Comments of the united states on the answers of brazil to further questions from the panel to the parties following the second panel meeting
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- : 237.10;23059.80;5566.20;0.00;0.00;0.00;0.00;0.00;0.00;0.00;0.00;0.00;0.00;0.00;0.00;0.00 Does the second line represent data on plantings by the same farm
- 264. The Panel asks the United States to clarify certain aspects of Exhibit US-128
- 265. In connection with the US response to Question No. 225, please also provide amounts actually "written off" and "forgiven" annually for each post
- 266. What are the precise terms, conditions and duration of each rescheduling reflected in column F in Exhibit US-128 Brazil’s Comment
- 270. With respect to Column I in Exhibit US-128, ("Interest paid on borrowing from US Treasury") and Note 8, p. 25 of Exhibit US-129
- (ii) Please explain the nature of "CCCs permanent indefinite borrowing authority from Treasury" referred to in Note 8, p. 25 of Exhibit US-129. Brazil’s Comment
- (iii) What determines the level of CCC export credit guarantee borrowing (interest-bearing and non-interest-bearing) Is the interest-free borrowing up to the amount of unreimbursed realized losses
261. Please confirm that each record in the actual planting database relates to a specific farm (Filenames: rPFCplac and rDCPplac in Exhibits US-111 and US-112). For example, in the data from rDCPplac:
Second line: 237.10;23059.80;5566.20;0.00;0.00;0.00;0.00;0.00;0.00;0.00;0.00;0.00;0.00;0.00;0.00;0.00
262. The Panel has noted the two CD-ROMs delivered by the US in the evening of 23 December 2003. They are marked "US-111" and "US-112" respectively, but the contents actually do not correspond to the indication. The Panel also takes note of the US letter dated 28 January 2004 and the CD-ROM delivered together with it. For the record, please clarify the correct CD-ROMs and provide corresponding descriptions of their contents with exhibit numbers. 263. The Panel has noted that the United States' response to Question No. 214 refers to Exhibits US-117 and US-118. Are these the correct documents to which the United States intended to refer in that response? If not, please provide a copy of regulations regarding the marketing loan programme and loan deficiency payments published at 58 Federal Register 15755, dated 24 March 1993. 264. The Panel asks the United States to clarify certain aspects of Exhibit US-128: (a) Is the Panel correct in understanding that -- as Brazil asserts in footnotes 290 and 291 of Brazil's 28 January 2004 comments on US responses to questions -- Exhibit US-128, all data are presented on a cohort-specific basis? If so, please also present the information originally requested by the Panel in another chart containing programme (as opposed to cohort-specific) activity by fiscal year. Brazil’s Comment: 29. In paragraph 21 of its 11 February 2004 response, the United States suggests that Brazil’s cash-basis accounting methodology for making an assessment under item (j), because it uses data included in the US budget, is “based on estimates and re-estimates” under the Federal Credit Reform Act (“FCRA”). This response is untruthful in the extreme. 30. None – absolutely none – of the data used for Brazil’s cash-basis accounting methodology for making an assessment under item (j) is “based on estimates and re-estimates” generated for the purposes of the FCRA. As is evident from the chart included in paragraph 165 of Brazil’s 11 August 2003 Answers (reproduced in paragraph 129 of its 28 January 2004 comments), Brazil’s cash-basis accounting methodology relies on data from the “actual”, prior year column of the US budget. Moreover, the data input into Brazil’s cash-basis accounting methodology is drawn from the “financing account” for the CCC programmes.610 The US budget makes the following statement about the financing account: As required by the Federal Credit Reform Act of 1990, this non-budgetary account records all cash flows to and from the Government resulting from loan guarantees committed in 1992 and beyond. The amounts in this account are a means of financing and are not included in the budget totals.611 31. Whether presented on a cohort-specific (Exhibit US-128) or a fiscal year (Exhibit US-147) basis, Brazil notes that none – absolutely none – of the data provided by the United States is verifiable. The United States has provided no documentation (or even citations to documentation that could be independently collected and reviewed by the Panel) to back up its data. The Panel asked the United States for this supporting documentation in July 2003, in Question 78 to the United States. The United States has never provided the supporting documentation requested by the Panel. In contrast, Brazil has provided US government documents to back up each and every figure input into its cash-basis accounting methodology for making an assessment under item (j).612 (b) Does the US agree with the statement in paragraph 135 