WT/DS533/R  
 
24 August 2020  
(20-5724) Page: 1/224 
  Original: English  
 
  
UNITED STATES – COUNTERVAILING MEASURES ON  
SOFTWOOD LUMBER FROM CANADA  
REPORT OF THE PANEL  
 
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  TABLE OF CONTENTS  
1  INTRODUCTION  ................................ ................................ ................................ .........  21 
1.1  Complaint by Canada  ................................ ................................ ................................ ...21 
1.2  Panel establishment and composition  ................................ ................................ ............. 21 
1.3  Panel proceedings ................................ ................................ ................................ ........ 21 
2  FACTUAL ASPECTS  ................................ ................................ ................................ ..... 22 
2.1  The measures at issue  ................................ ................................ ................................ .22 
3  PARTIES' REQUESTS FOR FINDINGS AND RECOMMENDATIONS  ................................ . 23 
4  ARGUMENTS OF THE PARTIES  ................................ ................................ ....................  25 
5  ARGUMENTS OF THE THIRD PARTIES  ................................ ................................ .........  25 
6  INTERIM REVIEW  ................................ ................................ ................................ ....... 25 
7  FINDINGS  ................................ ................................ ................................ ..................  25 
7.1  General principles regarding treaty interpretation, standard of review, and burden of proof  ..25 
7.1.1   Treaty interpretation  ................................ ................................ ................................ .25 
7.1.2   Standard of review  ................................ ................................ ................................ ...25 
7.1.3   Burden of proof  ................................ ................................ ................................ ........ 27 
7.2  Whether Article  14(d) required the USDOC to consider using, as a starting point in its benefit 
assessment, st umpage benchmarks from within certain "regional markets" in Canada  ................ 27 
7.2.1   Introduction  ................................ ................................ ................................ ............. 27 
7.2.2   Provision at issue  ................................ ................................ ................................ ......28 
7.2.3   Evaluation  ................................ ................................ ................................ ............... 28 
7.2.4   Conclusion  ................................ ................................ ................................ ............... 38 
7.3  Canada's  claims that the USDOC improperly rejected "in -market" prices as a stumpage 
benchmark in certain provinces  ................................ ................................ ........................... 38 
7.3.1   Legal standard  ................................ ................................ ................................ ......... 38 
7.3.2   Whether the USD OC improperly rejected certain private market prices in Ontario as an 
appropriate stumpage benchmark  ................................ ................................ ........................ 40 
7.3.2.1   Factual aspects  ................................ ................................ ................................ ......40 
7.3.2.2   Evaluation  ................................ ................................ ................................ ............. 41 
7.3.2.2.1   Administratively -set Crown stumpage prices  ................................ ........................... 43 
7.3.2.2.2   Flexible supply of Crown timber  ................................ ................................ ............ 44 
7.3.2.2.3   Market concentration  ................................ ................................ ........................... 47 
7.3.2.2.3.1   Whether the USDOC explained how market concentration interacts with other factors 
to effect price distortion  ................................ ................................ ................................ ......47 
7.3.2.2.3.2   Whether the USDOC was required to consider evidence relating to market 
concentration in the Hendricks Report  ................................ ................................ .................. 50 
7.3.2.2.4   Representativeness of MNP Ontario survey  ................................ ............................. 53 
7.3.2.2.5   Log prices in Ontario  ................................ ................................ ........................... 54 
7.3.2.3   Conclusion  ................................ ................................ ................................ ............ 56 
7.3.3   Whether  the USDOC improperly rejected BCTS auction prices in British  Columbia as an 
appropriate stumpage benchmark  ................................ ................................ ........................ 56 
7.3.3.1   Factual aspec ts ................................ ................................ ................................ ......56 WT/DS533/ R 
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  7.3.3.2   Evaluation  ................................ ................................ ................................ ............. 57 
7.3.3.2.1   Nature of the British  Columbia timber market  ................................ ......................... 58 
7.3.3.2.2   The three -sale limit  ................................ ................................ ............................. 62 
7.3.3.2.3   Log export regulations  ................................ ................................ ......................... 65 
7.3.3.2.4   Whether the log export regulation impacted the British  Columbia interior  ................... 70 
7.3.3.2.4.1   Whether log export regulations impact the British  Columbia interior directly  ............ 71 
7.3.3.2.4.2   Whether the impact of log export regulations will "ripple" through from the coast to 
the interior  ................................ ................................ ................................ ........................ 73 
7.3.3.2.4.3   Conclusion regarding the effect of log export regulations on log prices in  
the Interior  ................................ ................................ ................................ ....................... 76 
7.3.3.2.5   Conclusion  ................................ ................................ ................................ ......... 77 
7.3.4   Whether the USDOC improperly rejected auction prices in Québec as an appropriate 
stumpage benchmark  ................................ ................................ ................................ ......... 77 
7.3.4.1   Factual aspects  ................................ ................................ ................................ ......77 
7.3.4.2   Evaluation  ................................ ................................ ................................ ............. 79 
7.3.4.2.1   The government's  share in Québec's  stumpage market  ................................ ............ 79 
7.3.4.2.2   Market concentration  ................................ ................................ ........................... 80 
7.3.4.2.3   Sawmills'  access to additional Crown timber  ................................ ........................... 81 
7.3.4.2.4   Correlation between auction bids and TSG prices  ................................ .................... 83 
7.3.4.2.4.1   Whether TSG -holding sawmills and non -sawmills have an incentive not to bid at  
 above TSG prices at auction  ................................ ................................ ............................... 83 
7.3.4.2.4.2   Whether the USDOC properly evaluated the Marshall Report  ................................ ..85 
7.3.4.2.5   Unsold auction timber  ................................ ................................ .......................... 89 
7.3.4.2.6   Log-processing requirements  ................................ ................................ ................ 90 
7.3.4.2.7   Conclusion  ................................ ................................ ................................ ......... 93 
7.3.5   Whether the USDOC improperly rejected log prices in Alberta as an appropriate  
stumpage benchmark  ................................ ................................ ................................ ......... 93 
7.3.5.1   Factual background  ................................ ................................ ................................ 93 
7.3.5.2   Evaluation  ................................ ................................ ................................ ............. 94 
7.3.5.2.1   Whether the USDOC, using its "tier -one" analysis, improperly rejected the TDA  log 
prices as a valid benchmark for Alber ta ................................ ................................ ................ 95 
7.3.5.2.2   Whether the USDOC improperly found under its "tier -three" benchmark analysis  
that TDA log prices were inconsistent  with market principles  ................................ ................... 97 
7.3.5.2.2.1   Salvage timber  ................................ ................................ ................................ .97 
7.3.5.2.2.2   Sale of Crown -origin logs ................................ ................................ .................  102 
7.3.5.2.2.3   Log export prohibition  ................................ ................................ .....................  104 
7.3.5.2.2.4   The Brattle and Kalt Reports  ................................ ................................ ............  106 
7.3.5.2.2.5   Conclusion  ................................ ................................ ................................ ..... 109 
7.3.5.2.3   Whether the USDOC needed to assess that the TDA log prices were distorted as  
 a result of government intervention ................................ ................................ ...................  109 
7.3.5.3   Overa ll conclusion  ................................ ................................ ................................  111 
7.4  Whether the Nova  Scotia Benchmark relates to the prevailing market conditions in  
Alberta, Ontario, and Québe c ................................ ................................ ............................  111 WT/DS533/ R 
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  7.4.1   Evaluation  ................................ ................................ ................................ .............  111 
7.4.1.1   Difference in species mix  ................................ ................................ ......................  112 
7.4.1.2   Difference in diameter at breast height  ................................ ................................ ... 114 
7.4.1.2.1   Intra-province inconsistency  ................................ ................................ ...............  115 
7.4.1.2.2   Inter-province inconsistency  ................................ ................................ ...............  115 
7.4.1.3   Implications of exclusion of pulpwood from benchmark price  ................................ ..... 117 
7.4.1.3.1   Mismatch in the conditions of sale  ................................ ................................ ....... 118 
7.4.1.3.2   Mismatch in the quality of timber c ompared  ................................ .........................  120 
7.4.1.3.3   Demand for timber from paper mills in Nova  Scotia  ................................ ...............  121 
7.4.1.4   Difference in transportation -related costs  ................................ ................................  122 
7.4.1.5   Impact of declining supply of timber in Nova  Scotia  ................................ ..................  123 
7.4.1.6   Differences in growing and harvesting c onditions  ................................ .....................  124 
7.4.1.7   Conclusion  ................................ ................................ ................................ ..........  126 
7.5  Canada's claim concerning the reliability of the Nova  Scotia survey  ................................ . 127 
7.5.1   Legal basis for Canada's  claim  ................................ ................................ ..................  127 
7.5.2   Evaluation  ................................ ................................ ................................ .............  127 
7.5.2.1   Specific flaws in the Nova  Scotia survey  ................................ ................................ .. 127 
7.5.2.1.1   Representativeness of data in the survey  ................................ .............................  128 
7.5.2.1.2   Definition of "transaction"  ................................ ................................ ..................  129 
7.5.2.1.3   Exclusion of pulpwood transactions  ................................ ................................ ..... 130 
7.5.2.1.4   Conversion factor used to convert tonnes to cubic metres  ................................ ...... 131 
7.5.2.1.5   Errors detected in verification  ................................ ................................ .............  132 
7.5.2.1.6   Use of the survey  ................................ ................................ ..............................  133 
7.5.2.2   Conclusion  ................................ ................................ ................................ ..........  134 
7.6  Canada's  claim concerning the USDOC's  failure to consider the full remuneration paid by 
producers in Alberta, Ontario, Québec, and New  Brunswick  ................................ ...................  134 
7.6.1   Legal standard  ................................ ................................ ................................ ....... 134 
7.6.2   Evaluation  ................................ ................................ ................................ .............  135 
7.6.2.1   Costs not incorporated into the Nova  Scotia benchmark  ................................ ............  135 
7.6.2.2   Administrative costs were not directly related to stumpage prices  ..............................  137 
7.6.2.3   Absence of evidence that provincial governments considered long -term tenure  
obligations when fixing stumpage prices  ................................ ................................ .............  137 
7.6.2.4   Costs associated with long -term tenure obligations were billed on separate invoices  .... 138 
7.6.2.5   Conclusion  ................................ ................................ ................................ ..........  138 
7.7  Canada's claims concerning the USDOC's use of a Washington logs benchmark  .................  139 
7.7.1   Introduction  ................................ ................................ ................................ ...........  139 
7.7.2   Legal standard  ................................ ................................ ................................ ....... 139 
7.7.3   The USDOC's  use of the Washington Log benchmark for British  Columbia  ......................  140 
7.7.3.1   The appropriateness of the Washington log benchmark  ................................ .............  141 
7.7.3.2   The USDOC's  adjustments to derive the Washington log benchmark  ...........................  144 
7.7.3.2.1   Conversion factor s ................................ ................................ ............................  145 WT/DS533/ R 
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  7.7.3.2.1.1   Conversion from MBF to cubic metres  ................................ ...............................  145 
7.7.3.2.1.2   Evaluation  ................................ ................................ ................................ ..... 148 
7.7.3.2. 2  Adjustments for quality of logs  ................................ ................................ ...........  151 
7.7.3.2.2.1   Adjustments for log grade  ................................ ................................ ...............  151 
7.7.3.2.2.2   Adjustments for beetle -killed timber  ................................ ................................ . 154 
7.7.3.2.3   Stand -as-a-whole pricing  ................................ ................................ ...................  157 
7.7.3.2.4   Transportation costs  ................................ ................................ ..........................  160 
7.7.4   Conclusion  ................................ ................................ ................................ .............  162 
7.8  Whether the USDOC improperly set certain results of comparisons between the prices of  
the examined transactions and the corresponding benchmark prices to zero in determining  
the adequacy of remuneration  ................................ ................................ ...........................  162 
7.8.1   Factual aspects  ................................ ................................ ................................ ....... 162 
7.8.2   Evaluation  ................................ ................................ ................................ .............  163 
7.8.2.1   Legal basis for Canada's  claims  ................................ ................................ ..............  163 
7.8.2.2   Whether the USDOC's  determination was consistent with Article  14(d)  of the 
SCM Agreement  ................................ ................................ ................................ ...............  165 
7.8.2.2.1   Issues common to Canada's  claims concerning New  Brunswick as well as 
British  Columbia  ................................ ................................ ................................ ..............  165 
7.8.2.2.1.1   Whether the obligation to assess adequacy of remuneration  "in relation to  
prevailing market conditions" applies to all aspects of the benefit calculation method  ...............  166 
7.8.2.2.1.2   Whether the USDOC conducted the subsidy investigation on a transaction -specific 
basis or a programme -wide basis  ................................ ................................ .......................  167 
7.8.2.2.2   Whether the USDOC violated Article  14(d)  by setting certain comparison results  
to zero in its benefit determination for New  Brunswick's  provision of stumpage  .......................  168 
7.8.2.2.3   Whether the USDOC violated Article  14(d)  by setting certain comparison results  
to zero in its benefit determination for British  Columbia's  provision of stumpage  ......................  169 
7.8.3   Conclusion  ................................ ................................ ................................ .............  172 
7.9  Canada's claims concerning the export -permitting process for British  Columbia logs  ..........  173 
7.9.1   Provisions at issue  ................................ ................................ ................................ .. 173 
7.9.2   Whether the LEP process constitutes a f inancial contribution within the meaning of 
Article  1.1(a)(1)(iv)  ................................ ................................ ................................ ..........  174 
7.9.2.1   The USDOC's  finding of entrustment and direction  ................................ ...................  174 
7.9.2.2   Evaluation  ................................ ................................ ................................ ...........  175 
7.9.3   Whether the USDOC acted inconsistently with Articles  11.2 and 11.3 in initiating an 
investigation regarding the LEP process  ................................ ................................ ..............  178 
7.9.4   Conclusion  ................................ ................................ ................................ .............  179 
7.10  Canada's  claims concerning certain reimbursements made to harvesters by Québec and 
New Brunswick for silviculture and forest management activities  ................................ ...........  179 
7.10.1   Factual aspects  ................................ ................................ ................................ ..... 180 
7.10.2   Legal standard  ................................ ................................ ................................ ...... 180 
7.10.3   Evaluation  ................................ ................................ ................................ ............  180 
7.10.3.1   Whether the USDOC properly found silviculture reimbursements to be grants  ............  181 
7.10.3.1.1   New Brunswick  ................................ ................................ ................................  181 
7.10.3.1.2   Québec  ................................ ................................ ................................ ..........  183 WT/DS533/ R 
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  7.10.3.2   USDOC's  benefit determination  ................................ ................................ ............  185 
7.10.3.3   Conclusion  ................................ ................................ ................................ ........  185 
7.11  Canada's claims concerning provincial electricity programmes  ................................ ....... 185 
7.11.1   British  Columbia provincial electricity programme  ................................ .....................  186 
7.11.1.1   Introduction  ................................ ................................ ................................ ...... 186 
7.11.1.2   Legal standard  ................................ ................................ ................................ ... 187 
7.11.1.3   The British  Columbia Energy Plan  ................................ ................................ .........  187 
7.11.1.4   The USDOC's  determination regarding the benefit conferred on West Fraser  
and Tolko  ................................ ................................ ................................ ........................  188 
7.11.1.5   Whether the USDOC improperly determined that BC Hydro's  purchases of electricity  
were made for more than adequate remuneration  ................................ ................................  189 
7.11.1.5.1   The benchmark selected by the USDOC  ................................ ..............................  189 
7.11.1.5.2   Whether the USDOC improperly rejected the benchmarks submitted by th e 
interested parties  ................................ ................................ ................................ .............  191 
7.11.1.5.3   The USDOC's  determination of benefit in respect of Tolko's  turn-down payments  .... 193 
7.11.1.6   Conclusion  ................................ ................................ ................................ ........  195 
7.11.2   Québec provincial electricity programme  ................................ ................................ .. 195 
7.11.2.1   Introduction  ................................ ................................ ................................ ...... 195 
7.11.2.2   The Québec Energy Strategy  ................................ ................................ ...............  195 
7.11.2.3   The USDOC's  determination regarding the benefit conferred on Resolute  ..................  196 
7.11.2.4   Whether the USDOC improperly determined that Hydro -Québec's  purchases of  
electricity were made for more than adequate remuneration  ................................ .................  197 
7.11.2.4.1   The benchmark selected by the USDOC  ................................ ..............................  197 
7.11.2.4.2   Whether the USDOC improperly rejected the benchmark submitted by the  
interested parties  ................................ ................................ ................................ .............  198 
7.11.2.5   Conclusion  ................................ ................................ ................................ ........  199 
7.11.3   New Brunswick provincial electricity programme  ................................ .......................  199 
7.11.3.1   Introduction  ................................ ................................ ................................ ...... 199 
7.11.3.2   Legal standard  ................................ ................................ ................................ ... 199 
7.11.3.3   The Large Industrial Renewable Energy Purchase programme  ................................ .. 200 
7.11.3.4   The USDOC's  determination with respect to the benefit conferred on Irving  ...............  201 
7.11.3.5   Whether the USDOC improperly found that New  Brunswick provided a financial 
contribution to Irving in the form of revenue foregone that conferred a benefit  ........................  202 
7.11.3.6   Conclusion  ................................ ................................ ................................ ........  204 
7.11.4   Whether the USDOC failed to ascertain the precise amount of subsidies allegedly  
conferred by provincial programmes  ................................ ................................ ...................  204 
7.12  Canada's claims concerning the specificity of the accelerated capital cost  
allowance  (ACCA) for Class 29 assets  ................................ ................................ .................  204 
7.12.1   Provisions at issue  ................................ ................................ ................................  205 
7.12.2   Evaluation  ................................ ................................ ................................ ............  205 
7.12.2.1   Whether the USDOC acted inconsistently with Article  2.1(a)  by failing to  
demonstrate that the Canadian legislation at issue "explicitly limits access" to the Class  29 
programme to "certain enterprises"  ................................ ................................ ....................  206 WT/DS533/ R 
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  7.12.2.2   Whether the Class 29 programme is non -specific within the meaning of  
Article  2.1(b)  ................................ ................................ ................................ ...................  209 
7.12.2.3   Whether the USDOC acted inconsistently with Articles  2.1(a)  and 2.1(b), by failing  
to consider the specificity of the Class 29 programme within the broader context of Canadian  
tax legislation  ................................ ................................ ................................ ..................  210 
7.12.2.4   Conclusion  ................................ ................................ ................................ ........  211 
7.13  Canada's claims concerning the Maritimes Stumpage Benchmark  ................................ .. 211 
7.13.1   Introduction  ................................ ................................ ................................ .........  211 
7.13.2   Legal standard  ................................ ................................ ................................ ...... 212 
7.13.2.1   Measures  ................................ ................................ ................................ ..........  212 
7.13.2.2   Unwritten measures  ................................ ................................ ...........................  212 
7.13.2.3   Measures as present and continued application, or ongoing conduct  .........................  213 
7.13.3   Whether Canada has established the existence of the Maritimes Stumpage  
Benchmark  ................................ ................................ ................................ ......................  213 
7.13.3.1   Introduction  ................................ ................................ ................................ ...... 213 
7.13.3.2   The existence of the Maritimes Stumpag e Benchmark as a measure of present and 
continued application  ................................ ................................ ................................ ........  213 
7.13.3.3   The existence of the Maritimes Stumpage Benchmark as a measure of ongoing  
conduct  ................................ ................................ ................................ ..........................  220 
7.13.4   Conclusion  ................................ ................................ ................................ ...........  221 
8  CONCLUSIONS AND RECOMMENDATION  ................................ ................................ .. 221  
 
