Skip to Content

Final Dumping Determination on Softwood Lumber from Canada

Key Facts
Short Title: US — Softwood Lumber V
Respondent: United States
Third Parties: China; European Communities; Japan; India; New Zealand; Thailand;
Complaintant(s): Canada;
Dispute Number: DS264
Link to Dispute Site: http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds264_e.htm
Dispute Subject(s): Anti-dumping Measures; Lumber;
Dispute Status: Concluded
Complaint by Canada.

Considering that the measures allegedly taken by the United States to comply with the DSB's recommendations and rulings were inconsistent with US obligations under relevant WTO Agreements, on 19 May 2005 Canada requested the DSB of the establishment of a panel under Article 21.5 of the DSU.

On 27 May 2005, Canada and the United States sent to the DSB the understanding between the parties regarding procedures under Articles 21 and 22 of the DSU.

At its meeting of 1 June 2005 the DSB decided to refer the matter raised by Canada to the original panel. China, India, Japan and the European Communities reserved their third party rights.

On 26 August 2005, due to the resignation of the Chairman to the 21.5 Panel, the Director-General appointed a new Chairman to the Panel. On 16 September 2005, the Chairman of the Panel informed the DSB that it would not be possible for the Panel to complete its work in 90 days in light of the withdrawal of the Chairman of the Panel and consequent need to appoint a new Chairman, and scheduling conflicts, and that the Panel expected to complete its work in February 2006.

On 3 April 2006, the Article 21.5 Panel circulated its report to Members. This proceeding concerned the implementation by the United States of part of the DSB recommendations and rulings relating to the finding that the use of "zeroing" by the USDOC in the underlying investigation was inconsistent with Article 2.4.2 of the Anti-Dumping Agreement in the context of a comparison of "a weighted average normal value with a weighted average of all comparable export transactions". The DSB issued its recommendations and rulings after the Appellate Body upheld the relevant finding of the original panel.

In order to implement the DSB recommendations and rulings, the USDOC calculated new rates for the exporters subject to the anti-dumping duty order, based on a comparison of normal value and export prices on a transaction-to-transaction basis. The USDOC used zeroing in its transaction-to-transaction methodology.

Canada claimed that the USDOC's continued use of zeroing under the transaction-to-transaction comparison methodology is inconsistent with Articles 2.4.2 and 2.4 of the Anti-Dumping Agreement. The Article 21.5 Panel rejected Canada's claims. On 17 May 2006, Canada notified its decision to appeal to the Appellate Body certain issues of law and certain legal interpretations covered in the panel report. On 14 July 2006, the Appellate Body informed the DSB that due to the time required for completion and translation of the report, the Appellate Body would not be able to circulate its report within the 60-day period, and that it estimated that the Appellate Body report would be circulated to WTO Members no later than 15 August 2006.

On 15 August 2006, the Appellate Body report was circulated to Members. The Appellate Body reversed the Panel's findings and found, instead, that the use of zeroing is not permitted under the transaction-to-transaction methodology set out in Article 2.4.2 of the Anti-Dumping Agreement because "the ‘margins of dumping' established under this methodology are the results of the aggregation of the transaction-specific comparisons of export prices and normal value", and "in aggregating these results, an investigating authority must consider the results of all of the comparisons and may not disregard the results of comparisons in which export prices are above normal value".

In addition, the Appellate Body found that the use of zeroing under the transaction-to-transaction comparison methodology in the Section 129 Determination is inconsistent with the "fair comparison" requirement in Article 2.4 of the Anti-Dumping Agreement because it distorts the price of certain export transactions, which are not considered at their real value, and artificially inflates the magnitude of dumping, resulting in higher margins of dumping and making a positive determination of dumping more likely.

The Appellate Body reversed the Panel's conclusion that the United States had implemented the DSB recommendations and rulings and recommended that the DSB request the United States to bring its measure into conformity with its obligations under the Anti-Dumping Agreement . At its meeting on 1 September 2006, the DSB adopted the Appellate Body report and the Panel report, as reversed by the Appellate Body report.

Appellate Body and Panel Reports Adopted

On 13 September 2002, Canada requested consultations under Article 4.8 of the DSU (urgency procedure) with the US concerning the final affirmative determination of sales at less than fair value (dumping) with respect to certain softwood lumber products from Canada (Inv. No. A-122-838) announced by the US Department of Commerce (DOC) on 21 March 2002 pursuant to section 735 of the Tariff Act of 1930, as amended on 22 May 2002 (Final Determination). The measures at issue include the initiation of the investigation, the conduct of the investigation and the Final Determination.

