European Union. Instead the United States submitted evidence seeking to establish that Boeing did not use FSC/ETI tax concessions.452 The United States also confirmed in these panel proceedings that no guidance superseding the 2006 IRS Memorandum had been issued.453
5.164.
On appeal, the European Union submits that the 2006 IRS Memorandum is uncontested evidence regarding the meaning of the TIPRA that we can rely on in the completion of the legal analysis.454 The United States, however, asserts that the 2006 IRS Memorandum does not set out a "binding interpretation" of the TIPRA.455
5.165.
We note that in deciding whether evidence is uncontested, and can thus be relied on for the purpose of completing the legal analysis, we must consider it as presented to the panel, and cannot take into account subsequent contestation of such evidence in the appellate proceedings without substantiation based on the panel record.456 In the present case, the European Union presented before the Panel the 2006 IRS Memorandum in support of its argument that, pursuant to the TIPRA, Boeing remains eligible for FSC/ETI tax concessions in the post‑implementation period. In response, the United States submitted its own evidence regarding Boeing's use of FSC/ETI tax concession, but did not challenge the interpretative value of the 2006 IRS Memorandum regarding the TIPRA. Thus, as presented to the Panel, the 2006 IRS Memorandum is uncontested evidence for the purposes of our completion of the legal analysis. In any event, even if the 2006 IRS Memorandum does not set out a "binding interpretation" of the TIPRA under US law, this does not mean that it cannot be relied on as pertinent evidence in these proceedings. Therefore, we can rely on the 2006 IRS Memorandum in our completion of the legal analysis. We now turn to examine the relevant text of this Memorandum.
5.166.
The 2006 IRS Memorandum provides, in relevant part:

The TIPRA repeal date repeals the binding contract rules for taxable years that begin after May 17, 2006. Because the binding contract rules apply on a transaction-by-transaction basis, we interpret the TIPRA repeal date as repealing the binding contract rules prospectively, on a transaction-by-transaction basis, for transactions entered into during a taxable year that begins after May 17, 2006. In other words, the binding contract rules apply to certain transactions, but only if such transactions are not entered into in a taxable year that begins after May 17, 2006.457

5.167.
The quoted passage from the 2006 IRS Memorandum clarifies that the TIPRA repeals the "binding contract rules", referred to in Sections 513(a) and 513(b) of the TIPRA, prospectively, for transactions entered into during a taxable year that begins after 17 May 2006. It also explicitly recognizes that the "binding contract rules" continue to apply to transactions that are not entered into during a taxable year that begins after 17 May 2006. The "binding contract rules" refer to the provision of the ETI Act, which grandfathered the original FSC tax concessions, and the provisions of Section 101(f) of the AJCA, which grandfathered the ETI Act exclusion of "extraterritorial income" from taxation, with respect to certain transactions occurring pursuant to a binding contract that was in effect on a specified date. Thus, based on the interpretative guidance in the 2006 IRS Memorandum, the TIPRA terminates the binding contract rules of the ETI Act and the AJCA for transactions that are entered into during a taxable year that begins after 17 May 2006. However, Section 513(c) of the TIPRA allows the application of the binding contract rules of the ETI Act and the AJCA to certain transactions that are entered into during taxable years before 17 May 2006. For purposes of the present dispute, this means that Section 513 of the TIPRA has not removed FSC/ETI tax concessions for certain qualifying transactions entered into during taxable years before 17 May 2006. This has also been confirmed by the United States in the course of the oral hearing.458
5.168.
The European Union argued before the Panel that the continued availability of FSC/ETI tax concessions for certain qualifying transactions entered into during taxable years before 17 May 2006 allows Boeing to claim FSC/ETI tax concessions with respect to income generated by such transactions after the end of the period covered by the findings of the original panel, that is, after 31 December 2006.459 The European Union further submitted a list of orders for Boeing aircraft that allegedly qualify for the remaining FSC/ETI tax concessions and generate income after 31 December 2006.460 The United States did not respond to that evidence but referred instead to the Zrust statement that Boeing, as a company, did not consider income received after 31 December 2006 to be eligible for FSC/ETI tax concessions.461
5.169.
In its analysis, the Panel did not address the European Union's argument regarding Boeing's eligibility for FSC/ETI tax concessions in the post-implementation period and did not examine the list of orders for Boeing aircraft submitted by the European Union. The Panel focused instead on the evidence submitted by the United States pertaining to the question of Boeing's use of FSC/ETI tax concessions.462 The Panel thus did not reach a conclusion regarding the extent of Boeing's eligibility for FSC/ETI tax concessions.
5.170.
As noted above, Section 513 of the TIPRA has not removed FSC/ETI tax concessions for certain qualifying transactions entered into during taxable years before 17 May 2006. This means that if Boeing entered into such qualifying transactions during taxable years before 17 May 2006, then Boeing is entitled to claim FSC/ETI tax concessions with respect to income generated by those transactions. Therefore, to the extent that Boeing remains entitled to FSC/ETI tax concessions in the post-implementation period, the United States has not ceased to provide a financial contribution and thus has not withdrawn FSC/ETI subsidies with respect to Boeing within the meaning of Article 7.8 of the SCM Agreement.

5.3.4 Conclusion

5.171.
In sum, for revenue to be considered "foregone" under Article 1.1(a)(1)(ii) of the SCM Agreement, a government must relinquish an entitlement to raise revenue. Accordingly, establishing that such a financial contribution exists requires a determination that a government has relinquished an entitlement to raise revenue. This determination must focus on the conduct of a government, rather than on the use of tax concessions by the eligible taxpayers. We find that the Panel erred by focusing instead on whether Boeing used FSC/ETI tax concessions.
5.172.
We therefore reverse the Panel's finding, in paragraphs 8,612 and 11.7.c.ii of the Panel Report, that the European Union had not established that, after the expiry of the implementation period, the United States grants or maintains subsidies to Boeing in the form of FSC/ETI tax concessions because the European Union had failed to demonstrate that those tax concessions involved a financial contribution within the meaning of Article 1.1(a)(1)(ii) of the SCM Agreement. Furthermore, we have completed the legal analysis and find that, to the extent that Boeing remains entitled to FSC/ETI tax concessions in the post-implementation period, the United States has not ceased to provide a financial contribution and thus has not withdrawn FSC/ETI subsidies with respect to Boeing within the meaning of Article 7.8 of the SCM Agreement.

5.4 European Union's claims relating to the Panel's findings concerning specificity under Article 2.1(c) of the SCM Agreement

5.173.
In relation to the Panel's findings under Article 2.1(c) of the SCM Agreement, the European Union raises two sets of claims relating to two different subsidy measures. First, the European Union requests us to reverse the Panel's finding that the subsidies provided to Boeing through the City of Wichita IRBs are not specific within the meaning of the third factor in Article 2.1(c), second sentence ("the granting of disproportionately large amounts of subsidy to certain enterprises"), and its conclusion that the European Union failed to establish that the United States has not withdrawn the subsidy.463 In support of this request, the European Union argues that the Panel erred in its interpretation and application of Article 2.1(c) of the SCM Agreement and failed to make an objective assessment of the matter before it under Article 11 of the DSU, in limiting its assessment of de facto specificity of the City of Wichita IRB subsidy programme to the period of time after the end of the United States' implementation period.464 For its part, the United States asserts that the Panel did not err in finding that the subsidy provided through the IRBs is no longer specific and correctly based the specificity analysis on information post-dating the implementation period.465
5.174.
Second, the European Union requests us to reverse the Panel's finding that the subsidies to Boeing provided by South Carolina through EDBs for the funding of Project Gemini facilities and infrastructure are not specific within the meaning of Article 2.1(c) of the SCM Agreement.466 In support of this request, the European Union claims that the Panel erred in the interpretation of Article 2.1(c) by interpreting the term "limited number" in the first factor in Article 2.1(c), second sentence ("use of a subsidy programme by a limited number of certain enterprises"), as meaning a number smaller than three. The European Union also argues that the Panel erred in its interpretation and application of the term "certain enterprises" in the same clause by including in its analysis EDBs issued to public entities, such as cities and public colleges. Furthermore, the European Union submits that the Panel erred in interpreting the term "predominant" in the second factor in Article 2.1(c), second sentence ("predominant use by certain enterprises"), to involve a concept entirely different from the term "disproportionately" in the third factor in Article 2.1(c), second sentence ("the granting of disproportionately large amounts of subsidy to certain enterprises")467. In addition, the European Union alleges that the Panel failed to make an objective assessment as required pursuant to Article 11 of the DSU of the factors in the third sentence of Article 2.1(c).468 In response, the United States submits that the Panel's specificity findings relating to EDBs were based on a correct interpretation and application of Article 2 of the SCM Agreement as well as on an objective assessment of the evidence, consistent with Article 11 of the DSU.469
5.175.
We begin by addressing Article 2.1(c) of the SCM Agreement. We then turn to the European Union's claims relating to the IRB subsidies that the Panel erred in its interpretation and application of Article 2.1(c) and failed to make an objective assessment of the matter when finding that the relevant period over which to consider the existence of "disproportionately large amounts of subsidy" in these proceedings is the period after the end of the United States' implementation period. In this context, we also consider the European Union's request for completion of the legal analysis with respect to the IRB subsidies. Thereafter, we address the European Union's claims relating to the EDB subsidies that the Panel erred in its interpretation of the term "limited number", its interpretation and application of the term "certain enterprises", and its interpretation of the term "predominant use" in Article 2.1(c), second sentence. Finally, we consider the European Union's claim under Article 11 of the DSU regarding the Panel's assessment of the factors in the third sentence of Article 2.1(c), and its request for completion of the legal analysis with regard to the EDB subsidies.

5.4.1 Article 2.1(c) of the SCM Agreement

5.176.
Article 2.1 of the SCM Agreement reads:

2.1 In order to determine whether a subsidy, as defined in paragraph 1 of Article 1, is specific to an enterprise or industry or group of enterprises or industries (referred to in this Agreement as "certain enterprises") within the jurisdiction of the granting authority, the following principles shall apply:

(a) Where the granting authority, or the legislation pursuant to which the granting authority operates, explicitly limits access to a subsidy to certain enterprises, such subsidy shall be specific.

(b) Where the granting authority, or the legislation pursuant to which the granting authority operates, establishes objective criteria or conditions{*} governing the eligibility for, and the amount of, a subsidy, specificity shall not exist, provided that the eligibility is automatic and that such criteria and conditions are strictly adhered to. The criteria or conditions must be clearly spelled out in law, regulation, or other official document, so as to be capable of verification.

(c) If, notwithstanding any appearance of non‑specificity resulting from the application of the principles laid down in subparagraphs (a) and (b), there are reasons to believe that the subsidy may in fact be specific, other factors may be considered. Such factors are: use of a subsidy programme by a limited number of certain enterprises, predominant use by certain enterprises, the granting of disproportionately large amounts of subsidy to certain enterprises, and the manner in which discretion has been exercised by the granting authority in the decision to grant a subsidy.{**} In applying this subparagraph, account shall be taken of the extent of diversification of economic activities within the jurisdiction of the granting authority, as well as of the length of time during which the subsidy programme has been in operation.

{*fn original} 2 Objective criteria or conditions, as used herein, mean criteria or conditions which are neutral, which do not favour certain enterprises over others, and which are economic in nature and horizontal in application, such as number of employees or size of enterprise.

{**fn original} 3 In this regard, in particular, information on the frequency with which applications for a subsidy are refused or approved and the reasons for such decisions shall be considered.

5.177.
At the outset, we note that the chapeau of Article 2 refers to "principles" that shall apply in determining whether a subsidy is specific to certain enterprises. We recall that the use of the term "principles" in the chapeau of Article 2.1 of the SCM Agreement (instead of, for instance, "rules") suggests that subparagraphs (a) through (c) of this provision are to be considered within an analytical framework that recognizes and accords appropriate weight to each principle.470 Consequently, the application of one of the subparagraphs of Article 2.1 may not by itself be determinative in arriving at a conclusion that a particular subsidy is or is not specific. Specifically, in accordance with the first sentence of Article 2.1(c), despite the conclusion that there is an "appearance of non-specificity" following the application of the principles set out in Article 2.1(a) and (b), panels may consider that, in light of the arguments and evidence submitted by the parties, "there are reasons to believe that the subsidy may in fact be specific."471 In such circumstances, panels should consider the relevant factual features of a challenged subsidy in light of the factors listed in Article 2.1(c).472 The aim of the inquiry under Article 2.1(c) is to identify evidence of allocation or use of a subsidy that supports a finding of specificity, notwithstanding any appearance of non‑specificity that might arise from a review of the relevant legislation or the express acts of a granting authority.473
5.178.
The second sentence of Article 2.1(c) prescribes the following factors for consideration: (i) use of a subsidy programme by a limited number of certain enterprises; (ii) predominant use by certain enterprises; (iii) the granting of disproportionately large amounts of subsidy to certain enterprises; and (iv) the manner in which discretion has been exercised by the granting authority in the decision to grant a subsidy. The third sentence of Article 2.1(c) adds that, in applying this provision, account shall be taken of the extent of diversification of economic activities within the jurisdiction of the granting authority, as well as of the length of time during which the subsidy programme has been in operation. Which factors are relevant to the analysis of specificity under Article 2.1(c) will be a function of what reasons there are to believe that the subsidy may in fact be specific. Thus, a conclusion as to the existence of specificity in fact may, depending on the circumstances of the case, rely on an assessment of one, several, or all of those factors.474
5.179.
The first factor in the second sentence of Article 2.1(c) refers to the "use of a subsidy programme by a limited number of certain enterprises". The word "limited" refers to something that is "{c}ircumscribed within definite limits, bounded, restricted … small, slight, low (in number or extent)".475 Specifically, the term "limited number" pertains to a quantity of "certain enterprises" that must be found to have used the subsidy programme, and it suggests "an inquiry into whether the enterprises or industries so particularized constitute a quantitatively limited group".476 The concept of limitation is contained in both Article 2.1(a) and Article 2.1(c) of the SCM Agreement. However, whereas subparagraph (a) concerns limitations found explicitly in, for example, the legal instruments of a government authority, subparagraph (c) centres on the existence of limitations on the number of enterprises or industries that actually use the subsidy.477
5.180.
In this respect, we note the European Union's argument that what constitutes a "limited number" of certain enterprises in a particular case can be determined either by reference to the universe of enterprises eligible to receive the subsidy, or, alternatively, by reference to all enterprises within the jurisdiction of the granting authority.478 According to the European Union, it is for the complainant to make this choice. In this regard, we note that the principles in subparagraphs (a) to (c) of Article 2.1 are to be interpreted in context.479 The text of Article 2.1(c) makes it clear that the application of Article 2.1(c) proceeds on the basis of the conclusions reached as a result of the application of the preceding subparagraphs of that provision.480 The analysis under Article 2.1(a) and (b) involves consideration of legislation or of a granting authority's acts or pronouncements that explicitly limit access to the subsidy or establish objective access criteria or conditions. Consequently, where a panel's assessment proceeds from Article 2.1(a) and (b) to Article 2.1(c), the panel's analysis under subparagraph (c) would normally build upon the relevant legislative framework, and in particular the conditions of eligibility for the subsidy, examined under Article 2.1(a) and (b).481 In this regard, the Appellate Body has stated that the inquiry under Article 2.1(c) requires a panel to examine the reasons as to why the actual allocation or use of the subsidy differs from an allocation or use that would be expected if the subsidy were administered in accordance with the conditions of eligibility for that subsidy.482
5.181.
At the same time, a de facto specificity inquiry under Article 2.1(c) does not require identification of an explicit subsidy programme implemented through law or regulation or through other explicit means.483 In this regard the Appellate Body has observed that "in the absence of any written instrument or explicit pronouncement, evidence of a 'systematic activity or series of activities' may provide a sufficient basis to establish the existence of an unwritten subsidy programme in the context of assessing de facto specificity."484 Thus, depending on the specific facts at issue and the arguments made by the parties, the assessment of specificity may commence with an inquiry under subparagraph (c) rather than proceed from subparagraphs (a) and (b).485 Moreover, it may not always be possible to come to a definitive conclusion as to the existence of objective criteria or conditions governing the eligibility for, and the amount of, a subsidy within the meaning of Article 2.1(b), without examining factual evidence from the perspective of Article 2.1(c). In such circumstances, it may not be possible or appropriate for a panel to assess whether the number of users of the subsidy programme is small or restricted within the meaning of the first factor in Article 2.1(c), second sentence, in light of the conditions of eligibility for that subsidy, either because no de jure conditions of eligibility exist or because their objectivity is contested. However, in those cases where the granting authority or the legislation pursuant to which the granting authority operates sets out explicit eligibility criteria for the subsidy, panels should normally examine the question of whether the subsidy is used by a limited number of certain enterprises in light of these eligibility criteria, as assessed under subparagraphs (a) and (b).486 In any event, we consider that the universe of enterprises relevant for the purpose of this assessment depends on the characteristics of the measure and the circumstances of the case, rather than on how a complainant decides to frame its claim.
5.182.
Turning to the term "certain enterprises" in the first factor of Article 2.1(c), second sentence, we note that this term also appears in the chapeau of Article 2.1 and in Article 2.1(a). The chapeau of Article 2.1 defines "certain enterprises" as "an enterprise or industry or group of enterprises or industries". As the provision stipulates, this definition applies throughout the SCM Agreement.487 The Appellate Body has observed that "enterprise" may be defined as "{a} business firm, a company".488 Furthermore, we note that the term "enterprise" may refer to "{a} commercial or industrial undertaking, esp. one involving risk; a firm, company, or business".489 In turn, "industry" signifies "{a} particular form or branch of productive labour; a trade, a manufacture"490; "an industry, or group of 'industries', may be generally referred to by the type of products they produce"; "the concept of an 'industry' relates to producers of certain products"; and the "breadth of this concept of 'industry' may depend on several factors in a given case."491 The Appellate Body has further held that the term "certain enterprises" may refer to a single enterprise or industry or a class of enterprises or industries that are known and particularized; that the concept of "certain enterprises" involves a certain amount of indeterminacy at the edges; and that any determination of whether a number of enterprises or industries constitute "certain enterprises" can be made only on a case-by-case basis.492
5.183.
As regards the second factor in Article 2.1(c), second sentence, namely the phrase "predominant use by certain enterprises", we note that definitions of the term "predominant" include "{c}onstituting the main … or strongest element; prevailing".493 As we see it, in the context of Article 2.1(c), "predominance" may relate to the number of certain enterprises using the subsidy, the amounts of subsidy used by certain enterprises, or the incidence with which certain enterprises use a subsidy. The first factor in Article 2.1(c), second sentence ("use of a subsidy programme by a limited number of certain enterprises"), already captures the aspect of predominance relating to the number of subsidy users. In turn, the third factor in Article 2.1(c), second sentence ("the granting of disproportionately large amounts of subsidy to certain enterprises"), specifically captures the aspect of predominance relating to the amounts of subsidy used by certain enterprises. The fact that both the number of subsidy users and the amounts of subsidy used are captured by the other factors of Article 2.1(c) suggests that "predominant use by certain enterprises" covers primarily the element of the incidence or frequency with which the subsidy is used by certain enterprises.
5.184.
Finally, the third factor in Article 2.1(c), second sentence, concerns "the granting of disproportionately large amounts of subsidy to certain enterprises". The Appellate Body has noted that the language of this phrase indicates that the first task of a panel is to identify the "amounts of subsidy" granted and then to assess whether the amounts of subsidy are "disproportionately large".494 According to the Appellate Body, determining the existence of disproportionality "requires an assessment as to whether the amounts of subsidy are out of proportion, or relatively too large" and "requires a panel to determine whether the actual allocation of the 'amounts of subsidy' to certain enterprises is too large relative to what the allocation would have been if the subsidy were administered in accordance with the conditions of eligibility for that subsidy as assessed under Article 2.1(a) and (b)".495 Thus, in examining whether disproportionately large amounts of subsidy have been granted to certain enterprises within the meaning of Article 2.1(c), panels need to assess: (i) whether the granting of the subsidy indicates a disparity between the expected distribution of that subsidy, as determined by the conditions of eligibility, and its actual distribution; and (ii) the reasons for that disparity so as to determine whether there has been a granting of disproportionately large amounts of subsidy to certain enterprises.496

