GENEVA, Sept 30: The United States has failed to respect a World Trade Organization ruling issued more than five years ago which condemned corporate tax break legislation, the global commerce’s referee said on Friday.

In a report, a panel set up by the WTO’s Dispute Settlement Body (DSB) said that legal changes last year had failed properly to repeal the previous US Foreign Sales Corporations system.

The new US rules maintained subsidies which were declared in breach of the rules of international trade by the WTO in March 2000, after a European Union complaint, the report said.

The 148 trading nations in the WTO set the regulations among themselves, and agree to be bound by DSB decisions which are issued after investigations that often last for years.

EU trade chief Peter Mandelson hailed the finding.

“It has been confirmed that the US has yet to comply with previous WTO rulings,” he said in a statement.

“The EU appreciates that the US Congress has repealed the original FSC tax scheme” but replacement legislation was “unacceptable.”

“I hope that the US authorities will choose to act consistently in this matter.”

The US has the option of appealing against the ruling. But it has not yet decided what steps to take, said Neena Moorjani, press secretary for US Trade Representative Rob Portman.

“It’s premature to say. We are still in the process of studying the report,” she said.

In October 2004, President George W. Bush signed legislation that ended the FSC system of export tax breaks for US corporations operating in off-shore tax havens. The EU then lifted a threat to implement penalty tariffs on US goods.—AFP