of Brazil's 28 January 2004 comments on US responses to questions that the difference between the $1,148 billion in the chart at para. 165 of Brazil's 11 August answers to questions and the $666 million amount in Exhibit US-128 ($1.75 billion) closely corresponds to the total "Claims rescheduled" figure reported by the US in Exhibit US-128 (column F)? Brazil’s Comment: 32. The United States has failed to answer the Panel’s question, stating that it will instead do so on a timeline of its own choosing.613 The United States did not request additional time from the Panel, either in its 11 February 2004 response or in the cover letter to that response, but simply asserted in paragraph 23 of its response that it will take whatever additional time it needs.614 In its letter to the Panel dated 13 February 2004, Brazil noted that the United States had more than adequate time (8 days) to undertake the review necessary to answer the Panel’s question. After receiving the fiscal-year cash-basis accounting data included in Exhibit US-147, it took Brazil one hour to prepare a spreadsheet – included as Exhibit Bra-431 – that zeroes in on and identifies the reason that Brazil’s cash-basis accounting methodology concludes that the operating costs and losses for the CCC export credit guarantee programmes have exceeded income over the period 1993-2002 by $1.083 billion, while the United States’ cash-basis accounting methodology concludes that income for the CCC export credit guarantee programmes has exceeded operating costs and losses over the period 1993-2002 by $536 million. 33. In its 16 February 2004 ruling, the Panel did not respond to Brazil’s request that it deny the United States’ efforts to decide at what pace it wishes to offer responses to the Panel’s questions. Brazil requests that if the United States, whenever it deems it convenient, eventually offers a response to Question 264(b), the Panel reject that response as not timely filed. If the Panel accepts the United States’ response, Brazil reserves the right to comment. 34. In any event, the spreadsheet included as Exhibit Bra-431 confirms the assertion Brazil made in paragraph 135 of its 28 January 2004 Comments, which is that the difference between the results arrived at using the Brazilian versus the US cash-basis methodology (a difference of $1.6 billion) is largely due to the United States’ treatment of rescheduled claims (listed by the United States as $1.58 billion). As confirmed by the United States in paragraph 24 of its 11 February 2004 response to Question 264(c), the United States’ methodology treats defaulted guarantees that have been rescheduled as 100 per cent recovered at the moment the terms of the rescheduling are agreed. 35. Brazil, in contrast, treats rescheduled claims as receivables. Under Brazil’s methodology, receivables resulting from rescheduling are treated just like any other receivable – receivables resulting from rescheduling are only treated as recovered incrementally, to the extent, in a given year, some increment of the rescheduled debt is actually collected (in column 2(a) of Exhibit Bra-431). This fundamental difference in approach is the reason that the “claims outstanding” recorded by the United States (in column 4(b) of Exhibit Bra-431) and Brazil (in column 4(a) of Exhibit Bra-431) differ by $1.6 billion – the only significant difference revealed in the comparison included in Exhibit Bra-431. 36. As Brazil has previously demonstrated, it is not actuarially appropriate to treat defaulted guarantees that have been rescheduled as 100 per cent recovered at the moment the terms of the rescheduling are agreed.615 Brazil and the United States agree that a default that has been rescheduled is properly treated as a receivable616, but as the CCC itself has acknowledged in its financial statements, not all receivables are considered collectible, let alone actually collected.617 37. The United States’ methodology itself recognizes that defaulted guarantees that have been rescheduled are only collected over time (if at all). While the United States treats the principal amounts of rescheduled debt as an immediate, 100 per cent recovery that is passed through as a dollar-on-dollar reduction of the amount of claims outstanding in the year the terms of the rescheduling are agreed, it also tracks massive (and ever increasing) amounts of interest collected on reschedulings (column M in Exhibit US-147). Interest is collected on the rescheduled debt because significant amounts of principal remain outstanding on that rescheduled debt. It is not legitimate, therefore, for the United States to treat that rescheduled debt as recovered at the moment it is rescheduled, since it is not actually recovered at that moment. 