5.4.2 The Panel's findings concerning industrial revenue bonds

5.185.
The European Union argues that the Panel erred in its interpretation and application of the term "disproportionately large amounts of subsidy" in Article 2.1(c) of the SCM Agreement when it failed to follow the provision in Article 2.1(c) that "account shall be taken … of the length of time during which the subsidy programme has been in operation"497 (i.e.1979 onwards) and instead limited its assessment of specificity of Wichita IRB subsidy programme to the period of time "after the end of the implementation period" (i.e.2013 onwards).498 Further, the European Union submits that the Panel failed to make an objective assessment of the matter before it when it inappropriately deviated from the approach taken by the panel and the Appellate Body in the original proceedings to assess the existence of specificity based on the entire duration of the subsidy programme.499 The United States asserts that the Panel did not err in finding that the subsidy provided through the IRBs is no longer specific and correctly based the specificity analysis on information post-dating the reasonable period of time for compliance.500
5.186.
At the outset, we note that IRBs are issued by cities in Kansas, including the City of Wichita, and are sold to the general public on behalf of a qualifying private entity. The proceeds are used by the entity on whose behalf the IRBs are issued to purchase, construct, or improve commercial or industrial property (Project Property).501 In general, the City of Wichita acts as the "issuer" of the IRBs and retains legal title to the Project Property during the term of the IRB. The private entity leases the property, making rent payments to the holders of the IRBs. For a private entity, the advantages of having IRBs issued on its behalf include the ability to borrow funds at lower-than-market interest rates, property tax abatements for up to ten years on Project Property, and sales tax exemptions on Project Property and services acquired with the proceeds of IRBs.502
5.187.
The IRB scheme operated differently for Boeing and, subsequently, Spirit Aerosystems (Spirit).503 In particular, rather than being purchased by the public, the IRBs issued on behalf of Boeing or Spirit were purchased by the companies themselves. Therefore, the advantages of the IRB issuances to Boeing and Spirit were limited to property tax and sales tax exemptions. The City of Wichita issued IRBs to Boeing every year from 1979 to 2007.504 IRBs foresee property tax abatements on Project Property for up to ten years. Accordingly, property tax abatements stemming from IRBs issued to Boeing terminated in 2017. In January 2012, Boeing announced that it would close all of its Wichita operations by the end of 2013.505
5.188.
Before the Panel, the key point of disagreement between the parties was the relevant time period for the assessment of specificity.506 The Panel reasoned that, in the original proceedings, the European Communities had challenged the entirety of the subsidy received by Boeing since the inception of the IRB programme in 1979, so it was consistent with the scope of that challenge for the panel to consider the entirety of the IRBs granted to Boeing between 1979 and 2005. However, the Panel considered that, in the compliance proceedings, "the relevant financial contribution is that which was granted after the end of the implementation period" and that it was "concerned only with those tax abatements granted to Boeing from 2013 onwards".507 The Panel also noted that the amount of the tax abatements Boeing received after 2012 was determined by the value of the IRBs that were granted from 2002 onwards.508 Therefore, the Panel decided to assess "whether the subsidy is de facto specific by determining what percentage of the total amount of IRBs provided from 2002 onwards was granted to Boeing and Spirit".509
5.189.
The Panel then noted that, from 2002 onwards, Boeing and Spirit received 32% of the total amount of IRBs issued, and that this was considerably less than the 69% in the original proceedings.510 Taking into account that the IRB programme is open to enterprises with the capacity and inclination to make certain investments in commercial or industrial property, the Panel did not consider that "Boeing and Spirit's receipt of 32% of the total amount of IRBs issued indicates a distribution of the subsidy that is at odds with what one would expect were the IRB programme to be administered in accordance with the SCM Agreement."511 In light of these considerations, the Panel found that the subsidies provided to Boeing in the form of property and sales tax abatements related to IRBs issued by the City of Wichita after the expiry of the implementation period were not specific within the meaning of Article 2.1(c) of the SCM Agreement.512

5.4.2.1 Whether the Panel erred in its interpretation of Article 2.1(c) of the SCM Agreement

5.190.
The European Union argues that the Panel erred in its interpretation of Article 2.1(c) of the SCM Agreement when, in conducting its de facto specificity analysis to determine whether the City of Wichita had granted "disproportionately large amounts of subsidy to certain enterprises", it found that the relevant period over which to consider disproportionality is "after the end of the implementation period".513 Instead, according to the European Union, the Panel should have considered whether the IRB subsidy programme is specific on the grounds that Boeing and Spirit received disproportionately large amounts of the subsidy over the three-decade period of time during which the subsidy programme had been in operation (including, but not limited to, the period that passed since the beginning of the original panel proceedings), that is, from 1979 to 2012.514
5.191.
The United States disagrees with the European Union's argument that the Panel interpreted the terms in Article 2.1(c) to mean something different in compliance proceedings than in original proceedings. For the United States, the Panel "simply applied the same meaning to a different data set because the facts had changed – most importantly, the structure of Kansas' economy and the role of the aerospace industry in it".515 Furthermore, the United States considers that "with respect to Article 2.1, the relevant question is whether a subsidy 'is' specific, not whether it was specific at a prior point in time."516
5.192.
As noted above, the Appellate Body has stated that "disproportionality" is a relational concept.517 In particular, the analysis under the third factor in the second sentence of Article 2.1(c) requires determining the amounts of subsidy actually granted to the recipients under a subsidy programme within a certain time period, and assessing whether there is a disparity between the expected and actual distribution of the subsidy. In the present case, the specific question before us is whether the existence of disproportionality in the context of these compliance proceedings should be established on the basis of the amounts of subsidy granted during the entire period over which the subsidy programme has been in operation, or whether consideration of subsidies provided over a more limited period of time may be appropriate.
5.193.
We note that the text of Article 2.1(c) does not contain an express indication as to how to determine the time period relevant for assessing the existence of disproportionality. We recall, however, that the principles in subparagraphs (a) to (c) of Article 2.1 should be interpreted together and a proper understanding of specificity must allow for the concurrent application of these principles to the various legal and factual aspects of a subsidy.518 Thus, in the event of an appearance of non‑specificity resulting from an analysis under Article 2.1(a) and (b), indications as to the appropriate time period for assessing disproportionality under Article 2.1(c) may be drawn from the legislative framework examined under those subparagraphs. At the same time, the analysis under Article 2.1(c) will normally focus on evidence other than of the kind found in written documents or express acts or pronouncements by a granting authority.519 Thus, indications relating to the appropriate time period for the assessment of disproportionality may be drawn also from the structure and operation of the subsidy at issue, the circumstances of the case, and the evidence presented by the parties.
5.194.
We note that pursuant to the third sentence of Article 2.1(c), "account shall be taken of the extent of diversification of economic activities within the jurisdiction of the granting authority, as well as of the length of time during which the subsidy programme has been in operation." In our view, the third sentence of Article 2.1(c) directs panels to include in their analyses the two factors listed in that sentence. Specifically, the use of the word "shall" appears in the context of "account shall be taken of", which suggests the existence of an obligation for panels to consider the factors in the third sentence of Article 2.1(c) as part of their assessment of de facto specificity, together with any other pertinent factor. However, the provision does not prescribe a particular manner in which panels must consider the relevance of these factors or the importance of the factors for the panels' overall analysis. What precisely the import of those factors would be in a panel's assessment under Article 2.1(c) would thus depend on the particular circumstances of each case.
5.195.
In particular, while "the length of time during which the subsidy programme has been in operation" must be taken into account by panels in their assessment of specificity, it does not follow from the third sentence of Article 2.1(c) that the entire period during which the programme has been in operation has necessarily to be chosen as the relevant time period in determining whether, under the second sentence, disproportionately large amounts of subsidy have been granted to certain enterprises. Accordingly, the temporal baseline for the assessment of disproportionality under the second sentence of Article 2.1(c) may not necessarily be the entire duration of the subsidy programme at issue. For instance, where modifications to a subsidy programme have been made, consideration of a shorter time period for the assessment of disproportionality may be appropriate. In particular, this may be the case in the context of compliance proceedings, depending on the characteristics and functioning of the subsidy programme at issue and the existence and the nature of a measure taken to comply. We recall in this regard that the relevant question under Article 7.8 is whether the Member granting or maintaining the subsidy has taken appropriate steps to remove the adverse effects of the subsidy or to withdraw the subsidy. Thus, in order to withdraw a subsidy within the meaning of Article 7.8, "an implementing Member may be able to take action to align the terms of the subsidy with a market benchmark, or to otherwise modify the terms of the subsidy such that it no longer qualifies as a subsidy."520
5.196.
We recall the European Union's contention that the Panel erred by interpreting the term "disproportionately large" to mean "something different in a compliance proceeding than it does in an original proceeding", and to require, in the context of compliance proceedings, consideration only of financial contributions expected "after the end of the implementation period".521 The European Union further argues that the Panel's interpretation would allow Members faced with compliance obligations easily to circumvent their obligations under the SCM Agreement by "manipulating" the appearance of specificity for a short time following the end of the implementation period.522
5.197.
With respect to these contentions by the European Union, we note our observation above that the assessment of disproportionality under the third factor in the second sentence of Article 2.1(c) does not necessarily have to be based on the entire duration of the subsidy programme. In this light, we consider that the Panel cannot be said to have erred in its interpretation of the term "disproportionately large" in Article 2.1(c) simply because it assessed disproportionality on the basis of a time period shorter than the entire duration of the subsidy programme.
5.198.
In light of the above, we find that the Panel did not err in its interpretation of Article 2.1(c) of the SCM Agreement when concluding that the relevant period over which to consider disproportionality is "after the end of the implementation period".

5.4.2.2 Whether the Panel erred in its application of Article 2.1(c) of the SCM Agreement

5.199.
The European Union further alleges that the Panel erred in applying Article 2.1(c) of the SCM Agreement "when it assessed specificity based on facts restricted to 'after the end of the implementation period' and failed to consider data for the entire duration of the subsidy programme in evaluating disproportionality".523 According to the European Union, the Panel's finding on facts involving a time period quite different from "the length of time during which the subsidy programme has been in operation" constitutes an error in the application of Article 2.1(c).524
5.200.
In the present case, the Panel decided to use in its assessment of disproportionality the subsidy amounts (or tax abatements) granted after the end of the implementation period (i.e. from 2013 onwards), rather than those granted under the entirety of the subsidy programme since its inception in 1979. The Panel reasoned that "{i}n this proceeding … the relevant financial contribution is that which was granted after the end of the implementation period", and that, therefore, it is concerned only with those tax abatements granted to Boeing from 2013 onwards.525 The Panel thus contrasted the challenge in the original proceedings, where the measure before the panel was the entirety of the subsidy received by Boeing since the inception of the IRB programme in 1979, with the challenge in these compliance proceedings, where the measure before the Panel was the measure taken to comply notified by the United States. In this context, the question before us is whether, in the specific situation of the present compliance proceedings, the Panel erred in its application of Article 2.1(c) in considering tax abatements provided to Boeing relating to less than the entire duration of the subsidy programme.
5.201.
We noted above that, in the context of compliance proceedings, it may be appropriate for a panel to base its assessment of disproportionality under the third factor in the second sentence of Article 2.1(c) on a time period different from the entire duration of the subsidy programme, in order to assess whether, at the end of the reasonable period of time for compliance, the implementing Member has taken appropriate steps to withdraw the subsidy. This should be analysed on a case‑by‑case basis and will depend on the characteristics and functioning of the subsidy programme at issue, as well as other relevant facts, including the existence and the nature of a measure taken to comply.
5.202.
The Panel explained its decision to focus on the post-implementation period in its assessment of disproportionality with the fact that the relevant financial contribution in these compliance proceedings is different from that in the original proceedings. In other words, the Panel relied on the nature of these compliance proceedings for its finding that the subsidy is no longer de facto specific. We note that the Panel provided little explanation for this approach. For instance, the Panel did not explain how, in the context of these compliance proceedings, it was warranted to base its assessment on a period of time different from that of the original proceedings in light of the particular circumstances of the case. Furthermore, although the Panel outlined the functioning of the IRB subsidies, it did not clarify how its decision to limit its assessment to the timeframe after the end of the implementation period related to the nature and functioning of the particular subsidy at issue.
5.203.
At the same time, we recall that the subsidy measure in the present case consists of issuance of IRBs to Boeing every year between 1979 and 2007. The subsidy thus has been disbursed on a regular and periodic basis. Furthermore, the structure of the subsidy is such that IRBs are used to purchase property on which tax abatements are received for the following ten consecutive years.526 The Panel recognized this structure and assessed its specificity "by determining what percentage of the total amount of IRBs provided from 2002 onwards was granted to Boeing and Spirit", i.e. the amount of IRBs granted to Boeing and Spirit ten years before the end of the implementation period.527 In this way, the Panel took into consideration in its analysis the ten-year lifetime of the IRB subsidies.
5.204.
Moreover, in its Compliance Communication, the United States advised that the City of Wichita "has not provided any IRBs to Boeing since 2007".528 The Panel concluded that "{b}y reducing considerably the proportion of the subsidy programme received by Boeing after the end of the implementation period, the United States has brought the measure into conformity with the SCM Agreement because, as a non-specific-subsidy, the measure is no longer subject to the provisions of Part III of the SCM Agreement."529 We note that, since the amounts of tax abatements received by Boeing are directly proportionate to the amount of IRBs granted, these abatements continuously diminished since 2007, and in 2017 "Boeing {was} due to receive a single tax abatement on Project Property purchased with IRB issuance in 2007."530 Furthermore, Boeing announced that it would close all of its Wichita operations by the end of 2013.531 While the Panel did not elaborate on these aspects in its substantive assessment of the IRB subsidies, these facts are pertinent to determining the relevant time period for the assessment of disproportionality.
5.205.
In sum, while the Panel could have better explained the choice of the time period for assessing whether disproportionately large amounts of IRBs were used by Boeing in determining the existence of de facto specificity, the time period effectively used by the Panel does not appear inappropriate in the particular circumstances of these compliance proceedings and specifically in light of the nature and operation of the IRB subsidies, as well as of the nature of the alleged measure taken to comply.
5.206.
In any event, the Panel had to assess whether the total amount of IRBs issued indicates a distribution of the subsidy that differs from the allocation that one would expect were the IRB programme to be administered in accordance with its conditions of eligibility. In this regard, we draw attention to the Panel's analysis and findings concerning the comparison between the expected and actual distribution of the subsidy. The Panel noted that, based on the European Union's evidence, from 2002 onwards, Boeing and Spirit received 32% of the total amount of IRBs issued, and that this was considerably reduced from the percentage in the original proceedings, where the panel found that Boeing and Spirit had received 69% of the total amount.532 Taking into account that the IRB programme is open to any enterprises seeking to purchase, construct, or improve various types of commercial or industrial property, and that, therefore, its availability is somewhat restricted to entities with the capacity and inclination to make such investments, the Panel did not consider that "Boeing and Spirit's receipt of 32% of the total amount of IRBs issued indicates a distribution of the subsidy that is at odds with what one would expect were the IRB programme to be administered in accordance with the SCM Agreement."533
5.207.
With respect to the Panel's observation that the distribution of the IRB subsidy "is {not} at odds with what one would expect were the IRB programme to be administered in accordance with the SCM Agreement"534, we note that assessing disproportionality requires a panel to determine "whether the actual allocation of the 'amounts of subsidy' to certain enterprises is too large relative to what the allocation would have been if the subsidy were administered in accordance with the conditions for eligibility for that subsidy as assessed under Article 2.1(a) and (b)".535 The Appellate Body has further stated that, where the granting of the subsidy indicates a disparity between the expected distribution of that subsidy, as determined by the conditions of eligibility, and its actual distribution, a panel will be required to examine the reasons for that disparity so as ultimately to determine whether there has been a granting of disproportionately large amounts of subsidy to certain enterprises.536 Thus, the inquiry is directed at whether the allocation of the subsidy is in accordance with its conditions of eligibility, rather than with the SCM Agreement.
5.208.
We observe that, earlier in its analysis, the Panel correctly stated that "assessing whether Boeing and Spirit have received a disproportionate amount of the subsidy should be based on the amount of the tax abatements Boeing and Spirit have received, relative to the amount of tax abatements that all other IRB recipients have received."537 In order to determine whether, regardless of the discrepancies in the way the Panel articulated the legal standard, it conducted a proper analysis, we now turn to review the Panel's analysis with respect to the facts of the present case.
5.209.
We note that in its analysis, the Panel mainly relied on the observation that Boeing and Spirit's receipt of 32% of the total amount of IRBs was considerably lower than the 69% in the original proceedings. It is true that the IRB programme is available to those enterprises with the capacity to make investments in industrial and commercial property. In the original proceedings, however, the Appellate Body found that, despite the fact that not all enterprises in Wichita would, at any given time, wish to enjoy the benefits of IRBs with respect to property development, it "would nonetheless expect that the allocation of such benefits over the 25-year period between 1979 and 2005 would have produced a wider distribution of those benefits across different sectors of the Wichita economy".538 On this basis, the Appellate Body concluded that the actual distribution of the subsidy deviates materially from its expected distribution.539
5.210.
We agree with the Panel that the percentage of IRBs issued to Boeing and Spirit since 2002, namely 32%, is reduced from the original proceedings, where the panel found that Boeing and Spirit had received 69% of the total amount of IRBs. However, this fact says little about the existence of disproportionality under the third factor in the second sentence of Article 2.1(c). In itself, the fact that Boeing and Spirit received 32% of the total amount of IRBs between 2002 and 2012 does not answer the question of whether any disparity existed between the expected distribution of the subsidy, as determined by the conditions of eligibility, and its actual distribution. The existence of a disparity would depend, inter alia, on the extent of diversification of economic activities within Wichita's economy, in line with the first factor of Article 2.1(c), third sentence.540 The Panel, however, did not engage in any such assessment and provided no explanation as to why 32% of the total amount of IRBs received by Boeing and Spirit in a much shorter period of time than in the original proceedings, namely between 2002 and 2012, does not reveal the existence of a disparity. The Panel's only argument that "{t}he IRB programme remains open to any enterprises that seek to purchase, construct, or improve various types of commercial or industrial property" and its availability "is therefore somewhat restricted to entities with the capacity and inclination to make such investments"541 does not explain why 32% of the IRBs does not reveal the existence of a disparity. We therefore conclude that the Panel had no basis for finding whether any disparity existed between the expected and actual distribution of the subsidy and that thereby the United States had brought its measure into conformity with the SCM Agreement.
5.211.
In light of the above, we find that the Panel erred in its application of Article 2.1(c) of the SCM Agreement by providing insufficient reasoning for its conclusion that the distribution of the subsidy was not "at odds with what one would expect were the IRB programme to be administered in accordance with the SCM Agreement".542 We therefore reverse the Panel's finding, in paragraphs 8,640 and 11.7.c.iii of the Panel Report, that the European Union has failed to establish that the tax abatements provided through IRBs issued by the City of Wichita involve specific subsidies within the meaning of Articles 1 and 2 of the SCM Agreement.

5.4.2.3 Whether the Panel failed to make an objective assessment under Article 11 of the DSU

5.212.
The European Union asserts that the Panel failed to undertake an objective assessment of the matter, pursuant to Article 11 of the DSU, by inappropriately deviating from the findings of the original panel and the Appellate Body.543 According to the European Union, "{i}n interpreting or applying Article 2.1(c), the Panel failed to take into account the intervening guidance provided by the original panel and the Appellate Body"544 that requires consideration of the "whole" subsidy programme when assessing whether disproportionately large amounts of subsidy have been granted to certain enterprises.545 In this respect, the European Union relies on the Appellate Body's statement that "doubts could arise about the objective nature of an Article 21.5 panel's assessment if, on a specific issue, that panel were to deviate from the reasoning in the original panel report in the absence of any change in the underlying evidence in the record."546
5.213.
The United States considers that the European Union failed to establish that any deviation from the reasoning of the original panel occurred.547 In the United States' view, the original panel itself recognized that specificity can be based on "a time period shorter than the life of the subsidy programme … if 'there has been a significant change in the structure of the economy and the importance of the subsidized activities in the economy over the life of the subsidy'".548
5.214.
Having reversed the Panel's finding that the European Union failed to establish that the tax abatements provided through IRBs issued by the City of Wichita involve specific subsidies within the meaning of Articles 1 and 2 of the SCM Agreement, we do not consider it necessary to examine further the objectivity of the Panel's factual assessment in support of this finding.

