The dispute concerns tax incentives granted by the state of Washington in the United States (US) pursuant to the tax-related provisions of the Revised Code of Washington. Nine tax-related provisions incentives were adopted to attract the production of large civil aircraft in that state. The State of Washington adopted seven aerospace measures corresponding to the nine tax-related provisions. The aerospace measures fell into three general categories of measures: a reduced tax rate, tax credits, and tax exemptions, which included the following (i) reduced corporate tax rates for aircraft manufacturers and retailers (B&O aerospace rate); (ii) tax credits for property and leasehold excise taxes on computer manufacturing facilitates and aerospace product development; and (iii) exemptions of sales and use tax for certain computer hardware, software and peripherals and construction services and materials, and leasehold excise tax and leaseholder property tax. According to the European Union (EU), the measures at issue are prohibited under Article 3.1(b) and 3.2 of the Agreement on Subsidies and Countervailing Measures (SCM Agreement) because they are contingent on the use of domestic over imported goods. This contingency results from two siting provisions: the First Siting Provision and the Second Siting Provision, which are contained in Engrossed Substitute Senate Bill 5952 (ESSB 5952).
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