38. In fact, no evidence suggests that CCC will collect the rescheduled principal that remains outstanding. In column F of Exhibit US-147, the United States states that $1.64 billion of defaulted CCC guarantees have been rescheduled over the period 1992-2003. Yet as of 30 November 2003, the United States reports in Exhibit US-153 that the principal outstanding on these reschedulings amounts to $1.58 billion. This means that over the period 1992-2003, the CCC has only collected $60 million, or 3.6 per cent, of the $1.64 billion in defaulted CCC guarantees that have been rescheduled. Over 96 per cent of defaulted CCC guarantees that have been rescheduled over the period 1992-2003 remain outstanding. 39. This demonstrates precisely why it is not legitimate for the United States to treat rescheduled debt as recovered at the moment it is rescheduled. The record does not suggest that the CCC will collect this rescheduled debt – in fact, the record shows that the CCC hardly collects any of the principal on its rescheduled debt. Rescheduled debt is nothing more than a receivable, and should be treated as recovered only incrementally, as portions of that debt are, in fact, recovered. This is how Brazil has treated rescheduled debt in its own cash-basis accounting methodology for making an assessment under item (j) (column 2(a) of Exhibit Bra-431). 40. Even if rescheduled debt could, as an actuarial matter, be considered 100 per cent recovered at the very moment the terms of the rescheduling are concluded but before the rescheduled debt is in actual fact collected, the United States appears to have triple-counted portions of the CCC reschedulings. The Panel will recall that under the United States’ cash-basis accounting methodology for making an assessment under item (j), the entire amount of the approximately $1.6 billion in rescheduled debt (in column 3(b) of Exhibit Bra-431) is subtracted from the amount of claims outstanding (in column 4(b) of Exhibit Bra-431) in the year the terms of the rescheduling are agreed. Over $636 million of the approximately $1.6 billion in reschedulings listed in Exhibit US-153 and column 3(b) of Exhibit Bra-431, however, appears to have been “[p]reviously [r]escheduled” (see the last two entries in Exhibit US-153, concerning CCC guarantees to Russia). It already is not legitimate for the United States to treat rescheduled debt as recovered at the moment it is rescheduled, since the record shows that the CCC has only collected 3.6 per cent of that rescheduled debt. But to allow the United States to reduce claims outstanding multiple times for successive reschedulings of the very same underlying defaults is unacceptable. (c) Does the US agree that from the formula in column G (that is: (Column (D) minus (E) minus (F)), it follows that a rescheduled claim no longer constitutes an outstanding claim at the moment the terms of the re-scheduling are agreed and that a rescheduling is treated as 100 per cent recovered, as Brazil states in footnote 292 of Brazil's 28 January 2004 comments on US responses to questions? Brazil’s Comment: 41. Brazil notes the United States acknowledgment, in paragraph 24 of its response, that under the US cash-basis accounting methodology for making an assessment under item (j), a rescheduled claim no longer constitutes an outstanding claim as of the moment the terms of the rescheduling are agreed. Please see Brazil’s comment on the United States’ response to Question 264(b), which demonstrates that it is not legitimate for the United States to treat rescheduled debt as recovered at the moment it is rescheduled, since the record shows that the CCC has only collected 3.6 per cent of that rescheduled debt. 42. Additionally, Brazil notes the United States’ statement, at paragraph 24 of its 11 February 2004 response, that “no principal payments received under reschedulings are reflected in Exhibit US-128”. It is hardly surprising that the United States does not treat principal payments on rescheduled debt as recovered principal (under column 2(b) of Exhibit Bra-431), incrementally and year-on-year as they are actually recovered, since the United States already subtracts 100 per cent of rescheduled debt from claims outstanding (column 4(b) of Exhibit Bra-431) immediately, in the year the terms of the rescheduling are agreed. (d) Is the Panel correct in understanding that the amount of $888,984,792.04 in column F in Exhibit US-128 under "ALL" for 1992 represents the total continuing amount of unrecovered claims for the 1992 cohort, and that the amount of 387,692,219.39 represents the total continuing amount of unrecovered claims for the 1993 cohort, etc? Please indicate and substantiate how much principal and/or interest has actually been paid/recovered/rescheduled annually 1992-2003 in respect of each of the amounts shown in Columns D, E & F in the table. Brazil’s Comment: 43. Please see Brazil’s comment on the United States’ response to Question 264(b), which demonstrates that it is not legitimate for the United States to treat rescheduled debt as recovered at the moment it is rescheduled, since the record shows that the CCC has only collected 3.6 per cent of that rescheduled debt. 44. As noted in Brazil’s comment on the US response to Question 264(c), it is evident that the US methodology does not “reflect payment performance under the reschedulings themselves”618 (under column 2(b) of Exhibit Bra-431), since the United States already subtracts 100 per cent of rescheduled debt from claims outstanding (column 4(b) of Exhibit Bra-431) immediately, in the year the terms of the rescheduling are agreed. 