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UNITED STATES - PRELIMINARY DETERMINATIONS
The report of the Panel on United States - Preliminary Determinations with Respect to Certain Softwood Lumber from Canada is being circulated to all Members, pursuant to the DSU. The report is being circulated as an unrestricted document from 27 September 2002 pursuant to the Procedures for the Circulation and Derestriction of WTO Documents (WT/L/160/Rev.1). Members are reminded that in accordance with the DSU only parties to the dispute may appeal a panel report. An appeal shall be limited to issues of law covered in the Panel report and legal interpretations developed by the Panel. There shall be no ex parte communications with the Panel or Appellate Body concerning matters under consideration by the Panel or Appellate Body.
(a) Canada Bears the Burden of Proving Its
Claim
(i) Provincial Stumpage Programmes Constitute a "Financial Contribution"
(ii) Provincial Stumpage Programmes Provide a "Benefit"
(iii) The Calculation Did Not Overstate the Subsidy Found to Exist
(iv) Canada's "Pass-through" Argument Is Inapposite
(c) The Preliminary Critical Circumstances Finding Is Consistent with the SCM
Agreement
(i) Judicial Economy
(ii) Authority to Impose Provisional Measures Retroactively
(iii) Basis for Critical Circumstances Findings
(d) Expedited and Administrative Reviews
(i) Section 777A(e)(2)(A) and (B) of the Tariff Act of 1930
(ii) Expedited Reviews
(iii) Administrative Reviews
(a) Stumpage is not a "financial contribution"
(b) The USDOC's use of "cross-border" benchmarks to find and measure "benefit"
violates the SCM Agreement
(c) The USDOC impermissibly presumed a pass-through of an alleged benefit
(d) The USDOC impermissibly inflated the subsidy rate by calculating a
"weighted-average country-wide rate" based upon only a portion of Canadian
production and exports
(e) The USDOC impermissibly applied provisional measures in excess of the
subsidy preliminarily found to exist
(a) Financial Contribution
(b) Benefit
(c) Cross-Border Benchmark
(d) Benefit Calculation - Indirect Subsidies (Pass-Through)
(e) Benefit Calculation - Denominator
(a) "Financial Contribution"
(b) "Benefit"
(c) Pass-Through
(d) First Mill
(a) The USDOC's Preliminary Determination that the Canadian Provincial
Governments Provide a Good to Lumber Producers Is Consistent with Article
1.1(a)(1)(iii) of the SCM Agreement
(b) The USDOC Properly Measured the Benefit from Provincial Stumpage Systems
Under Article 14(d) of the SCM Agreement
(i) The Use of Commercially Available World Market Prices Is, in Appropriate
Circumstances, Consistent with Article 14(d) of the SCM Agreement
(ii) There Is No Evidence of a Market Benchmark in Canada
(iii) US Stumpage Prices Are Commercially Available to Canadian Lumber
Producers
(c) The USDOC Properly Calculated the Total Amount of the Subsidy to Producers
of the Subject Merchandise
(d) The Preliminary Critical Circumstances Finding Is Consistent with the SCM
Agreement
(e) US Laws Governing Reviews Are Consistent with the SCM Agreement
(a) Financial Contribution
(b) Benefit
(c) Pass-through
(d) First mill
(a) Processing Requirements - Independent Loggers
(b) Private Prices
(a) Article 1.1(a)(1)(iv) of the SCM Agreement not the relevant benchmark for a
"pass through" benefit determination
(b) Determination of a "benefit" according to Article 1.1(b) of the SCM
Agreement
(a) Indirect Subsidies
(b) Existence of a financial contribution by a government
(c) Benefits conferred
(a) Arguments of the parties
(i) Canada
(ii) United States
(b) Analysis
(c) Conclusion
(a) arguments of the parties
(i) Canada
(ii) United States
(b) Analysis
(c) Conclusion
(a) Arguments of the parties
(i) Canada
(ii) United States
(b) Analysis
(c) Conclusion
(a) Arguments of the parties
(i) Canada
(ii) United States
(b) Analysis
(a) Arguments of the parties
(i) Canada
(ii) United States
(b) Analysis
(i) Does Article 20.6 SCM Agreement allow for the retroactive application of
provisional measures?
(ii) Does the retroactive application of provisional measures also violate
the disciplines of Article 17 SCM Agreement.
(c) Conclusion
(a) Arguments of the parties
(i) Canada
(ii) United States
(b) Analysis
(a) Arguments of the parties
(i) Canada
(ii) United States
(b) Analysis
(i) Mandatory versus discretionary legislation
(ii) The US Statute and the Statement of Administrative Action
(iii) USDOC Regulations
(c) Conclusion
LIST OF ANNEXES
Contents Page
I. INTRODUCTION
A. COMPLAINT OF CANADA
1.1 On 21 August 2001, Canada requested consultations with the United States
pursuant to Article 4 of the Dispute Settlement Understanding ("the DSU"),
Article XXII of the General Agreement on Tariffs and Trade 1994 ("GATT 1994")
and Article 30 of the Agreement on Subsidies and Countervailing Measures ("the
SCM Agreement" or "the Agreement"), with regard to the preliminary
countervailing duty determination and the preliminary critical circumstances
determination made by the US Department of Commerce ("USDOC") on 9 August 2001,
with respect to certain softwood lumber from Canada, and with regard to US
measures on company-specific expedited reviews and administrative reviews.1
1.2 On 17 September 2001, Canada and the United States held the requested
consultations, but failed to reach a mutually satisfactory resolution of the
matter.