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  LIST OF ANNEXES  
ANNEX  A 
PANEL  DOCUMENTS  
Contents  Page  
Annex  A-1 Working Procedures of the Panel  4 
Annex  A-2 Additional Working Procedures of the Panel: Open Meetings  11 
Annex  A-3 Additional Working Procedures of the Panel Concerning Business Confidential 
Information  12 
Annex A -4  Interim Review  14 
ANNEX B  
ARGUMENTS OF THE PARTIES  
Contents  Page  
Annex  B-1 Integrated executive summary of the arguments of Canada  41 
Annex  B-2 Integrated executive summary of the arguments of the United States  56 
ANNEX C  
ARGUMENTS OF THE THIRD PARTIES  
Contents  Page  
Annex  C-1 Integrated executive summary of the arguments of Brazil  72 
Annex  C-2 Integrated executive summary of the arguments of the European Union  75 
Annex  C-3 Integrated executive summary of the arguments of Japan  78 
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  CASES CITED IN THIS REPORT  
Short title  Full Case Title and Citation  
Argentina – Ceramic Tiles  Panel Report, Argentina – Definitive Anti-Dumping Measures on 
Imports of Ceramic Floor Tiles from Italy , WT/DS189 /R, adopted 
5 November 2001, DSR 2001:XII, p. 6241  
Argentina – Import 
Measures  Appellate Body Reports, Argentina – Measures Affecting the 
Importation of Goods , WT/DS438/AB/R  / WT/DS444/AB/R  / 
WT/DS445/AB/R , adopted 26  January  2015, DSR 2015:II, p. 579  
Argentina – Poultry 
Anti-Dumping Duties  Panel Report, Argentina – Definitive Anti -Dumping Duties on Poultry 
from Brazil , WT/DS241/R , adopted 19 May 2003, DSR 2003:V, 
p. 1727 
Brazil – Taxation  Appel late Body Reports, Brazil – Certain Measures Concerning 
Taxation and Charges , WT/DS472/AB/R  and Add.1 / 
WT/DS497/AB/R  and Add.1, adopted 11  January 2019 
Canada – Aircraft  Appellate Body Report, Canada – Measures Affecting the Export of 
Civilian Aircraft , WT/DS70/AB/R , adopted 20  August  1999, 
DSR 1999:III, p.  1377 
Canada – Aircraft  Panel Report, Canada – Measures Affecting the Export of Civilian 
Aircraft , WT/DS70/R , adopted 20  August  1999, upheld by 
Appellate  Body Report WT/DS70/AB/R , DSR 1999:IV, p. 1443  
Canada – Renewable 
Energy  / Canada – Feed-in 
Tariff Program  Appellate Body Reports, Canada – Certain Measures Affecting the 
Renewable Energy Generation Sector / Canada – Measures Relating 
to the Feed -in Tariff Program , WT/DS412/AB/R  / WT/DS426/AB/R , 
adopted 24  May 2013, DSR 2013:I, p. 7  
Canada – Renewable 
Energy  / Canada – Feed-in 
Tariff Program  Panel Reports, Canada – Certain Measures Affecting the Renewable 
Energy Generation Sector / Canada – Measures Relating to the Feed -
in Tariff Program , WT/DS412/R  and Add.1 / WT/DS426/R  and Add.1, 
adopted 24  May 2013, as modified by Appellate Body Reports 
WT/DS412/AB/R / WT/DS426/AB/R, DSR 2013:I, p. 237  
Chile – Price Band System 
(Article 21.5 – Argentina)  Appellate Body Report, Chile – Price Band System and Safeguard 
Measures Relating to Certain Agricultural Products – Recourse to 
Article  21.5 of the  DSU by Argentina , WT/DS207/AB/RW , adopted 
22 May 2007, DSR  2007:II, p. 513  
EC – Fasteners (China)  Appellate Body Report, European Communities – Definitive Anti -
Dumping Measures on Certain Iron or Steel Fasteners from China , 
WT/DS397/AB/R , adopted 28  July 2011, DSR 2011:VII, p. 3995  
EC – Hormones  Appellate Body Report, European Communities – Measures 
Concerning Meat and Meat Products (Hormones) , WT/DS26/AB/R , 
WT/DS48/AB/R , adopted 13  February  1998, DSR 1998:I, p. 135  
EC and certain m ember 
States – Large Civil Aircraft  Appellate Body Report, European Communities and Certain Member 
States  – Measures Affecting Trade in Large Civil Aircraft , 
WT/DS316/AB/R , adopted 1  June 2011, DSR 2011:I, p. 7  
EC and certain member 
States – Large Civil Aircraft  Panel Report, European Communities and Certain Member States – 
Measures Affecting Trade in Large Civil Aircraft , WT/DS316/R , 
adopted 1  June 2011, as modified by Appellate Body Report 
WT/DS316/AB/R, DSR  2011:II, p. 685  
EC – Poultry  Appellate Body Report, European Communities – Measures Affecting 
the Importation of Certain Poultry Products , WT/DS69/AB/R , 
adopted 23 July 1998, DSR 1998:V, p. 2031  
EU – Biodiesel (Argentina)  Appellate Body Report, European Union – Anti-Dumping Measures on 
Biodiesel from Argentina , WT/DS473/AB/R  and Add.1, adopted 
26 October  2016, DSR 2016:VI, p. 2871  
EU – Biodiesel (Indonesia)  Panel Report, European Union – Anti-Dumping Measures on Biodiesel 
from Indonesia , WT/DS480/R  and Add.1, adopted 28  February  2018 WT/DS533/ R 
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  Short title  Full Case Title and Citation  
EU – Fatty Alcohols 
(Indonesia)  Appellate Body Report, European Union – Anti-Dumping Measures on 
Imports of Certain Fatty Alcohols from Indonesia , WT/DS442/AB/R 
and Add.1, adopted 29 September 2017, DSR 2017:VI, p. 2613  
Guatemala – Cement I  Appellate Body Report, Guatemala – Anti-Dumping Investigation 
Regarding Portland Cemen t from Mexico , WT/DS60/AB/R , adopted 
25 November  1998, DSR 1998:IX, p. 376 7 
India – Agricultural Products  Panel Report, India – Measures Concerning the Importation of 
Certain Agricultural Products , WT/DS430/R  and Add.1, adopted 
19 June 2015, as modified by Appellate Body Report 
WT/DS430/AB/R, DSR 2015:V, p. 2663  
India – Quantitative 
Restrictions  Panel Report, India – Quantitative Restrictions on Imports of 
Agricultural, Textile and Industrial Products , WT/DS90/R , adopted 
22 September 1999, upheld by Appellate Body Report 
WT/DS90/AB/R, DSR 1999:V, p. 1799  
Indonesia – Iron or Steel 
Products  Panel Report, Indonesia – Safeguard on Certain Iron or Steel 
Products , WT/DS490/R , WT/DS496/R , and Add.1, adopted 
27 August 2018, as modified by Appellate Body Report 
WT/DS490/AB/R, WT/DS496/AB/R  
Japan – Alcoholic 
Beverages  II Appellate Body Report, Japan – Taxes on Alcoholic 
Beverages , WT/DS8/AB/R , WT/DS10/AB/R , WT/DS11/AB/R , 
adopted 1  November  1996, DSR 1996:I, p. 97  
Japan – Apples  Appellate Body Report, Japan – Measures Affecting the Importat ion 
of Apples , WT/DS245/AB/R , adopted 10  December  2003, 
DSR 2003:IX, p.  4391 
Japan – DRAMs (Korea)  Appellate Body Report, Japan – Countervailing Duties on Dynamic 
Random Access Memories from Korea , WT/DS336/AB/R  and Corr.1, 
adopted 17  December  2007, DSR 2007:VII, p. 2703  
Japan – DRAMs (Korea)  Panel Report, Japan – Countervailing Duties on Dynamic Random 
Access Memories from Korea , WT/DS336/R , adopted 
17 December  2007, as modified by Appellate Body Report 
WT/DS336/AB/R, DSR 2007:VII, p.  2805 
Russia – Railway Equipment  Panel Report, Russia – Measures Affecting the Importation of Railway 
Equipment and Parts Thereof , WT/DS499/R  and Add.1, adopted 
5 March  2020, as modifi ed by Appellate Body Report 
WT/DS499/AB/R  
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 5 April 2001, DSR 2001:VII, 
p. 2701 
US – Anti-Dumping and 
Countervailing Duties 
(China)  Appellate Body Report, United States – Definitive Anti -Dumping and 
Countervailing Duties on Certain Products from China , 
WT/DS379/AB/R , adopted 25  March  2011, DSR 2011:V, p. 2869  
US – Anti-Dumping and 
Countervailing Duties 
(China)  Panel Report, United States – Definitive Anti -Dumping and 
Countervailing Duties on Certain Products from China , WT/DS379/R , 
adopted 25  March  2011, as modified by Appellate Body Report 
WT/DS379/AB/R, DSR 2011:VI, p. 3143  
US – Anti-Dumping 
Methodologies (China)  Appellate Body Report, United States – Certain Methodologies and 
Their Application to Anti -Dumping Proceedings Involving China , 
WT/DS471/AB/R  and Add.1, adopted 22  May 2017, DSR 2017:III, 
p. 1423 
US – Carbon Steel (India)  Appellate Body Report, United States – Countervailing Measures on 
Certain Hot -Rolled Carbon Steel Flat Products from India , 
WT/DS436/AB/R , adopted 19  December  2014, DSR 2014:V, p. 1727  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
- 11 - 
 