265. In connection with the US response to Question No. 225, please also provide amounts actually "written off" and "forgiven" annually for each post-1992 cohort, with annual details of country and amount (principal/interest). Brazil’s Comment: 45. The United States notes, in paragraph 27 of its response, that “CCC financial records indicate that no amounts have been ‘written off’ or ‘forgiven’ with respect to any post-1992 cohort.” Brazil makes two observations. 46. First, Brazil notes that the Federal Credit Reform Act took effect for the 1992 cohort. Thus, the Panel’s question was likely meant to refer to “each post-1991 cohort”. Brazil hopes that the United States understood the Panel’s question to include the 1992 cohort. 47. Second, Brazil makes the obvious point that defaults need not be “written off” or “forgiven” to constitute an operating cost or loss for the purposes of item (j). Defaults (or other operating costs and losses) that remain on the books are just as relevant to an assessment under item (j) as they would be if they were “written off” or “forgiven”. 266. What are the precise terms, conditions and duration of each rescheduling reflected in column F in Exhibit US-128? Brazil’s Comment: 48. While the Panel asked for the “precise terms, conditions and duration of each rescheduling”, the United States has provided “summarized” data619, without any documentary evidence as support. 267. Is the Panel correct in understanding that "interest collected on reschedulings" in Column M in Exhibit US-128 refers not to amounts that have been actually collected by the CCC but rather to interest capitalized in conjunction with the rescheduling? If so, what are the terms, conditions and duration of the arrangements pertaining to these amounts? Brazil’s Comment: 49. Please see Brazil’s comment on the United States’ response to Question 264(b), which demonstrates that it is not legitimate for the United States to treat rescheduled debt as recovered at the moment it is rescheduled, since the record shows that the CCC has only collected 3.6 per cent of that rescheduled debt. 50. As noted in Brazil’s comment on the US responses to Questions 264(c) and 264(d), it is hardly surprising that the US methodology does not “reflect … payment of original principal”620 (under column 2(b) of Exhibit Bra-431), since the United States already subtracts 100 per cent of rescheduled debt from claims outstanding (column 4(b) of Exhibit Bra-431) immediately, in the year the terms of the rescheduling are agreed. 268. Concerning Column N in Exhibit US-128, please elaborate upon "Interest earned from US Treasury on uninvested funds". What is the source and authority for these funds and for the interest thereon to be part of the CCC total revenues? What are the terms, conditions and duration of the arrangements pertaining to these amounts? 269. The Panel notes the table submitted by the US in its answer to Question No. 224 (CCC Financing Account Payments of Interest on Borrowings from Treasury and Interest Earned on Uninvested Funds). Is the Panel correct in understanding that the figures in this table correspond to the "ALL" figures in Columns I and N of Exhibit US-128? 270. With respect to Column I in Exhibit US-128, ("Interest paid on borrowing from US Treasury") and Note 8, p. 25 of Exhibit US-129: (i) please provide the total annual amounts (interest bearing and non-interest bearing) borrowed by the CCC from the US Treasury (annually since 1992), as well as the terms, conditions, interest rate (where applicable) and duration of such borrowing. Please provide details of any other amount borrowed by the CCC from the US Treasury during this period that may not have formed part of the regular annual borrowings. Brazil’s Comment: 51. The United States has not answered the Panel’s question, which requested “the terms, conditions, interest rate (where applicable) and duration” of CCC borrowings from the US Treasury. (ii) Please explain the nature of "CCC's permanent indefinite borrowing authority from Treasury" referred to in Note 8, p. 25 of Exhibit US-129. Brazil’s Comment: 52. The United States’ response inaccurately implies that CCC’s authority to extend export credit guarantees is somehow limited by the budget appropriations process. As Brazil has frequently noted, US law expressly provides that the CCC export credit guarantee programmes are exempt from the requirement that they receive new Congressional budget authority before undertaking new guarantee commitments.621 Moreover, any “subsidy” losses the programmes incur are funded “through a permanent, indefinite appropriation and not by annual appropriation”.622 (iii) What determines the level of CCC export credit guarantee borrowing (interest-bearing and non-interest-bearing)? Is the interest-free borrowing up to the amount of unreimbursed realized losses? (iv) Why are repayments applied to non-interest bearing notes first, as indicated at Note 8, p. 25 of Exhibit US-129? 