1.3 On 25 October 2001, Canada requested the establishment of a panel to examine
the matter.2
B. ESTABLISHMENT AND COMPOSITION OF THE PANEL
1.4 At its meeting of 5 December 2001, the Dispute Settlement Body ("the DSB")
established a Panel in accordance with Article 6 of the DSU and pursuant to the
request made by Canada in document WT/DS236/2.
1.5 At that meeting, the parties to the dispute also agreed that the Panel
should have standard terms of reference. The terms of reference therefore are
the following:
"To examine, in the light of the relevant provisions of the covered agreements
cited by Canada in document WT/DS236/2 the matter referred to the DSB by Canada
in that document, and to make such findings as will assist the DSB in making the
recommendations or in giving the rulings provided for in those agreements."
1.6 On 22 January 2002, Canada requested the Director-General to determine the
composition of the Panel, pursuant to paragraph 7 of Article 8 of the DSU. This
paragraph provides:
"If there is no agreement on the panelists within 20 days after the date of the
establishment of a panel, at the request of either party, the Director-General,
in consultation with the Chairman of the DSB and the Chairman of the relevant
Council or Committee, shall determine the composition of the panel by appointing
the panelists whom the Director-General considers most appropriate in accordance
with any relevant special or additional rules or procedures of the covered
agreement or covered agreements which are at issue in the dispute, after
consulting with the parties to the dispute. The Chairman of the DSB shall inform
the Members of the composition of the panel thus formed no later than 10 days
after the date the Chairman receives such a request."
1.7 On 1 February 2002, the Director-General accordingly composed the Panel as
follows:
The European Communities, India and Japan reserved their third party rights.
C. PANEL PROCEEDINGS
1.8 The Panel met with the parties on 24-25 April 2002 and 4 June 2002. The
Panel met with third parties on 24 April 2002.
1.9 On 26 July 2002, the Panel provided its interim report to the parties.
II. FACTUAL ASPECTS
2.1 This dispute concerns the preliminary countervailing duty determination and
the preliminary critical circumstances determination made by the USDOC on 9
August 2001 in respect of certain softwood lumber imports from Canada,
classified under headings 4407.1000, 4409.1010, 4409.1020, and 4409.1090.3 This
dispute also concerns US law on expedited and administrative reviews in the
context of countervailing measures.
2.2 On 2 April 2001 an application for countervailing duties was filed with the
USDOC by the Coalition for Fair Lumber Imports Executive Committee; the United
Brotherhood of Carpenters and Joiners; and the Paper, Allied-Industrial,
Chemical and Energy Workers International Union. On 20 April 2001, the
application was amended to include as applicants Moose River Lumber Co., Inc.;
Shearer Lumber Products; Shuqualak Lumber Co.; and Tolleson Lumber Co., Inc. On
30 April 2001, the USDOC published a notice of initiation of a countervailing
duty investigation in the US Federal Register.
2.3 In May 2001, the US International Trade Commission ("ITC") published its
preliminary affirmative determination that there was a reasonable indication
that the US industry was threatened with material injury by reason of imports
from Canada of softwood lumber, which were alleged to be subsidized by the
Government of Canada.
2.4 On 27 July 2001, the USDOC amended the initiation of the investigation, to
exempt from investigation imports of certain softwood lumber produced in the
Maritime Provinces from timber harvested in the Maritime Provinces.4
2.5 On 17 August 2001, the USDOC published in the Federal Register a notice of
preliminary affirmative countervailing duty determination, preliminary
affirmative critical circumstances determination, and alignment of final
countervailing duty determination with final antidumping duty determination.
Provisional measures (withholding of appraisement and posting of cash deposit or
bond) were imposed on the basis of a preliminary subsidy rate of 19.31 per cent,
applicable to all producers/exporters, and applied to all entries of the subject
merchandise from Canada entered, or withdrawn from warehouse, for consumption on
or after 90 days prior to the date of publication of the notice.
1 WT/DS/236/1.
2
WT/DS/236/2.
3
The countervailing duty investigation concerned in this
dispute is sometimes referred to as the "Lumber IV" investigation.
4
US Department of Commerce, Notice of preliminary
affirmative countervailing duty determination, preliminary affirmative critical
circumstances determination, and alignment of final countervailing duty
determination with final antidumping duty determination: Certain softwood lumber
products from Canada, Exhibit CDA-1, p. 43,188.
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