  Short title  Full Case Title and Citation  
US – Carbon Steel (India)  Panel Report, United States – Countervailing Measures on Certain 
Hot-Rolled Carbon Steel Flat Products from India , WT/DS436/R  and 
Add.1, adopted 19 December 2014, as modified by Appellate Body 
Report WT/DS436/AB/R, DSR 2014:VI, p. 2189  
US – Coated Paper 
(Indonesia)  Panel Report, United States – Anti-Dumping and Countervailing 
Measures on Certain Coated Paper from Indonesia , WT/DS491/R  and 
Add.1, adopte d 22 January  2018 
US – Continued Zeroing  Appellate Body Report, United States – Continued Existence and 
Application of Zeroing Methodology , WT/DS350/AB/R , adopted 
19 February 2009, DSR 2009:III, p. 1291  
US – Contin ued Zeroing  Panel Report, United States – Continued Existence and Application 
of Zeroing Methodology , WT/DS350/R , adopted 19  February  2009, 
as modified as Appellate Body Report WT/DS350/AB/R, 
DSR 2009:III, p.  1481 
US – COOL  Appellate Body Reports, United States – Certain Country of Origin 
Labelling (COOL) Requirements , WT/DS384/AB/R  / 
WT/DS386/AB/R , adopted 23 July 2012, DSR 2012:V, p. 2449  
US – Corrosion -Resistant 
Steel Sunset Review  Appellate Body Report, United States – Sunset Review of Anti -
Dumping Duties on Corrosion -Resistant Carbon Steel Flat Products 
from Japan , WT/DS244/AB/R , adopted 9  January  2004, DSR 2004:I, 
p. 3 
US – Cotton Yarn  Appellate Body Report, United States – Transitional Safeguard 
Measure on Combed Cotton Yarn from Pakistan , WT/DS192/AB/R , 
adopted 5  November  2001, DSR 2001:XII, p. 6027  
US – Counter vailing Duty 
Investigation on DRAMS  Appellate Body Report, United States – Countervailing Duty 
Investigation on Dynamic Random Access Memory Semiconductors 
(DRAMS) from Korea , WT/DS296/AB/R , adopted 20  July 2005, 
DSR 2005:XVI, p. 8131  
US – Countervailing 
Measures (China)  Appellate Body Report, United States – Countervailing Duty 
Measures on Certain Products from China , WT/DS437/AB/ R, adopted 
16 January  2015, DSR 2015:I, p. 7  
US – Countervailing 
Measures (China)  Panel Report, United States – Countervailing Duty Measures on 
Certain Products from China , WT/DS437/R  and Add.1, adopted 
16 January  2015, as modified by Appellate Body Report 
WT/DS437/AB/R, DSR 2015:I, p.  183 
US – Countervailing 
Measures (China) 
(Article  21.5 – China)  Appellate Body Report, United States – Countervailing Duty 
Measures on Certain Products from China – Recourse to Article 21.5 
of the DSU by China,  WT/DS437/AB/RW  and Add.1, adopted 
15 August  2019 
US – Countervailing 
Measures (China) 
(Article  21.5 – China)  Panel Report, United States – Countervailing Duty Measures on 
Certain Products from China – Recourse to Article 21.5 of the DSU 
by China,  WT/DS437/RW  and Add.1, adopted 15  August  2019, as 
modified by Appellate Body Report WT/DS437/AB/RW  
US – Export Restraints  Panel Report, United States – Measures Treating Exports Restraints 
as Subsidies , WT/DS194/R  and Corr.2 , adopted 23  August  2001, 
DSR 2001:XI, p. 5767  
US – FSC Appellate Body Report, United States – Tax Treatment for "Foreign 
Sales Corporations" , WT/DS108/AB/R , adopted 20  March  2000, 
DSR 2000:III, p.  1619 
US – Gambling  Appellate Body Report, United States – Measures Affecting the 
Cross -Border Supply of Gambling and Betting Services , 
WT/DS285/AB/R , adopted 20  April 2005, DSR 2005:XII, p. 5663 
(and Corr.1, DSR  2006:XII, p. 5475)  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
- 12 - 
 
  Short title  Full Case Title and Citation  
US – Gasoline  Appellate Body Report, United States – Standards for Reformulated 
and Conventional Gasoline , WT/DS2/AB/R , adopted 20 May 1996, 
DSR 1996:I, p. 3  
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 
16 May 2001, DSR 2001:IX, p. 4051  
US – Large Civil Aircraft 
(2nd complaint)  Appellate Body Report, United States – Measures Affecting Trade in 
Large Civil Aircraft (Second Complaint) , WT/DS353/AB/R , adopted 
23 March  2012, DSR 2012:I, p. 7  
US – Large Civil Aircraft 
(2nd complaint)  Panel Report, United States – Measures Affecting Trade in Large Civil 
Aircraft (Second Comp laint), WT/DS353/R , adopted 23  March  2012, 
as modified by Appellate Body Re port WT/DS353/AB/R, 
DSR 2012:II, p. 649  
US – Oil Country Tubular 
Goods Sunset Reviews  Appellate Body Report, United States – Sunset Reviews of Anti -
Dumping Measures on Oil Country Tubular Goods from Argentina , 
WT/DS268/AB/R , adopted 17  December  2004, DSR 2004:VII, 
p. 3257 
US – Orange Juice (Brazil)  Panel Report, United States  – Anti-Dumping Administrative Reviews 
and Other Measures Related to Imports of Certain Orange Juice from 
Brazil , WT/DS382/R , adopted 17  June 2011, DSR 2011:VII, p. 3753  
US – Poultry (China)  Panel Report, United States – Certain Measures Affecting Imports of 
Poultry from China , WT/DS392/R , adopted 25 October 2010, 
DSR 2010:V, p. 1909  
US – Softwood Lumber  IV Appellate Body Report, United States – Final Countervailing Duty 
Determination with Respect to Certain Softwood Lumber from 
Canada , WT/DS257/AB/R , adopted 17  February  2004, DSR 2004:II, 
p. 571  
US – Softwood Lumber  VI 
(Article  21.5 – Canada)  Appellate Body Report, United States – Investigation of the 
International Trade Com mission in Softwood Lumber from Canada – 
Recourse to Article  21.5 of the DSU by Canada , WT/DS277/AB/RW , 
adopted 9  May 2006, and Corr.1, DSR 2006:XI, p. 4865  
US – Steel Safeguards  Appellate Body Report, United States – Definitive Safeguard 
Measures on Imports of Certain Steel Products , WT/DS248/AB/R , 
WT/DS249/AB/R , WT/DS251/AB/R , WT/DS252/AB/R , 
WT/DS253/AB/R , WT/DS254/AB/R , WT/DS258/AB/R , 
WT/DS259/AB/R , adopted 10 December 2003, DSR  2003:VII, 
p. 3117 
US – Supercalendered Paper  Appellate Body Report, United States – Countervailing Measures on 
Supercalendered Paper from Canada , WT/DS505/AB/R  and Add.1, 
adopted 5  March  2020 
US – Supercalendered Paper  Panel Report, United States – Countervailing Measures on 
Supercalendered Paper from Canada , WT/DS505/R  and Add.1, 
adopted 5  March  2020, as upheld by Appellate Body Report 
WT/DS505/AB/R  
US – Tuna II (Mexico ) 
(Article 21.5 – Mexico)  Appellate Body Report, United States – Measures Concerning the 
Importation, Marketing and Sale of Tuna and Tuna Products – 
Recourse to Article 21.5 of the DSU by Mexico , WT/DS381/AB/RW  
and Add.1, adopted 3 December 2015, DSR 2015:X, p. 5133  
US – Washing Machines  Appellate Body Report,  United States – Anti-Dumping and 
Countervailing Measures on Large Residential Washers from Korea , 
WT/DS464/AB/R  and Add.1, adopted 26  September  2016, 
DSR 2016:V, p. 2275  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
- 13 - 
 
  Short title  Full Case Title and Citation  
US – Washing Machines  Panel Report, United States – Anti-Dumping and Countervailing 
Measures on Large Residentia l Washers from Korea , WT/DS464/R  
and Add.1, adopted 26  September  2016, as m odified by 
Appellate  Body Report WT/DS464/AB/R, DSR 2016:V, p. 2505  
US – Wheat Gluten  Appellate Body Report, United States – Definitive Safeguard 
Measures on Imports of Wheat Gluten from the 
European  Communities , WT/DS166/AB/R , adopted 
19 January  2001, DSR  2001:II, p. 717  
US – Wool Shir ts and 
Blouses  Appellate Body Report, United States – Measure Affecting Imports of 
Woven Wool Shirts and Blouses from India , WT/DS33/AB/R , adopted 
23 May 1997, and Corr.1, DSR 1997:I, p. 323  
US – Zeroing (EC)  Appellate Body Report, United States – Laws, Regulations and 
Methodology for Calculating Dumping Margins ("Zeroing") , 
WT/DS294/AB/R , adopted 9  May 2006, and Corr.1, DSR 2006:II,  
p. 417 
 WT/DS533/ R 
BCI deleted, as indicated [[***]]  
- 14 - 
 
  EXHIBITS REFERRED TO IN THIS REPORT  
Exhibit  Short Title  Description/Long Title  
CAN-8 Preliminary 
determination  Memorandum dated 24  April 2017 from the USDOC on Decision 
for the preliminary determination in the countervailing duty 
investigation of certain softwood lumber products from Canada  
CAN-10 Final determination  Memorandum dated 1  November  2017 from the USDO C on 
Issues and Decision for the final determination in the 
countervailing duty investigation of certain softwood lumber 
products from Canada  
CAN-13 Canada, Appendix II 
from the 
Constitution  Act Appendix II from the Consolidated Constitution Act of Canad a 
(1 January  2013)  
CAN-14 Kalt Report on Crown 
timber  J. P. Kalt, Prof., PH.D., "Economic analysis of remuneration for 
Canadian Crown timber: are in -jurisdiction benchmarks 
distorted by Crown stumpage?"  
CAN-15 Asker Report  J. Asker, Prof., PH.D., "Econo mic analysis of factors affecting 
cross jurisdictional stumpage price comparisons"  
CAN-16 (BCI)  Kalt Report on LEPs  J. P. Kalt , Prof., PH.D., "An analysis of certain economic issues 
relating to petitioner's claims about the operation of stumpage 
and log markets in British  Columbia"  
CAN-17 Bustard Report  B. Bustard, Vanlog Forestry Services, "The business of log 
exports from Bri tish Columbia and log export -permitting 
processes"  
CAN-18 (BCI)  British  Columbia  initial 
questionnaire 
response  Response of the Government of British  Columbia to the USDOC 
initial questionnaire dated 19 January  2017, Part I, stumpage 
(14 March  2017)  
CAN-19 (BCI)  Hendricks Report  K. Hendricks, Dr, "An economic analysis of the Ontario timber 
market and an examinatio n of private market prices in that 
competitive market"  
CAN-20 (BCI)  Jendro and Hart 
Report  Jendro and Hart LLC, "Critique of petitioner's proposed 
cross-border subsidy methodology" (13  March  2017)  
CAN-23 Athey Report  S. Athey, Prof., "British  Columbia 's market -based pricing system 
for timber" (March 2017)  
CAN-29 Summary of BC 
harvest data  British  Columbia, summary of BC harvest data by 
species  (2015)  
CAN-31 (BCI)  Larry Gardner 
affidavit  Affidavit dated 12  March  2017 of Larry Gardner,  West Fraser 
Mills, Ltd.  
CAN-33 (BCI)  [[***]] affidavit  Affidavit of [[***]] 
CAN-34 (BCI)  Mark Feldinger 
affidavit  Affidavit dated 13  March  2017 of Mark Feldinger, Canfor 
Corporation  
CAN-35 (BCI)  [[***]] affidavit  Affidavit of [[***]] 
CAN-39 Forest Act  British  Columbia, Forest Act (1996)  
CAN-49 (BCI)  British  Columbia initial 
questionnaire 
response on LEP  Response of the Government of Canada and the Government of 
British  Columbia to the USDOC initial questionnaire dated 
19 January  2017, Part  I – log export permit processing narrative 
(13 March  2017) (Corrected)  
CAN-51 (BCI)  Canfor initial 
questionnaire 
response  Response of Canfor to the USDOC initial questionnaire 
(13 March 2017)  
CAN-52 (BCI)  West Fraser 
questionnaire 
response  Response of West Fraser to the USDOC questionnaire dated 
19 January  2017 (14  March 2017)  
CAN-67 (BCI)  Tolko questionnaire 
response  Response of Tolko to the USDOC questionnaire, section III 
(13 March 2017)  
CAN-68 (BCI)  [[***]] affidavit  Affidavit of [[***]] 
CAN-69 Federal Notice to 
Exporters No. 102  Government of Canada, Notice to exporters No.  102 
(1 April 1998)  
CAN-72 (BCI)  Overview of the BC 
export process  British  Columbia, "Overview of BC log export process", 
questionnaire verifica tion (June 2017)  
CAN-80 Market memorandum  Memorandum from British  Columbia on volume allocation and 
softwood harvest for 2015 -2016 
CAN-88 British  Columbia 
verification of 
questionnaire 
response  USDOC, Verification of the questionnaire responses of the 
Government of British  Columbia (14  July 2017)  
CAN-90 (BCI)  Kalt response on LEPs  J. P. Kalt, Prof., PH.D., "response to petitioner claims of 
march  24, 2017 about the operation of stumpage and log 
markets in British  Columbia"  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
- 15 - 
 
