Financial Contribution

1. Introduction

550. The issues raised in this part of the appeal concern both the Panel's interpretation and application of Article 1.1(a)(1) of the SCM Agreement. We note that, in its analysis of whether the NASA and USDOD measures challenged by the European Communities constitute financial contributions within the meaning of Article 1.1(a)(1) of the SCM Agreement, the Panel began by focusing on the interpretative issue of whether measures that are properly characterized as “purchases of services” are excluded from the scope of Article 1.1(a)(1)(i) of the SCM Agreement and, therefore, do not qualify as financial contributions by means of a “direct transfer of funds”.

551. After determining that Article 1.1(a)(1)(i) does not include within its scope measures that are “properly characterized” as purchases of services, the Panel proceeded to consider whether the NASA and USDOD measures at issue qualify as such. For this purpose, the Panel developed and applied a test that it derived from Article 1.1(a)(1). According to the Panel, whether or not the NASA and USDOD measures could be properly characterized as purchases of services depends on the nature of the work that Boeing was required to perform pursuant to them and, more specifically, whether that research was “principally for {Boeing's} own benefit and use, or whether it was principally for the benefit and use of the U.S. Government (or unrelated third parties)”.