5.4.2.4 Completion of the legal analysis

5.215.
Having found that the Panel erred in its application of Article 2.1(c) of the SCM Agreement, we now turn to the European Union's request that we complete the legal analysis and find that the subsidies provided to Boeing under the IRB programme are specific, and, thus, that the United States has failed to withdraw these subsidies.549 The European Union considers that we can complete the analysis based on uncontested evidence on the record to the effect that between 1979 and 2012 Boeing and Spirit received 59% of the subsidy, which represents an allocation at variance from what would have been expected from the allocation of IRBs in accordance with their conditions of eligibility.550
5.216.
We note the European Communities' contention in the original proceedings that, in assessing whether a subsidy granted to certain enterprises is "disproportionately large", some information about Boeing, such as employment levels, should be compared to comparable information relating to the entire economy in the jurisdiction of the granting authority. By contrast, the United States argued that such information about Boeing should be compared to information about the group of recipients of the alleged subsidy.551 The original panel ultimately concluded that "there is a significant disparity between the proportion of IRBs received by Boeing and Spirit and their place within the goods sector of the economy, as indicated by the proportion of the sector they employ."552 On appeal, the Appellate Body disagreed with the approach taken by the original panel focusing on the share of manufacturing employment of Boeing and Spirit, and it agreed with the United States that "examining qualifying investments would have been a reasonable basis on which to show why the 69% figure does not indicate that IRB subsidies were granted in disproportionately large amounts."553 However, the United States had not provided evidence explaining why Boeing and Spirit had received over two thirds of the subsidy's benefits.554
5.217.
The reasoning provided by the Appellate Body in upholding the panel's finding in the original proceedings is instructive in the context of completion of the legal analysis in these compliance proceedings. We recall that, in order to determine whether certain enterprises "are grant{ed} disproportionately large amounts of subsidy" within the meaning of the second sentence of Article 2.1(c), two things should be assessed: (i) whether the granting of the subsidy indicates a disparity between the expected distribution of that subsidy, as determined by the conditions of eligibility, and its actual distribution, and (ii) what the reasons that might explain this disparity are, with a view to determining whether there has been a granting of disproportionately large amounts of subsidy to certain enterprises.555
5.218.
Above, we found that the Panel erred in its application of Article 2.1(c) in concluding that Boeing and Spirit's receipt of 32% of the total amount of IRBs issued since 2002 does not indicate a distribution of the subsidy that is at odds with what one would expect were the IRB programme to be administered in accordance with the conditions of eligibility for the subsidy. However, we also found that the Panel did not err in basing its assessment of disproportionality in these compliance proceedings on a time period shorter than the entire duration of the IRB subsidy programme. In completing the legal analysis, we can therefore rely on the same facts the Panel relied on in its assessment of disproportionality.
5.219.
The first question before us is whether this allocation of the subsidy indicates a disparity between the expected distribution of that subsidy, as determined by the conditions of eligibility, and its actual distribution. In the original proceedings, the panel found that Boeing and Spirit had received 69% of all IRBs that included property tax abatements. The Appellate Body considered that a wide distribution of the benefits across various sectors of the Wichita economy is to be expected on the basis of the conditions of eligibility for IRBs.556 The Appellate Body reasoned that "{e}ven taking into account the fact that not all enterprises in Wichita would, at any given time, wish to enjoy the benefits of IRBs in respect of property development, we would nonetheless expect that the allocation of such benefits over the 25-year period between 1979 and 2005 would have produced a wider distribution of those benefits across different sectors of the Wichita economy."557
5.220.
Turning to the present compliance proceedings, we note that Boeing and Spirit received 32% of the total amount of IRBs issued from 2002 onwards. While the IRB programme is available to enterprises with the capacity to make the required investments in industrial and commercial property, and while the percentage of IRBs issued to Boeing and Spirit since 2002 is reduced from the original proceedings (69%), we have no specific information on record that would permit us to evaluate whether this actual distribution of the subsidy is at odds with its expected distribution in light of the conditions of eligibility. Specifically, while the receipt of 69% of all IRBs over the entire duration of the IRB subsidy clearly reflects an actual distribution that "deviates materially from the expected distribution of that subsidy"558 in light of its conditions of eligibility, the receipt of 32% of the subsidy in the relevant time period of these compliance proceedings may or may not represent such deviation, depending, inter alia,on the diversification of Wichita's economy.
5.221.
Furthermore, even if we were to find the existence of a disparity, the second question before us would then be whether there are any reasons that explain the existence of that disparity between the actual and expected distributions of the subsidy. In the original proceedings, the Appellate Body explained that, in view of the conditions of eligibility for the IRB subsidy, examining qualifying investments would have been a reasonable basis on which to show why one company and its successor received over two thirds of the subsidy's benefits over a 25-year period.559 In this respect, however, there is no data on record as to the percentage of companies that funded, constructed, or improved industrial and/or commercial property within Wichita's economy during the relevant period of time (i.e. those companies that actually made investments in such property and could potentially benefit from the IRB subsidy), or to the diversification of Wichita's economy, namely the qualifying investments of the companies that made investments in industrial and commercial property, and what percentage of those investments came from companies that focused on aircraft production.
5.222.
In light of the above and in the absence of sufficient factual findings by the Panel or undisputed facts on the Panel record, we are unable to complete the legal analysis in relation to the European Union's claim that the Panel erred in its application of Article 2.1(c) of the SCM Agreement.

5.4.2.5 Conclusion

5.223.
In sum, the length of time during which the subsidy programme has been in operation must be taken into account by panels in their assessment of specificity under Article 2.1(c) of the SCM Agreement. However, it does not follow from this that the entire period during which the programme has been in operation has necessarily to be chosen as the relevant time period in determining whether, under the second sentence of this provision, disproportionately large amounts of subsidy have been granted to certain enterprises.
5.224.
We therefore find that the Panel did not err in its interpretation of Article 2.1(c) of the SCM Agreement in concluding that, in the specific circumstances of this case, the relevant time period over which to consider disproportionality was as from the end of the implementation period.
5.225.
With respect to the Panel's application of Article 2.1(c) of the SCM Agreement, we find that the Panel erred in finding that no disparity existed between the expected and actual distribution of the subsidy.
5.226.
We therefore reverse the Panel's finding, in paragraphs 8,640 and 11.7.c.iii of the Panel Report, that the European Union has failed to establish that the tax abatements provided through IRBs issued by the City of Wichita involve specific subsidies within the meaning of Articles 1 and 2 of the SCM Agreement. We also find that there are insufficient factual findings by the Panel or undisputed facts on the Panel record for us to complete the legal analysis in this respect. Having reversed the Panel's finding, we do not consider it necessary to address whether, in addition, the Panel acted inconsistently with Article 11 of the DSU.

5.4.3 The Panel's findings concerning economic development bonds

5.227.
The European Union claims that the Panel erred in the interpretation of the terms "limited number", "certain enterprises", and "predominant" in the second sentence of Article 2.1(c) of the SCM Agreement.560 The European Union further submits that the Panel erred in the application of Article 2.1(c), by including EDBs issued to public entities in its evaluation of whether the EDBs were used by a "limited number of certain enterprises".561 Finally, the European Union alleges that the Panel failed to make an objective assessment under Article 11 of the DSU of the factors in the third sentence of Article 2.1(c).562 The United States submits that the Panel's specificity findings relating to EDBs were based on a correct interpretation and application of Article 2 of the SCM Agreement and on an objective assessment of the evidence, consistent with Article 11 of the DSU.563
5.228.
We begin by noting that, before the Panel, the European Union alleged that several South Carolina state and local measures in connection with the production and assembly of 787s in North Charleston are specific subsidies to Boeing. These measures were adopted pursuant to Project Gemini and Project Emerald. In particular, with regard to Project Gemini, the European Union challenged the:

Provision of facilities and infrastructure at the Charleston International Airport site, as provided for in the Project Gemini Agreement between Boeing and the State of South Carolina, dated 1 January 2010, funded through state general obligation bonds issued pursuant to Title 11, Chapter 41 of the S.C. Code, as amended by Section 5 of H3130, Act No. 124, 2009 S.C. Acts 1092 (H3130), and S.C. Code § 55-11-520, at no cost to Boeing.564

5.229.
As a matter of background, when Boeing considered potential locations for its second 787 final assembly and delivery line, South Carolina legislators proposed an incentive package that included US$170 million in government bonds, the elimination of Boeing's state corporate income taxes, and sales tax exemptions for computers, fuel for test flights, and construction materials and equipment.565 On 28 October 2009, Boeing announced that it had decided to locate the second 787 assembly line (the Project Gemini facilities and infrastructure) at the same site as its recently acquired North Charleston 787 fuselage fabrication and integration complex (the Project Emerald facilities and infrastructure). Also on 28 October 2009, the South Carolina General Assembly passed an act that was signed into law on 30 October 2009 (H3130), which amended several South Carolina laws in order to: (i) authorize the issuance of additional general EDBs up to US$170 million aggregate principal amount; (ii) authorize an agreement to apportion the income of taxpayers either planning a new facility in the state, or expanding an existing facility, conditional on the taxpayer investing at least US$750 million in a single county and creating at least 3,800 new full-time jobs in the county; and (iii) exempt from sales and use tax aircraft fuel, computer equipment, and construction materials where the taxpayer invests at least US$750 million in a single county and creates at least 3,800 new full‑time jobs in the county.566
5.230.
Under the Project Gemini Agreement, dated 1 January 2010, South Carolina committed to issue a total of US$220 million in state EDBs to offset the costs of infrastructure associated with the project and a total of US$50 million in air hub bonds to offset the costs associated with air carrier hub terminal facilities that Boeing agreed to operate in support of the project.567 In return, Boeing agreed to make a new investment in real and personal property of US$750 million (the minimum investment requirement) and to employ 6,000 employees in the state (the minimum job requirement) within a specified period. If those requirements are not met during the applicable time period, Boeing will be obligated to reimburse the State of South Carolina.568 The Project Gemini Agreement procedures provided that Boeing enter into contracts to construct infrastructure and facilities, pay the invoices, and then submit the invoices to South Carolina for reimbursement.569
5.231.
The Panel found that the payments made by South Carolina to Boeing pursuant to the Project Gemini Agreement involve a financial contribution and confer a benefit.570 In the context of specificity, the Panel considered that the European Union had not offered sufficient reasoning to establish that the Project Gemini incentive package is explicitly limited to certain enterprises within the meaning of Article 2.1(a) of the SCM Agreement.571 The European Union further argued that the transfer of bond proceeds is specific within the meaning of Article 2.1(c) on the grounds that it had been used only by a limited number of enterprises and that Boeing and its suppliers had been the predominant users of the subsidy.572
5.232.
With regard to the factor "limited number of certain enterprises" in Article 2.1(c) of the SCM Agreement, the Panel noted that the evidence before it indicated that since the adoption of South Carolina legislation authorizing the issuance of EDBs in 2002, South Carolina had issued such bonds for BMW (in 2003 in the amount of up to US$105 million)573, the Project Emerald companies (in 2004 in the amount of up to US$160 million), and Boeing (in 2010 in the amount of up to US$220 million).574 In addition, EDBs had been issued to three public entities in 2005, namely, the City of Greenville, the City of Myrtle Beach, and Trident Technical College, in the amount of up to US$7 million each.575 The Panel found that the European Union had provided "no reasoning as to why, in light of the level of diversification in the South Carolina economy and the duration of the economic development bond scheme, the grant of economic development bond proceeds to BMW, the Project Emerald companies and Boeing amounts to use by a limited number of enterprises".576
5.233.
With respect to the factor of "predominant use by certain enterprises" in Article 2.1(c), the Panel noted the original panel's finding that predominant use "requires consideration of whether the subsidy programme in issue is mainly or most frequently used by 'certain enterprises'".577 The Panel then noted the European Union's argument that Boeing and its suppliers have been the predominant users of the subsidy, benefiting from US$390 million of a total US$495 million in EDBs and air hub bonds, or 79% of the bonds by value.578 However, the Panel considered that this information did not show that the EDB scheme had mainly or most frequently been used by certain enterprises. Whereas the information could be relevant to an argument that a disproportionately large amount of subsidy had been granted to certain enterprises, the European Union had not made this argument. Therefore, the Panel could not take the information into account without confounding the factor "predominant use by certain enterprises" with the factor "the granting of disproportionately large amounts of subsidy to certain enterprises".579
5.234.
Furthermore, the Panel rejected the European Union's contention that the specificity analysis under Article 2.1(c) should not include EDBs issued for public entities, such as cities or public colleges, because specificity must be assessed with respect to enterprises and industries. For the Panel, the fact that EDBs have been issued to public entities, namely two cities and a public college, in addition to private entities, suggested that the scheme was not limited to "certain enterprises" within the meaning of Article 2.1(c).580 Ultimately, the Panel concluded that the European Union failed to establish that the subsidy provided by South Carolina through EDB proceeds to compensate Boeing for part of the cost of constructing the Project Gemini facilities is specific within the meaning of Article 2.1 of the SCM Agreement.581

5.4.3.1 Whether the Panel erred in its interpretation of the term "limited number" in Article 2.1(c) of the SCM Agreement

5.235.
The European Union alleges that the Panel erred in its interpretation of the phrase "limited number of certain enterprises" in Article 2.1(c) of the SCM Agreement, insofar as the Panel's interpretation precluded the possibility that a group of three enterprises would constitute a "limited number".582 According to European Union, the Panel's finding that air hub bonds were used by a "limited number of certain enterprises" because they were granted to only one enterprise, Boeing, while EDBs, which were granted to only three enterprises, were not so "limited" reflects an interpretation of "limited number" to mean "one" or, at least, "fewer than three".583
5.236.
The United States responds that the Panel did not find that the terms "limited number" could never refer to three, but instead found that, in the circumstances of this case, the European Union had failed to explain why the grant of the subsidy to three particular companies showed that the subsidy was de facto specific.584
5.237.
Above, we observed that the term "limited number" in the first factor of Article 2.1(c), second sentence, suggests an inquiry into whether the enterprises or industries so particularized constitute a quantitatively limited group. Furthermore, the concept of "limitation" in subparagraph (c), as opposed to in subparagraphs (a) and (b), directs the inquiry specifically towards whether the users of the subsidy programme are small or restricted in number. For the reasons explained above, what constitutes a quantitatively limited group of enterprises must be determined on a case-by-case basis, taking into account the particular characteristics of the subsidy programme and the prevailing circumstances of the case; such an analysis also has to take account of the factors in the third sentence of Article 2.1(c), namely, "the extent of diversification of economic activities within the jurisdiction of the granting authority, as well as of the length of time during which the subsidy programme has been in operation".
5.238.
Turning to the facts of the present case, we note the European Union's contention that the Panel's reasoning in the context of its analysis of the EDBs and air hub bonds under Article 2.1(c) reflects an implicit interpretation of the terms "limited number" as meaning "'one' – or, at least, fewer than three'".585 We further note that, according to the Panel, the evidence before it indicated that, since the adoption of its legislation authorizing the issuance of EDBs in 2002, South Carolina had issued EDBs for BMW, the Project Emerald companies, and Boeing.586 In addition, EDBs had been issued to certain public entities, namely the City of Greenville, the City of Myrtle Beach, and Trident Technical College.587 The Panel took the view that the European Union "failed to establish that the transfer of funds to Boeing through economic development bond proceeds is specific within the meaning of Article 2.1(c) because it is used by a limited number of certain enterprises".588 In particular, the Panel found that the European Union provided "no reasoning as to why, in light of the level of diversification in the South Carolina economy and the duration of the economic development bond scheme, the grant of economic development bond proceeds to BMW, the Project Emerald companies and Boeing amounts to use by a limited number of enterprises".589
5.239.
In the context of its analysis under Article 2.1(a) of the SCM Agreement, the Panel considered that whether the subsidy is specific should be determined on the basis of the text of the relevant legislative framework relating to the issuance of EDBs, rather than, as the European Union argued, based on the individual resolutions adopted by South Carolina authorizing the issuance of the EDBs.590 In this regard, Section 11-41-40 of the South Carolina Code provides that EDBs can be used to fund financing for infrastructure.591 In order for EDBs to be issued, the South Carolina Department of Commerce must notify the Joint Bond Review Committee and the State Budget and Control Board that the related infrastructure project meets certain requirements, including a minimum investment and contribution to employment.592 In this context, "economic development project" is defined as "a project in this State as defined in Section 12-44-30(16) in which a total of at least {US$400 million} is invested in the project by the sponsor and at least {400} new jobs are created at the project by the sponsor".593
5.240.
As noted above, the meaning of a quantitatively limited group should be determined, inter alia, in light of the factors in Article 2.1(c), third sentence, that require panels to take account of "the extent of diversification of economic activities within the jurisdiction of the granting authority, as well as of the length of time during which the subsidy programme has been in operation". While the import of these factors in any given case would depend on the particular circumstances at issue, they constitute important considerations that have to form part of a panel's assessment of de facto specificity, together with any other pertinent factors. Therefore, to the extent that the two factors in the third sentence of Article 2.1(c) form part of the legal test under that provision, it would be for the European Union to provide evidence in making a prima facie case. Moreover, we observed that where a panel's assessment proceeds from Article 2.1(a) and (b) to Article 2.1(c), the panel's analysis under subparagraph (c) would normally build upon the relevant legislative framework examined under Article 2.1(a) and (b).
5.241.
In the present case, based on the de jure conditions of eligibility for the subsidy, namely the relevant provisions of the South Carolina Code, EDBs may be issued only to companies complying with the minimum investment and employment requirements. That means that companies eligible to receive EDBs are those prepared to invest at least US$400 million in an economic development project and create at least 400 new jobs.594 We observe that the eligibility requirements under the subsidy programme appear to be onerous. With respect to the legislation setting out these requirements, the Panel found that "{t}here is no provision in South Carolina law limiting access for funds raised through economic development bonds … to certain enterprises", and "none of the individual pieces of legislation pursuant to which the bonds are issued limit access to certain enterprises."595 In these circumstances, the question before the Panel under Article 2.1(c) was whether, notwithstanding the appearance of non-specificity resulting from the application of the principles in Article 2.1(a), there were reasons to believe that the subsidy may in fact be specific by virtue of the subsidy programme being used by a limited number of certain enterprises. In these circumstances, it was for the European Union to provide evidence demonstrating that the actual allocation of the subsidy differs from an allocation that would have been expected if the subsidy were administered in accordance with its conditions of eligibility, as well as in light of the diversification of South Carolina's economy and the length of time during which the subsidy was in operation.
5.242.
The Panel did not elaborate on the reasons for rejecting the European Union's claim that the EDB subsidy had been used by a limited number of certain enterprises. In particular, the Panel did not explicitly set out its understanding of the term "limited number" in Article 2.1(c). However, we also do not see that the European Union gave specific reasons in support of its argument. In its written submissions before the Panel, in the context of Article 2.1(c), the European Union argued that "{t}his form of subsidy has been utilized by only a limited number of enterprises", insofar as "{o}ther than Boeing, economic development bonds have been issued to support projects by private firms on only two occasions: 1) in 2003 for a new BMW manufacturing facility ($105 million), and 2) in 2004 for Project Emerald ($120 million)."596 The United States, by contrast, submits that:

BMW, the Project Emerald companies, and Boeing are among the largest employers in the State of South Carolina. As of early 2008, BMW employed 5,400 full-time equivalents in South Carolina. The Project Emerald companies committed to invest $450 million in Project Emerald and employ 745 people in South Carolina. In addition, Boeing was the largest employer in South Carolina, with 6,000 employees and Boeing had invested a total of [BCI] in infrastructure in the state.597

