WT/DS257/R
Page 1
World TradeOrganization
WT/DS257/R
29 August 2003
(03-4360)
Original: English
UNITED STATES – FINAL COUNTERVAILING DUTY DETERMINATION WITH RESPECT TO CERTAIN SOFTWOOD LUMBER FROM CANADA
Report of the Panel
The Report of the Panel on United States – Final Countervailing Duty Determination 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 29 August 2003 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 exparte communications with the Panel or Appellate Body concerning matters under consideration by the Panel or Appellate Body.
Note by the Secretariat: This Panel Report shall be adopted by the Dispute Settlement Body (DSB) within 60days after the date of its circulation unless a party to the dispute decides to appeal or the DSB decides by consensus not to adopt the report. If the Panel Report is appealed to the Appellate Body, it shall not be considered for adoption by the DSB until after the completion of the appeal. Information on the current status of the Panel Report is available from the WTO Secretariat.WT/DS257/R
Page 1
TABLE OF CONTENTS
Page
I.introduction......
A.complaint of canada......
B.establishment and composition of the panel......
C.panel proceedings......
II.FACTUAL ASPECTS......
A.The USDOC investigation......
B.related wto proceedings......
III.parties' requests for findings and recommendations......
A.request of canada......
B.request of the united states......
IV.ARGUMENTS OF THE PARTIES......
A.first written submission of canada......
1.The US Imposed Countervailing Duties On Practices That Are Not Countervailable Subsidies
2.Canadian provincial stumpage programmes are not specific to certain enterprises.....
3.USDOC’s Calculation Methodology Impermissibly Inflates the Rate of the Alleged Subsidy and the Countervailing Duty
4.Conduct of the Investigation......
5.Initiation of the Lumber IV Investigation......
6.Administrative Reviews......
B.first written submission of the united states......
1.Introduction......
2.Standard Of Review......
3.Argument......
(a)Canada Bears the Burden of Proving Its Claim......
(b)The Final Countervailing Duty Determination Is Consistent with the SCM......
(c)The Conduct of This Investigation Was Consistent with the Obligations of Article 12 of the SCM
(d)The United States Initiated the Softwood Lumber Investigation Based on Adequate Domestic Industry Support Consistent with the Requirements of Article 11.4 of the SCM
4.Conclusion......
C.first oral statement of canada......
1.Financial Contribution......
2.Benefit......
3.Pass-through......
4.Specificity......
5.Calculations......
6.Conduct of the Investigation......
7.Initiation......
8.Administrative Reviews......
D.first oral statement of the united states......
1.Opening Statement of the United States of America at the First Meeting of the Panel...
(a)Financial Contribution......
(b)Benefit......
(c)Calculation Issues......
(d)Specificity......
2.Closing Statement of the United States of America at the First Meeting of the Panel....
(a)Financial Contribution......
(b)Benefit......
(c)Market Distortion......
(d)Calculation Issues......
(e)Administrative Reviews......
(f)Conclusion......
E.second written submission of canada......
1.Financial Contribution......
2.Benefit......
3.Pass-Through......
4.Specificity......
5.Other Claims......
(a)Calculations......
(b)Conduct of the Investigation......
F.second written submission of the united states......
G.second oral statement of canada......
1.Financial Contribution......
2.Benefit......
3.Pass-through......
4.Specificity......
5.Calculations......
6.Conduct of the Investigation......
H.second oral statement of the united states......
V.ARGUMENTS OF THE THIRD PARTIES......
A.third party written submission of the european communities......
1.Claims Relating to the Existence of a Subsidy within the meaning of Article 1 of the SCM Agreement
(a)Financial contribution......
(b)Benefit......
(c)Failure to Examine and Determine the Existence of a Benefit to all Producers of the Subject Product (“Pass Through”)
2.Conclusion......
B.third party oral statement of the european communities......
1.Financial contribution......
2.Benefit......
3.Specificity......
4.Violation of Article 12.3 and 12.8......
(a)Violation of Article 12.3 of the SCM Agreement......
(b)Violation of Article 12.8 of the SCM Agreement......
C.third party oral statement of india......
D.third party written submission of japan......
1.Introduction......
2.Legal Arguments......
(a)Provision of “goods”......
(b)A Benefit Conferred......
(c)A Pass-through of an Alleged Subsidy......
VI.interim review......
VII.FINDINGS......
A.Claim 1: inconsistent finding of the existence of a financial contribution......
1.Arguments of the parties......
(a)Canada......
(b)United States......
2.Analysis......
(a)What do the stumpage programmes provide: the right to harvest or standing timber ?......
(b)Is standing timber a "good" in the sense of Article 1.1 (a) (1) (iii) SCM Agreement?......