  Exhibit  Short Title  Description/Long Title  
CAN-91 Time between 
advertising list date 
and federal surplus 
decision authorizing 
export in POI  British  Columbia, time between advertising list date and federal 
surplus decision authorizing export in POI  
CAN-92 Alberta case brief  Case brief of the Government of Alberta and the Alberta 
Softwood Lumber Trade Council (27  July 2017)  
CAN-93 Brattle Report  Brattle group, "Assessment of an internal benchmark for Alberta 
crown timber" (10  March  2017)  
CAN-94 First remand 
determination  USDOC, Remand Determination, in the matter of certain 
softwood lumber from Canada: final affirmative countervailing 
duty determination (12 January 2004)  
CAN-96 Alberta, MNP 
cross-border analysis  MNP cross -border analysis of stumpage and log prices in Alberta 
and six other jurisdictions (10 March 2017)  
CAN-97 Alberta initial 
questionnaire 
response  Response of the Government of Alberta to the USDOC 
17 January  2017 initial questionnaire, Vol. IV, Stumpage 
(13 March  2017)  
CAN-102 Alberta MNP damage 
assessment  MNP Timber Damage Assessment, tab le 2016 update 
(27 April 2016)  
CAN-103 (BCI)  Alberta JMC survey  Joint Management Committee survey of 2015 timber values for 
the 2016 TDA table update  
CAN-109 Alberta MNP TDA log 
transactions overview  MNP, Timber damage assessment log transactions overview 
(8 March 2017)  
CAN-110 (BCI)  Alberta verification 
report  USDOC, Verification of the questionnaire responses of the 
Government of Alberta (17 July 2017)  
CAN-112 Alberta Forest Act  Alberta, "Correct ed Exhibit AB -S-7: Table 1 – FY 15/16 Harvest 
Volume by Land Ownership Type"  
CAN-114 Alberta Timber 
Harvest Planning  Alberta, Forests Act  (17 December 2014)  
CAN-115 Alberta TMR  Alberta, "Alberta Forest Management Planning Standard"  
CAN-137 (BCI)  Canfor case brief  Case brief of Canfor No.  C-122-858 (27 July 2017)  
CAN-139 (BCI)  West Fraser case brief  Case brief of West Fraser (27 July  2017)  
CAN-141 MNP supplemental 
report  MNP, "Supplement #2 to MNP's March  10, 2017 cross border 
analysis of stumpag e and log prices in Alberta and six other 
jurisdictions" (6 April 2017)  
CAN-144 (BCI)  MNP Ontario survey  MNP, " A Survey of the Ontario Private Timber Market " 
(3 March  2017)  
CAN-145 KPMG Report  KPMG, "Report on 2015 -16 Ontario softwood timber costs and 
resources covering the period April  1, 2015 to March  31, 2016" 
(6 March 2017)  
CAN-147 Ontario, the forests  Ontario, "The forests resources of Ontario, 2011"  
CAN-149 Ontario, comparison 
between Acadian and 
Boreal forest regions  J. Golding, RPF, MFE, "A comparison between the Acadian Forest 
region in Nova  Scotia and New  Brunswick and the Boreal Forest 
region in Ontario" (March 2017)  
CAN-152 Ontario, structure of 
the softwood lumber 
industry  Ontario, "Overview of the structure of the softwood lumber 
indus try" (June 2017)  
CAN-153 Ontario, diameter 
distribution of timber  M. Sharma, Dr, "Comparison of scaling methodology and 
applicability of adapting diameter distributions in provincially 
harvested timber from 2005 to 2015" (8 March 2017)  
CAN-155 Ontario i nitial 
questionnaire 
response  Response of the Government of Ontario to the USDOC 
19 January 2017 initial questionnaire (13 March 2017)  
CAN-156 Ontario, notes on 
Maritimes forests  Canadian Forest Services, "Some notes on the forests of the 
Maritimes" (31 August 2014)  
CAN-169 SFDA  Québec, Sustainable Forest Development Act 2015 -16 
(21 April 2015)  
CAN-170 Québec initial 
questionnaire 
response  Response of the Government of Québec to the USDOC 
19 January 2017 initial questionnaire, Vol.  I, stumpage 
(13 March 2017)  
CAN-171 (BCI)  Marshall Report  R. C. Marshall, PH.D., "Expert Report" (10 March 2017)  
CAN-184 Québec verification 
report  USDOC, Veri fication of the questionnaire responses of the 
Government of Québec (14 July 2017)  
CAN-193 Québec, sample 
BMMB auction tender 
package  Québec, Document of the call for tenders, sample BMMB auction 
tender package (26 October 2015)  
CAN-206 Third administrative 
review on softwood 
lumber products  USDOC, Notice of preliminary results and extension of final 
result of countervailing duty administrative review: certain WT/DS533/ R 
BCI deleted, as indicated [[***]]  
- 16 - 
 
  Exhibit  Short Title  Description/Long Title  
softwood lumber products from Canada, United States Federal 
Register, Vol. 71, p.  33,932 (12 June 2006)  
CAN-208 Treasury Board Note  Québec, Treasury Board Note establishing PCIP – CT212414 
(2013 -2016)  
CAN-211 (BCI)  Québec auction data 
file Québec, data for each auction block  
CAN-213 Québec stumpage 
data file  Québec, unitary stumpage rat es (1 January  to 31 March  2015)  
CAN-214 (BCI)  Québec operating 
permit 2015 -2016 Québec, Softwood sawmills, operating permit size 2015 -16 
CAN-240 (BCI)  New Brunswick 
questionnaire 
response  Response of the Government of New  Brunswick, Vol.  II of III, 
stumpage questions (17 March 2017)  
CAN-242 New Brunswick CLFA  New Brunswick, Crown Lands and Forests Act (16 July 1980)  
CAN-250 (BCI)  JDIL Forest 
Management 
Agreement  New Brunswick, JDIL Forest Management Agreement 
(31 July 2014)  
CAN-264 (BCI)  Irving final calculation  USDOC, J.D. Irving Limited final calculation (1 November 2017)  
CAN-284 USDOC memorandum 
to the WDNR on 
delivered log price 
information  Memorandum dated 25 April 2015 from the USDOC to file 
Washington Department of Natural Resources delivered log price 
information  
CAN-286 (BCI)  Leamer Report  E. Leamer, Prof., "Statistical and Economic Issues Associated 
with Petitioner's Proposed Use of a Cross -Border Log 
Methodology to Measure the 'Adequacy of Remuneration' for 
BC Timber" (13 March 2017)  
CAN-287 Spelter Study  H. Spelter, "Conversion of Board Foot Scaled Logs to Cubic 
Meters in Washington State, 1970 -1998" (June 2002)  
CAN-295 British  Columbia case 
brief Case brief of the Government of British  Columbia and the 
BC Lumber Trade Council, Vol.  V (28 July 2017)  
CAN-303 (BCI)  Miller Report  E. Miller, "Characteristics of Nova  Scotia's Wood Fibre Market" 
(10 March 2017)  
CAN-304 Nova Scotia tree 
identification guide  Alberta, "Nova Scotia Tree Identification Guide"  
CAN-305 Nova Scotia forest 
inventory  P. Townsend, "Nova  Scotia Inventory Based on Permanent 
Sample Plots Measured Between 1999 and 2003 Report 
for 2004"  
CAN-306 Québec, de scription of 
softwood species  Québec, "Description of Each Species of Softwood"  
CAN-307 (BCI)  Resolute new factual 
information 
declaration  Resolute declaration on new factual information 
(28 March  2017)  
CAN-310 Mill specifications  Elmsdale  Lumber Company Ltd, "Logs specifications" 
(1 January  2017)  
CAN-311 Public version of joint 
case brief  Public version of the joint case brief of the Government of 
Canada, Vols. I and  II (27  July 2017)  
CAN-312 Deloitte Report  Deloitte, "Report of Nova  Scotia private stumpage prices for the 
period April 1, 2015 through December 31, 2015" 
(10 March  2017)  
CAN-313 Nova Scotia 
addendum 
questionnaire 
response  Response of the Government of Nova  Scotia to the USDOC 
questionnaire addendum for the provincial governments 
(17 March 2017)  
CAN-316 (BCI)  Tolko verification 
report  USDOC, Verification of the questionna ire responses of Tolko 
(14 July 2017)  
CAN-318 Redacted version of 
Nova Scotia 
verification report  USDOC, Verification of the questionnaire responses of the 
Government of Nova  Scotia (11 July 2017)  
CAN-329 Attachment 60 to 
Asker Report  Nova Scotia Woodlot Owners and Operators Association Legacy 
Newsletter  (Summer 2013) ( attachment  60 to Asker Report )  
CAN-330 Attachment 30 to 
Asker Report  Government of Nova  Scotia, "Economic Impact Analysis of 
Timber Management & Supply Changes on Nova  Scotia's Forest 
Industry" ( attachment  30 to Asker Report ) (May 2011)  
CAN-331 Attachment 62 to 
Asker Report  P. Woodbridge, "Nova  Scotia pulp & paper sector back from 
brink of disaster" ( attachment  62 to Asker Report ) (2015)  
CAN-353 (BCI)  Irving submission  of 
factual information  Irving submission of factual information to measure the 
adequacy of remuneration (27 March 2017)  
CAN-358 (BCI)  TSG 206  Resolute, Timber supply guarantee granted pursuant to 
Section  338 of the Sustainable Forest Development Act  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
- 17 - 
 
  Exhibit  Short Title  Description/Long Title  
CAN-380 (BCI)  USDOC  calculation 
memo, Canfor  Memorandum dated 1 November 2017 from the USDOC on final 
determination calculations for Canfor  
CAN-381 (BCI)  USDOC  calculation 
memo, Tolko  Memorandum dated 1 November 2017 from the USDOC on final 
determination calculations for Tolko Marketing and Sales Ltd. 
and Tolko Industries Ltd. (collectively Tolko)  
CAN-382 (BCI)  USDOC  calculation 
memo, West Fr aser Memorandum dated 1 November 2017 from the USDOC on final 
determination calculations for West Fraser  
CAN-383 (BCI)  Attachment IV to 
USDOC calculation 
memo, Canfor  USDOC, BC stumpage and log export restraint subsidy rate 
calculations (attachment  IV to Canfor Calculation Memo)  
CAN-384 (BCI)  USDOC initiation 
checklist  USDOC, Enforcement and compliance office of AD/CVD 
operations, countervailing duty investigation initiation checklist, 
certain softwood lumber products from Canada (C -122-858) 
(15 December  2016)  
CAN-395 British  Columbia initial 
questionnaire 
response  Response of the Government of British  Columbia to the USDOC 
19 January 2017 initial questionnaire, Part I, BC Hydro 
(14 March 2017)  
CAN-397 Hydro and Power 
Authority Act  British  Columbia, Hydro Power and Authority Act   
CAN-398 Utilities Commission 
Act British  Columbia, Utilities Commission Act  
CAN-402 BC Energy Plan  Tolko, "The BC energy plan: a vision for clean energy 
leadership"  
CAN-403 Clean Energy Act  British  Columb ia, Clean Energy Act  
CAN-404 (BCI)  BCUC application for 
BioPhase  1 British  Columbia Utilities Commission, Application for BioPhase  1 
CAN-405 Report on the RFP 
process  West Fraser, "Bioenergy Phase  2 call request for proposals: 
report on the request for proposals process" (10 February 2012)  
CAN-407 Standing Offer 
programme rules  BC Hydro, Standing Offer programme, programme rules, 
version  2.3 (October 2013)  
CAN-411 (BCI)  Fraser Lake EPA  BC Hydro and West Fraser Mills Ltd. electricity purcha se 
agreement bioenergy phase 2 call, Fraser Lake  
CAN-412 (BCI)  Chetwynd EPA  BC Hydro and West Fraser Mills Ltd. electricity purchase 
agreement bioenergy phase 2 call, Chetwynd  
CAN-414 (BCI)  Armstrong EPA  BC Hydro and Tolko Industries Ltd. electricity purchase 
agreement, Armstrong  
CAN-416 (BCI)  Kelowna Standing 
Offer programme EPA  BC Hydro electricity purchase agreement, Kelowna standing 
offer programme  
CAN-417 Rosenzweig Report  M. Rosenzweig, Dr, "An an alysis of certain economic issues 
relating to the coalition's claims about BC Hydro's electricity 
purchase agreements"  
CAN-420 (BCI)  Tolko calculation 
memorandum  Attachment II to the memorandum from the USDOC on Tolko, 
grants and taxes  
CAN-423 Hydro -Québec Act  Québec, Hydro -Québec Act  (1 November 2016)  
CAN-424 (BCI)  Québec questionnaire 
response  Response of the Government of Québec to the USDOC 
19 January  2017 initial questionnaire, Vol.  III, purchase of 
electricity under PAE  2011-11 (13 March 2017)  
CAN-428 Act respecting the 
Régie de l'énergie  Québec, Act respecting the  Régie de l'énergie  
(1 November  2016)  
CAN-429 Québec Energy 
Strategy 2006 -2015 Government of Québec, Québec Energy Strategy 2006 -2015 
(2006)  
CAN-431 Order in Council 
D-1086-2011 Québec, Order in Council Decree No.  1086-2011 
(26 October  2011)  
CAN-432 Cost of 
biomass -generated 
electricity  Merrimack Energy Group Inc., "The competitive cost of biomass 
generated electricity" (7 May 2010)  
CAN-438 Electricity Act  New Brunswick  Electricity Act  (21 June 2013)  
CAN-439 LIREPP Regulation  New Brunswick  Regulation No.  2013-65 (24 September 2013)  
CAN-440 (BCI)  LIREPP  New Brunswick large industrial renewable energy purchase 
programme  
CAN-448 (BCI)  LIREPP  Agreement  Agree ment between New  Brunswick and Irving for the purchase 
and resale of eligible electricity, large industrial renewable 
energy purchase programme contract  
CAN-450 (BCI)  Appendix to 
New Brunswick 
questionnaire 
response  Appendix to New  Brunswick questionnaire  response, allocation 
and grant  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
- 18 - 
 