5.243.
In light of these arguments, the Panel's conclusion reflects an understanding that the granting of the subsidy to only three companies does not necessarily demonstrate that the subsidy was used by a "limited number" of certain enterprises within the meaning of the first factor in Article 2.1(c), second sentence. First, we note that the recipients of the subsidy are not all from the same sector of the economy. Furthermore, there are no indications that, in light of the eligibility requirements under the subsidy scheme and the diversification of economic activities within South Carolina or the length of time during which the subsidy has been in operation, the actual allocation of the subsidy differed from its expected allocation. The European Union did not argue, for instance, that other enterprises within South Carolina's economy could have potentially met the requirements to receive EDBs but were not granted the subsidy during the ten years of operation of the subsidy programme. It may well be that, depending on the diversification of South Carolina's economy, only a small number of companies were ready to make the necessary investments and create the required number of jobs, and therefore be able to satisfy the legal conditions for access to the EDB subsidy. Thus, given the specific de jure conditions of eligibility under the EDB scheme, the small number of enterprises to which EDBs were issued between 2002 and 2012 would not necessarily reflect "use of a subsidy programme by a limited number of certain enterprises" within the meaning of Article 2.1(c). The European Union has also not demonstrated that other enterprises, outside South Carolina's economy, have applied for the subsidy but have not been considered eligible, or that there are other reasons to believe that the actual allocation of the subsidy renders it de facto specific.
5.244.
Therefore, as we understand it, in stating that "{t}he European Union provides no reasoning as to why, in light of the level of diversification in the South Carolina economy and the duration of the economic development bond scheme, the grant of economic development bond proceeds to BMW, the Project Emerald companies and Boeing amounts to use by a limited number of enterprises"598, the Panel has not implicitly interpreted the term "limited number" as "one" or "fewer than three".599 Rather, we understand the Panel to have considered that the European Union has not met its burden of proof in demonstrating that, in the circumstances of the present case, the EDB subsidy has been used by a limited number of certain enterprises within the meaning of the first factor in Article 2.1(c), second sentence.
5.245.
The European Union also argues that it presented evidence on EDBs and air hub bonds jointly, but the Panel found fault with its reasoning on why the bonds were used by a limited number of certain enterprises, in light of the diversification of South Carolina's economy and the duration of the bond scheme, only in the context of EDBs. According to the European Union, "{t}his suggests that the motivating factor behind the Panel's decision was the fact that three enterprises received EDBs, whereas only one enterprise received air hub bonds."600
5.246.
The Panel found that the European Union established that the grant of air hub bond proceeds to Boeing is specific within the meaning of Article 2.1(c), in the sense that the use of the subsidy programme is limited to certain enterprises. The Panel's reasoning was based on the undisputed fact that "air hub bonds have only been issued to Boeing during the almost three‑decade long existence of the scheme", which was "unsurprising since the evidence before the Panel suggests that only Boeing meets the requirements to benefit from air hub bond proceeds, namely to be the operator of an 'air carrier hub terminal facility' as defined in the South Carolina Code".601
5.247.
As we see it, the Panel's finding with regard to the air hub bonds was not based simply on the fact that these bonds were granted only to Boeing. Instead, it was made in light of the specific language in the South Carolina Code that appeared, de facto, to restrict the eligibility for those bonds to an enterprise with Boeing's specific profile. We do not consider that the Panel's reasoning in this context translates into an implicit interpretation of "limited number of certain enterprises" as "just one (or two) enterprise(s)", as alleged by the European Union.602 Instead, in our view, the statements that the Panel made in applying the law to the facts of the present case do not suggest that the Panel considered that three or more enterprises could not constitute a "limited number" within the meaning of Article 2.1(c).
5.248.
In view of the above, we find that the Panel did not err in its interpretation of the phrase "limited number of certain enterprises" in Article 2.1(c) of the SCM Agreement by implicitly interpreting the term "limited number" as referring to "one" or "fewer than three" entities.

5.4.3.2 Whether the Panel erred in its interpretation and application of the term "certain enterprises" in Article 2.1(c) of the SCM Agreement

5.249.
The European Union further argues that the Panel erred in interpreting the term "certain enterprises" in Article 2.1(c) of the SCM Agreement as encompassing public entities, such as cities and public colleges. The European Union asserts that the Appellate Body Report in US – Washing Machines stands for the proposition that the term "certain enterprises" encompasses only private entities, i.e. business firms or companies involved in commercial transactions and engagements.603 Since public entities do not qualify as "certain enterprises", they should be omitted from the specificity analysis.604 Moreover, the European Union alleges that issuance of funds within the government or between different levels of government should not be considered a financial contribution, to the extent that Article 1.1(a)(1), by its text, concerns "a financial contribution by a government or any public body", not a financial contribution to a government.605 Furthermore, since subparagraphs (a)-(c) of Article 14 of the SCM Agreement indicate that a recipient of a subsidy is understood to be a non-governmental entity, a government cannot be the recipient of a benefit either.606 The European Union also submits that the Panel erred in its application of Article 2.1(c) by including in its specificity analysis EDBs provided to public entities, such as cities and public colleges, which are not "enterprises" within the meaning of Article 2.1.607
5.250.
The United States disagrees with the European Union that the Panel found public entities that received the subsidy at issue to be "enterprises". Rather, according to the United States, the Panel found that the receipt of the subsidy by three public entities "suggests that the scheme is not limited to 'certain enterprises' within the meaning of Article 2.1(c)".608 The United States thus contends that if a subsidy is granted to entities that are not "certain enterprises" as defined in the chapeau to Article 2.1 – regardless of whether those entities are themselves enterprises – this weighs against a finding of de facto specificity.609 In the United States' view, the European Union fails to address this point.
5.251.
As noted above, the term "enterprises" in the first factor of Article 2.1(c), second sentence, refers to a single enterprise or industry or a class of enterprises or industries that are known and particularized. Whereas "enterprise" can be defined as "{a} business firm, a company" or an "activity undertaken with an economic or commercial end in view"610, "industry" signifies "{a} particular form or branch of productive labour; a trade, a manufacture".611 In any event, the concept of "certain enterprises" involves a certain amount of indeterminacy at the edges, and any determination of whether a number of enterprises or industries constitute "certain enterprises" has to be made on a case-by-case basis.
5.252.
The European Union's appeal raises the question of how to define the contours of "enterprises" in the sense of Article 2.1(c). In our view, read together, the above definitions indicate that the term "enterprise" in Article 2.1 can be interpreted as an entity that engages in certain activities of a business or commercial nature. The term "enterprise" thus refers to an entity that conducts certain economic activities in the market. The reference to "an enterprise or industry or group of enterprises or industries" also suggests that the terms of the provision relate primarily to the type of activity carried out by the entity and do not necessarily limit the scope of entities based on whether they are publicly or privately owned. The understanding that ownership is not dispositive of the definition of "enterprise" finds support also in the third sentence of Article 2.1(c), which requires that account be taken of "the extent of diversification of economic activities within the jurisdiction of the granting authority"612, thereby confirming the focus of Article 2.1 on activities that are economic in nature.
5.253.
Turning to the relevant context for the interpretation of the term "enterprise" in Article 2.1, we note that Article 1 sets out the definition of a subsidy for purposes of the SCM Agreement. According to the chapeau of Article 2.1, the analysis of specificity must relate to the measure that has been determined to constitute a subsidy under Article 1.1 in terms of financial contribution and benefit.613 However, Article 1.1(a)(1) describes the types of financial contributions by reference to the specific governmental action of granting the subsidy, and not the nature or activities of the entity receiving the contributions. Thus, in defining the circumstances in which "a subsidy shall be deemed to exist", Article 1.1 does not specifically address the scope of recipients of these financial contributions.
5.254.
In light of the above, we consider that the determination of whether a number of enterprises or industries constitute "certain enterprises" within the meaning of Article 2.1(c) should be made in light of all relevant characteristics of the entities concerned, including the nature and purpose of their activities in the markets in question and the context in which these activities are exercised. The ownership of the entity may be a relevant factor but is not determinative of whether an entity qualifies as an "enterprise" for purposes of Article 2. The organization of the Member's national economy and the classification of these activities in its legal order may also constitute relevant considerations in determining whether the activities examined are of economic character.
5.255.
Turning to the Panel's analysis of the term "certain enterprises", we recall that, since the adoption of South Carolina legislation authorizing the issuance of EDBs in 2002, such bonds have been issued to BMW, the Project Emerald companies, and Boeing, as well as to certain public entities, namely the City of Greenville, the City of Myrtle Beach, and Trident Technical College.614 Before the Panel, the European Union took the view that the subsidy provided by South Carolina through EDBs for the funding of Project Gemini facilities and infrastructure is de facto specific because it has been used only by a limited number of enterprises, and Boeing and its suppliers have been the predominant users.615 In this regard, the European Union argued that because specificity is assessed with respect to enterprises and industries, the European Union does not include EDBs issued for public entities, such as cities or public colleges.616
5.256.
In its analysis, the Panel referred to the European Union's contention regarding the relevance of the three public entities at issue to the Panel's specificity analysis, and considered that "precisely the fact that economic development bonds can be and have been issued to public entities, namely two cities and a public college, in addition to private entities, suggests that the scheme is not limited to 'certain enterprises' within the meaning of Article 2.1(c)."617 It is not entirely clear what the Panel meant when making this statement. On the one hand, the fact that a subsidy has been granted to both public and private entities may be potentially relevant to an assessment of de facto specificity, to the extent that all of these entities are "certain enterprises" in the sense of that provision. On the other hand, however, in making this statement, the Panel refrained from making an assessment and reaching a conclusion as to whether the three public entities at issue should be considered as "enterprises", but nevertheless considered these entities relevant to its analysis of de facto specificity.
5.257.
We have noted above that an "enterprise" within the meaning of Article 2.1 is an entity that engages in certain economic activities. Whether this is the case should be analysed on a case‑by‑case basis by reference to all relevant characteristics of the entity, including its nature and operation in the markets in question. The European Union's contention implies that, by its very nature, a public entity cannot be considered as an "enterprise" under Article 2.1(c). We disagree with this proposition. As we have explained above, the ownership of an entity is not a decisive criterion in determining whether the entity constitutes an "enterprise". At the same time, we note that the Panel provided no analysis with regard to the features of the entities at issue and the types of activities they engage in. Thus, the Panel's analysis suggests that the Panel took into account the three public entities in its analysis of specificity under Article 2.1(c) without having established that they constitute "certain enterprises" within the meaning of Article 2.1.
5.258.
We disagree with this approach. The chapeau of Article 2.1 explicitly directs panels to assess whether a subsidy is "specific to an enterprise or industry or group of enterprises or industries (referred to in {the SCM} Agreement as 'certain enterprises')". The notion of specificity within the meaning of the SCM Agreement therefore encompasses the universe of entities that constitute "certain enterprises", as determined in light of the principles in subparagraphs (a) through (c) of Article 2.1. We therefore do not see the pertinence of subsidy recipients that fall outside the definition of an "enterprise" for a panel's determination of whether a subsidy is specific to "certain enterprises".
5.259.
It follows that, if a subsidy is found to be specific "to an enterprise or industry or group of enterprises or industries", the fact that this subsidy has also been granted to certain other entities that do not fall within the definition of an "enterprise" has no bearing on the finding of specificity that has to be made with regard to the group of "enterprises". We recall, in this regard, the Appellate Body's statement in the context of Article 2.1(a) that "{w}here access to certain funding under a subsidy programme is explicitly limited to a grouping of enterprises or industries that qualify as 'certain enterprises', this … leads to a provisional indication of specificity …, irrespective of how other funding under that programme is distributed."618 Similarly, if funding under the same subsidy programme is granted to certain enterprises, as well as to other entities that do not constitute "enterprises" within the meaning of Article 2, the specificity of the subsidy programme should be assessed only by reference to those entities that constitute "enterprises".
5.260.
At the same time, the Panel also concluded, with respect to the factor "use of a subsidy programme by a limited number of certain enterprises", that "{t}he European Union provides no reasoning as to why, in light of the level of diversification in the South Carolina economy and the duration of the economic development bond scheme, the grant of economic development bond proceeds to BMW, the Project Emerald companies and Boeing amounts to use by a limited number of enterprises."619 We note that the Panel reached its conclusion before making its statement as to the relevance of "public entities" in the assessment of de facto specificity. Similarly, before making the statement in question, the Panel had already rejected the relevance of the European Union's evidence for establishing "predominant use by certain enterprises" and had found that "{t}he European Union makes no other arguments why, in light of the diversification of the South Carolina economy and the duration of the economic development bond scheme, economic development bond proceeds have been mainly or most frequently used by certain enterprises."620 Therefore, we do not think that the Panel's rejection of the European Union's claims that the EDB subsidy is specific within the meaning of Article 2.1(c) hinges upon its statement relating to the relevance of the three public entities in its analysis of de facto specificity. Thus, the Panel's error in its analysis relating to the relevance of subsidies provided to the City of Greenville, the City of Myrtle Beach, and Trident Technical College in the assessment of specificity does not invalidate the Panel's ultimate finding that the European Union failed to establish that the subsidy provided by South Carolina through EDBs is specific within the meaning of Article 2.1(c).621

5.4.3.3 Whether the Panel erred in its interpretation of the term "predominant use" in Article 2.1(c) of the SCM Agreement

5.261.
The European Union argues that the Panel erred in interpreting the term "predominant" in the factor "predominant use by certain enterprises" in the second sentence of Article 2.1(c) of the SCM Agreement as involving a concept entirely different from the term "disproportionate{}" in the factor "disproportionately large amounts of subsidy to certain enterprises". In the European Union's view, based on this erroneous distinction, the Panel rejected the European Union's evidence as inadequate or irrelevant for determining the existence of "predominant use".622 The United States considers that the Panel merely explained "why it was not addressing whether the subsidy was de facto specific because of 'the granting of disproportionately large amounts of subsidy to certain enterprises'" and "did not state that 'predominant use' and 'the granting of disproportionately large amounts' cannot rely on overlapping evidence".623
5.262.
We observed above that the term "predominant" in the factor "predominant use by certain enterprises" in Article 2.1(c), second sentence, may relate to the number of certain enterprises using the subsidy, the amounts of subsidy used by certain enterprises, or the incidence with which certain enterprises use that subsidy. However, given the focus of the other factors of the second sentence ("use of a subsidy programme by a limited number of certain enterprises" and "the granting of disproportionately large amounts of subsidy to certain enterprises"), this term is to be interpreted as relating primarily to the incidence or frequency with which the subsidy is used by certain enterprises.
5.263.
At the same time, the different focus of the various factors listed in Article 2.1(c), second sentence, does not imply that the analyses under those factors have to rely on completely distinct sets of evidence. This is because whether a subsidy programme is mainly, or for the most part, used by "certain enterprises" is necessarily a question that should be answered on a case-by-case basis, taking into account the particular characteristics of the subsidy programme at issue and the prevailing circumstances of the case, and in light of the factors in the third sentence of Article 2.1(c). Furthermore, the Appellate Body has highlighted that determining which factors in Article 2.1(c) will be relevant to the analysis of specificity is "a function of what reasons there are to believe that the subsidy may in fact be specific", and panels should "remain open to the applicability of each of the elements set out in Article 2.1(c), and to the possibility that a conclusion in respect of specificity in fact may, depending on the circumstances of the case, rely on an assessment of one, several, or all of those elements".624 Ultimately, the aim is to determine whether, notwithstanding any appearance of non-specificity resulting from the application of subparagraphs (a) and (b), the evidence of actual allocation or use of the subsidy provides sufficient assurance as to the existence of specificity.625
5.264.
With respect to the European Union's evidence presented in relation to the factor "predominant use", the Panel noted the original panel's reasoning that predominant use "requires consideration of whether the subsidy programme in issue is mainly or most frequently used by 'certain enterprises'", taking into account the extent of diversification of economic activities within the jurisdiction of the granting authority and the length of time during which the subsidy programme has been in operation.626 Having noted the European Union's argument that Boeing and its suppliers (the Project Emerald companies) have been the predominant users of the subsidy, benefiting from US$390 million out of a total of US$495 million in EDBs and air hub bonds, or 79% of the bonds by value, the Panel "d{id} not consider this information to show that the economic development bond scheme has mainly or most frequently been used by certain enterprises".627 The Panel reasoned that:

While this information could be relevant to an argument that a disproportionately large amount of subsidy has been granted to certain enterprises, this is not an argument that the European Union makes. To find otherwise would be to confound predominant use by certain enterprises …, and the granting of disproportionately large amounts of subsidy to certain enterprises ….628

5.265.
We note that, beyond quoting the original panel's observations about "predominant use", the Panel did not develop its own understanding of the meaning of this term and what evidence might be relevant to establishing that the EDB scheme was mainly, or most frequently, used by certain enterprises in the present circumstances. In this regard, the European Union argues that "{t}here is nothing in Article 2.1(c), itself, or any other aspect of Article 2.1 indicating that evidence relevant to one of the 'factors' in Article 2.1(c) is exclusive to that factor, and irrelevant for considering the other 'factors'."629 According to the European Union, given that the overall enquiry is the same, that is, to determine whether a subsidy is specific to certain enterprises, the factors listed in Article 2.1(c) are closely related, and evidence demonstrating one factor of Article 2.1(c) could also be relevant to other factors.630
5.266.
We agree with the European Union that there may be overlap in the evidence demonstrating the existence of "predominant use {of a subsidy programme} by certain enterprises" and the "disproportionately large amounts of subsidy to certain enterprises", depending on the nature, functioning, and actual distribution of the particular subsidy programme; other relevant factual circumstances; and the assessment of the factors in the third sentence of Article 2.1(c). Evidence about the number of enterprises receiving a subsidy, the amounts received by certain enterprises, and the frequency with which the subsidy has been received by those enterprises may therefore be complementary and, depending on the circumstances of the case, point to the existence of de facto specificity based on one or another factor under Article 2.1(c), second sentence. Thus, evidence on the percentage of bonds by value used by certain enterprises may be potentially relevant to showing the existence of predominant use, insofar as "{o}ne way to show that a subsidy programme is mainly or most frequently used by 'certain enterprises' is to show how much of that subsidy programme is used by certain enterprises."631
5.267.
In the present case, the European Union put forward evidence that, since the adoption of its legislation authorizing the issuance of EDBs in 2002, South Carolina has issued EDBs to the following recipients: BMW (up to US$105 million in 2003); the Project Emerald companies (up to US$160 million in 2004); each of three public entities (the City of Greenville, the City of Myrtle Beach, and Trident Technical College) (up to US$7 million in 2005); and Boeing (up to US$220 million in 2010).632 The subsidy has been granted to relatively few entities, relatively infrequently, and in relatively large amounts. In these circumstances, the question as to whether the subsidy programme has been used predominantly by certain enterprises would have to take into account not just the incidence or frequency with which Boeing and other enterprises have been granted the subsidy, but also the value of the EDBs granted. Only then would it be possible to answer the question of whether the subsidy has been mainly, or for the most part, used by certain enterprises for the purposes of Article 2.1(c). Thus, by excluding a category of evidence potentially relevant to the assessment of the existence of "predominant use by certain enterprises" and ultimately for determining de facto specificity, on the sole basis that this evidence was more relevant to the assessment of another factor under Article 2.1(c), second sentence, the Panel erred in its interpretation of these factors in Article 2.1(c).
5.268.
We also do not share the Panel's concern that to find otherwise "would be to confound" the two factors under Article 2.1(c), second sentence.633 There is no reason why a priori certain categories of evidence should not be relevant in the context of more than one legal question, all of which have the purpose of establishing "whether a subsidy, although not apparently limited to certain enterprises from a review of the relevant legislation or express acts of a granting authority, is nevertheless allocated in a manner that belies the apparent neutrality of the measure".634 Therefore, in our view, the Panel should not have excluded from consideration certain categories of evidence simply because they appear to relate more specifically to one, as opposed to another, factor under Article 2.1(c), second sentence.
5.269.
In light of the above, we find that the Panel erred in its interpretation of the factors "predominant use by certain enterprises" and "granting of disproportionately large amounts of subsidy to certain enterprises" in Article 2.1(c) of the SCM Agreement. We therefore reverse the Panel's finding, in paragraph 8,843 of the Panel Report, that the European Union has failed to establish that the subsidy provided by South Carolina through EDB proceeds is specific within the meaning of Article 2.1 of the SCM Agreement.635

5.4.3.4 Whether the Panel failed to make an objective assessment under Article 11 of the DSU

5.270.
The European Union contends that the Panel failed to make an objective assessment under Article 11 of the DSU of the factors in the third sentence of Article 2.1(c) of the SCM Agreement, namely the extent of diversification of economic activities within the jurisdiction of the granting authority, and the length of time during which the subsidy programme has been in operation.636 According to the European Union, "{t}he Panel had undisputed evidence before it of (i) a granting authority (i.e., the State of South Carolina) with a diverse economy in which many companies operated, and (ii) the length of time that the measure authorising the EDBs had existed (since 2002)."637
5.271.
The United States argues that the total number of manufacturing establishments in South Carolina does not indicate the number of companies that were eligible for the EDB programme, namely "those that establish a new economic development project in South Carolina, involving an investment of at least $400 million and the creation of 400 new jobs".638 Furthermore, the United States considers that the European Union "offers no reason to expect that, in light of the demanding eligibility requirements, more than six entities should have qualified for the EDB program during the period from 2002 to 2012".639
5.272.
Having reversed the Panel's finding that the European Union has failed to establish that the subsidy provided by South Carolina through EDB proceeds is specific within the meaning of Article 2.1 of the SCM Agreement, we do not consider it necessary to examine further the objectivity of the Panel's assessment with respect to the factors in the third sentence of Article 2.1(c).

