The European Commission today gave the United States an autumn deadline to make progress on repealing disputed tax breaks for exporters or face up to $4 billion in sanctions.
The United States has been discussing ways it can comply with a World Trade Organisation (WTO) ruling that the system of tax breaks, known as the Foreign Sales Corporation, is illegal.
The WTO is later set to approve a list of US goods on which the EU can impose punitive duties for the tax breaks.
"We trust that the United States will repeal the FSC in the course of the current year," European Commission trade spokeswoman Ms Arancha Gonzalez told a news conference.
"We are going to review the situation in the autumn and if there is no sign of (US) compliance (with the WTO ruling), no sign that compliance is on its way by then, we will then start internal procedures within the European Union to adopt the counter-measures (punitive duties)," she added.