  Exhibit  Short Title  Description/Long Title  
CAN-451 (BCI)  Appendix to LIREPP 
questionnaire 
response  Appendix to Irving questionnaire response, LIREPP  
CAN-452 New Brunswick 
LIREPP  Irving, New  Brunswick large industrial renewable energy 
purchase programme  
CAN-500 Decree 259 -2015 Québec Decree No. 258 -2005 allowing export of crown wood 
(25 March 2015)  
CAN-511 (BCI)  Nova Scotia 
verification report  USDOC, Verification of the questionnaire responses of the 
Government of Nova  Scotia (11 July 2017)  
CAN-512 (BCI) Nova Scotia 
verification 
exhibit  NS-VE-6 Deloitte, Nova  Scotia private softwood lumber stumpage survey 
(26 June 2016)  
CAN-513 (BCI)  Joint case brief  Joint case brief of the Government of Canada, Vols. I and II 
(27 July 2017)  
CAN-516 (BCI)  Nova Scotia, freedom 
of information 
response  Letter dated 6 November 2018 from Nova  Scotia in reply to the 
request based on the Freedom of Information and Protection of 
Privacy Act, 2018 -7611-DLF 
CAN-525 Canada presentation 
at first meeting 
(26 February 2 019) Canada's presentation at the first substantive meeting of the 
panel, 26 February 2019  
CAN-528 (BCI)  Canada presentation 
at first meeting 
(28 February  2019)  Canada PowerPoint presentation at the first substantive meeting 
of the Panel (28 February 2019 ) 
CAN-551 (BCI)  Nova Scotia 
verification 
exhibit  NS-VE-7 Nova Scotia, survey response of single largest purchaser  
CAN-552 (BCI)  Nova Scotia 
verification 
exhibit  NS-VE-8-C Nova Scotia, supporting documentation for survey obs. 239  
CAN-594 Québec comments on 
subsidy methodology  USDOC, Certain softwood lumber from Canada, comments of 
the Government of Québec on appropriate subsidy methodology 
and respondent selection (29 December 2016)  
CAN-595 Québec comments on 
preliminary 
determination  USDOC, Cer tain softwood lumber from Canada, comments of 
the Government of Québec for the Preliminary Determination, 
(13 April 2017)  
CAN-608 Attachment 6 to Kalt 
Report  D. Zhang and P. H. Pease, Forest Economics , (UBS Press, 2011) 
(Attachment 6 to Kalt Report)  
CAN-616 Nova Scotia scaling 
manual  "Nova  Scotia scaling manual", 2nd edn (October 2007)  
CAN-623 (BCI)  Harvest  Agreement  Harvest Agreement between Québec and Resolute (2014 -2016)  
USA-3 Ontario market 
memorandum  Memorandum dated 1 November 2017 from the USDOC on final 
determination on Ontario private stumpage market distortion  
USA-10 Petition  Petitions for the imposition of antidumping duties and 
countervailing duties on imports of certain softwood lumber 
products from Canada (25 November 2016)  
USA-16 GOC-CRA-ACCA -4 Exhibit GOC -CRA-ACCA -4 (14 March 2017)  
USA-19 Petitioner's comments 
on Canada initial 
questionnaire 
response  Petitioners' comments on Canada's initial questionnaire 
responses, exhibits 3, 4, 5, 8, 11, 12, 13, 19, and 32 
(27 March  2017)  
USA-26 (BCI)  Nova Scotia 
verification 
exhibit  NS-VE-4 Nova Scotia verification exhibit NS -VE-4 
USA-32 (BCI)  Nova Scotia 
first supplemental 
questionnaire 
response  First supplemental questionnaire response of the Government of 
Nova Scotia (3 April 2017), ex hibit NS -SUPP1, Statement of 
work provided by Deloitte to Nova  Scotia, in June 2016  
USA-51 (BCI)  Nova Scotia 
verification 
exhibit  VE-9-C Government of Nova  Scotia verification exhibits: exhibit NS -VE-
8A, exhibit NS -VE-8B, exhibit NS -VE-8C, exhibit NS -VE-8D, 
exhibit NS -VE-8E, exhibit NS -VE-8F, exhibit NS -VE-9A, 
exhibit  NS-VE-9B, exhibit NS -VE-9C, and exhibit NS -VE-10 
USA-63 Initial stumpage 
questionnaire  USDOC, initial stumpage questionnaire (19 January 2017)  
USA-64 Addendum initial 
stumpage 
questionnaire  USDOC, Addendum to the initial stumpage questionnaire 
(31 January 2017)  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  Exhibit  Short Title  Description/Long Title  
USA-75 Québec questionnaire 
response  Response of the Government of Québec, Exhibit QC -STUMP -22, 
Excerpt from SFDA Regulations, chapter A -18.1, r.7, section 89 
of the regulation respecting standards of forest management for 
forests in the domain of the State  
USA-78 Definition of "group" 
from Oxford English 
Dictionary Online  Definition of "group" from Oxford English Dictionary Online  
USA-84 Exhibit BC -S-124 of 
British  Columbia initial 
questionnaire 
response  Initial questionnaire response of the Government of 
British  Columbia (14 March 2017), exhibit BC -S-124 
USA-92 (BCI)  Québec verification 
exhibit VE -QC-29 Government of Québec verification exhibit VE -QC-29 
 
 WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  ABBREVIATIONS USED IN THIS REPORT  
Abbreviation  Description  
AAC annual allowable cut  
ACCA  accelerated capital cost allowance  
AWS annual work schedules  
BC British  Columbia  
BC Hydro  British  Columbia  Hydro and Power Authority  
BCI Business Confidential Information  
BCTS  British  Columbia  Timber Sales  
BCUC  British  Columbia  Utilities Commission  
BMMB  Timber Marketing Bureau, Le Bureau de mise en marché des bois  
CLFA Crown Lands and Forests Act  
DBH diameter at breast height  
DERD  Department of Energy and Resource Development  
DSB Dispute Settlement Body  
DSU Understanding on Rules and Procedures Governing the Settlement of 
Disputes  
EIPA Export and Import Permits Act  
EPA electricity purchase agreement  
FMA Forest Management  Agreement  
FMU Forest Management Unit  
FRIAA  Forest Resource Improvement Association of Alberta  
GATT 1994  General Agreement on Tariffs and Trade 1994  
GBC Government of British  Columbia  
GOC Government of Canada  
HBS Harvest Billing System  
Hydro -Québec  Commission hydro -électrique du Québec  
JDIL J.D. Irving, Ltd.  
JMC Joint Management Committee  
KPMG  KPMG LLP  
LEP log export -permitting  
LIREPP  large industrial renewable energy purchase programme  
MBF thousand board feet  
MFFP Ministry of Forests, Wildlife , and Parks  
MFLNRO  Ministry of Forests, Lands , and Natural Resource Operations  
MNP MNP LLP  
MPB mountain pine beetle  
MPS Market Pricing System  
NB Power  New Brunswick  Power Corporation  
NS Nova Scotia  
NSDNR  Nova Scotia  Department of Natural Resources  
PCIP Partial Cut Investment programme  
PNW Pacific North -West 
POI period of investigation  
PPA power purchase  agreement  
Resolute  Resolute FP Canada Inc.  
RFP request for proposal  
SCM Agreement  Agreement on Subsidies and Countervailing Measures  
SFDA  Sustainable Forest Development Act  
SPF spruce -pine-fir 
TDA Timber Damage Assessment  
TMR Timber Management Regulation  
TSG Timber Supply Guarantee  
USDOC  United States Department of Commerce  
Vienna Convention  Vienna Convention on the Law of Treaties, Done at Vienna, 
23 May 1969, 1155 UNTS 331; 8 International Legal Materials 679  
WDNR  Washington Department of Natural Resources  
WTO World Trade Organization  
 WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  1  INTRODUCTION  
1.1  Complaint by Canada  
1.1.  On 28  November  2017, Canada requested consultations with the United States pursuant to 
Article 4 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU), 
Article XXII:1 of the  General Agreement on Tariffs and Trade 1994 (GATT 1994) and Article  30 of 
the Agreement on Subsidies and Countervailing Measures (SCM Agreement) with respect to the 
measures and claims set out below.1  
1.2.  Consultations were held on 17  January  2018, but fail ed to resolve the dispute . 
1.2  Panel establishment and composition  
1.3.  On 15  March  2018, Canada requested the establishment of a panel pursuant to Article  6 of the 
DSU and Article 30 of the SCM Agreement with standard terms of reference.2 At its meeting on 
9 April 2018, the Dispute Settlement Body (DSB) established a panel pursuant to the request of 
Canada in document WT/DS533/2 , in accordance with Article  6 of the DSU.3 
1.4.  The Panel's terms of reference are the following:  
To examine, in the light of the relevant provisions of the covered agreements cited by 
the parties to the dispute, the matter referred to the DSB by Canada in document 
WT/DS533/2 and to make such findings as will assist the DSB in making the 
recommendations or in giving the rulings provi ded for in those agreements.4 
1.5.  On 27 June 2018, Canada requested the Director -General to determine the composition of the 
panel, pursuant to Article 8.7 of the DSU . On 6  July 2018, the Director -General accordingly 
composed the Panel as follows:  
Chairperson:  Ms Enie Neri de Ross  
 
Members:   Mr Gustav Brink  
Mr Alberto Trejos  
1.6.  Brazil, China, the European Union, Japan, Kazakhstan, the Republic of Korea, the 
Russian  Federation, Turkey, and Viet Nam notified their interest in participating in the Panel 
proceedings as third parties.  
1.3  Panel proceedings  
1.7.  After consultation with the parties, the Panel adopted its Working Procedures5, Additional 
Working Procedures on Business Confidential Information (BCI), Additional Working Procedures on 
Open Panel Meetings, and the partial timetable on 23  August  2018. The Panel revised the timetable 
on 27  March  2019 and 21  November  2019.  
1.8.  The Panel held a first substantive meeting with the parties on 26 , 27, and 28  February  2019. 
A session with the third parties took place on 28  February  2019. The Panel held a second substantive 
meeting with the parties on 16, 17, and 18  October  2019. On 18  December  2019, the Panel issued 
the descriptive part of its Report to the parties. The Panel issued its Interim Report to the part ies on 
12 May 2020 . The Panel issued its Final Report to the parties on 30 June 2020 .  
1.9.  In its letter of 5  March  2019 to the Panel, the United States objected to Canada designating as 
BCI certain statements and exhibits that form part of Canada's submission s in these proceedings. 
In its letter to the Panel dated 11  March  2019, as amended by another letter dated 2  April 2019, 
 
1 Request for consultations by Canada, WT/DS533/1 (Canada's consultations request).  
2 Request for the establishment of a Panel by Canada, WT/DS533/2 (Canada's panel request).  
3 DSB, Minutes of meeting held on 9 April 2018, WT/DSB/M/411.  
4 Constitution note of the Panel, WT/DS533/3.  
5 See the Panel's Working Procedures in Annex A -1. WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  Canada responded to the United States' objections, proposing to maintain its designation as BCI for 
certain statements, while withdrawi ng it for others. The Panel addressed the 
United  States'  objections regarding BCI designation of the relevant information by Canada by issuing 
a ruling on 2  May 2019.  
2  FACTUAL ASPECTS  
2.1  The measures at issue  
2.1.  This dispute concerns certain US countervailing me asures concerning softwood lumber 
products from Canada. In the request for the establishment of a panel, Canada identified the 
following measures as being the measures at issue:  
a. Certain Softwood Lumber Products from Canada: Final Affirmative Countervailing  Duty 
Determination, and Final Negative Determination of Critical Circumstances, 82 
United  States Federal Register  51,814 ( 8 November 2017);  
b. Countervailing Duty Investigation of Certain Softwood Lumber Products from Canada:  
Issues and Decision Memorandum f or the Final Determination ( 1 November  2017);  
c. Certain Softwood Lumber Products from Canada: Amended Final Affirmative  
Countervailing Duty Determination and Countervailing Duty Order, 83 United States 
Federal Register  347 (3 January 2018); and  
d. the notice of initiation, initiation checklist, questionnaires, verification reports,  preliminary 
determination, decision memorandum for the preliminary determination,  calculations 
memoranda, market memoranda, as well as other determinations,  memoranda, report s, 
and measures related to the certain softwood lumber products  from Canada countervailing 
duty investigation.6  
2.2.  Canada also challenge d an alleged US measure pursuant to which the United States has treated  
stumpage in certain Maritime  provinces as an in -country benchmark that reflected prevailing market 
conditions for standing timber sold in provincial markets in Alberta, Ontario, and Québec .7 According 
to Canada's panel request, this alleged measure is evidence d, inter alia , by the following:  
a. Notice of Final Results of Countervailing Duty Administrative Review and Rescission of 
Certain Company -Specific Reviews: Certain Softwood Lumber Products from Canada, 
69 United States Federal Register  75,917 ( 20 December  2004) as amended by 70 
United  State s Federal Register  9,046 ( 24 February  2005);  
b. Issues and Decision Memorandum: Final Results of Administrative  Review: Certain 
Softwood Lumber Products from Canada ( 13 December  2004);  
c. Notice of Final Results of Countervailing Duty Administrative Review: Certain Softwood 
Lumber Products from Canada, 70 United States Federal Register  73,448 
(12 December  2005);  
d. Second Administrative  Review of the Countervailing Duty Order on Certain Softwo od 
Lumber Products from Canada: Issues and Decision Memorandum: Final Results of 
Administrative  Review ( 5 December  2005);  
e. Notice of Preliminary Results and Extension of Final Result of Countervailing Duty 
Administrative Review: Certain Softwood Lumber Prod ucts from Canada, 71 United States 
Federal Register  33,931 ( 12 June 2006);  
 
6 Canada's Panel request, p. 1.  
7 The United States disagrees with Canada as regards the existence of such a measure. 
(United  States'  first written submission, para. 765).  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  f. Certain Softwood Lumber Products from Canada: Preliminary Affirmative Countervailing 
Duty Determination, and Alignment of Final Determination with Final Anti dumping  Duty 
Determination, 82 United States Federal Register  19,657 ( 28 April 2017);  
g. Decision Memorandum for the Preliminary Determinati on in the Countervailing Duty 
Investigation of Certain Softwood Lumber Products from Canada ( 24 April 2017);  
h. Certain Softwood Lumber Products from Canada: Final Affirmative Countervailing Duty 
Determination, and Final Negative Determination of Critical Cir cumstances, 82 
United  States Federal Register 51,814 ( 8 November 2017);  
i. Countervailing Duty Investigation of Certain Softwood Lumber Products from Canada: 
Issues and Decision Memorandum for the Final Determination ( 1 November  2017);  
j. Certain Uncoated Ground wood Paper from Canada: Preliminary Affirmative Countervailing 
Duty Determination, and Alignment of Final Determination with Final Anti dumping  Duty 
Determination, 83 United States Federal Registe r 2,133 ( 16 January  2018);  
k. Decision Memorandum for the Affirm ative Preliminary Determination in the Countervailing 
Duty Investigation of Certain Uncoated Groundwood Paper from Canada 
(8 January  2018); and  
l. the orders, questionnaires, verification reports, calculations memoranda, issues and 
decision memoranda, as well as other determinations, memoranda, reports, and measures 
related to the above administrative reviews and investigations concerning softwood lumbe r 
products from Canada.  
3  PARTIES' REQUESTS FOR FINDINGS AND RECOMMENDATIONS  
3.1.  Canada requests that the Panel find that the United States Department of Commerce (USDOC)  
acted inconsistently with the United States' obligations under the SCM Agreement and the 
GATT 1994.8, 9 Specifically, Canada contends that the USDOC  acted inconsistently with:  
a. Article 14(d) of the SCM Agreement by improperly rejecting in -market benchmarks from 
British  Columbia , Alberta, Ontario, Québec , and New Brunswick  to determine the 
adequ acy of remuneration for Crown  timber provided to the respondent companies by 
each province10; 
 