5.4.3.5 Completion of the legal analysis

5.273.
In our analysis above, we found that the Panel erred in its interpretation of Article 2.1(c) of the SCM Agreement by interpreting the factors "predominant use by certain enterprises" and "the granting of disproportionately large amounts of subsidy to certain enterprises" as mutually exclusive in terms of the evidence on the basis of which their existence can be established. We therefore now turn to the European Union's request for completion of the legal analysis.
5.274.
The European Union requests us to complete the legal analysis and conclude that the EDB subsidies are specific within the meaning of Article 2.1(c) of the SCM Agreement.640 In the European Union's view, the Appellate Body should rely on factual findings by the Panel that, since the adoption of its legislation authorizing the issuance of EDBs in 2002, South Carolina has issued EDBs benefiting only three private ventures: BMW (US$105 million), the Project Emerald companies (US$120 million), and Boeing (US$220 million).641 The European Union considers that the Appellate Body can also take into account undisputed factual evidence that the South Carolina economy is diverse, including: (i) the Panel's finding that "a wide variety of industries and enterprises" in South Carolina entered into 954 FILOT agreements with the State; (ii) evidence that "{d}ata from the United States Census Bureau indicates that, in 2012, there were … 3,867 manufacturing establishments" in South Carolina; and (iii) evidence that "many more {than two} (manufacturing) enterprises in South Carolina invest in facilities and infrastructure" and therefore "had access to {the EDB} subsidy".642
5.275.
We recall that whether a subsidy programme is mainly, or for the most part, used by certain enterprises is necessarily a question that should be answered on a case-by-case basis, taking into account the particular characteristics of the subsidy programme at issue and the prevailing circumstances of the case, and in light of the factors in the third sentence of Article 2.1(c). As observed above, the European Union's evidence does not provide specific information concerning the number of entities with the capacity to make an investment and to create employment of the scale required by the criteria of eligibility under the EDB subsidy. Accordingly, we see no basis for assessing whether the actual allocation of the EDBs differed from the allocation that would have been expected in light of the investment and employment requirements, which in turn may establish the existence of predominant use of the subsidy programme by certain enterprises. Similarly, the fact that "many more {than two} (manufacturing) enterprises in South Carolina invest in facilities and infrastructure"643 does not necessarily mean that those other enterprises have the potential to comply with the minimum investment and employment requirements and are thereby in a position actually to avail themselves of the EDB benefits. There are no other factual findings by the Panel or undisputed facts on the Panel record relevant to the assessment of whether the EDB subsidy has been predominantly used by certain enterprises.
5.276.
In view of the above and in the absence of sufficient factual findings by the Panel or undisputed facts on the Panel record, we are unable to complete the legal analysis in relation to the European Union's claim that the EDB subsidy programme is de facto specific because of its predominant use by certain enterprises within the meaning of Article 2.1(c) of the SCM Agreement.

5.4.3.6 Conclusion

5.277.
With regard to the European Union's claim that the Panel erred in its interpretation of the term "limited number" in the second sentence of Article 2.1(c) of the SCM Agreement, we observed that what constitutes a quantitatively limited group of enterprises must be determined on a case‑by‑case basis, taking into account the particular characteristics of the subsidy programme and the circumstances of the case. We disagree with the European Union that the Panel implicitly interpreted the term "limited number" as "one" or "fewer than three". Rather, the Panel considered that the European Union had not met its burden of proof as to whether the EDB subsidy has been used by only a "limited number" of certain enterprises. Accordingly, we find that the Panel did not err in its interpretation of the term "limited number" of certain enterprises in Article 2.1(c) of the SCM Agreement.
5.278.
With regard to the European Union's claim that the Panel erred in its interpretation and application of the term "certain enterprises" in the second sentence of Article 2.1(c), we observed that the determination of whether a number of enterprises or industries constitute "certain enterprises" should be made in light of all relevant characteristics of the entities, including the nature and purpose of their activities in the markets in question and the context in which these activities are exercised. The Panel erred by taking into account three specific entities in its analysis under Article 2.1(c) without having established that they constitute "certain enterprises". However, the Panel's rejection of the European Union's claims does not hinge on its statement relating to the relevance of the three specific entities in its analysis of de facto specificity.
5.279.
With regard to the European Union's claim that the Panel erred in its interpretation of the term "predominant use" in the second sentence of Article 2.1(c), we observed that this term refers primarily to the incidence or frequency with which the subsidy is used by certain enterprises. Furthermore, we found that evidence demonstrating the existence of "predominant use by certain enterprises" may also be pertinent for demonstrating the granting of "disproportionately large amounts of subsidy to certain enterprises". Accordingly, we find that, by excluding a category of evidence potentially relevant to the assessment of the existence of "predominant use by certain enterprises" and ultimately for determining de facto specificity, on the basis that this evidence was more relevant to the assessment of another factor under Article 2.1(c), second sentence, the Panel erred in its interpretation of these factors in Article 2.1(c).
5.280.
We therefore reverse the Panel's finding, in paragraph 8,843 of the Panel Report, that the European Union has failed to establish that the subsidy provided by South Carolina through EDB proceeds is specific within the meaning of Article 2.1 of the SCM Agreement. We also find that there are insufficient factual findings by the Panel or undisputed facts on the Panel record for us to complete the legal analysis in this respect. Having reversed the Panel's finding, we do not consider it necessary to address whether, in addition, the Panel acted inconsistently with Article 11 of the DSU.

5.5 European Union's claims relating to the Panel's findings concerning South Carolina MCIP job tax credits

5.281.
The European Union requests us to reverse the Panel's finding that the European Union had failed to establish that the subsidy provided through the additional corporate income tax credits is specific within the meaning of Article 2.2 of the SCM Agreement and its conclusion that the European Union had not established that the United States failed to withdraw this subsidy within the meaning of Article 7.8 of the SCM Agreement.644 The European Union submits that, in reaching its finding, the Panel erred in the application of Article 2.2 and also acted inconsistently with Article 11 of the DSU. The European Union also requests us to complete the legal analysis and find that the subsidy is specific within the meaning of Article 2.2 of the SCM Agreement.645
5.282.
The United States requests us to uphold the Panel's finding that the subsidy provided to Boeing through the additional corporate income tax credits is not specific within the meaning of Article 2.2 of the SCM Agreement.646 The United States submits that the Panel did not err in the application of Article 2.2 of the SCM Agreement and did not fail to conduct an objective assessment of the matter, as required by Article 11 of the DSU.
5.283.
In our analysis below, we first outline the measure at issue and recall the parties' arguments before the Panel and the Panel's findings, as relevant for the claims before us. Then, we turn to the analysis of the European Union's claims on appeal, which will proceed in three steps. We begin by addressing the legal standard under Article 2.2 of the SCM Agreement. Subsequently, we evaluate whether the Panel erred in the application of this provision. Finally, we address the European Union's claim under Article 11 of the DSU.

5.5.1 The Panel's findings

5.284.
Before the Panel, the European Union challenged the additional corporate income tax credits provided to Boeing by virtue of the inclusion of Boeing's production facilities within the industrial park jointly established by Charleston County and Colleton County (Charleston-Colleton MCIP). According to Section 12‑6‑3360 of the South Carolina Income Tax Act, taxpayers that create new full-time jobs in South Carolina may receive two types of corporate income tax credits – standard tax credits and additional tax credits. All taxpayers that meet certain employment-related criteria are eligible for the standard tax credits. However, in order to receive the additional tax credits, such taxpayers must be located in a business or industrial park jointly established and developed by a group of South Carolina counties pursuant to Section 13 of Article VIII of the Constitution of South Carolina.647
5.285.
Section 13 of Article VIII of the Constitution of South Carolina provides that "{c}ounties may jointly develop an industrial or business park with other counties within the geographical boundaries of one or more of the member counties."648 Pursuant to this authority, Charleston County and Colleton County jointly established the Charleston-Colleton MCIP.649 The territory of this MCIP was subsequently extended in order to include Boeing's production facilities in South Carolina.650 As a result of the inclusion of Boeing's production facilities within the Charleston‑Colleton MCIP, Boeing became "located" within an industrial park jointly developed by a group of South Carolina counties in accordance with Section 13 of Article VIII of the Constitution of South Carolina. This entitled Boeing to the additional corporate income tax credits under Section 12‑6‑3360 of the South Carolina Income Tax Act, its eligibility for the standard corporate income tax credits not being in dispute before the Panel.651
5.286.
The Panel found that the provision of the additional corporate income tax credits to Boeing involved a financial contribution in the form of revenue "foregone" within the meaning of Article 1.1(a)(1)(ii) and conferred a benefit within the meaning of Article 1.1(b) of the SCM Agreement.652 The European Union argued that the resulting subsidy (MCIP subsidy) was specific under Articles 2.1(a), 2.1(c), and 2.2 of the SCM Agreement.653 The Panel found that the European Union had failed to establish that the MCIP subsidy is specific within the meaning of those provisions.654 On appeal, the European Union challenges only the Panel's finding with respect to Article 2.2 of the SCM Agreement.
5.287.
Before the Panel, the European Union argued that the MCIP subsidy is specific under Article 2.2 of the SCM Agreement because it is "limited to certain enterprises located within a designated geographic{al} region within the jurisdiction of the granting authority".655 The European Union asserted that: (i) the Charleston-Colleton MCIP is a particular geographical region designated by two counties; (ii) the State of South Carolina is the granting authority, within the jurisdiction in which that region is located; and (iii) the number of enterprises located within that region is irrelevant for the specificity analysis under Article 2.2.656
5.288.
The United States argued before the Panel that the MCIP subsidy is not "limited to certain enterprises located within a designated geographical region" within the meaning of Article 2.2 of the SCM Agreement but is provided to a number of enterprises located within any number of different MCIPs throughout South Carolina. The United States asserted that MCIPs are pervasive in South Carolina and are available to any business that requests the inclusion of its property within an MCIP.657 Furthermore, because counties can freely add property to or subtract it from MCIPs at any time, an MCIP is not a "designated" region within the meaning of Article 2.2 of the SCM Agreement.658
5.289.
The Panel began by noting the findings of previous panels to the effect that: (i) any identified tract of land within the jurisdiction of the granting authority may be a "designated geographical region" within the meaning of Article 2.2 of the SCM Agreement659; and (ii) an industrial park or economic development zone could constitute such a region.660 The Panel further observed that when a subsidy is provided only to enterprises located within a region that has a "fixed geographic identity", such a subsidy is limited to certain enterprises within that region because it is not possible for enterprises not located within that designated region to have access to the subsidy.661 The Panel noted, however, that this logic did not apply to the MCIP subsidy at issue, because the "MCIP designation" is "readily available upon request"662 to any enterprise regardless of its particular location in South Carolina. The Panel thus considered that the availability of the MCIP subsidy only to enterprises located within an MCIP "cannot be meaningfully considered to amount to a limitation under Article 2.2".663 On that basis, the Panel found that the European Union had failed to establish that the subsidy provided through the additional corporate income tax credits is specific within the meaning of Article 2.2 of the SCM Agreement.664

5.5.2 Claims and arguments on appeal

5.290.
The European Union claims that, in finding that the MCIP subsidy is not "limited to certain enterprises located within a designated geographical region", the Panel erred in the application of Article 2.2 of the SCM Agreement and reached, on this basis, an erroneous conclusion that the European Union had failed to establish that the United States had not withdrawn this subsidy within the meaning of Article 7.8 of the SCM Agreement.665 In addition, the European Union argues that the Panel acted inconsistently with Article 11 of the DSU because the Panel's conclusion that the MCIP subsidy is not specific under Article 2.2 of the SCM Agreement is not based on an objective assessment of the facts.666
5.291.
The European Union submits that the Panel erred in the application of Article 2.2 of the SCM Agreement because it failed to recognize that limiting access to the MCIP subsidy to enterprises located within an MCIP constitutes a geographical limitation on this subsidy.667 The European Union argues that the Panel based its finding that the limitation on access to the subsidy to enterprises located within an MCIP "cannot be meaningfully considered to amount to a limitation under Article 2.2" on the mere possibility that the geographical boundaries of MCIPs could be reduced or expanded in the future.668 In the European Union's view, just the possibility that this might occur in the future cannot justify a finding that, at present, the MCIP subsidy is not specific within the meaning of Article 2.2 of the SCM Agreement.669 The European Union further contends that the Panel's finding suggests that the term "designated geographical region" can encompass only a "fixed geographic identity" that cannot be changed or amended in the future.670 However, for the European Union, the "designated geographical region" within the meaning of Article 2.2 need not be strictly defined or fixed.671
5.292.
Furthermore, the European Union claims that the Panel acted inconsistently with Article 11 of the DSU in finding that the MCIP designation is "readily available upon request" to any enterprise.672 The European Union argues that the Panel did not refer to any evidence in support of that finding and failed to conduct an independent assessment of whether the MCIP designation was indeed available upon request to any enterprise.673 According to the European Union, the Panel's finding is contrary to undisputed evidence on the record, which shows that the MCIP designation requires a multi-county legislative action, and is therefore not easily available to any enterprise requesting it.674 The European Union further argues that the Panel failed to explain how its finding that the MCIP designation is readily available to any enterprise accords with the distinction between the standard corporate income tax credits (for which an enterprise does not need to be located within an MCIP) and additional corporate income tax credits (for which an enterprise is required to be located in an MCIP) under South Carolina law. The European Union argues, therefore, that the Panel's view of the facts is implausible and unsupported by reasoned and adequate explanations and coherent reasoning, as required by Article 11 of the DSU.675
5.293.
Referring to the European Union's argument that the Panel's finding suggests that the term "designated geographical region" can encompass only a "fixed geographic identity" that cannot be changed or amended in the future,676 the United States responds that, in making this argument, the European Union inaccurately ascribes a legal interpretation to the Panel that it did not adopt.677 According to the United States, the Panel found that the MCIP designation does not operate as a genuine limitation on access to the subsidy because the MCIP designation is "infinitely mutable".678 In the United States' view, however, this does not imply that a geographical designation must be "immutable" in order to fall under Article 2.2 of the SCM Agreement.679 In addition, the United States points out that the measure at issue provides no way of identifying, either explicitly or implicitly, the areas included within MCIPs. For the United States, this supports the conclusion that the MCIP subsidy is not specific under Article 2.2 of the SCM Agreement.680
5.294.
With respect to the European Union's claim under Article 11 of the DSU, the United States argues that the Panel's finding that the MCIP designation is "readily available upon request"681 to any enterprise is supported by the fact that the text of the Charleston-Colleton MCIP Agreement contemplates changes to the territory of that MCIP682, as well as by the fact that such changes had occurred 18 times between 1995 and 2013.683 The United States further contends that the European Union failed to provide evidence of applications for the receipt of the subsidy being rejected. Therefore, there is no indication that the Panel's finding regarding the availability of the MCIP designation lacked objectivity.684

5.5.3 Whether the Panel erred in its application of Article 2.2 of the SCM Agreement

5.295.
In this section, we examine the European Union's claim on appeal that the Panel erred under Article 2.2 of the SCM Agreement in finding that the European Union had failed to establish that the subsidy provided through the additional corporate income tax credits is specific within the meaning of Article 2.2 of the SCM Agreement. We first address the legal standard under Article 2.2 and then turn to review the Panel's analysis under that provision.
5.296.
Article 2.2 of the SCM Agreement provides, in relevant part:

A subsidy which is limited to certain enterprises located within a designated geographical region within the jurisdiction of the granting authority shall be specific.