Canada considered these measures and, in particular, the determinations made and methodologies adopted therein by the DOC under authority of the United States Tariff Act of 1930, to violate Articles 1, 2.1, 2.2, 2.4, 2.6, 5.1, 5.2, 5.3, 5.4, 5.8, 6.1, 6.2, 6.4, 6.9 and 9.3 of the Anti-Dumping Agreement and Articles VI and X:3(a) of the GATT 1994.

On 6 December 2002, Canada requested the establishment of a panel. At its meeting of 19 December 2002, the DSB deferred the establishment of a panel. Further to a second request by Canada, a panel was established by the DSB at its meeting on 8 January 2003. The EC and India reserved their third-party rights. On 15 January 2003, Japan reserved its third-party rights. On 25 February 2003, the Panel was composed.

On 25 August 2003, the Chairman of the Panel informed the DSB that due to the complexity of the matter, the Panel would not be able to complete its work in six months. The Panel expected to issue its final report to the parties in December 2003. On 2 December 2003, the Chairman of the Panel informed the DSB that the Panel expected to issue its final report to the parties in February 2004.

On 13 April 2004, the Panel report was circulated to Members. The Panel found that, in its final dumping determination, the US Department of Commerce (DOC) failed to comply with the requirements of Articles 2.4.2 of the AD Agreement because the DOC did not take into account all export transactions by applying the "zeroing" methodology when calculating the margin of dumping. (One member of the Panel issued a dissenting opinion regarding the finding on "zeroing".) The Panel found that all other claims submitted by Canada failed.

On 13 May 2004, the United States notified its decision to appeal to the Appellate Body certain issues of law covered in the Panel Report and certain legal interpretations developed by the Panel. On 8 July 2004, the Chairman of the Appellate Body informed the DSB that it would not be possible for the Appellate Body to complete its work within 60-day period due to the time required for completion and translation of the Report. The Appellate Body expected to complete its work no later than 11 August 2004.

On 11 August 2004, the Appellate Body Report was circulated to Members. The Appellate Body:

* upheld the Panel's finding that the United States had acted inconsistently with the Anti-Dumping Agreement by calculating margins of dumping on the basis of a methodology incorporating the practice of "zeroing";

* reversed the Panel's finding that the United States did not act inconsistently with the Anti-Dumping Agreement when calculating the amount of financial expense attributable to the production of softwood lumber for Abitibi, one of the Canadian companies under investigation. Although the Appellate Body reversed the Panel on this issue, it was not required itself to rule on whether the United States had acted inconsistently with its WTO obligations in this regard; and

* upheld the Panel's finding that the United States did not act inconsistently with certain provisions of the Anti-Dumping Agreement when calculating the amount for by-product revenue from the "sale" of wood chips for Tembec, another Canadian company under investigation. The Appellate Body did not disturb the Panel's finding that the United States had not acted in a biased, non-objective, or other than even-handed manner.

At its meeting on 31 August 2004, the DSB adopted the Appellate Body report and the Panel report, as modified by the Appellate Body report.

Implementation Status of Adopted Reports

At the DSB meeting on 27 September 2004, the United States stated that it was the intention of the US to implement the recommendations and rulings of the DSB in a manner that respected its WTO obligations, and that it would require a reasonable period of time to implement the recommendations and rulings of the DSB and was ready to consult with Canada in accordance with Article 21.3(b) of the DSU.

As Canada and the United States had been unable to agree on a reasonable period of time, on 18 October 2004 Canada requests that the reasonable period of time be determined through binding arbitration pursuant to Article 21.3(c) of the DSU. On 1 November 2004, they agreed that Mr. Lockhart act as arbitrator under Article 21.3(c) of the DSU. On 4 November 2004, Mr. Lockhart informed that he accepted the appointment as arbitrator.

On 6 December 2004, Canada and the United States informed the DSB that, pursuant to Article 21.3(b) of the DSU, both parties had mutually agreed that the reasonable period of time to implement the recommendations and rulings of the Dispute Settlement Body in the above-referenced dispute shall be seven and one-half months, that is from 31 August 2004 to 15 April 2005. In addition, they informed that, in light of the agreement, the proceeding under Article 21.3(c) of the DSU be terminated. On 13 December 2004, the Report of Arbitrator was circulated. On 14 February 2005, Canada and the United States informed the DSB that both parties had agreed to modify the reasonable period of time so as to expire on 2 May 2005.

