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Preliminary Determinations with Respect to Certain Softwood Lumber from Canada

Key Facts
Short Title: US — Softwood Lumber III
Respondent: United States
Third Parties: European Communities; Japan; India;
Complaintant(s): Canada;
Dispute Number: DS236
Link to Dispute Site: http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds236_e.htm
Dispute Subject(s): Countervailing Duty; Lumber;
Dispute Status: Concluded
Complaint by Canada.

On 21 August 2001, Canada requested consultations with the US concerning the preliminary countervailing duty determination and the preliminary critical circumstances determination made by the US Department of Commerce on 9 August 2001, with respect to certain softwood lumber from Canada. This request also concerned US measures on company-specific expedited reviews and administrative reviews. In particular:

* As far as the preliminary countervailing duty determination is concerned, Canada considered this determination to be inconsistent with US obligations under Articles 1, 2, 10, 14, 17.1, 17.5, 19.4 and 32.1 of the SCM Agreement and Article VI(3) of GATT 1994.

* With respect to the preliminary critical circumstances determination, Canada considered this determination to be inconsistent with Articles 17.1, 17.3, 17.4, 19.4 and 20.6 of the SCM Agreement.

* As regards US measures on company-specific expedited reviews and administrative reviews, Canada considered these measures are inconsistent with US obligations under Article VI:3 of the GATT 1994 and Articles 10, 19.3, 19.4, 21.1, 21.2 and 32.1 of the SCM Agreement.

* Canada also considered that the US had failed to ensure that its laws and regulations are in conformity with its WTO obligations as required by Article 32.5 of the SCM Agreement and Article XVI:4 of the WTO Agreement.

On the grounds that the affirmative preliminary countervailing duty and critical circumstances determinations had an immediate and significant trade impact, Canada requested urgent consultations pursuant to Article 4.8 of the DSU. Although accepting Canada's request to enter into consultations, the US did not accept this to be a case of urgency for the purposes of Article 4.8 of the DSU since the measures in question involve the posting of bond for or deposit of preliminary duties which could be refunded in whole or in part.

On 25 October 2001, Canada requested the establishment of a panel. At its meeting on 5 November 2001, the DSB deferred the establishment of a panel. At its meeting on 5 December 2001, the DSB established a panel. The EC and India reserved their third-party rights to participate in the panel proceedings. On 17 December 2001, Japan requested to participate in the proceedings as a third party.

On 22 January 2002, Canada requested the Director-General to determine the composition of the panel. On 1 February 2002, the Director-General composed the panel.

On 27 September 2002, the Panel Report was circulated. The Panel found that the USDOC Preliminary Countervailing Duty Determination:

* was not inconsistent with Article 1.1 (a) SCM Agreement when the USDOC found that the provision of stumpage constituted a financial contribution, in the form of the provision of a good or service;

* failed to determine the existence and amount of benefit to the producers of the subject merchandise on the basis of the prevailing market conditions in Canada as required by Article 1.1 (b) and Article 14 and 14 (d) SCM Agreement; and

* failed to establish that a benefit was conferred to certain producers of the subject merchandise as the USDOC did not examine whether a benefit was passed through by the unrelated upstream producers of log inputs to the downstream producers of the subject merchandise;

Therefore, the Panel concluded that the USDOC's imposition of provisional measures based on the preliminary countervailing duty determination was inconsistent with the US obligations under Articles 1.1 (b), 10, 14, 14 (d), and 17.1(b) SCM Agreement.

The Panel exercised judicial economy in respect of Canada's claim that the USDOC instructions transmitted to the United States Customs Service on 4 September 2001, imposed provisional measures in excess of the subsidy preliminarily found to exist in a manner inconsistent with Articles 10, 17.2, 17.5, 19.4 and 32.1 of the SCM Agreement and Article VI:3 of GATT 1994.

The Panel further concluded that the retroactive imposition of a provisional measure on the basis of the USDOC Preliminary Critical Circumstances Determination is inconsistent with Articles 20.6, 17.3, and 17.4 SCM Agreement and exercised judicial economy in respect of Canada's claim that the USDOC failed to establish the existence of critical circumstances under Article 20.6 SCM Agreement in its Preliminary Critical Circumstances Determination.

Finally, the Panel concluded that the US laws and regulations challenged by Canada on expedited and administrative reviews are not inconsistent with the SCM Agreement as they do not require the executive authority to act in a manner inconsistent with the US obligations under Articles 19 and 21 of the SCM Agreement concerning expedited and administrative reviews. As a result the Panel rejected Canada's claims that the United States has failed to ensure that its laws and regulations are in conformity with its WTO obligations as required by Article 32.5 of the SCM Agreement and Article XVI:4 of the WTO Agreement.

The Panel recommended that the DSB request the United States to bring its measure into conformity with its obligations under the SCM Agreement.

At its meeting on 1 November 2002, the DSB adopted the Panel Report.

Implementation Status of Adopted Reports

At the DSB meeting of 28 November 2002, the US said that the measures at issue in this dispute were no longer in effect and that the provisional cash deposits that Canada challenged had been refunded prior to the circulation of the Panel Report. As such, it was not necessary for the US to take any further action to comply with the recommendations and rulings of the DSB. Canada dismissed the US view that no action was required on its part to implement the recommendations and rulings of the DSB. Canada stated that the legal methodologies found by the Panel to be plainly illegal in the US Preliminary Countervailing Duty Determination remained unchanged in the Final Determination.

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.

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
06/14/2002Executive Summary of the Oral Statement of the United States at the Second Meeting of the Panel
06/13/2002U.S. Answers to Panel's June 6, 2002 Questions
06/06/2002Executive Summary of U.S. Answers to Panel's Questions
06/04/2002Oral Statement of the United States at the Second Meeting of the Panel
05/27/2002Executive Summary of the Second Submission (pdf)
05/21/2002Executive Summary of U.S. Answers to Panel's 26 April 2002 Questions (pdf)
05/17/2002Second Written Submission of the United States (pdf)
05/08/2002U.S. Answers to Panel's April 26, 2002 Questions (pdf)
05/06/2002Executive Summary of U.S. Oral Statement at the First Meeting of the Panel (pdf)
04/25/2002Executive Summary of U.S. First Written Submission (pdf)
04/24/2002Oral Statement of the United States at the First Meeting of the Panel (pdf)
04/15/2002First Written Submission of the United States (pdf)