The US has been given 60 days to amend its tax legislation or face 2.3 billion in sanctions after it lost an appeal to the World Trade Organisation over its so-called Foreign Sales Corporation tax break, which was officially ended in 2004.
Firms affected were given an extension of the tax breaks until the end of 2006. The US also decided that contracts signed before September 17, 2003 were unaffected by the ending of the scheme. But the WTO has ruled that the exemptions were unfair.
Beneficiaries from the tax breaks include Microsoft and Boeing. Boeing alone is thought to have gained $1.6 billion through the tax breaks in the past decade.
EU trade commissioner Peter Mandelson said responsibility for the matter now lay with the US, adding: "We are seeking nothing more than the re-establishment...