At the DSB meeting on 19 May 2005, the United States stated that that it had implemented the recommendations and rulings of the DSB, by issuing on 15 April 2005 a new final determination, in which it calculated new rates of dumping with respect to its antidumping duty investigation on certain softwood lumber products from Canada.

Considering that the measures allegedly taken by the United States to comply with the DSB's recommendations and rulings were inconsistent with US obligations under relevant WTO Agreements, on 19 May 2005 Canada requested the DSB of the establishment of a panel under Article 21.5 of the DSU and authorization to suspend concessions or other obligations with respect to the United States under Article 22.2 of the DSU.

On 27 May 2005, Canada and the United States sent to the DSB the understanding between the parties regarding procedures under Articles 21 and 22 of the DSU.

In respect of the Article 21.5 proceeding, at its meeting of 1 June 2005 the DSB decided to refer the matter raised by Canada to the original panel. China, India, Japan and the European Communities reserved their third party rights.

In respect of the Article 22 proceeding, on 31 May 2005 the United States requested this matter to be referred to arbitration in accordance with Article 22.6 of the DSU. At its meeting of 1 June 2005, the DSB agreed that the matter raised by the United States be referred to arbitration in accordance with Article 22.6 of the DSU. Pursuant to the bilateral agreement, the Article 22.6 arbitration proceeding was suspended until the completion of the Article 21.5 proceeding.

For details of the Article 21.5 panel and Appellate Body proceedings, see above.

On 12 October 2006, the United States and Canada informed the DSB that they had reached a mutually agreed solution under Article 3.6 of the DSU in the disputes WT/DS236, WT/DS247, WT/DS257, WT/DS264, WT/DS277 and WT/DS311. In light of this mutually agreed solution, the suspended Article 22.6 arbitration proceeding was withdrawn.

Mutually Agreed Solutions notified under Article 3.6 of the DSU

On 12 October 2006, the United States and Canada informed the DSB that they had reached a mutually agreed solution under Article 3.6 of the DSU in the disputes WT/DS236, WT/DS247, WT/DS257, WT/DS264, WT/DS277 and WT/DS311. This solution was in the form of a comprehensive agreement (Softwood Lumber Agreement) between the United States and Canada, dated 12 September 2006. On 23 February 2007, the United States and Canada informed the DSB that on 12 October 2006 they had concluded a further Agreement, which amended the original Agreement to facilitate its entry into force.

Panel Proceedings
Brief DateBrief Description
11/17/2003Answer to Panel Question 140 (pdf)
09/05/2003U.S. Comments on Canada's Answers to the Panel's Questions in Connection with the Second Meeting of the Panel
08/26/2003Attachment to the Answers to the Panel's Questions in Connection with the Second Meeting of the Panel (pdf)
08/26/2003Answers to the Panel's Questions in Connection with the Second Meeting of the Panel (pdf)
08/21/2003Executive Summary of the U.S. Oral Presentation at the Second Meeting of the Panel (pdf)
08/12/2003Closing Statement of the United States at the Second Panel Meeting (pdf)
08/11/2003Opening Statement of the United States at the Second Panel Meeting (pdf)
07/18/2003Executive Summary of the Second Written Submission of the United States (pdf)
07/09/2003Second Written Submission of the United States (pdf)
06/30/2003Answers to the Panel's Questions in Connection with the First Meeting of the Panel (pdf)
06/27/2003Executive Summary of the Oral Presentation of the United States at the First Meeting of the Panel (pdf)
06/18/2003Closing Statement of the United States at the First Panel Meeting (pdf)
06/17/2003Opening Statement of the United States at the First Panel Meeting (pdf)
05/22/2003Executive Summary of the U.S. First Written Submission (pdf)
05/12/2003First Written Submission of the United States (pdf)

Appeal Proceedings
Brief DateBrief Description
06/22/2004Opening Statement of the United States (pdf)
06/07/2004Appellee's Submission of the United States (pdf)
05/24/2004Appellant's Submission of the United States (pdf)

Recourse by Canada to Article 21.5 of the DSU
Brief DateBrief Description
08/01/2005Executive Summary of the Second Written Submission of the United States (pdf)
07/25/2005Second Written Submission of the United States (pdf)
07/14/2005Executive Summary of the First Written Submission of the United States (pdf)
07/07/2005First Written Submission of the United States (pdf)

Recourse by Canada to Article 21.5 of the DSU: Appeal Proceedings
Brief DateBrief Description
06/24/2006Opening Statement of the United States at the Oral (pdf)
06/12/2006U.S. Appellee Submission (pdf)