5.297.
Article 2.2 concerns regional specificity of subsidies, i.e. specificity by reason of the location of eligible subsidy recipients within a particular geographical region.685 The phrase "{a} subsidy which is limited to" refers to the concept of a limitation, similar to the one contained in Articles 2.1(a) and 2.1(c) of the SCM Agreement. The dictionary definition of the verb "to limit" is to "confine within limits, to set bounds to", "to bound, restrict".686 Accordingly, Article 2.2 concerns those subsidies that are provided within certain bounds or limits. As Article 2.2 deals with regional specificity, the term "limited", in the context of this provision, suggests that access to a subsidy must be limited to eligible recipients located within a "designated geographical region" within the jurisdiction of the granting authority.
5.298.
We note that, in contrast to Article 2.1(a) of the SCM Agreement, the term "limited" in the text of Article 2.2 is not qualified by the word "explicitly". This suggests that, in principle, Article 2.2 covers both explicit and implicit limitations on access to a subsidy. We also observe that Article 2.2 does not prescribe a particular manner in which a limitation on access to a subsidy must be imposed. Unlike Article 2.1(a), the text of Article 2.2 does not specify that such a limitation must necessarily be found in "the legislation pursuant to which the granting authority operates", or that it must be imposed by the granting authority itself.
5.299.
In order for a subsidy to be specific within the meaning of Article 2.2 of the SCM Agreement, a subsidy must be limited to "certain enterprises". The term "certain enterprises" is defined in the chapeau of Article 2.1 as "an enterprise or industry or group of enterprises or industries". As we noted above, the term "enterprise" may be understood to refer to an entity that engages in certain economic activities in the market. The Appellate Body has further held that the term "certain enterprises" refers to a single enterprise or industry or a class of enterprises or industries that are known and particularized.687 The Appellate Body also noted that this concept involves a certain amount of indeterminacy at the edges and that any determination of whether a number of enterprises or industries constitute "certain enterprises" can be made only on a case‑by-case basis.688
5.300.
The chapeau of Article 2.1 offers interpretative guidance with regard to the scope and meaning of the rest of Article 2689, including the term "certain enterprises" employed in different parts of Article 2. Therefore, in principle, the definition of the term "certain enterprises" provided therein is also relevant for the interpretation of this term in Article 2.2. However, it does not follow that this term necessarily has an identical meaning across all of the provisions of Article 2. Rather, it must be read in the context of the specific provision of Article 2 in which it appears. As already observed, Article 2.2 concerns specificity by reason of the location of eligible subsidy recipients within a particular geographical region.690 Accordingly, we understand the term "certain enterprises" in Article 2.2 to refer to those enterprises that are located within a "designated geographical region" within the jurisdiction of the granting authority.
5.301.
We further noted above that the term "enterprise" refers to an entity engaged in economic activities in the market. The term "located", in turn, connotes a place where an enterprise has established itself.691 As observed by the Appellate Body, an enterprise may be considered to be established in a variety of places, including at the sites of its headquarters, branch offices, or manufacturing facilities.692 This means that, for purposes of specificity under Article 2.2 of the SCM Agreement, access to a subsidy must be limited to entities that are engaged in economic activities in the market; have their headquarters, branch offices, or manufacturing facilities in a "designated geographical region"; or are otherwise established within such a region.
5.302.
Turning now to examine the meaning of the term "designated geographical region" in Article 2.2 of the SCM Agreement, we note that the word "region" refers to "any area, space, or place of more or less definite extent or character"693, while "geographical" denotes that something is "considered or defined in relation to a particular place, area, or region".694 This suggests that the term "geographical region" in Article 2.2 refers to a geographical area, space, or place of more or less definite extent or character within the jurisdiction of the granting authority. Article 2.2 does not further specify any criteria that may distinguish a particular "geographical region" from the rest of the area within the jurisdiction of the granting authority. We note, in this regard, the conclusion of the panel in US – Anti-Dumping and Countervailing Duties (China) that Article 2.2 does not require that a region have any formal administrative or economic identity and that a "geographical region" in the sense of that provision may encompass any identified tract of land within the jurisdiction of the granting authority.695
5.303.
Article 2.2 of the SCM Agreement requires that the relevant geographical region within the jurisdiction of the granting authority be "designated". The term "designated" presupposes a certain degree of identification of this region.696 As observed by the Appellate Body in US – Washing Machines, certain aspects of the meaning of the verb "designate" – such as "specify" and "{c}all by name" – point to an act of explicit or affirmative identification, whereas other aspects – such as "indicate" and "describe" – suggest that identification may also be carried out through indirect means.697 The identification of a region for the purposes of Article 2.2 of the SCM Agreement may be explicit or implicit, provided that the relevant region is clearly discernible from the text, design, structure, and operation of the subsidy measure at issue.698
5.304.
In sum, a subsidy is specific under Article 2.2 of the SCM Agreement when it is limited to "certain enterprises" located within a "designated geographical region within the jurisdiction of the granting authority". This is the case when access to a subsidy is either explicitly or implicitly limited to entities that are engaged in economic activities in the market; have their headquarters, branch offices, or manufacturing facilities in a "designated geographical region" within the jurisdiction of the granting authority; or are otherwise established within such a region. A "designated geographical region" refers to an identified geographical area, space, or place of more or less definite extent or character. The identification of a geographical region for the purposes of Article 2.2 of the SCM Agreement may be explicit or implicit, provided that the relevant region is clearly discernible from the text, design, structure, and operation of the subsidy measure at issue.699
5.305.
With these considerations in mind, we turn to examine whether the Panel erred in the application of Article 2.2 of the SCM Agreement in its assessment of the specificity of the MCIP subsidy. We recall that the Panel commenced its analysis by noting the findings of previous panels to the effect that: (i) any identified tract of land within the jurisdiction of the granting authority may be a "designated geographical region" within the meaning of Article 2.2 of the SCM Agreement700; and (ii) an industrial park or economic development zone could constitute such a region.701 The Panel further observed that when a subsidy is provided only to enterprises located within a region that has a "fixed geographic identity", such a subsidy is "limited" to certain enterprises within that region because it is not possible for enterprises not located within that "designated region" to have access to the subsidy.702 With respect to whether the MCIP subsidy is "limited" within the meaning of Article 2.2 of the SCM Agreement, the Panel found that it was available only to taxpayers located in an MCIP.703 We understand that this was based on Section 12‑6‑3360 of the South Carolina Income Tax Act, which provides that only taxpayers located in an MCIP are eligible for this subsidy.704 Thus, there is an explicit limitation on access to the MCIP subsidy based on the location of the potential subsidy recipient. We note, however, that instead of assessing whether this is a limitation concerning "certain enterprises" located in a "designated geographical region" in the sense of Article 2.2, the Panel reasoned that, due to the availability of the MCIP designation upon request to any enterprise, this "cannot be meaningfully considered to amount to a limitation under Article 2.2" of the SCM Agreement.705 On this basis, the Panel concluded that the European Union had failed to demonstrate that the MCIP subsidy is specific within the meaning of Article 2.2 of the SCM Agreement.
5.306.
As we see it, the explicit requirement that taxpayers be located in an MCIP in order to receive the additional corporate income tax credits is a limitation on access to the MCIP subsidy. This limitation is not made void by the fact that enterprises not located in an MCIP may become part of an MCIP in the future and then qualify for the subsidy. We understand that the size and configuration of MCIPs in South Carolina may change over time. The territory of existing MCIPs may be reduced or expanded, and new MCIPs may be established. However, this does not change the fact that only enterprises located in an MCIP are eligible to receive the MCIP subsidy. We therefore disagree with the Panel that the requirement of Section 12-6-3360 of the South Carolina Income Tax Act that taxpayers be located in an MCIP in order to receive the additional corporate income tax credits cannot be "meaningfully" considered as a "limitation" under Article 2.2 of the SCM Agreement.
5.307.
In view of the foregoing, we find that the Panel erred in the application of Article 2.2 of the SCM Agreement in stating that the availability of the MCIP subsidy only to enterprises located within an MCIP "cannot be meaningfully considered to amount to a limitation under Article 2.2" of the SCM Agreement.706 Therefore, we reverse the Panel's finding, in paragraph 8,931 of the Panel Report, that the European Union had failed to establish that the subsidy provided through the additional corporate income tax credits is specific within the meaning of Article 2.2 of the SCM Agreement.

5.5.4 Whether the Panel failed to make an objective assessment under Article 11 of the DSU

5.308.
The European Union also claims that the Panel acted inconsistently with Article 11 of the DSU. Specifically, the European Union argues that the Panel's finding that the MCIP designation is "readily available upon request", which led it to conclude that the European Union had not established that the MCIP subsidy is specific under Article 2.2 of the SCM Agreement, is not based on an objective assessment of the facts.707
5.309.
We have reversed above the Panel's finding that the European Union had failed to establish that the subsidy provided through the additional corporate income tax credits is specific within the meaning of Article 2.2 of the SCM Agreement on account of the Panel's error in the application of Article 2.2 of the SCM Agreement. Having reversed this finding, it is not necessary for us to examine further the objectivity under Article 11 of the DSU of the Panel's factual assessment in support of this finding.

5.5.5 Completion of the legal analysis

5.310.
We now turn to consider the European Union's request that we complete the legal analysis and find that the MCIP subsidy is specific within the meaning of Article 2.2 of the SCM Agreement.708
5.311.
We recall that the Appellate Body may complete the legal analysis with a view to facilitating the prompt settlement and effective resolution of the dispute when the factual findings by the panel709 and/or facts on the Panel record, which are uncontested by the disputing parties710, provide a sufficient factual basis for doing so.711 At the same time, the Appellate Body has declined to complete the legal analysis for reasons such as the absence of full exploration of the issues before the panel712, considerations pertaining to the parties' due process rights713, and where doing so was not required to resolve the dispute.714
5.312.
With these considerations in mind, we proceed to assess whether there is a sufficient factual basis for us to complete the legal analysis in the present appeal and determine whether the MCIP subsidy is specific under Article 2.2 of the SCM Agreement. We begin by addressing the question of whether there is a limitation on access to the MCIP subsidy. We recall in this regard that Section 12‑6-3360 of the South Carolina Income Tax Act sets forth the conditions of eligibility for the MCIP subsidy and provides that, in order to be eligible for this subsidy, taxpayers must be located in an MCIP.715 We thus consider that Section 12-6-3360 of the South Carolina Income Tax Act imposes a limitation on access to the MCIP subsidy.
5.313.
Turning to the question of whether this limitation concerns "certain enterprises located within a designated geographical region" within the meaning of Article 2.2 of the SCM Agreement, we note that the European Union's claim pertains to the availability of the MCIP subsidy to Boeing as a result of the inclusion of its manufacturing facilities within the Charleston-Colleton MCIP.716 As observed by the Appellate Body in the original proceedings, the specificity inquiry:

{F}ocuses not only on whether the subsidy was provided to the particular recipients identified in the complaint, but focuses also on all enterprises or industries eligible to receive that same subsidy. Thus, even where a complaining Member has focused its complaint on the grant of a subsidy to one or more enterprises or industries, the inquiry may have to extend beyond the complaint to determine what other enterprises or industries also have access to that same subsidy under that subsidy scheme.717

5.314.
Thus, while the European Union's claim focuses on the availability of the MCIP subsidy to Boeing because of its location in the Charleston-Colleton MCIP, the assessment of whether this subsidy is specific under Article 2.2 of the SCM Agreement is broader. It concerns the question of whether the MCIP subsidy is limited to "certain enterprises" located within a "designated geographical region" and not whether it is available only to Boeing, due to its location in the Charleston-Colleton MCIP.
5.315.
In addressing this issue, we note that Section 12-6-3360 of the South Carolina Income Tax Act provides that, in order to be eligible for this subsidy, taxpayers must be "located in a business or industrial park jointly established and developed by a group of counties".718 It does not, on its face, designate any particular MCIP(s) within which enterprises eligible for this subsidy must be located. The United States further submits that Section 12-6-3360 does not allow the identification of the areas included within MCIPs, either explicitly or implicitly.719 On this basis, the United States argues that Section 12-6-3360 of the South Carolina Income Tax Act does not designate the relevant "geographical region" within the meaning of Article 2.2, and that, as a consequence, the MCIP subsidy is not specific within the meaning of this provision.720
5.316.
We agree with the United States to the extent that Section 12-6-3360 of the South Carolina Income Tax Act does not itself predetermine the geographical areas of the MCIPs established in South Carolina. However, we disagree with the suggested implications of this for the analysis of whether the MCIP subsidy is specific under Article 2.2 of the SCM Agreement. We recall that a "designated geographical region" within the meaning of Article 2.2 refers to an identified geographical area, space, or place of more or less definite extent or character. The identification of a geographical region for the purposes of Article 2.2 may be explicit or implicit, provided that the relevant region is clearly discernible from the text, design, structure, and operation of the subsidy measure at issue.721
5.317.
In the present case, the Panel found that, while the MCIP subsidy is provided at the state level722, MCIPs are established by the South Carolina counties, pursuant to the authority granted to them by Section 13 of Article VIII of the Constitution of South Carolina.723 In exercising this authority, Charleston County and Colleton County entered into an agreement establishing the Charleston‑Colleton MCIP.724 The Charleston‑Colleton MCIP is thus an MCIP that allows taxpayers located within its boundaries to claim the additional corporate income tax credits, in accordance with Section 12-6-3360 of the South Carolina Income Tax Act. The uncontested facts on the Panel record further indicate that the geographical area and location of the Charleston-Colleton MCIP are defined in the Agreement for Development for Joint County Industrial Park, as subsequently amended.725 In this respect, we recall that a "designated geographical region" under Article 2.2 may encompass any "identified tract of land within the jurisdiction of a granting authority"726 and that it is not required that it have a "formal administrative or economic identity".727 While the geographical area of a particular MCIP, such as the Charleston-Colleton MCIP, is not explicitly specified in Section 12‑6‑3360 of the South Carolina Income Tax Act, it may be discerned from the instrument establishing an MCIP. We thus consider that the subsidy measure at issue designates the "geographical region" within which enterprises must be located in order to receive the subsidy.
5.318.
We note that it was not contested before the Panel that multiple MCIPs may be created in South Carolina, and that the size and configuration of MCIPs may change over time. The parties, however, did not submit to the Panel information on the number of MCIPs established in South Carolina and the frequency of changes in the size and configuration of the MCIPs728, and the Panel did not conduct an assessment of those factors. We thus see no basis on the Panel record supporting the United States' contention that, because of a potentially unlimited number of MCIPs that may be created in South Carolina, or because of the flexible nature of the territorial borders of the existing MCIPs, the subsidy at issue is not limited to enterprises located within the geographical area of an MCIP, but is in fact widely available in South Carolina.729 We have taken note of the Panel's statement that the MCIP designation is "readily available upon request to any company".730 However, the Panel did not provide any explanation or reasoning in support of that statement. Moreover, the Panel did not provide any explanation as to how, in the circumstances of this case, the extent of potential access to the subsidy served to overcome the express geographical delimitation that attaches to each MCIP designation. In the absence of such an explanation, we consider that the manner in which this subsidy measure designates the geographical area of an MCIP provides a sufficient basis for a finding that the subsidy measure at issue designates the "geographical region" within which enterprises must be located in order to receive the subsidy.
5.319.
In view of the foregoing, we find that the subsidy provided to Boeing through the additional corporate income tax credits, pursuant to Section 12-6-3360 of the South Carolina Income Tax Act, is specific within the meaning of Article 2.2 of the SCM Agreement.

5.5.6 Conclusion

5.320.
In sum, a subsidy is specific under Article 2.2 of the SCM Agreement when access to it is either explicitly or implicitly limited to entities engaged in economic activities in the market that have their headquarters, branch offices, or manufacturing facilities in a "designated geographical region" within the jurisdiction of the granting authority, or that are otherwise established within such a region. In the present case, such limitation contained in Section 12‑6‑3360 of the South Carolina Income Tax Act is not made void by the fact that enterprises not currently located in an MCIP may become part of an MCIP in the future and then qualify for the subsidy. We find that the Panel erred in the application of Article 2.2 of the SCM Agreement in stating that the availability of the MCIP subsidy only to enterprises located within an MCIP "cannot be meaningfully considered to amount to a limitation under Article 2.2" of the SCM Agreement.731 Consequently, we reverse the Panel's finding, in paragraphs 8,931 and 11.7.c.vii of the Panel Report, that the European Union has failed to establish that the subsidy provided through the additional corporate income tax credits is specific within the meaning of Article 2.2 of the SCM Agreement.
5.321.
Furthermore, we complete the legal analysis and find that the subsidy provided to Boeing through the additional corporate income tax credits, pursuant to Section 12-6-3360 of the South Carolina Income Tax Act, is specific within the meaning of Article 2.2 of the SCM Agreement.

5.6 Continuing adverse effects from the original reference period

5.322.
The European Union presents two sets of challenges to the Panel's finding that the European Union had failed to establish that certain forms of serious prejudice, which were found by the original panel to be the effects of the pre-2007 aeronautics R&D subsidies in the original reference period in the form of significant price suppression, significant lost sales, and a threat of displacement or impedance with respect to the A330 and Original A350, continue into the post‑implementation period as serious prejudice with respect to the A330 and A350XWB.732
5.323.
First, the European Union requests us to reverse the Panel's finding that adverse effects consisting of significant price suppression and significant lost sales cannot continue to be caused by subsidies in instances where LCA orders occurred prior to the end of the implementation period, but for which deliveries remained outstanding in the post-implementation period. The European Union submits that the Panel erred under Article 7.8 of the SCM Agreement, and acted inconsistently with Article 11 of the DSU, by excluding specific transactions found to cause adverse effects during the original proceedings from the obligation to take appropriate steps to remove adverse effects.
5.324.
Second, the European Union requests us to reverse the Panel's finding that the European Union's claim of continuing adverse effects was unsupported by the evidence and/or was in contradiction with the findings made in the original proceedings. The European Union argues that the Panel acted inconsistently with Article 11 of the DSU by deviating from the adopted findings in the original proceedings concerning the 200-300 seat LCA market by now focusing on separate aircraft models. The European Union further alleges that the Panel erred under Articles 5 and 6.3 of the SCM Agreement by failing to conduct a proper counterfactual analysis when assessing whether there was continuing price suppression of the A330 in the post‑implementation period.

5.6.1 Whether the Panel erred under Article 7.8 of the SCM Agreement, or acted inconsistently with Article 11 of the DSU, by excluding transactions found to cause adverse effects during the original reference period from the obligation to take appropriate steps to remove adverse effects