8 In the United States' comments on the draft descriptive part of the Interim Report, the  United States 
argues that Canada did not request a finding under Article 1.1(b) in relation to British  Columbia Hydro and 
Power Authority  (BC Hydro) 's purchases of electricity ( para. 3.1(h) of the draft descriptive part of the 
Interim  Report) , and New  Brunswick’s large industrial renewable energy purchase programme ( LIREPP) 
(para.  3.1(i) of the draft descriptive part of the Interim Report). The United States argues that Canada did not 
request these findings in the relevant sections of its first written sub mission, in its opening statement during 
the first panel meeting, nor in its second written submission. (United States' comments on the draft descriptive 
part of the Report, paras.  11 and 13). We consider that Canada has requested a finding under Article 1 .1(b) in 
relation to BC Hydro's purchases of electricity and New  Brunswick’s LIREPP. Canada presented facts and 
arguments to substantiate a request for these findings in its first written submission, in accordance with 
para. 3(1) of the Working Procedures,  in particular, in section VI.A of its first written submission. Furthermore, 
we note that the United States responded to Canada's request for a finding under Article 1.1(b) in relation to 
BC Hydro's purchases of electricity and New  Brunswick's LIREPP in i ts first written submission, in sections VI.A 
and VI.B respectively.  
9 In Canada's comments on the draft descriptive part of the Interim Report, Canada requested that we 
include certain additional provisions of the SCM Agreement and the GATT 1994 to its re quest for findings in 
paragraph 3.1 of the draft descriptive part. (Canada's comments on the draft descriptive part of the Report, 
para. 3.1). We note in this respect that para. 3(1) of the Working Procedures provides:  
Before the first substantive meeting of the Panel with the parties, each party shall submit a 
written submission in which it presents the facts of the case and its arguments, in accordance 
with the timetable adopted by the Panel.  
We reject Canada's request as it did not pu t forth arguments in its first written submission under the 
provisions that it has requested the Panel to add to Canada's request for findings.  
10 Canada's first written submission, p. 21. WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  b. Article 14(d) of the SCM Agreement by using the Washington State log price benchmark 
for determining the adequacy of remuneration for Crown  timber provided by 
British Columbia11; 
c. Articles 14(d) and 19.4 of the SCM Agreement and Article VI:3 of the GATT 1994 by using 
the Nova Scotia  survey benchmark for determining the adequacy of remuneration for 
Crown  timber provided by Alberta, Ontario, and Québec12; 
d. Article 14(d) of the SCM Agreement by using Irving's purchases of Nova Scotia  private 
timber as a benchmark for determining the adequacy of remuneration for Crown timber 
provided by New Brunswick13; 
e. Article 14(d) of the SCM Agreement by failing to consider  the full remuneration paid by 
producers in Alberta, Ontario, Québec , and New Brunswick14; 
f. Articles 1.1(b), 14(d), 19.3, and 19.4 of the SCM Agreement and Article VI:3 of the 
GATT  1994 because it improperly "set to zero" the results of certain comparisons used to 
calculate the benefit for the government provision of Crown timber15; 
g. Article 1.1(a)(1)(iv)  because it improperly treated the log export -permitting (LEP)  process 
for British  Columbia  logs as a financial contribution16; 
h. Articles 11.2 and 11.3 of the SCM Agreement by improperly initiating an investigation into 
the British  Columbia  LEP process17;  
i. Articles 1.1(a)(1), 1.1(b), 19.3, and 19.4 of the SCM Agreement in treating certain 
reimbursements provided by Québec  and New Brunswick  relating to licen ce management 
and silviculture as a financial contribution or, alternatively, even if the reimbursement s 
were found to constitute a financial contribution, Article 1.1(b) of the SCM Agreement in 
that the reimbursements did not confer a benefit18; 
j. Articles 1.1(b) and 14(d) of the SCM Agreement because it improperly assessed the 
adequacy of remuneration for British Columbia  Hydro and Power Authority  
(BC Hydro )'s purchase of electricity19; 
k. Articles 1.1(b) and 14(d) of the SCM Agreement because it improperly assessed the 
adequacy of remuneration for Commission hydro -électrique du Québec  
(Hydro -Québec)'s purchase  of electricity20; 
l. Articles 1.1(a) (1)(iii), 1.1(b) , and 14(d) of the SCM Agreement because it incorrectly 
analysed benefit for New Brunswick 's large industrial renewable energy purchase 
programme  (LIREPP)21; 
m. Articles 10, 19.1, 19.3, and 19.4 of the SCM Agr eement and Article VI:3 of the GATT 1994 
by failing to ascertain the precise amount of subsidies allegedly conferred by provincial 
electricity program mes that were attributable to softwood lumber products22; 
 
11 Canada's first written submission, p. 248. 
12 Canada's first written submission, p. 312. 
13 Canada's first written submission, p. 247. 
14 Canada's first written submission, p. 359. 
15 Canada's first written submission, p. 380. 
16 Canada's first written submiss ion, p. 391. 
17 Canada's first written submission, para. 969.  
18 Canada's first written submission, p. 403; response to Panel question No. 134, para. 385.  
19 Canada's first written submission, p. 424. 
20 Canada's first written submission, p. 438. 
21 Canada's first written submission, p. 446. 
22 Canada's first written submission, p. 454. WT/DS533/ R 
BCI deleted, as indicated [[***]]  
- 25 - 
 
  n. Articles 2.1(a) and (b) of the SCM Agreement by incorrectly concluding that the 
accelerated capital cost allowance  (ACCA)  for Class 29 assets was de jure  specific23; 
o. Articles 1.1(b) and 14(d) of the SCM Agreement by improperly making use of standing 
timber in the Maritime provinces as an in -market bench mark in the application of the 
"Maritimes Stumpage Benchmark " measure24; and   
p. Articles 21.1, 21.2, 32.1 , and 32.5 of the SCM Agreement.25  
3.2.  Canada further requests, pursuant to Article 19.1 of the DSU, that the Panel recommend that 
the United States bring its measures into conformity with its WTO obligations.  
3.3.  The United States requests that the Panel reject Canada' s claims in this dispute in their entirety.  
4  ARGUMENTS OF THE PARTIES  
4.1.  The arguments of the parties are reflected in their integrated executi ve summaries, provided 
to the Panel in accordance with paragraph 22 of the Working Procedures adopted by the Panel 
(see Annexes B -1 and B -2). 
5  ARGUMENTS OF THE THI RD PARTIES  
5.1.  The arguments of Brazil, the European Union, and Japan are reflected in their integ rated 
executive summaries, provided in accordance with paragraph 25 of the Working Procedures adopted 
by the Panel (see Annexes C -1, C-2, and C -3). China, Kazakhstan, the Republic of Korea, the 
Russian  Federation, Turkey, and Viet Nam  did not submit writte n or oral arguments to the Panel.  
6  INTERIM REVIEW  
6.1.  On 29 May 2020 , Canada  and the United States  each submitted written requests for the review 
of precise aspects of the Interim Report. Neither party requested an interim review meeting. On 
12 June 2020 , both parties submitted comments on each other's requests for review. On 
15 June 2020, the United S tates filed an additional submission related to the interim review. Canada 
responded to the United States' additional submission on 19 June 2020. The Panel's discussion and 
disposition of the parties' submissions related to the interim review  are set out i n Annex A -4. 
7  FINDINGS  
7.1  General principles regarding treaty interpretation, standard of review, and burden of 
proof  
7.1.1   Treaty interpretation  
7.1.  Article  3.2 of the DSU provides that the WTO dispute settlement system serves to clarify the 
existing provisions of the covered  Agreements "in accordance with customary rules of interpretation 
of public international law". It is generally accepted that the principles codified in Articles  31 and 32 
of the Vienna Convention on the Law of Treaties  (Vienna Convention)  are such customary rules.26 
7.1.2   Standard of review  
7.2.  Panels generally are bound by the standard of review set forth in Article  11 of the DSU, which 
provides, in relevant part, that:  
 
23 Canada's first written submission, p. 464. 
24 Canada's first written submission, p. 489. 
25 Canada's first written submission, para. 1209.i.  
26 Appellate  Body Reports, US – Gasol ine, DSR 1996:I, pp.  15-16; Japan – Alcoholic Beverages  II, 
DSR 1996:I, p.  10, section D.  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  [A] panel should make an objective assessment of the matter before it, including an 
objective assessment of the facts of the case and the applicability of and conformity 
with the relevant covered  Agreements.  
7.3.  The Appellate  Body has stated that the "objective assessment" to be made by a panel reviewing 
an investigating authority's  determina tion is to be informed by an examination of whether the 
authority provided a reasoned and adequate explanation as to (a) how the evidence on the record 
supported its factual findings; and (b) how those factual findings supported the overall 
determination.27 
7.4.  The Appellate  Body has also stated that a panel reviewing an investigating 
authority's  determination may not undertake a de novo  review of the evidence or substitute its 
judgment for that of the investigating authority. At the same time, a panel must not  simply defer to 
the conclusions of the investigating authority. A panel's  examination of those conclusions must be 
"in-depth" and "critical and searching".28  
7.5.  A panel must limit its examination to the evidence that was before the authority during the 
course of the investigation and must take into account all such evidence submitted by the parties to 
the dispute.29 In that regard, a panel may be called upon to respond to allegations by a complainant 
concerning the significance of record evidence that the in vestigating authority allegedly ignored, or 
on which it placed insufficient weight, or from which it drew incorrect inferences, or that there was 
no record evidence that could have possibly substantiated its conclusion.30 The fact that an 
investigating aut hority has not cited every piece of record evidence which negates – or 
substantiates  – these kinds of allegations does not mean that a panel is prevented from considering 
such evidence to test the veracity of such allegations. A panel's  review of the recor d evidence in 
order to establish the veracity of such allegations, and thus determine whether the complainant has 
demonstrated sufficiently that the investigating authority's  conclusions were not reasoned and 
adequate, does not amount to a de novo review o f the record evidence.31 
7.6.  Likewise, a panel's  examination of whether an investigating authority's  conclusions were 
reasoned and adequate is not necessarily limited to the pieces of evidence expressly  relied upon by 
the authority in its establishment and eva luation of the facts in arriving at a particular conclusion.32 
Rather, a panel may also take into consideration other pieces of evidence that were on the record 
and that are connected to the explanation provided by the investigating authority in its 
determ ination. This flows from the principle that investigating authorities are not required to cite or 
discuss every  piece of supporting record evidence for each fact in the final determination .33 However, 
since a panel's  review cannot be de novo , ex post  rationalizations unconnected to the investigating 
authority's  explanation – even when founded on record evidence – cannot form the basis of a 
panel's  finding that the authority's  conclusion was reasoned and adequate.34 
7.7.  We also note that not every error made or questionable inference drawn by an investigating 
authority in its treatment of a given piece of evidence will necessarily rise to the level of a violation 
of an obligation of the WTO Agreements. Rather, a panel's evaluation of whether an investigating 
authority's explanation is "reasoned and adequate" requires an assessment of the totality of evidence 
relied upon by an authority to justify its reasoning on a given point.35 
 
27 Appellate  Body Report, US – Countervailing Duty Investigation on DRAMS , para.  186. 
28 Appellate  Body Reports, US – Softwood Lumber  VI (Article  21.5 – Canada) , para.  93; and US – Lamb , 
paras.  106-107. 
29 Appellate  Body Report, US – Countervailing Duty Investigation on DRAMS , para.  187. 
30 Appellate  Body Report, EU – Fatty Alcohols (Indonesia) , para.  5.99. 
31 Appellate  Body Report, EU – Fatty Alcohols (Indonesia) , para.  5.99. 
32 Appellate  Body Report, Thailand – H-Beams , paras.  117-119. 
33 Appellate  Body Report, US – Countervailing Duty Investigation on DRAMS , para.  164. 
34 Appellate  Body Report, US – Lamb , paras.  153-161. See also Appellate  Body Reports, US – Steel 
Safeguards , para.  326; US – Softwood Lumber VI (Article  21.5 – Canada) , para.  97; and Panel Reports, 
Argentina – Ceramic Tiles , para.  6.27; Argentina – Poultry Anti -Dumping Duties , para.  7.48. 
35 See e.g. App ellate Body Report, Japan – DRAMs (Korea),  paras.  133-134. See also Panel Report, EC – 
Fasteners (China ), para. 7.359.  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  7.1.3   Burden of proof  
7.8.  The general principles applicable to the allocation of the burden of proof in WTO dispute 
settlement require that a party claiming a violation of a provision of a WTO  Agreement must assert 
and prove its claim.36 Therefore, Canada bears the burden of demonstrating that the challenged 
measures are inconsistent with the WTO Agreements. A complaining party will satisfy its burden 
when it establishes a prima facie  case, namely a case which, in the absence of effective refutation 
by the defending party, requires a panel, as a matter of law, to rule in favour of the compl aining 
party.37 It is generally for each party asserting a fact to provide proof thereof.38 
7.2  Whether Article  14(d) required the USDOC to consider using, as a starting point in its 
benefit assessment, stumpage benchmarks from within certain "regional markets " in 
Canada  
7.2.1   Introduction  
7.9.  In the underlying investigation, the USDOC used stumpage prices in Nova Scotia  as a 
benchmark to determine the adequacy of remuneration for Crown stumpage in Alberta, Ontario, 
Québec , and New Brunswick , and a benchmark in Washington State in the United  States to 
determine the adequacy of remuneration for Crown stumpage in British  Columbia . In the process of 
selecting stumpage benchmarks, the USDOC considered using certain prices from within each of 
Alberta, Ontario, Québec , New Brunswick , and British  Columbia  as stumpage benchmarks for each 
of those regions respectively. Having considered using those prices as benchmarks, the USDOC 
ultimately rejected them on the basis that they were distorted as a resul t of the government's  share 
in the stumpage market taken together with certain other factors, in each of the regions.39  
7.10.   In this dispute, Canada challenges the USDOC's  rejection of those prices from each of Alberta, 
Ontario, Québec , New Brunswick , and the British Columbia interior  as benchmarks in determining 
the adequacy of remuneration for Crown stumpage provided in each of those regions. Canada also 
challenges the USDOC's  use of stumpage prices in Nova Scotia , instead, as a benchmark to assess 
benefit fr om provision of Crown stumpage in Alberta, Ontario, and Québec ; and of log prices in 
Washington State as a benchmark to assess benefit from provision of Crown stumpage in 
British  Columbia. Canada claims that, given the facts of the underlying investigation , the USDOC 
acted inconsistently with Article  14(d) of the SCM  Agreement in rejecting "in -market", and selecting 
"out-of-market", benchmarks for determining adequacy of remuneration for Crown stumpage 
provided in the regions in question.40 For Canada, the USDOC, in light of the record evidence, should 
have selected "in -market" benchmarks from within the relevant "regional markets" in each of the 
five Canadian regions, in order to comply with the requirements of Article  14(d). Canada's  claims 
thus pertain to  the appropriate stumpage benchmark that the USDOC was required to use for 
determining the adequacy of remuneration for Crown stumpage. These claims are based on 
Canada's  argument that Article  14(d) placed the USDOC under an obligation to consider using, a s a 
starting point in its benefit assessment, stumpage benchmarks from within Canada's  "regional 
markets".41  
7.11.   The United  States rejects Canada's  argument, asserting that Article  14(d) placed the USDOC 
under no such obligation. For the United  States, as lon g as the USDOC used as a benchmark a 
market -determined price for the good in question in the country of provision, which the United  States 
asserts the USDOC did in the underlying investigation, the authority had met the requirements of 
Article  14(d).42 The United  States posits that each of Canada's  claims under Article  14(d) concerning 
the USDOC's  rejection of prices from within the alleged "regional markets" in question as 
benchmarks to assess benefit from the provision of Crown stumpage in those regions m ust 
 