B.Claim 2: inconsistent determination of benefit under Article 14 (d) SCM Agreement......
1.Arguments of the parties......
(a)Canada......
(b)United States......
2.Analysis......
C.Claim 3: usdoc impermissibly assumed a pass-through of the alleged subsidy......
1.Arguments of the parties......
(a)Canada......
(b)United States......
2.Analysis......
(a)Legal requirements concerning pass-through analysis......
(b)Pass-through analysis in the present dispute......
(c)Has Canada introduced a new claim, i.e., a violation of Article 1.1, which is outside the Panel's terms of reference?
D.Claim 4: Canadian stumpage programmes are not specific to certain enterprises......
1.Arguments of the parties......
(a)Canada......
(b)United States......
2.Analysis......
E.Claim 5: Inconsistent calculation of the amount of subsidization......
1.Claims and arguments of the parties......
(a)Alleged improper conversion from US to Canadian log volume measurement system......
(b)Alleged failure to account for the multiple uses of softwood logs produced from Crown timber
(c)Alleged understatement of the value of "final mill" sales......
2.Analysis......
F.Claim 6: failure to conduct the investigation in accordance with article 12 SCM agreement...
1.Arguments of the parties......
(a)Canada......
(b)United States......
2.Analysis......
G.claim 7: Inconsistent initiation of the investigation......
1.Arguments of the parties......
(a)Canada......
(b)United States......
2.Analysis......
VIII.Conclusions and recommendations......
ANNEX A
PARTIES' RESPONSES TO QUESTIONS
FROM THE FIRST MEETING
Contents / PageAnnex A-1Canada Response to Questions from the Panel at First Meeting / A-2
Annex A-2United States Response to Questions from the Panel at the First Meeting / A-35
Annex B
PARTIES' RESPONSES TO QUESTIONS
FROM THE SECOND MEETING
Contents / PageAnnex B-1Canada Response to Questions from the Panel at the Second Meeting / B-2
Annex B-2United States Response to Questions from the Panel at the Second Meeting / B-16
Annex C
THIRD PARTY RESPONSES TO
QUESTIONS FROM THE PANEL
Contents / PageAnnex CEuropean Communities Response to Questions from the Panel at the Third Party Session / C-2
ANNEX D
REQUEST FOR THE ESTABLISHMENT
OF A PANEL
Contents / PageAnnex DRequest for the Establishment of a Panel – Document WT/DS257/3 / D-2
TABLE OF CASES CITED IN THIS REPORT
Short Title / Full Case Title and CitationArgentina – Ceramic Tiles / Panel Report, Argentina – Definitive Anti-Dumping Measures on Imports of Ceramic Floor Tiles from Italy, WT/DS189/R, adopted 5 November 2001
Brazil – Aircraft
(Article 21.5 – CanadaII) / Panel Report, Brazil – Export Financing Programme for Aircraft – Second Recourse by Canada to Article 21.5 of the DSU, WT/DS46/RW/2, adopted 23August2001
Canada – Aircraft / Appellate Body Report, Canada – Measures Affecting the Export of Civilian Aircraft, WT/DS70/AB/R, adopted 20August1999, DSR1999:III,1377
EC–Bed Linen / Panel Report, European Communities – Anti-Dumping Duties on Imports of Cotton-Type Bed Linen from India, WT/DS141/R, adopted 12March2001, as modified by the Appellate Body Report, WT/DS141/AB/R
EC–Hormones / Appellate Body Report, EC Measures Concerning Meat and Meat Products (Hormones), WT/DS26/AB/R, WT/DS48/AB/R, adopted 13February1998, DSR1998:I,135
EC–Tube and Pipe Fittings / Panel Report, European Communities – Anti-Dumping Duties on Malleable Cast Iron Tube or Pipe Fittings from Brazil, WT/DS219/R, 7 March 2003 [appealed]
Egypt – Steel Rebar / Panel Report, Egypt – Definitive Anti-Dumping Measures on Steel Rebar from Turkey, WT/DS211/R, adopted 1October2002
Guatemala – Cement II / Panel Report, Guatemala – Definitive Anti-Dumping Measures on Grey Portland Cement from Mexico, WT/DS156/R, adopted 17 November 2000, DSR 2000:XI, 5295
India – Patents(US) / Appellate Body Report, India – Patent Protection for Pharmaceutical and Agricultural Chemical Products, WT/DS50/AB/R, adopted 16January1998, DSR1998:I,9
India – Quantitative Restrictions / Appellate Body Report, India – Quantitative Restrictions on Imports of Agricultural, Textile and Industrial Products, WT/DS90/AB/R, adopted 22September1999, DSR1999:IV,1763
Japan – Alcoholic BeveragesII / Appellate Body Report, Japan – Taxes on Alcoholic Beverages, WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R, adopted 1November1996, DSR1996:I,97
Mexico – Corn Syrup / Panel Report, Mexico – Anti-Dumping Investigation of High Fructose Corn Syrup (HFCS) from the United States, WT/DS132/R and Corr.1, adopted 24February2000, DSR2000:III,1345
Thailand – H-Beams / Appellate Body Report, Thailand – Anti-Dumping Duties on Angles, Shapes and Sections of Iron or Non-Alloy Steel and H-Beams from Poland, WT/DS122/AB/R, adopted 5April2001
US – Canadian Pork / Panel Report, United States – Countervailing Duties on Fresh, Chilled and Frozen Pork from Canada, adopted 11 July 1991, BISD 38S/30.