5.325.
The European Union considers that the Panel erred in the interpretation of Article 7.8 of the SCM Agreement by purportedly excluding adverse effects "found in relation to specific transactions during the original reference period" from the obligation to take appropriate steps to remove adverse effects.733 Thus, according to the European Union, the Panel erroneously found that the original adverse effects were no longer present adverse effects, but rather "continuing manifestations or effects of past adverse effects".734 As the European Union argues, to the extent a subsidy is maintained and its adverse effects still exist in the post‑implementation period, the implementing Member has an obligation to take appropriate steps to remove the adverse effects, including with respect to the specific transactions addressed in the original proceedings. The European Union also submits that the Panel erred in the application of Article 7.8 of the SCM Agreement, and acted inconsistently with Article 11 of the DSU, by erroneously finding that lost sales and price suppression begin and end at the time at which an LCA is ordered, and do not exist throughout the life of the contract until the final aircraft is delivered. For the European Union, this runs counter to the original panel's finding that the phenomena of lost sales and price suppression in the LCA market "should be understood to begin at the time at which an LCA order is obtained (or an order is lost), and to continue up to and including the time at which that aircraft is delivered (or not delivered)".735
5.326.
The United States maintains that the Panel correctly rejected the European Union's interpretation of Article 7.8, which is fundamentally at odds with the prospective nature of that provision.736 According to the United States, the fact that deliveries (from orders that were found to constitute adverse effects in the original reference period) were scheduled after the expiration of the implementation period does not mean that they represent harm in the post-implementation period. Rather, the United States argues, this is simply a consequence of the original lost sale, and to require action with respect to those deliveries would require the United States retrospectively to remedy the specific indicia of harm from the original proceedings. For the United States, the use of the present tense in Article 6.3 is critical, and thus the United States considers that the "effects" that a complying Member must "remove" are those that result from the subsidies at the time of the obligation – that is, effects occurring after the end of the implementation period – and not those that resulted during the original reference period.737 Regarding the European Union's assertion that the Panel improperly deviated from the original panel's statement on the phenomena of lost sales and price suppression, the United States maintains that the Panel carefully considered the statement highlighted by the European Union and concluded that the original panel and the Appellate Body relied on sales campaign evidence and the resultant orders, not delivery data.738
5.327.
At the outset, we note the United States' contention that the European Union's appeal of the Panel's interpretation of Article 7.8 is "moot" because the Panel provided "an independent basis for the Panel's ultimate conclusion that the transactions were not evidence of lost sales or price suppression".739 This concerns the Panel's finding that the European Union's claim of continuing adverse effects was unsupported by the evidence and/or in contradiction with the findings made in the original proceedings.740 The United States' suggestion appears to be that, if we see no reason to disturb the Panel's conclusions based on these evidentiary grounds, we need not consider the interpretation claim in order to sustain the Panel's ultimate conclusion that the European Union had failed to establish that serious prejudice found to exist in the original proceedings continues into the post-implementation period. We note that this interpretation claim raises issues of law covered in the Panel Report and legal interpretations developed by the Panel, within the meaning of Article 17.6 of the DSU. We further note that the question as to how the United States' compliance obligation under Article 7.8 of the SCM Agreement relates to the timing of LCA orders and deliveries has a bearing on subsequent claims at issue in this appeal. We therefore proceed in examining the European Union's claim.
5.328.
Article 7.8 provides that, when a panel or Appellate Body report is adopted "in which it is determined that any subsidy has resulted in adverse effects … the Member granting or maintaining such subsidy shall take appropriate steps to remove the adverse effects or shall withdraw the subsidy".741 By indicating that the removal of adverse effects relates to "such subsidy" that was found to have caused the effects in the original proceedings, Article 7.8 clearly specifies that the focus of the analysis concerns the removal of adverse effects caused by the subsidy that was challenged in the original proceedings, to the extent that such subsidy continues to be "grant{ed} or maintain{ed}" by the implementing Member after the end of the implementation period. As the Appellate Body recently stated, "Article 7.8 reflects an obligation to cease any conduct amounting to the 'granting or maintaining' of subsidies that cause adverse effects."742 The Appellate Body has added that Article 7.8 sets out an obligation "of a continuous nature, extending beyond subsidies granted in the past"743; "{w}hile a past subsidy that no longer exists may 'be found to cause or have caused adverse effects that continue to be present during the reference period', the source of the inconsistency under Article 5 is nonetheless the subsidy that causes adverse effects."744 Accordingly, in assessing whether a Member has taken appropriate steps to remove the adverse effects of subsidies within the meaning of Article 7.8, developments up to and including the post‑implementation period must be taken into account. Moreover, while the starting point of the analysis under Article 7.8 must be the effects of the original subsidy or subsidies found to have caused adverse effects in the original proceedings, the inquiry must also take into account any developments concerning those subsidies, as well as any new subsidies found to be closely related to such subsidies, and the impact this has for any adverse effects in the post-implementation period.
5.329.
The participants disagree as to the ongoing impact of the serious prejudice phenomena of significant price suppression and significant lost sales, as they relate to particular transactions that were found to form the basis of adverse effects findings in the original reference period. More concretely, the question is when the market phenomena of significant price suppression and significant lost sales that arose in the original reference period could be said to continue after the end of the implementation period, and whether the Panel was justified in excluding the potential relevance of deliveries in the post-implementation period as the basis for establishing such a case.
5.330.
Article 6.3(c) refers to significant price suppression and significant lost sales. In US – Upland Cotton, the Appellate Body endorsed the view of the panel that "price suppression" arises when prices are "prevented or inhibited from rising (i.e. they do not increase when they otherwise would have) or they do actually increase, but the increase is less than it otherwise would have been".745 The Appellate Body has also observed that price suppression is not a directly observable phenomenon, and inevitably requires a counterfactual analysis involving "a comparison of an observable factual situation (prices) with a counterfactual situation (what prices would have been) where one has to determine whether, in the absence of the subsidies (or some other controlling phenomenon), prices would have increased or would have increased more than they actually did".746
5.331.
In EC and certain member States – Large Civil Aircraft, the Appellate Body explained that "lost sales" are sales that suppliers of the complaining Member "failed to obtain" and that instead were won by suppliers of the respondent Member.747 The Appellate Body added that it is a "relational concept" and that its assessment "requires consideration of the behaviour of both the subsidized firm(s), which must have won the sales, and the competing firm(s), which allegedly lost the sales".748 For the Appellate Body, an assessment of lost sales also normally entails a counterfactual assessment, in this case in order to establish that "sales won by the subsidized firm(s) of the respondent Member would have been made instead by the competing firm(s) of the complaining Member, thus revealing the effect of the challenged subsidies."749
5.332.
With regard to the meaning of "significant", the Appellate Body noted in EC and certain member States – Large Civil Aircraft that the term appears before the phrase "price suppression, price depression or lost sales" in Article 6.3(c), and accordingly understood the term "significant" as qualifying all three situations.750 In US – Upland Cotton, the Appellate Body endorsed the panel's view that the term "significant" means "important, notable or consequential", and that such a term, depending on the circumstances, could have both quantitative and qualitative aspects.751
5.333.
Depending on the circumstances of a particular transaction or set of transactions that form the basis for a finding of significant price suppression or significant lost sales under Article 6.3(c), we do not see that the foregoing terms suggest that the particular phenomena of significant price suppression or significant lost sales must be limited to the moment at which the transaction or set of transactions first occur. With regard to price suppression, for example, there may be circumstances in which certain payment terms in the future will continue to be a reflection of suppressed prices. Indeed, as the Appellate Body noted, the determination as to whether price suppression exists is focused on whether, in the absence of subsidies, prices would have increased or would have increased more than they actually did. We do not see that such an assessment, even with respect to the original transactions that formed the basis of the original adverse effects findings, could not continue to be relevant even after the end of the implementation period to the extent that the pricing terms of those transactions continue to indicate an ongoing effect of price suppression. With respect to lost sales, we acknowledge that there may be a stronger case for understanding the phenomena as limited to the moment at which the suppliers of the complaining Member "failed to obtain" a sale that was instead won by suppliers of the respondent Member. At the same time, depending on the nature and scope of the transaction, there may be elements affecting finalization of the transaction, or concerning follow-on transactions in the form of options or purchase rights, that may be indicative of an ongoing phenomenon of lost sales. In any event, we would emphasize that the extent to which elements of the transactions underlying the original finding of adverse effects in the form of price suppression or lost sales endure in a manner so as to indicate the ongoing existence of adverse effects will very much depend on the nature, timing, and scope of those underlying transactions. In addition, we are cognizant of the fact that such variables will be affected by the particular dynamics of transactions in a particular industry, and that how the phenomena of price suppression and lost sales manifest themselves in the LCA industry may not be extrapolated to other industries.
5.334.
In the context of the LCA industry in particular, the original panel remarked that, given the particularities of LCA production and sale, the phenomena of price suppression and lost sales "do not begin and end at the time at which an LCA is ordered", but "should be understood to begin at the time at which an LCA order is obtained (or an order is lost), and to continue up to and including the time at which that aircraft is delivered (or not delivered)".752 The original panel also considered that, because the phenomena of price suppression and lost sales exist from the time an LCA is ordered to the time it is delivered, "data pertaining to both LCA orders and to LCA deliveries will potentially be relevant to demonstrating the existence of significant price suppression and significant lost sales."753 We note that these findings were not appealed in the original proceedings, and that neither participant has taken issue with these general propositions set out by the original panel.754
5.335.
We consider that, in the LCA market, the market phenomena of price suppression and lost sales are not limited to what occurs at the time of an LCA order, and that such phenomena may, in appropriate factual circumstances, continue up to the point of LCA delivery. As both the panel and the Appellate Body remarked in the original proceedings, LCA are sold to customers through long‑term contracts, often involving staggered deliveries over several years.755 Although the terms and conditions of each purchase contract are set at the time the order is made (including different elements, such as aircraft specification, net price, discounts, non-price concessions, and financing arrangements), "{c}omplete payment does not occur until delivery of the aircraft."756 Moreover, the original panel and Appellate Body noted that these contracts also have escalation clauses that provide for increases to the basic airframe price to account for the time that elapses between negotiation of price at the time of order and delivery of the aircraft, and that these facts can significantly increase the LCA purchase price.757 Thus, although the extent to which prices are suppressed or sales are lost is certainly first manifest at the time LCA are ordered, the consequences of these phenomena may continue to be affected by factors occurring from the time of order through delivery, which indicates that the phenomena of price suppression and lost sales could be found to continue through to the moment of LCA delivery.
5.336.
At the same time, it would be improper to suggest that in all instances involving the phenomena of price suppression and lost sales in the LCA market, the phenomena manifest themselves to the same degree throughout the time period from order to delivery. As the Appellate Body has noted, "effects of a subsidy will ordinarily dissipate over time and will end at some point after the subsidy has expired"758, and thus a panel "should consider, where relevant for the adverse effects analysis, that the effects of a subsidy will ordinarily dissipate over time and will come to an end".759 For instance, in the LCA industry, although price escalation clauses may continue to reflect evidence of ongoing price suppression, the terms have already been set at the time of the original order. As the original panel noted, "there is, in principle, no re-negotiation of the terms and conditions of the purchase contract, and assessment of the profitability of a certain contract prior to delivery, as well as the profit margins actually generated, is based on the terms and conditions established at the time of order."760 Similarly, although there may be circumstances in which the consequences of a lost sale may persist where a lost sale for which delivery remains outstanding continues to exert harmful consequences on a competitor, there can be little doubt that the sale was "lost" at the time of order when the supplier of the subsidized Member obtained that sale at the expense of that competitor. We therefore do not see that there can be any generalized guidance about the circumstances in which original findings of price suppression or lost sales may be said to persist beyond the moment of order.
5.337.
Turning to the Panel's analysis, we observe that, although the Panel took note of the original panel's statements that the phenomena of price suppression and lost sales exist from the time of LCA order through delivery761, the Panel then sought to dismiss the relevance of these statements in the circumstances of this case on several grounds. The Panel noted that when the original panel reached findings of adverse effects consisting of significant price suppression and significant lost sales, it did not explicitly recall this general proposition, but instead relied exclusively on order data.762 Accordingly, the Panel considered that "it is somewhat unclear whether and, if so, how the idea that price suppression and lost sales 'exist from the time an order is made, up to and including its delivery' is reflected in the actual findings of significant price suppression and lost sales made in the original proceeding."763
5.338.
We consider that the Panel did not have a sound basis for distinguishing the original panel's general pronouncements regarding the phenomena of price suppression and lost sales, and the original panel's subsequent findings regarding those phenomena. The original panel stated that, because the phenomena of price suppression and lost sales exist from the time an LCA is ordered to the time it is delivered, "data pertaining to both LCA orders and to LCA deliveries will potentially be relevant to demonstrating the existence of significant price suppression and significant lost sales."764 As an evidentiary matter, a party may offer, and a panel may choose to rely upon, some combination of order and delivery data in seeking to establish the existence of significant price suppression or significant lost sales. It may even be that such a determination could be made on the basis of order data alone. A panel's reliance on such data in a particular dispute, however, does not, in our view, undermine the broader proposition that the serious prejudice phenomena themselves may not be confined to the time of the LCA order only, but instead may continue through the point of delivery.
5.339.
The Panel then went on to identify additional, "more important" reasons for finding the European Union's claim under Article 7.8 to be "problematic".765 The essential difficulty the Panel had with the European Union's claim is that it suggested that, in order for the United States to take appropriate steps to remove the adverse effects of significant price suppression and lost sales, it must cease such phenomena with respect to the original transactions. For the Panel, such an approach: (i) is not "meaningful in a practical sense"766 since it is not clear how the United States could remove price suppression or lost sales occurring with respect to those specific transactions; and (ii) cannot be "reconcile{d} with the prospective interpretation of Article 7.8"767 since it would seem to require the United States to undo retrospectively those original transactions. The Panel accordingly disagreed with the European Union's proposition that, where aircraft that were the subject of a past order found in the original proceedings to be a lost sale are undelivered at the time of the expiry of the implementation period, this is a present adverse effect. Instead the Panel considered this to be "a consequence or manifestation of an event that occurred in the past" or as "continuing manifestations or effects of past adverse effects".768
5.340.
We consider that the Panel adopted an overly rigid approach with respect to the question of whether outstanding deliveries concerning LCA orders that were relied on to find significant price suppression or significant lost sales may still provide a basis for a finding of such effects in the post‑implementation period. As we have noted, the original panel seems to have developed reasonable grounds for understanding such market phenomena, in the specific context of the LCA market, as potentially encompassing the period from order through delivery. In our view, this does not mean that the existence of any outstanding deliveries in the post-implementation period is necessarily sufficient to establish the existence of adverse effects in that period. However, it would seem that what transpires between LCA orders and their subsequent deliveries would be relevant, particularly as it relates to evidence demonstrating the ongoing existence of price suppression or lost sales. Moreover, establishing the existence of serious prejudice under Article 6.3(c) with respect to the market phenomena of price suppression or lost sales also requires that the phenomena be found to be "significant". Thus, simply because certain market phenomena of price suppression or lost sales may be shown to persist after the end of the implementation period, this will not necessarily mean that such price suppression or lost sales would be "significant" in the post‑implementation period.
5.341.
For the foregoing reasons, the mere existence of outstanding deliveries after September 2012 relating to original orders found to have resulted in significant price suppression or significant lost sales between 2004 and 2006 would not necessarily, by itself, be dispositive as to the existence of significant price suppression or significant lost sales in the post‑implementation period. Deliveries in the post‑implementation period may indeed be relevant to an adverse effects analysis if there is evidence that significant price suppression or lost sales occurring between the time of order and delivery continues into the post-implementation period. Specifically, there would need to be some indication that subsequent developments following the initial order confirm the ongoing existence of such market phenomena. Therefore, while we would not agree with the European Union's assertion before the Panel that outstanding deliveries in the post‑implementation period are necessarily sufficient to establish the existence of present adverse effects, we likewise would disagree with the Panel's suggestion that such evidence can never form the basis of a finding as to the ongoing existence of such effects.
5.342.
We also find the Panel's reasoning with respect to Article 7.8 unpersuasive. The Panel's concern that the European Union's claim would result in a retrospective remedy appears premised on the notion that the only means by which the United States could bring itself into compliance under the European Union's theory is to undo the original orders. However, Article 7.8 does not specify what "steps" are "appropriate" for purposes of removing the adverse effects, which suggests that it covers a range of possible actions. While certain actions regarding a subsidy may not lead to its withdrawal, they could, for example, alter the benefit of the subsidy such that it attenuates the causal link between the subsidy and the adverse effects. While the Panel may be correct to note that the European Union did not explain "what kind of action the United States could have taken with respect to that undelivered aircraft that would have removed the 'present' adverse effects"769, this does not mean that such removal is not possible, and does not support the Panel's apparent assumption that the only way to remove such effects would therefore have to be a retrospective undoing of the original orders.
5.343.
More importantly, the Panel's approach leads it to draw a faulty distinction between "present adverse effects", on the one hand, and "consequence{s} or manifestation{s} of an event that occurred in the past" or "continuing manifestations or effects of past adverse effects", on the other hand.770 On this basis, the Panel sought to disregard the significance of outstanding deliveries in the post‑implementation period by characterizing them as a mere consequence of past adverse effects. However, as we have noted, Article 7.8 calls on panels to assess whether an implementing Member has ceased conduct amounting to the granting or maintaining of subsidies that cause adverse effects. To the extent that adverse effects arising in the post-implementation period are shown to have been caused by subsidies that have not expired, they are themselves adverse effects, not something consequential to the original adverse effects. In this respect, we see no basis to categorically exclude consideration of delivery data concerning the post-implementation period to the extent that such evidence, in conjunction with other evidence, shows ongoing price suppression or lost sales in the post-implementation period. As we have said, while evidence pertaining to outstanding deliveries is unlikely by itself to be dispositive as to adverse effects occurring well after the LCA sales that gave rise to the original findings were made, we see no tenable basis to exclude the potential relevance of such evidence in establishing such a case.
5.344.
For the foregoing reasons, we find that the Panel erred in its interpretation of Article 7.8 of the SCM Agreement by excluding ab initio, from an inquiry into whether the United States had failed to take appropriate steps to remove the adverse effects of the subsidies, evidence relating to transactions for which the orders arose in the original reference period but for which deliveries remain outstanding in the post‑implementation period. Accordingly, we reverse the Panel's interpretation of Article 7.8, in paragraphs 9,311 to 9,314 of the Panel Report, and its statement in paragraph 9,332 of the Panel Report, that reliance on the role of deliveries of aircraft in the post‑implementation period as evidence of a continuation of serious prejudice "is inconsistent with a prospective interpretation of Article 7.8".771
5.345.
Additionally, the European Union claims that the Panel erred in the application of Article 7.8 of the SCM Agreement, and acted inconsistently with Article 11 of the DSU, by departing from the original panel's finding that "price suppression and lost sales … exist from the time an order for LCA is made, up to and including its delivery."772 Having examined above the role of orders and deliveries in assessing a claim of continuing adverse effects, and having reversed the Panel's interpretation of Article 7.8 of the SCM Agreement, we need not further consider these corollary claims by the European Union.
5.346.
We further note that, as a consequence of our reversal of the Panel's interpretation of Article 7.8 as it relates to the significance of deliveries for establishing significant price suppression and significant lost sales, the European Union additionally requests that we reverse the Panel's finding in paragraph 9,407 regarding significant lost sales caused by the tied tax subsidies in the single-aisle LCA market insofar as it excluded the Fly Dubai 2008 and Delta Airlines 2011 sales campaigns.773 It is not clear to us whether the Panel's decision to exclude these two sales campaigns from its finding of significant lost sales resulted from the error we have associated with the Panel's interpretation of Article 7.8. Indeed, the Panel did not provide any reason for the treatment of these two sales campaigns other than to state in footnotes that it was "not necessary" for it to consider whether these two sales campaigns constitute evidence of significant lost sales in the post‑implementation period.774 Additionally, it appears that the basis for the European Union's allegation that these two sales campaigns also constitute significant lost sales is the contention that there remain outstanding deliveries at the end of the implementation period.775 As we have explained, we do not consider this to be a sufficient basis upon which to establish the existence of serious prejudice in the form of significant lost sales in the post-implementation period. Accordingly, we decline to reverse this finding by the Panel in the manner requested by the European Union.

5.6.2 Whether the Panel erred under Articles 5 and 6.3 of the SCM Agreement, or acted inconsistently with Article 11 of the DSU, in its treatment of claims of continuing adverse effects from the original proceedings