36 Appellate  Body Report, US – Wool Shirts and Blouses , DSR 1997:I, p.  337. 
37 Appellate  Body Report, EC – Hormones , para. 104. 
38 Appellate  Body Report, US – Wool Shirts and Blouses , DSR 1997:I, p.  335. 
39 United  States'  first written submission, paras.  200, 245, 285, 323, and 357.  
40 Canada's  first written submission, para.  34. 
41 Canada's  first written submission, paras.  50-54 and 300.  
42 United  States'  response to Panel question No. 154, para.  6. WT/DS533/ R 
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  necessarily fail because the USDOC was under no obligation in the first place to have considered 
using such benchmarks.43  
7.12.   In order to address Canada's  claims regarding the USDOC's  rejection of certain prices from 
each of the five regions in question a s stumpage benchmarks for those regions, the Panel must 
therefore, as a threshold matter, examine whether, as Canada argues, Article  14(d) required the 
USDOC to have considered using as a starting point in its benefit assessment benchmarks from 
within thos e regions. Should we conclude that the USDOC was, in light of the facts of the underlying 
investigation, required to do so, we will proceed to evaluate Canada's  claims under Article  14(d) 
regarding the USDOC's  rejection of benchmarks from within the region s in question. On the contrary, 
if we conclude that the USDOC was not so required, we will have no basis to evaluate Canada's  claims 
in question and will reject them.  
7.13.   For the reasons discussed in our evaluation below, we conclude that, in light of the fac ts of 
the underlying investigation, Article  14(d) did require the USDOC to have considered using, as a 
starting point, benchmarks for Ontario, Québec , and Alberta from within each of those regions, and 
for British  Columbia , from the British Columbia interi or.  
7.14.   As regards New Brunswick , we have no basis to examine whether the USDOC was required 
to consider using, as a starting point in its benefit analysis, a stumpage benchmark for 
New Brunswick  from within that region because Canada has not properly made ou t a claim that the 
USDOC improperly  found that the benchmark price in Nova Scotia  relates to prevailing market 
conditions in New Brunswick .44  
7.2.2   Provision at issue  
7.15.   The chapeau and Article  14(d) of the SCM  Agreement provide that:  
For the purpose of Part  V, any method used by the investigating authority to calculate 
the benefit to the recipient conferred pursuant to paragraph  1 of Article  1 shall be 
provided for in the national legislation or implementing regulations of the Member 
concerned and its application  to each particular case shall be transparent and 
adequately explained. Furthermore, any such method shall be consistent with the 
following guidelines:  
… 
[T]he provision of goods or services or purchase of goods by a government shall not be 
considered as c onferring a benefit unless the provision is made for less than adequate 
remuneration, or the purchase is made for more than adequate remuneration. The 
adequacy of remuneration shall be determined in relation to prevailing market 
conditions for the good or service in question in the country of provision or purchase 
(including price, quality, availability, marketability, transportation and other conditions 
of purchase or sale).  
7.2.3   Evaluation  
7.16.   As noted earlier, the USDOC used stumpage prices in Nova Scotia  as a benchmark to 
determine the adequacy of remuneration for Crown stumpage in Alberta, Ontario, Québec , and 
New Brunswick . Further, it relied on a benchmark in Washington State in the United  States to 
determine the adequacy of remuneration for Crown stumpage in British  Columbia . Canada 
challenges the USDOC's  choice of stumpage benchmarks, arguing that Article  14(d) required the 
USDOC to select an "in -market" or regional benchmark for each of t he five regions in question.45 In 
particular, Canada argues that the USDOC was required to use a benchmark for Alberta, Ontario, 
Québec , and New  Brunswick from within each of those regions, and in the case of British  Columbia , 
from the British Columbia interior .46 Instead, the USDOC rejected those "in -market" benchmarks 
 
43 United  States'  response to Panel question No. 154, para.  2. 
44 See fn  118 below . 
45 Canada's  argument is based on its assertion that the USDOC improperly rejected the "in -market" or 
regional benchmark for each of the five regions in question. (Canada's  first written submission, para.  34). 
46 Canada's  second written submission, paras.  15 and 21.  WT/DS533/ R 
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  and relied on an "out -of-market"47 benchmark to assess the adequacy of remuneration for Crown 
stumpage in Alberta, Ontario, Québec , and New Brunswick , and an out -of-country bench mark to do 
the same for British  Columbia . Canada argues that in doing so, the USDOC acted inconsistently with 
Article  14(d) of the SCM  Agreement.48  
7.17.   For Canada, the USDOC was required to have selected regional, "in -market" benchmarks to 
determine the adequ acy of remuneration for Crown timber provided under the relevant provincial 
stumpage programmes, as these provinces have discrete, regional stumpage markets. These 
regional markets are defined by differences in, among others, forest type (tree species, cli mate, 
terrain)49, the structure and operations of the industry in each region, and government 
management.50 Canada posits that the regional nature of the markets in question is driven by the 
fact that Crown timber is an immovable good.51 Canada contends th at the USDOC was therefore 
required to choose benchmarks that related to "prevailing market conditions", in the sense of 
Article  14(d), within each of those regional markets.52 Canada asserts that Alberta, Ontario, Québec , 
New Brunswick , and the British Co lumbia interior , each constituted their own "regional market".  
7.18.   Canada points to an Appellate Body finding that an investigating authority may rely on 
out-of-country benchmarks only in "very limited" circumstances.53 Canada contends that, similarly, 
the leg al and evidentiary thresholds that must be met for an investigating authority investigating 
"regional markets" to reject "in -market" prices are also high.54 An investigating authority may reject 
"in-market" prices only upon establishing that government int ervention in the market distorts 
"in-market" prices.55 In other words, Canada accepts that an investigating authority may ultimately 
apply "out -of-market", or even out -of-country, benchmarks but only after first determining that the 
"in-market" prices are distorted by government intervention.56  
7.19.   The United  States, in response, contends that Canada incorrectly argues that Article  14(d) 
required the USDOC to select benchmark prices that reflected the prevailing market conditions in 
Canadian "regional markets" . According to the United  States, Article  14(d) makes no mention of 
"regional markets". Article  14(d) does not require that an investigating authority use prices from the 
province or region of provision as a benchmark in determining the adequacy of remuner ation. 
Rather, Article  14(d) requires that the investigating authority select a benchmark that relates to the 
prevailing market conditions for the good in question " in the country of provision ", which is precisely 
what the USDOC did in selecting the Nova Scotia benchmark.57 In the United  States'  view, even if 
the term "market" within the phrase "prevailing market conditions" in Article  14(d) is interpreted as 
relating to a particular geographical location, that location is the country of provision and not, as 
Canada suggests, a particular "region". Neither the text nor the context of Article  14(d) supports 
Canada's  emphasis on the "regional" aspects of a market.58 For the United  States, therefore, there 
was no obligation on the USDOC to consider the use of w hat Canada refers to as "in -market" 
benchmarks; rather, the USDOC was entitled to select a benchmark from within Canada, i.e. "the 
country of provision", even if that benchmark was not based on prices from the alleged "regional 
markets" at issue.  
7.20.   The main issue before us is whether Article  14(d), given the facts of the underlying 
investigation, required the USDOC to consider using, as a starting point in its benefit assessment, 
benchmark prices from within the five regions59 in question, before it could tur n to stumpage 
 
47 The "out -of-market" benchmark that the USDOC relied on for Alberta, Ontario, Québec, and 
New Brunswick was based on stumpage prices in Nova  Scotia, which was within Canada.  
48 Canada's  first written submission , para.  34. 
49 Canada asserts that forest density, terrain, and climate affect the cost of harvesting timber, which, in 
turn, affects the value of standing timber to forestry companies. (Canada's  first written submission, 
paras.  28-29). 
50 Canada's  first wri tten submission, para.  25. 
51 Canada's  second written submission, para.  21. 
52 Canada's  first written submission, para.  33. 
53 Canada's  first written submission, para.  51 (referring to Appellate Body Report, US – Softwood 
Lumber IV , para.  102). 
54 Canada's  first written submission, paras.  51-52. 
55 Canada's  first written submission, paras.  51-54. 
56 Canada's  first written submission, paras.  50-54 and 300.  
57 United  States'  first written submission, paras.  81-82 and 85. (emphasis added)  
58 United  States'  first writt en submission, paras.  86 and 88.  
59 Alberta, Québec, Ontario, New  Brunswick, and the British Columbia interior .  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  benchmarks  from outside those regions . We note that the text of Article  14(d) does not expressly 
mention "regional markets". Article  14(d) provides, in relevant part, that:  
[T]he provision  of goods by a government shall not be considered as conferring a benefit 
unless the provision is made for less than adequate remuneration. The adequacy of 
remuneration shall be determined in relation to prevailing market conditions for the 
good in questio n in the country of provision (including price, quality, availability, 
marketability, transportation and other conditions of sale).  
7.21.   The first sentence of Article  14(d) pertains to the provision of goods by a government and 
requires that the provision of g oods must not be considered as conferring a benefit unless it is made 
for less than adequate remuneration. The second sentence relates to the method for determining 
the adequacy of remuneration for "the good in question". It follows from reading the first and second 
sentences of Article  14(d) together that "the good in question" referred to in the second sentence of 
Article  14(d) is the government -provided good. In other words, the "good in question" is the good 
that the governmen t actually sold and for whi ch the investigating authority seeks to determine the 
adequacy of remuneration.  
7.22.   To determine the adequacy of remuneration for the government -provided good in question, 
Article  14(d) requires that an investigating authority use a benchmark that relates to the "prevailing 
market conditions" for that good in the country of provision.60 Article  14(d) therefore requires that 
an investigating authority select a benchmark that relates to the prevailing market conditions for 
the government -provided good  in questio n in the country of provision.61 In other words, as a 
previous panel observed, the benchmark must reflect the "factual situation" found to exist in respect 
of the government -provided good.62  
7.23.   We consider that a benchmark price that reflects the factual sit uation of the 
government -provided good, will generally emanate from the prevailing market conditions for that 
good. Because that price results  from the same or similar market conditions as those for the 
government -provided good, it therefore inherently relates to  the prevailing market conditions for 
the government -provided good.  
7.24.   In response to a question from the Panel, t he United  States suggests  that it suffices for 
purposes of Article  14(d) to pick a benchmark from anywhere  in the country of provision as  long as 
that benchmark is a private, market -determined price for a good that is the same as the 
government -provided good.63 For the United  States, if the benchmark good is the same as the good 
in question and the benchmark price is a market -determined price in the country of provision, that 
benchmark price will reflect the same prevailing market conditions as those encountered  by the 
government -provided good.64 We disagree. Simply because goods that are the same as or similar 
to the government -provided good are sold across the country of provision, it is not necessary that 
market -determined prices for those goods will reflect t he same prevailing market conditions as those 
for the government -provided good. For instance, it is not necessarily true that the same good, say 
stumpage, sold in different parts of the country of provision, will have the same quality, availability, 
 
