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Investigation of the International Trade Commission in Softwood Lumber from Canada

Key Facts
Short Title: US — Softwood Lumber VI
Respondent: United States
Third Parties: China; European Communities; Japan; Korea;
Complaintant(s): Canada;
Dispute Number: DS277
Link to Dispute Site: http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds277_e.htm
Dispute Subject(s): Countervailing Duty; Lumber;
Dispute Status: Concluded
Complaint by Canada.

On 20 December 2002, Canada requested consultations with the United States regarding the investigation of the USITC in Softwood Lumber from Canada (Invs. Nos. 701-TA-414 and 731-TA-928 (Final)) and the final definitive anti-dumping and countervailing duties applied as a result of the USITC's final determination made on 2 May 2002, notice of which was published in the United States Federal Register on 22 May 2002 (Volume 67, Number 99 at pp. 36022-36023) that an industry in the United States is threatened with material injury by reason of imports of softwood lumber from Canada that the Department of Commerce has determined are subsidized and sold in the United States at less than fair value.

Canada claimed that, through these measures, the United States has violated its obligations under Article VI:6(a) of the GATT 1994, Articles 1, 3.1, 3.2, 3.3, 3.4, 3.5, 3.7, 3.8, 12 and 18.1 of the Anti-Dumping Agreement and Articles 10, 15.1, 15.2, 15.3, 15.4, 15.5, 15.7, 15.8, 22 and 32.1 of the SCM Agreement.

On 3 April 2003, Canada requested the establishment of a panel. At its meeting on 15 April 2003, the DSB deferred the establishment of the panel. Further to a second request by Canada, the DSB established a panel at its meeting on 7 May 2003. The EC and Japan reserved their third party rights. On 16 May 2003, Korea reserved its third party rights. On 12 June 2003, Canada requested the Director-General to compose the panel. On 19 June 2003, the Director-General composed the panel. On 19 December 2003, the Chairman of the Panel informed the DSB that it would not be possible for the Panel to complete its work in six months in light of scheduling comflicts. The Panel expected to complete its work in February 2004.

On 22 March 2004, the Panel report was circulated to Members. The Panel found that, in its final threat of injury determination, the US International Trade Commission (USITC) failed to comply with the requirements of Articles 3.5 and 3.7 the AD Agreement and Article 15.5 and 15.7 of the SCM Agreement in finding a likely imminent substantial increase in imports and a casual link between imports and threat of injury to the domestic industry in the US producing softwood lumber. The Panel found that the USITC's finding of likelihood of substantially increased imports was not consistent with the requirements of the Agreements, and that the causation conclusion rested on this inconsistent finding. The Panel therefore found that the anti-dumping and countervailing measures imposed by the US on imports of softwood lumber from Canada are inconsistent with the US obligations under those provisions, and recommended that those measures be brought into conformity with the US obligations.

At its meeting on 26 April 2004, the DSB adopted the Panel report.

Appellate Body and Panel Compliance Reports (Article 21.5) Adopted

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 14 February 2005 Canada requested the DSB of the establishment of a panel under Article 21.5 of the DSU.

On 23 February 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, which provides that Article 22.6 arbitration be suspended until adoption by the DSB of the recommendations and rulings in the Article 21.5 compliance proceedings.

At its meeting of 25 February 2005 the DSB decided to refer the matter raised by Canada to the original panel. China and the European Communities reserved their third party rights. On 2 March 2005 the Panel was composed.

On 25 May 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 scheduling conflicts, and that the Panel expected to complete its work in September 2005.

On 15 November 2005, the Article 21.5 Panel circulated its Report to Members. In its Report, the Panel found that the determination of the US ITC implementing the Panel and DSB recommendations in the original dispute is not inconsistent with the United States' obligations under the Anti-Dumping Agreement and the SCM Agreement.

On 13 January 2006, Canada notified its decision to appeal to the Appellate Body certain issues of law covered in the Article 21.5 panel report and certain legal interpretations developed by the Panel. On 10 March 2006, the Chairman of the Appellate Body informed the DSB that the Appellate Body would not be able to circulate its Report within the 60-day period due to the time required for completion and translation of the Report, and that it estimated it would be circulated to WTO Members no later than 13 April 2006.

