The European Union says the World Trade Organization has ruled against a U.S. export-credit tax law, despite changes made to address European objections. At issue is a U.S. law that the European Union says grants billions of dollars a year in tax breaks to major U.S. exporters, such as plane-manufacturer Boeing.

The European Union says a WTO compliance panel report has found that the U.S. Foreign Sales Corporation Replacement Act is a prohibited export subsidy. Washington enacted the measure last November to comply with an earlier WTO ruling on the matter.

EU trade official, Stephen Gospage says a number of big American companies benefit from the tax break. "Aerospace is one of the major areas," said Mr. Gospage. "Also, I believe General Electric is a big beneficiary, Caterpillar, Honeywell, Motorola. So clearly it is a big benefit for large exporting companies."

The European Union has threatened to impose at least $4 billion in sanctions on American goods over the dispute.

The United States has until October 19 to appeal the WTO ruling.

In July, the European Union said Washington had signaled that it is going in the direction of compliance with the ruling. But in a letter this month, executives of major American companies urged President Bush to appeal to allow time to negotiate a settlement.

U.S. officials have previously said they want to promote America's economic interests, while also meeting WTO obligations. There was no immediate U.S. reaction to the latest development in the case.