US – Countervailing Measures on Certain EC Products / Panel Report, United States – Countervailing Measures Concerning Certain Products from the European Communities, WT/DS212/R, adopted 8 January 2003, as modified by the Appellate Body Report, WT/DS212/AB/R
US – Export Restraints / Panel Report, United States – Measures Treating Exports Restraints as Subsidies, WT/DS194/R and Corr.2, adopted 23August2001
US – Hot-Rolled Steel / Appellate Body Report, United States – Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan, WT/DS184/AB/R, adopted 23 August 2001
US – Lamb / Appellate Body Report, United States – Safeguard Measures on Imports of Fresh, Chilled or Frozen Lamb Meat from New Zealand and Australia, WT/DS177/AB/R, WT/DS178/AB/R, adopted 16May2001
US – Lead and BismuthII / Appellate Body Report, United States – Imposition of Countervailing Duties on Certain Hot-Rolled Lead and Bismuth Carbon Steel Products Originating in the United Kingdom, WT/DS138/AB/R, adopted 7June2000, DSR2000:V,2601
US – Offset Act
(Byrd Amendment) / Appellate Body Report, United States – Continued Dumping and Subsidy Offset Act of 2000, WT/DS217/AB/R, WT/DS234/AB/R, adopted 27January2003
US – Shrimp / Appellate Body Report, United States – Import Prohibition of Certain Shrimp and Shrimp Products, WT/DS58/AB/R, adopted 6November1998, DSR1998:VII,2755
US – Softwood LumberIII / Panel Report, United States – Preliminary Determinations with Respect to Certain Softwood Lumber from Canada, WT/DS236/R, adopted 1November2002
WT/DS257/R
Page 1
I.introduction
A.complaint of canada
1.1On 3 May 2002, 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"), concerning the final affirmative countervailing duty determination by the US Department of Commerce ("USDOC") (File No. C-122839) issued on 25 March 2002, with respect to certain softwood lumber from Canada.[1]
1.2On 18 June 2002, Canada and the United States ("the US") held the requested consultations, but failed to reach a mutually satisfactory resolution of the matter.
1.3On 18 July 2002, Canada requested the establishment of a panel to examine the matter.[2] Canada subsequently withdrew that request, and on 19 August 2002 made a new request for establishment of a panel to examine the matter.[3]
B.establishment and composition of the panel
1.4At its meeting of 1 October 2002, the DSB established a panel in accordance with Article 6 of the DSU and pursuant to the request made by Canada in document WT/DS257/3.[4]
1.5At that meeting, the parties to the dispute also agreed that the Panel should have standard terms of reference. The terms of reference are, therefore, the following:
"To examine, in the light of the relevant provisions of the covered agreements cited by Canada in document WT/DS257/3, the matter referred by Canada to the DSB 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".
1.6On 4 November 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".
1.7On 8 November 2002, the Director-General accordingly composed the Panel as follows:
Chairman:Mr. Elbio O. Rosselli
Members:Mr. Wieslaw Karsz
Mr. Remo Moretta
1.8The European Communities, India and Japan reserved their third-party rights.
C.panel proceedings
1.9The Panel met with the parties on 11-12 February 2003 and 25 March 2003. The Panel met with third parties on 12February 2003.
II.FACTUAL ASPECTS
A.The USDOC investigation
2.1This dispute concerns the final countervailing duty determination made by USDOC on 21March 2002 in respect of certain softwood lumber imports from Canada, classified under headings 4407.1000, 4409.1010, 4409.1090, and 4409.1020.
2.2The investigation was initiated by USDOC on 30 April 2001, pursuant to an application filed with USDOC on 2 April 2001 (amended 20 April 2001 to add certain applicants). The applicants were the Coalition for Fair Lumber Imports Executive Committee; the United Brotherhood of Carpenters and Joiners; the Paper, Allied-Industrial, Chemical and Energy Workers International Union; Moose River Lumber Co., Inc.; Shearer Lumber Products; Shuqualak Lumber Co.; and Tolleson Lumber Co., Inc.