On 13 April 2006, the Appellate Body circulated its report to Members. The Appellate Body clarified the standard of review to be followed by panels in reviewing threat of injury determinations. The Appellate Body found that the Panel had acted inconsistently with Article 11 of the DSU because it articulated and applied an improper standard of review in its assessment of the USITC's Section 129 determination. Consequently, the Appellate Body reversed the Panel's findings that the USITC's determination is not inconsistent with the obligations of the United States under Articles 3.5 or 3.7 of the Anti-Dumping Agreement and Articles 15.5 and 15.7 of the SCM Agreement, and also reversed the Panel's finding that the United States had implemented the recommendations and rulings of the DSB in the original dispute.

However, the Appellate Body was unable to complete the analysis and determine whether the USITC's Section 129 determination is consistent or inconsistent with the United States' obligations under Articles 3.5 and 3.7 of the Anti-Dumping Agreement and Articles 15.5 and 15.7 of the SCM Agreement because of the absence of pertinent factual findings by the Panel and undisputed facts on the Panel record.

On 9 May 2006, the DSB adopted the Appellate Body report and the Panel report, as reversed by the Appellate Body report.

Implementation Status of Adopted Reports

At the DSB meeting on 19 May 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. On 26 July 2004, both parties jointly informed the DSB that they were holding bilateral consultations on the period of time required for the United States to implement the recommendations and rulings of the DSB and confirmed that should recourse to arbitration be sought, the award of the arbitrator made within the agreed 45-day time period shall be deemed to be the award of the arbitrator for the purpose of Article 21.3(c) of the DSU. On 1 October 2004, both parties jointly informed the DSB that they had mutually agreed that the reasonable period of time to implement the recommendations and rulings of the DSB shall be 9 months, that is from 26 April 2004 to 26 January 2005.

At the DSB meeting on 25 January 2005, the United States stated that it had implemented the DSB's recommendations and rulings by amending the US anti-dumping and counvervailing duty order concerned, and Canada stated it was reviewing the results of the US implementation.

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 14 February 2005 Canada requested the DSB of both 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 23 February 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, which provides that Article 22.6 arbitration be suspended until adoption by the DSB of the recommendations and rulings in the Article 21.5 compliance proceedings.

In respect of the the Article 22 proceeding, on 23 February 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 25 January 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. In respect of the Article 21.5 proceeding, at its meeting of 25 February 2005 the DSB decided to refer the matter raised by Canada to the original panel. Pursuant to the bilateral agreement, the Article 22.6 arbitration proceeding was suspended until the completion of the Article 21.5 proceeding. On 2 March 2005. the Article 21.5 Panel was composed.

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
03/17/2003U.S. Answers to the Second Set of Panel Questions (pdf)
10/17/2003Executive Summary of the U.S. Oral Statements at the Second Panel Meeting (pdf)
10/07/2003U.S. Opening Statement at the Second Panel Meeting (pdf)
10/07/2003U.S. Closing Statement at the Second Panel Meeting (pdf)
09/24/2003Second Written Submission of the United States (pdf)
09/24/2003U.S. Answers to the First Set of Panel Questions (pdf)
09/15/2003Executive Summary of the U.S. Oral Statements at the First Panel Meeting (pdf)
09/05/2003U.S. Closing Statement at the First Panel Meeting (pdf)
09/04/2003U.S. Opening Statement at the First Panel Meeting (pdf)
08/25/2003Executive Summary of the First Written Submission of the United States (pdf)
08/15/2003First Written Submission of the United States (pdf)

Recourse by Canada to Article 21.5 of the DSU
Brief DateBrief Description
07/18/2005U.S. Comments on Canada's Answers to Panel Questions (pdf)
07/11/2005U.S. Answers to Panel Questions (pdf)
07/07/2005Executive Summary of the Closing Statement of the United States at the Panel Meeting (pdf)
06/29/2005Closing Statement of the United States (pdf)
06/28/2005Opening Statement of the United States (pdf)
05/24/2005Executive Summary of the Second Submission of the United States (pdf)
05/17/2005Second Submission of the United States (pdf)
05/04/2005Executive Summary of the First Submission of the United States (pdf)
04/29/2005First Submission of the United States (pdf)

Recourse by Canada to Article 21.5 of the DSU: Appeal Proceedings
Brief DateBrief Description
02/24/2006Oral Statement of the United States (pdf)
02/07/2006Appellee Submission of the United States (pdf)