5.347.
The European Union also appeals the Panel's separate conclusion that the European Union's arguments regarding continuing adverse effects were "unsupported by the evidence and/or in contradiction with the findings made in the original proceeding".776 We first examine the European Union's claim that, in reaching this conclusion, the Panel acted inconsistently with Article 11 of the DSU by deviating from the adopted findings in the original proceedings concerning the 200-300 seat LCA market. According to the European Union, although the original panel made intermediate findings that were based on evidence relating to the A330 and the Original A350, the ultimate findings of the original panel related to the 200-300 seat LCA market as a whole, which had been defined to include those two LCA models as well as the A350XWB-800.777 The European Union considers that, where the Panel's findings confirmed the continued existence of the same LCA market for which the original panel and the Appellate Body made their respective findings of significant price suppression, significant lost sales, and threat of displacement or impedance, the Panel had no basis to deviate from the findings in the original proceedings. The European Union submits that the fact that the Panel deviated from the original findings and focused its adverse effects assessment on different aircraft models therefore constitutes legal error under Article 11 of the DSU.
5.348.
The United States responds that the Panel did not improperly deviate from the original panel's findings. According to the United States, the European Union cannot fault the Panel for focusing on argumentation and evidence for specific aircraft models because the original panel adopted the same approach in the original proceedings, as did the European Union when presenting its arguments and evidence in these compliance proceedings.778 In addition, the United States considers that the European Union is wrong to assert that the circumstances of these compliance proceedings are the same as, and therefore require the same conclusions as, the situation before the original panel. This proposition, the United States maintains, is legally incorrect and contrary to the evidence, and the Panel was therefore required to carefully consider the evidence and argumentation concerning developments since the original reference period.779
5.349.
The central proposition underpinning this claim on appeal is the European Union's contention that the Panel acted in a manner inconsistent with Article 11 of the DSU because it "deviated"780 from the findings in the original proceedings. The European Union adds that, instead of following those findings, the Panel focused on the "entirely irrelevant"781 fact that the A330, Original A350, and the A350XWB are "different aircraft".782 The paragraphs cited by the European Union pertain to the Panel's consideration of the European Union's claims regarding significant price suppression, significant lost sales, and threat of displacement of the A350XWB.783 As the European Union explains, because there has been no change to the LCA competing in the 200-300 seat LCA market for which the original panel and the Appellate Body made their respective adverse effects findings, the Panel had no basis for deviating from the approach in the original proceedings by now focusing on separate aircraft models.784 In this respect, the European Union relies on the observation that, although the original panel made intermediate findings that were based on a consideration of evidence that related to the A330 and the Original A350, the ultimate findings made by the original panel related to the 200-300 seat LCA market as a whole, which was defined also to include the A350XWB-800.785
5.350.
Beginning with the original panel's findings of adverse effects, we understand that the original panel appears to have accepted the European Communities' contention that the 200-300 seat LCA market consisted of the Boeing 787 LCA family as well as the Airbus A330, Original A350, and A350XWB-800 LCA.786 Moreover, we note that the original panel appeared to base its findings on evidence relating to the A330 and the Original A350, but not the A350XWB. Thus, with regard to significant price suppression, the original panel found that it was able to conclude, "based on the evidence" that, absent the subsidies, "prices of the A330 and the Original A350 in the 2004 to 2006 period would have been significantly higher."787 Similarly, with regard to significant lost sales, the original panel found that, absent the subsidies, "Airbus would have made additional sales of the A330 and Original A350 over the same period."788 Furthermore, regarding the threat of displacement or impedance, the original panel found that, absent the subsidies, "Airbus would have obtained additional orders for its A330 and Original A350 LCA from customers in third country markets Australia, Ethiopia, Kenya and Iceland in 2005 and 2006."789 It is therefore clear that the original panel's findings were not based on evidence relating to the A350XWB. In addition, we note that, at least with respect to significant price suppression, the original panel explicitly excluded any finding of price suppression for the A350XWB-800 because it had no pricing data before it on which to reach such a finding.790 In any event, we would note that the fact that the Panel's findings were not based on evidence pertaining to the A350XWB-800 may not be surprising given that the A350XWB-800 was launched in December 2006, which was the last month of the original reference period from 2004 to 2006.791
5.351.
At the same time, the European Union is correct to note that, in each instance, the original panel also seemed to frame its conclusions with respect to a product market and/or geographic markets as a whole. Thus, following its reference to the evidence as limited to the A330 and Original A350, the panel found significant price suppression and significant lost sales "in the 200‑300 seat wide‑body LCA product market, within the meaning of Article 6.3(c) of the SCM Agreement", and threat of displacement or impedance "of exports from third country markets within the meaning of Article 6.3(b) of the SCM Agreement".792
5.352.
In the compliance proceedings, the Panel did not accept that the original adverse effects findings that were made with respect to the Original A350 could be transposed into findings of continuing adverse effects with respect to the A350XWB. Thus, in addressing the European Union's claim of continuing significant price suppression for the A350XWB in the post-implementation period, the Panel considered that the European Union's contention was "in contradiction with the fact that the price suppression that occurred in 2004-2006 was price suppression of a different aircraft, the Original A350".793 With regard to the claim of continuing significant lost sales for the A350XWB, the Panel stated that there was no "logical basis" to now treat lost sales of the A330 and Original A350 as lost sales of the A350XWB, and further observed that "at the time the 787 sales were made, they caused lost sales of the A330 and Original A350, not the A350XWB."794 With regard to the claim of a continuing threat of displacement in the Australian market, the Panel stated that there was "no basis" to treat a threat of displacement regarding the Original A350 now as a finding of a threat of displacement concerning the A350XWB.795
5.353.
In light of the foregoing discussion, we make several observations. First, although the original panel made ultimate findings for each serious prejudice phenomenon with respect to the 200-300 seat LCA market as a whole, the evidentiary basis for doing so regarding the original reference period related solely to the A330 and the Original A350, but not the A350XWB. In our view, this is a relevant consideration in evaluating the extent to which the original adverse effects may be said to continue into the post-implementation period, and, at a minimum, does not seem to support the European Union's assertion that the Panel in these compliance proceedings somehow departed from the approach taken by the original panel in focusing on evidence relating to specific LCA models. Indeed, we understand the Panel to be making the point that, because the original adverse effects findings were associated with particular evidence of serious prejudice suffered by the A330 and the Original A350, it cannot simply be assumed that such findings would necessarily extend to the A350XWB‑800, an LCA model that, while part of the same product market, had not been shown to have suffered serious prejudice in the original reference period.
5.354.
We further recall, in particular, our discussion in the preceding section regarding the role served by original findings of adverse effects in establishing whether, in compliance proceedings, the original adverse effects continue after the end of the implementation period. As we have noted, although original findings of adverse effects necessarily serve as the starting point of the analysis in compliance proceedings, it is incumbent on a complaining Member to establish afresh through arguments and evidence whether, and to what extent, the specific serious prejudice phenomena from the original proceedings continue to exist in the post-implementation period. Therefore, while the analysis begins with the original findings of adverse effects, the European Union had also to demonstrate how those particular adverse effects that were based on findings regarding certain aircraft could be transposed to a different aircraft model that did not provide a foundation for the findings in the original proceedings. As we understand it, however, the European Union sought to make this demonstration by relying principally on the fact that orders of Original A350 were converted to orders of A350XWB, and that certain deliveries of the latter remained outstanding at the end of the implementation period. While we have faulted the Panel for disregarding the relevance of developments following the original findings of adverse effects in assessing whether those effects continue into the post-implementation period, we have also disagreed with the European Union's proposition that the mere existence of outstanding deliveries in the post‑implementation period would suffice to establish continuing adverse effects.
5.355.
We also believe that the Panel had grounds to consider that developments concerning the relevant LCA market since the original reference period precluded mere transposition of the original panel's findings into the post-implementation period. We again note that, although the European Union is correct to observe that the original panel accepted that the A350XWB‑800 formed part of the 200-300 seat LCA market, that aircraft was launched at the very end of the original reference period in December 2006. Accordingly, while the original panel was aware of the existence of that LCA model, and even acknowledged that it would be in competition with the Boeing 787 LCA in that product market segment, the findings by the original panel were not based on any evidence pertaining to the A350XWB-800. Even within product markets there can be a degree of product differentiation that may be of relevance to an adverse effects analysis. Just because the Original A350 and the A350XWB-800 compete with the 787 does not mean that they do so in the same way. In this respect, it is important to note that, while the A350XWB-800 was accepted for inclusion in the product market delineation established by the original panel, by the time of the compliance proceedings, the Original A350 no longer featured in the product market defined by the Panel.796 As has been well rehearsed in both the original and compliance proceedings, this is because the newer model A350XWB represented the replacement aircraft for the older model Original A350.797
5.356.
For the foregoing reasons, we do not think it was improper for the Panel to consider that it could not merely transpose the findings from the original proceedings – that were based on evidence of significant lost sales, significant price suppression, and a threat of displacement or impedance concerning the Original A350 – to establish the same serious prejudice phenomena with regard to the A350XWB-800, an LCA model that received only limited consideration in the original panel's analysis, and did not form the evidentiary basis for any of its adverse effects findings. While we do not exclude that, as a general matter, serious prejudice phenomena may be established on a product-market-wide basis such that product differentiation within that market may be less relevant, we consider that, in the context of this dispute, the Panel did not err in relying on the manner in which the twin-aisle LCA market had evolved between the original and compliance proceedings. We therefore find that the Panel did not act inconsistently with Article 11 of the DSU by deviating from the adopted findings in the original proceedings concerning the 200-300 seat LCA market.
5.357.
The European Union further alleges that the Panel erred under Articles 5 and 6.3 of the SCM Agreement by failing to conduct a proper counterfactual analysis when assessing whether there was continuing price suppression of the A330 in the post‑implementation period.798 According to the European Union, a proper counterfactual analysis required a comparison of actual A330 prices with counterfactual A330 prices in the absence of subsidies, and that, since neither the 787 nor the A350XWB would have been launched and delivered by the end of the implementation period, prices for the A330 would have been higher.799 Instead, according to the European Union, the Panel erroneously compared actual A330 prices with the actual situation in which the 787 and A350XWB would have already changed the competitive dynamics of the market.800
5.358.
The United States maintains that the Panel conducted a proper counterfactual analysis. The United States points to the various evidentiary shortcomings and methodological flaws that were noted by the Panel regarding the European Union's case.801 In addition, the United States observes that, in response to the simplistic contention by the European Union that "something" must be holding down A330 prices in the post‑implementation period, the Panel's analysis reflected a proper counterfactual evaluation that the prevailing A330 prices would not have been different in the absence of the subsidies because the competitive dynamic driving those prices after the end of the implementation period would have been the same.802
5.359.
This challenge on appeal is focused on the Panel's rejection of the European Union's contention that competition from the 787 is what was holding down A330 prices during the relevant period. In particular, the European Union challenges the Panel's statement that it was not clear "why Airbus could have legitimately expected A330 prices to ever 'recover' to their pre-2004 levels, when the A330 was the technological market leader, given the reality that since then, the 787 and A350XWB have changed the competitive dynamics of this market".803 By referring to "the reality" of competition between the 787 and the A350XWB, the argument by the European Union is that the Panel was referring to what was taking place in the actual world, rather than in the counterfactual world. The suggestion is that, by failing to account for what that competitive dynamic would have been in a counterfactual scenario, the Panel did not properly consider that the accelerated entry in the market of the 787 and the A350XWB is what caused suppression of A330 prices.
5.360.
We do not consider that the Panel's statement in this context indicates that it failed to conduct a proper counterfactual analysis. We note, first of all, that the Panel properly explained that, in examining claims of significant price suppression, "price trend data alone is not sufficient", and that "it is also necessary to present counterfactual argumentation demonstrating that, in the absence of the subsidies, prices would have been higher."804 In addition, we note the Panel's prior conclusion that Boeing, even without these subsidies, would have been able to launch the 787 well before the end of the implementation period, which means that the competitive dynamic between the more technologically advanced Boeing and Airbus LCA offerings would already have been present by the end of that period.805 Thus, the Panel would have considered in the context of this analysis that the "actual" and the "counterfactual" situations were the same in the sense that, as of the end of the implementation period, the 787 would have been launched in the LCA market regardless of subsidization and would have been competing with the A350XWB. In this light, we consider that the Panel's view that the A330 would not have been able to command the sort of price it once did, in view of the technological superiority of the 787 and the A350XWB, did not reflect a failure to conduct a proper counterfactual analysis.
5.361.
Moreover, we note that the Panel identified other reasons for its rejection of the European Union's claim.806 While these reasons do not explicitly reference a counterfactual analysis, they do underscore the Panel's view that the European Union had not substantiated that A330 pricing would have been higher in the absence of the subsidies.
5.362.
For the foregoing reasons, we find that the Panel did not err under Articles 5 and 6.3 of the SCM Agreement by failing to conduct a proper counterfactual analysis when assessing whether there was continuing price suppression of the A330 in the post‑implementation period.
5.363.
Having found no Panel error under either Article 11 of the DSU, or under Articles 5 and 6.3 of the SCM Agreement, we uphold the Panel's separate finding, in paragraph 9,332 of the Panel Report, that "the European Union's arguments are unsupported by the evidence and/or in contradiction with the findings made in the original proceeding."807

5.6.3 Conclusion

5.364.
In assessing whether appropriate steps have been taken to remove the adverse effects of a subsidy within the meaning of Article 7.8 of the SCM Agreement, the time period for assessing the removal of adverse effects may include developments subsequent to the time of order, including through the point of delivery. Accordingly, we find that the Panel erred in its interpretation of Article 7.8 by excluding ab initio, from an inquiry into whether the United States had failed to take appropriate steps to remove the adverse effects of the subsidies, evidence relating to transactions for which the orders arose in the original reference period but for which deliveries remain outstanding in the post‑implementation period. We therefore reverse the Panel's interpretation of Article 7.8 of the SCM Agreement, in paragraphs 9,311 to 9,314 of the Panel Report, and its statement in paragraph 9,332 of the Panel Report, that reliance on the role of deliveries of aircraft in the post‑implementation period as evidence of a continuation of serious prejudice would be inconsistent with Article 7.8. Having reversed this finding, we do not address whether, in addition, the Panel erred in the application of Article 7.8, or acted inconsistently with Article 11 of the DSU. However, because it is not clear whether the Panel's decision to exclude two additional sales campaigns as significant lost sales resulted from the above error, and because the European Union's request is based on a premise that we rejected, we decline to reverse the Panel's finding, in paragraph 9,407 of the Panel Report, insofar as it excludes the Fly Dubai 2008 and Delta Airlines 2011 sales campaigns.
5.365.
We further find that the Panel did not err under Articles 5 and 6.3 of the SCM Agreement, or act inconsistently with Article 11 of the DSU, in separately finding that the European Union's arguments are unsupported by evidence and/or in contradiction with the findings made in the original proceedings. We therefore uphold the Panel's finding, in paragraphs 9,332 and 11.8.b of the Panel Report, that the European Union had failed to establish that the original adverse effects of the pre‑2007 aeronautics R&D subsidies continue into the post‑implementation period as present serious prejudice in relation to the A330 and A350XWB, within the meaning of Articles 5(c) and 6.3 of the SCM Agreement.
5.366.
In addition, because we uphold the Panel's rejection of the European Union's claim regarding continuing adverse effects with respect to the A330, we need not consider the United States' conditional claim that the Panel erred in finding that the European Union had not failed to make a prima facie case of significant price suppression with respect to the A330.808

5.7 Technology effects

5.367.
The European Union requests us to reverse the Panel's finding that the European Union failed to establish that the pre-2007 aeronautics R&D subsidies are a genuine and substantial cause of adverse effects in the post-implementation period through a technology causal mechanism. The European Union contends that the Panel, in reaching this finding, committed several legal errors in the application of Articles 5, 6.3, and 7.8 of the SCM Agreement, and failed to make an objective assessment of the matter under Article 11 of the DSU.809
5.368.
With regard to its application claims, the European Union maintains that the Panel erred by: (i) focusing its counterfactual assessment solely on the impact of the pre-2007 aeronautics R&D subsidies on the launch date of the 787810, without taking into consideration the timing of its delivery811; (ii) focusing on technology development involving later stages of LCA development (i.enear‑term R&D activities), while it should have also taken into account the early phases of fundamental R&D, which were the focus of the original panel's analysis812; (iii) focusing solely on the identification of the amount oftime needed to perform certain fundamental research, without considering the implications for the sequencing of the relevant R&D in the overall process813; and (iv) requiring the European Union to show the precise amount of time that Boeing would have required to perform each of a series of R&D tasks absent the pre-2007 aeronautics R&D subsidies, contrary to the applicable causation standard.814 The European Union also brings various challenges under Article 11 of the DSU that the Panel failed to conduct an objective assessment of the matter before it by: (i) providing internally inconsistent reasoning815 and incoherent or inadequate reasoning816; (ii) deviating from findings in the original proceedings817; (iii) imposing an "impossible" burden of proof818; and (iv) failing to base its findings on a sufficient evidentiary basis.819
5.369.
Before addressing the European Union's challenge to the Panel's analysis of the technology effects of the pre-2007 aeronautics R&D subsidies, we first summarize key aspects of that analysis.

5.7.1 The Panel's analysis

5.370.
Before the Panel, the European Union argued that the pre‑2007 aeronautics R&D subsidies cause significant competitive harm to the European Union's LCA-related interests following the end of the implementation period through their genuine and substantial contribution to Boeing's accelerated development of technologies for its current LCA and for future Boeing LCA. The European Union alleged that Boeing benefits from the effects of the pre‑2007 aeronautics R&D subsidies in the following ways820:

a. Original subsidy technology effects: Boeing continues to benefit from 787 technologies that were "found to be the effect" of the original pre‑2007 aeronautics R&D subsidies, which impact the market through sales of the 787.

b. Spill-over technology effects: Boeing has benefited from the application of the "subsidized 787 technologies" to Boeing's more recent 787, 777X, and 737 MAX LCA developments.821

5.371.
The Panel divided its analysis of the European Union's claims of serious prejudice through a technology causal mechanism into two main sections. First, the Panel examined the European Union's claims regarding the technology effects of the aeronautics R&D subsidies in the twin-aisle LCA market.822 Second, the Panel addressed the technology effects of the aeronautics R&D subsidies in the single-aisle LCA market.823
5.372.
In assessing the technology effects of the aeronautics R&D subsidies in the twin-aisle LCA market, the Panel indicated that it would evaluate the European Union's claims by first examining whether the pre-2007 aeronautics R&D subsidies and certain post-2006 aeronautics R&D subsidies, alleged to operate through a technology causal mechanism, give rise to the particular forms of technology effects in the post-implementation period argued by the European Union. To the extent that it would find that these subsidies have such effects on Boeing's product development of the relevant LCA, the Panel indicated that, as a second step, it would assess the consequent impact on Airbus' LCA sales and prices in the post-implementation period so as to determine whether the subsidies in question, through these technology effects, constitute a genuine and substantial cause of the particular forms of serious prejudice alleged by the European Union.824
5.373.
The Panel began its analysis of the European Union's claims regarding the original subsidy technology effects of the pre-2007 aeronautics R&D subsidies by indicating that neither the original panel nor the Appellate Body considered that the 787 technologies were themselves the effects of the pre-2007 aeronautics R&D subsidies. In other words, the pre-2007 aeronautics R&D subsidies were not found to have brought into existence any technology or product that would not have otherwise existed.825 Instead, the Panel noted that the original panel and the Appellate Body found that the pre-2007 aeronautics R&D subsidies accelerated Boeing's development of technologies for the 787, which in turn enabled Boeing to launch the 787 earlier than otherwise would have been possible, thereby reducing Boeing's time to market for the 787.826 Therefore, the Panel pointed out that the issue before it was whether the acceleration of Boeing's development of advanced LCA technologies that the pre-2007 aeronautics R&D subsidies were found to have in the original proceedings is still evident or whether it had ended by the end of the implementation period.827 The Panel considered that the counterfactual question before it was "whether it is likely that, absent these subsidies, the 787 technologies would still not have been developed by the end of the implementation period and thus the 787 would not have been present in the market by that time."828
5.374.
The European Union argued before the Panel that it would have taken Boeing "at least 10 years to develop only a number of select LCA technologies and design tools necessary for the 787" and that Boeing "would further 'require considerable time to develop the knowledge it has acquired through its decades of experience participating in the US Government-supported R&D programmes'".829 In contrast, the United States submitted that, absent the pre‑2007 aeronautics R&D subsidies, Boeing would have launched the 787 most likely no later than 2006. The United States maintained that this left "ample time" for Boeing to adapt the 787 technologies to the 777X and 737 MAX.830
5.375.
The Panel first examined the arguments presented by the European Union in support of its time estimate, which were based on a statement by Airbus engineers submitted to the Panel.831 According to the European Union, the counterfactual question should focus on the amount of additional time that it would have taken Boeing to research, develop, produce, certify, and deliver the 787. The Panel indicated that, if it were to formulate the counterfactual question in the terms proposed by the European Union, its conclusion would also include time to undertake activities (internal R&D conducted by Boeing and its suppliers, production, certification, and delivery) that were not found to have been effects of the pre‑2007 aeronautics R&D subsidies in the original proceedings. In the Panel's view, the original panel did not consider that Boeing's technology development in relation to the 787 was solely the result of Boeing's subsidized participation in the NASA and USDOD aeronautics R&D programmes, or that the acceleration effects of the pre-2007 aeronautics R&D subsidies encompassed phases in the development of the 787 beyond its launch. Thus, the Panel found that "the European Union's estimate erroneously attributes to the pre‑2007 aeronautics R&D subsidies aspects of the 787's development that were not found to have been accelerated by Boeing's participation in the relevant NASA and DOD aeronautics R&D programmes."832 In addition, the Panel noted that the European Union had not provided a clear statement, or supporting evidence, that the 787 would not have launched until after the end of the implementation period.833
5.376.
Turning to the United States' time estimate, the Panel began by agreeing with the United States that there was no evidence, and no support in the findings in the original proceedings, that suggested the possibility that Boeing would have taken a commercial decision not to proceed with the development of the 787, absent the pre‑2007 aeronautics R&D subsidies.834 The Panel then turned to address the European Union's criticisms of the United States' time estimate. In particular, the Panel addressed the argument that the United States had failed to demonstrate that it would have been technically feasible to launch the 787 in 2006 (rather than the actual launch in 2004) absent the pre‑2007 aeronautics R&D subsidies, as concluded by certain Boeing engineers in the Statement of Boeing Engineers Regarding the Technologies and Development of the 787, 737 MAX, and 777X (Boeing Engineers' Statement).835
5.377.
First, the Panel examined the European Union's criticism of the methodology used by the Boeing engineers. In this context, the Panel reiterated its disagreement with the European Union's argument that the counterfactual assessment should consider the entire development period of the 787 beyond its launch. In the Panel's view, the European Union's approach is inconsistent with the findings in the original proceedings and risks attributing unsubsidized aspects of the 787's development to the effects of the pre-2007 aeronautics R&D subsidies.836 In addition, the Panel considered the European Union's criticism of the Boeing engineers' methodology to be "highly‑generalized in nature, and ultimately unpersuasive".837
5.378.
Second, the Panel indicated that the European Union did not itself enumerate the specific additional tasks that the Boeing engineers should have reflected in the Boeing Engineers' Statement. Nor did the European Union provide evidence of how long Boeing would have needed to conduct any of the R&D tasks that were actually performed under the NASA and USDOD aeronautics R&D programmes. The Panel further noted that the European Union failed to provide specific evidence to rebut the timing estimates that the Boeing engineers provided for the specific R&D tasks discussed in their statement.838 The Panel noted that "{i}t is the European Union's burden to establish that the pre-2007 aeronautics R&D subsidies continue to cause any of the alleged serious prejudice market phenomena in the post-implementation period."839 Consequently, in the absence of any clear estimate from the European Union as to how much additional time Boeing would have needed to conduct any of the R&D tasks, the Panel found it difficult to accept the European Union's generalized criticisms of the United States' estimate.840