The WTO's dispute settlement body agreed to a Brazilian request to set up a panel of trade experts to certify whether or not Washington had implemented the March 2005 ruling.

The panel is scheduled to rule within three months.

Brazil and the United States have been arguing for months over the issue.

Brazil claims that the United States did not go far enough when it recently repealed a controversial subsidy programme, and alleges that other forms of support remain in place.

US trade diplomats have said that the Brazilian request for WTO arbitration is "without basis," arguing that Washington has respected the trade body's ruling.

In its original decision the 149-nation WTO, which sets the framework for global commerce, found that US payouts to producers were an illegal subsidy which skewed international trade by undermining global cotton prices.

If the panel were to find that that Washington was still violating international trade rules, Brazil could then ask the WTO to authorise retaliatory customs duties against a swathe of US goods.

Brazil had previously asked for the right to impose sanctions worth 4.0 billion dollars (3.0 billion euros), but the request was put on ice during the complex WTO arbitration process that led to last year's ruling.

On August 2, the United States announced that it had formally repealed its so-called "Step 2" cotton subsidy.

In the wake of the March 2005 WTO decision, Brazil had reached a deal with Washington, giving the United States time to adapt its legislation.