2.3On 17 August 2001, 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 were imposed on the basis of a preliminary subsidy rate of 19.31per cent.
2.4On 2 April 2002, USDOC published in the Federal Register a notice of final affirmative countervailing duty determination. Definitive measures were imposed on the basis of a final subsidy rate of 19.34 per cent, with 19.25 per cent being the amount attributable to stumpage programmes. On 22 May 2002, USDOC published in the Federal Register a notice of amended final affirmative countervailing determination and notice of countervailing duty order, which decreased the final subsidy rate to 18.79 per cent as a result of corrections for ministerial errors. Of this amount, 18.70per cent was attributable to stumpage programmes.
B.related wto proceedings
2.5At its meeting of 5 December 2001, the DSB established a panel, pursuant to a request by Canada, in respect of USDOC's preliminary determinations in the investigation at issue in this dispute. On 27 September 2002, that panel's report, United States – Preliminary Determinations with Respect to Certain Softwood Lumber from Canada (WT/DS236/R), was circulated to all WTO Members.[5]
III.parties' requests for findings and recommendations
A.request of canada
3.1Canada requests the Panel to:
- find that the initiation of USDOC's investigation and the definitive countervailing duties imposed as a result violate Articles 10, 11.4, and 32.1 of SCM Agreement;
- find that USDOC'sinvestigation and the Final Determination, and the definitive countervailing duties imposed as a result violate Articles 1.2, 10, 12.1, 12.3, 12.8, 14, 14(d), 19.1, 19.4 and 32.1 of SCM Agreement and Article VI:3 of GATT 1994; and
- recommend that the US bring its measures into conformity with its WTO obligations, including by revoking the countervailing duty order, ceasing to impose countervailing duties and refunding the countervailing duties imposed as a result of the Lumber IV investigation and the Final Determination.
B.request of the united states
3.2The United States requests that the Panel reject Canada's claims in their entirety.
IV.ARGUMENTS OF THE PARTIES
4.1The arguments of the parties are set out in their written and oral submissions to the Panel, and in their answers to questions. The parties' arguments as presented in their submissions are summarized in this section. The parties' written answers to questions are set out in full as Annexes to this report. (See, List of Annexes, page v).
A.first written submission of canada
4.2The following summarizes Canada's arguments in its first written submission.
4.3At issue in this dispute are countervailing duties on certain softwood lumber products from Canada imposed on 21 March 2002, by USDOC pursuant to a final affirmative countervailing duty determination
1.The US Imposed Countervailing Duties On Practices That Are Not Countervailable Subsidies
4.4Article 1.1 sets out the exclusive definition for what constitutes a subsidy for the purposes of the SCM Agreement. A subsidy has two discrete elements: (i) a financial contribution that (ii)confers a benefit. The US has not established the existence of a subsidy for the following reasons.
4.5USDOC erred in determining that provincial stumpage programmes “provide goods”. The US has imposed countervailing duties on practices that do not constitute a “financial contribution” within the meaning of Article 1.1(a)(1)(iii). In Canada, natural resources are, for the most part, the property of provincial governments. Many of these resources have traditionally been managed through the transfer of real property interests and exploitation rights. Forests are one among many of these resources; harvesting trees is but one aspect of the overall management of forestry resources. At issue in this dispute is the legal characterization of these forestry resources management systems.
4.6Forestry management regimes in Canada reflect three critical considerations: (1) the land is publicly owned; (2) forestry resources such as air, water, wildlife, plants, trees and parkland may be put to a variety of uses; and (3) forestry resources must be carefully managed in the best interests of the public. Forestry resources are managed through a system of interlocking rights and obligations between the Crown and timber harvesters. This system of resource management is based most frequently on tenure and licensing agreements. The details of such tenure and licensing agreements vary, but they are all similar in that they are a complex bundle of rights and obligations, containing at a minimum: the right to harvest standing timber on Crown land or “stumpage”; service and maintenance obligations (e.g., road-building, protection against fire, disease, and insects); implementation of forestry management and conservation measures, including silviculture; and payment of a volumetric “stumpage charge” that is levied upon the exercise of the harvesting right.
4.7Stumpage takes two different forms in Canada: a real property right (generally referred to as a profit à prendre)or a licence to harvest standing timber. A profit à prendre is a form of real property right that conveys a non-possessory interest in the land to the recipient. A licence is a revocable right to do something on, or to the detriment of, the land of another that would otherwise not be permitted – in this case, the right to harvest standing timber.