271. Note 8, p. 25 of Exhibit US-129 states that "In fiscal year 2003, CCC was fully reimbursed for its prior year net realized losses." Please indicate the amounts of prior year net realized losses (annually, since 1992) for which the CCC has been fully reimbursed. Brazil’s Comment: 53. The United States’ response inaccurately implies that CCC’s authority to extend export credit guarantees is somehow limited by the budget appropriations process. As Brazil has frequently noted, US law expressly provides that the CCC export credit guarantee programmes are exempt from the requirement that they receive new Congressional budget authority before undertaking new guarantee commitments.623 Moreover, any “subsidy” losses the programmes incur are funded “through a permanent, indefinite appropriation and not by annual appropriation”.624 272. With respect to the US response to Question No. 226, is the Panel correct in understanding that the reflection of write-offs as part of the operating loss of the CCC which in turn was replenished through the annual appropriations process ended with the entry into force of the FCRA in fiscal year 1992? If not, what amounts have been replenished through this process annually since fiscal year 1992? Brazil’s Comment: 54. Brazil notes that under US law, any “subsidy” losses the CCC export credit guarantee programmes incur are funded “through a permanent, indefinite appropriation and not by annual appropriation”.625 273. With respect to the US response to Question No. 225, what criteria does the CCC apply to "independently determine" that a debt is uncollectible? For post-1992 cohorts, what are these uncollectible amounts (annually) and how, if at all, are such "uncollectible amounts" shown in Exhibit US-128? Brazil’s Comment: 55. The United States notes, in paragraph 44 of its response, that “[w]ith respect to post-1992 cohorts, no amounts have been determined uncollectible . . .” Brazil makes two observations. 56. First, Brazil notes that the Federal Credit Reform Act took effect for the 1992 cohort. Thus, the Panel’s question was likely meant to refer to “each post-1991 cohort”. Brazil hopes that the United States understood the Panel’s question to include the 1992 cohort. 57. Second, Brazil notes that CCC’s financial statements record a $1.16 billion “subsidy allowance” for all post-1991 cohorts.626 Under the FCRA, the subsidy allowance is recorded on a net present value basis, which means that it represents the cost CCC considers it will incur on post-1991 guarantee cohorts at the time those cohorts are closed. In other words, at the time all outstanding post-1991 cohorts close, the CCC considers that it will face $1.16 billion in uncollectible guarantees.627 274. The Panel notes the US statement in the US response to Question No. 81 that "All rescheduled claims are currently performing " and that "all payments due up to this point under [rescheduling] agreements have been received". However, the Panel also notes Exhibit US-129 (in particular, Note 5 on p. 22) and Brazil's reference thereto in Brazil's 28 January comments on the US response to Question No. 222. In this connection:
Brazil’s Comment: 58. The United States has offered no documentary support for its assertion that the “substantial majority” of the reschedulings referred to in Note 5, p. 22 of Exhibit US-129 “pertain to activities related to the P.L. 480 foreign food assistance programme”.628 59. Moreover, the United States has never offered any support for its repeated assertion that “[a]ll rescheduled export credit guarantee debt is currently performing.”629 In fact, in its comment on the US response to Question 264(b), Brazil demonstrated that CCC is not collecting over 96 per cent of the rescheduled principal that remains outstanding.630 In column F of Exhibit US-147, the United States states that $1.64 billion of defaulted CCC guarantees have been rescheduled over the period 1992-2003. Yet as of 30 November 2003, the United States reports in Exhibit US-153 that the principal outstanding on these reschedulings amounts to $1.58 billion. This means that over the period 1992-2003, the CCC has only collected $60 million, or 3.6 per cent, of the $1.64 billion in defaulted CCC guarantees that have been rescheduled. Over 96 per cent of defaulted CCC guarantees that have been rescheduled over the period 1992-2003 remains outstanding. Directory: english -> tratop e -> dispu e dispu e -> Annex g list of exhibits submitted by the parties dispu e -> World Trade Organization dispu e -> World Trade Organization Download 2.58 Mb. Share with your friends:
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