60 Article  14(d) requires that the adequacy of remuneration for the government -provided good be 
determined in relation to the prevailing market c onditions for that good. It follows that any market -determined 
benchmark price used for purposes of assessing the adequacy of remuneration must also relate to  the 
prevailing market conditions for the government -provided good.  
61 The underlying reasoning com ports with the panel's observation in US – Anti-Dumping and 
Countervailing Duties (China) that "any benchmark identified as representing the 'prevailing market conditions ' 
for the good provided by a government must reflect the price for that same good as it would be or is sold by 
private sources at that time and on comparable terms and conditions." (Panel Report, US – Anti-Dumping and 
Countervailing Duties (China) , para. 11.53). At the same time, like the panel in US – Carbon Steel (India) , we 
do not consider that "such market benchmarks need mirror the contractual terms on which the government 
provider sells its good". We further agree with the panel that  the terms "prevail ing market conditions" and 
"conditions of sale" in the second sentence of Article 14(d) relate not to the specific contractual terms on which 
the government provides goods but to "the general conditions of the relevant market , in the context of which 
marke t operators engage in sales transactions". (Panel Report, US – Carbon Steel (India) , para. 7.60 
(emphasis added) ). 
62 Panel Report, US – Anti-Dumping and Countervailing Duties (China) , para.  11.56.  
63 United  States'  response to Panel question No. 154, paras. 6 and 11 -12. 
64 United  States'  response to Panel question No. 154, para.  6. WT/DS533/ R 
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  market ability, transportation -related costs, and conditions of sale – all prevailing market conditions 
as set out under Article  14(d).65  
7.25.   The United  States further cites to the Appellate Body's  finding that where the investigating 
authority selects as a benchmar k a private, market -determined price from within the country of 
provision, that benchmark will necessarily  relate to the prevailing market conditions for the 
government -provided good in the country of provision.66 For the United  States, this suggests that 
an investigating authority may use as a benchmark, a private, market -determined price for a good 
that is the same or similar as the government -provided good from anywhere  within the country of 
provision. We consider that Article  14(d) permits an investigat ing authority to do so in certain, but 
not all, situations, depending on the facts and circumstances of the case before it. Further, the 
Appellate Body's  observations that the United  States refers to were not based on the facts of this 
dispute – in that ca se there was no suggestion that the prevailing market conditions for the relevant 
good changed from one region to another within the country of provision.  
7.26.   Where the record evidence before the investigating authority shows that the prevailing market 
conditi ons for the government -provided good reflect the prevailing market conditions for the same 
or similar goods sold across the country of provision, in that case, a market -determined benchmark 
price selected from anywhere  in the country of provision would sat isfy the requirements of 
Article  14(d). This is so because considering that the prevailing market conditions would be the same 
everywhere in the country of provision, no matter where the market -determined benchmark is 
picked from in the country of provisio n, that benchmark will relate to the prevailing market conditions 
for the government -provided good.  
7.27.   Where the record evidence before the investigating authority shows, however, that the 
prevailing market conditions for the government -provided good differ f rom the prevailing market 
conditions for the same or similar goods sold in other parts of the country of provision, it is not 
sufficient for purposes of Article  14(d) that the investigating authority uses as a benchmark a 
market -determined price from anywh ere in the country of provision.67 In that case, the investigating 
authority will need to do more to ensure that, as Article  14(d) requires, the selected benchmark 
relates to the prevailing market conditions for the government -provided good  in question, that is, 
the factual situation found to exist in respect of the government -provided good. The investigating 
authority may do so, in certain cases, by taking the market -determined price for the same or similar 
good from anywhere in the country  of provision and making appropriate adjustments to that price 
so that it relates to the prevailing market conditions for the government -provided good .68 We 
consider, however, that market -determined prices that result from  the prevailing market conditions 
 
65 Indeed, the USDOC itself did not select a country -wide benchmark, that is, a benchmark from 
anywhere in the country of provision, for determining the adequacy of remunerati on for provision of stumpage 
in each of the provinces in question. The USDOC concluded that private stumpage prices in Nova  Scotia were 
not an appropriate benchmark for the provision of stumpage in British  Columbia, even though the USDOC had 
found that the  Nova Scotia prices were in -country, market -determined prices for stumpage. In this regard, the 
United  States argues, in response to a question from the Panel, that the USDOC had found that  
British  Columbia stumpage was distinct from stumpage provided in t he other provinces in Canada. 
(United  States'  response to Panel question No. 154, paras.  9 and 14). We note that, although the USDOC did 
find differences related to species and diameter between stumpage in Nova  Scotia and in British  Columbia, it 
never dete rmined that the good in question sold in British  Columbia was not stumpage. In particular, the 
USDOC found that "the standing timber in British  Columbia is not comparable to the standing timber in 
Nova Scotia", and not that the good in question in British  Columbia was not standing timber (or stumpage). 
(Preliminary determination , (Exhibit CAN -8), p.  46). Therefore, based on the logic of the United  States'  own 
argument, as long as the timber sold in British  Columbia was stumpage and the Nova  Scotia benchmark  was 
an in-country market -determined price for the same or similar good, the Nova  Scotia benchmark should have 
sufficed as a benchmark for British  Columbia stumpage. Yet, the USDOC concluded that the private stumpage 
prices in Nova  Scotia were not an appro priate benchmark for the provision of stumpage in British  Columbia. 
Therefore, we note that the United  States'  argument is at odds with the USDOC's  own finding.  
66 United  States'  first written submission, paras.  72 and 74 (referring to Appellate Body Repor t, US – 
Countervailing Measures (China) , para.  4.46).  
67 In other words, this is a case where , even though goods that are the same or similar to the 
government -provided good are sold in the country of provision, the record shows that the prevailing market 
conditions for the government -provided good are different from the prevailing market conditions for the same 
or similar goods.  
68 We note that, in the underlying investigation, the USDOC found that the benchmark price for 
stumpage in Nova  Scotia "reasonably reflected" the prevailing market conditions for stumpage in Alberta, 
Ontario, New  Brunswick, and Québec, and that adjustments to the Nova  Scotia benchmark were "not 
warranted to address comparability issues". (Final determination, (Exhi bit CAN -10), p.  125).  WT/DS533/ R 
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  for the government -provided good  itself would more accurately reflect the prevailing market 
conditions for that good.69 For, as noted in paragraph  7.23, such prices emanate from the same or 
similar market conditions as the government -provided good, and therefore intrinsically relate to the 
prevailing market conditions for the government -provided good. We take the view that such prices 
will have the nece ssary connection with the prevailing market conditions for the 
government -provided good. In contrast, market -determined prices for goods that are the same or 
similar to the government -provided good but that result from prevailing market conditions differen t 
from those for the government -provided good , must be carefully selected and adjusted so that they 
reflect the prevailing market conditions for the government -provided good. We understand, in light 
of the Appellate Body's  observations70, that practically speaking, it would be difficult for investigating 
authorities to "replicate reliably", by way of adjustments, a price reflecting prevailing market 
conditions for the government -provided good based on another price, which, although for the same 
or similar g ood, results from prevailing market conditions different from those for the 
government -provided good.  
7.28.   We therefore consider that making adjustments to prices for goods that are the same or 
similar to the government -provided good, but that result from prev ailing market conditions different 
to those for the government -provided good, even when those prices are market -determined and 
"in-country", is not the preferred way of arriving at an appropriate benchmark. The underlying 
reasons are similar to the Appella te Body's consideration that making adjustments to 
"out-of-country" prices is not the preferred way to arrive at an appropriate benchmark. In that 
context, the Appellate Body has suggested that using "out -of-country" prices by making adjustments 
to them, m ay be an alternative to be relied on only where "in -country" prices for the 
government -provided good are distorted.71 In particular, the Appellate Body observed that:  
[I]t seems to us that it would be difficult, from a practical point of view , for investig ating 
authorities to replicate reliably market conditions prevailing in one country on the basis 
of market conditions prevailing in another country. First, there are numerous factors to 
be taken into account in making adjustments to market conditions preva iling in one 
country so as to replicate those prevailing in another country; secondly, it would be 
difficult to ensure that all necessary adjustments are made to prices in one country in 
order to develop a benchmark that relates or refers to, or is connect ed with, prevailing 
market conditions in another country, so as to reflect price, quality, availability, 
marketability, transportation and other conditions of purchase or sale in that other 
country.72  
7.29.   The Appellate Body therefore observed that before reso rting to the use of external 
benchmarks, an investigating authority needs to consider as the starting point, when determining 
adequacy of remuneration for the government -provided good, the price at which the same or similar 
goods are sold by private suppli ers in arm's -length transactions in the country of provision.73 The 
Appellate Body found that prices in the market of the country of provision are the primary, but not 
the exclusive, benchmark for calculating benefit. Investigating authorities may use a be nchmark 
other than private prices in the country of provision under Article  14(d), if it is first established that 
 
69 We note that the dissenting opinion of one member of the panel in Canada – Feed-In Tariff Program 
addresses this issue, as set out below, and we agree with this general approach:  
In the present disputes, the complainants have not ad vanced country -specific price benchmarks, 
but rather benchmarks based on prices established in regional intra -national markets operating 
in Canada, and also the United  States. The complainants appear to have done so because there 
are no national electricit y wholesale markets in Canada. In other words, the "prevailing market 
conditions" in the country of purchase (Canada) are such that there are no country -wide 
electricity markets. In my view Article  14(d) does not suggest that the prevailing market 
conditio ns can only be those of a national market. Market conditions in a regional market of a 
country are, relevantly, market conditions "in the country of purchase". In this light, the 
complainants'  approach is not inconsistent with the guidelines stipulated in Article  14(d) of the 
SCM Agreement.  
(Panel Report, Canada – Feed-In Tariff Program , para. 9.9 (emphasis original))  
70 Appellate Body Report, US – Softwood Lumber IV , para.  108. 
71 Appellate Body Report, US – Softwood Lumber IV , para.  102. 
72 Appellate Body R eport, US – Softwood Lumber IV , para.  108. (emphasis  added)  
73 Appellate Body Reports, US – Softwood Lumber IV , para.  90; US – Carbon Steel (India) , para. 4.154; 
and Panel Report, US – Coated Paper (Indonesia) , para. 7.33. WT/DS533/ R 
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  private prices in that country are distorted because of the government's  predominant role in 
providing those goods in the market.74  
7.30.   We consi der, in a similar vein, the preferred approach for selecting a benchmark in cases 
where the record shows that the prevailing market conditions for the government -provided good 
differ from the prevailing market conditions for the same or similar goods sold in other parts of the 
country of provision. We find that in such cases, for reasons set out in paragraph  7.23, an authority 
is required to consider, as a starting point in its benefit analysis, using as a benchmark the prices 
resulting from the prevailing market conditions for the government -provided good. Where the record 
shows that  the prevailing market conditions for the government -provided good span, and are limited 
to, a particular geographical area, say a specific region within the country of provision, the 
benchmark price must reflect the prevai ling market conditions in that region, because it is those 
prevailing market conditions that constitute the prevailing market conditions for the transactions 
concerning the government -provided good being investigated. The investigating authority would 
therefore be required to consider using, at least as a starting point in its benefit assessment, a 
benchmark price resulting from the prevailing market conditions within that region , because that 
price would necessarily relate to the prevailing market conditio ns for the government -provided good.  
7.31.   It follows that, where the record evidence suggests that the country of provision has regionally 
different prevailing market conditions, the investigating authority would need to provide a reasoned 
and adequate explana tion regarding whether the record demonstrates that the prevailing market 
conditions for the government -provided good are limited, for instance, to a specific region.75 Indeed, 
the obligation that the investigating authority consider using as a starting po int a benchmark price 
resulting from the prevailing market conditions for the government -provided good, would make it 
incumbent upon the investigating authority to first provide that reasoned and adequate explanation 
regarding whether that region has its o wn distinct prevailing market conditions before the authority 
can turn to using benchmarks from outside that region. If the investigating authority adequately 
explains that the prevailing market conditions for that region are not distinct from other region (s) 
in the country of provision, it need not consider using a benchmark from that region and could select 
a benchmark external to that region. Absent that reasoned and adequate explanation, the 
investigating authority would not have properly considered whe ther the region in question has its 
own distinct prevailing market conditions and would not have met its obligation to first consider 
using a benchmark resulting from the prevailing market conditions for the government -provided 
good. Unless the authority p rovides that reasoned and adequate explanation, it would therefore 
remain under an obligation to consider using as a starting point a benchmark price resulting from 
the prevailing market conditions for the government -provided good , before it can use an ext ernal 
benchmark.  
7.32.   Upon consideration of such prices resulting from the prevailing market conditions for the 
government -provided good as the starting point in its benefits analysis, should the investigating 
authority find them to be distorted as a result of the government's  role as a predominant or 
significant supplier in the market, the investigating authority may decline using those prices as 
benchmarks and may instead use a benchmark price that is "as comparable as possible"76 to that 
price, including by m aking appropriate adjustments, if necessary. This would include using as a 
benchmark a price for a good that is the same as or similar to the government -provided good, but 
which results from prevailing market conditions different to those for the governmen t-provided good, 
provided that it is adjusted to reflect prevailing market conditions for the government -provided good.  
7.33.   We further consider that the obligation in Article  19.4 of the SCM  Agreement supports the 
reasoning above. That provision requires that no countervailing duty be levied on any imported 
product in excess of the amount of subsidy found to exist. As Canada submits, the Appellate Body 
has found that Article  19.4 of the SCM  Agreement requires an investigating authority to "ascertain 
as accurate ly as possible the amount of subsidization bestowed on the investigated products".77, 78 
 
74 Appellate Body Report, US – Softwood Lumber IV , para.  90. 
75 This obligation flows from the chapeau  of Article  14(d), which requires that an investigating 
authority's  "application to each particular case" of any method it uses to calculate the benefit conferred to the 
recipient be "transp arent" and "adequately explained".  
76 Panel Report, US – Anti-Dumping and Countervailing Duties (China) , para.  10.187.  
77 Appellate Body Report, US – Washing Machines, para. 5.268.  
78 We note that in its first written submission, the United States has acknowledged in the context of 
another argument  that Canada's view that "[t]he SCM Agreement requires that an investigating authority 
 WT/DS533/ R 
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  Considering that the amount of subsidy is determined based on the amount of benefit conferred, 
which in turn depends on the choice of benchmark, it follows that the in vestigating authority will 
need to at least start its benefit assessment with considering the use of a benchmark that best 
reflects the prevailing market conditions for the government -provided good. A price that results from 
the prevailing market condition s for the government -provided good, for reasons discussed above, 
would constitute such a benchmark.  
7.34.   Whether the USDOC was required, in the underlying investigation, to have first considered 
selecting a stumpage benchmark for Alberta, Ontario, Québec , and New Brunswick  from within each 
of those regions, and in the case of British  Columbia , from the British Columbia interior , will hinge 
on whether there was evidence on the record of the investigation pertaining to differences in 
prevailing market conditions for Crown stumpage provided in these regions and whether the USDOC 
provided a reasoned and adequate explanation, in light of that evidence, as to whether each of these 
regions had their own distinct prevailing market conditions. We will accordingly evaluat e whether 
there was evidence on the record before the USDOC pertaining to distinct prevailing market 
conditions in the regions in question, and if so, whether the USDOC provided a reasoned and 
adequate explanation in light of that evidence regarding whethe r each of these regions did have 
distinct prevailing market conditions. If we consider that the USDOC did not provide a reasoned and 
adequate explanation for why any relevant evidence on the record did not show that the regions in 
question had distinct pre vailing market conditions, we will find that the USDOC was under an 
obligation to have considered using, as a starting point in its benefit analysis, a benchmark price 
from within each of those regions.  
7.35.   The United  States contends that, in arguing that the  benchmark selection should have been 
limited to regional jurisdictions, Canada has not established that such regional subdivisions even 
exist in the country. The United  States notes that on the one hand, Canada argues that the conditions 
in one province c annot be compared to the conditions in another province because the government 
pricing mechanism in each province creates province -specific conditions. On the other hand, Canada 
argues that the relevant market conditions "vary significantly" across even th e smallest distances 
e.g. "even at the level of the individual mills located within the same states, owned by the same 
company, and within an hour and a half haul of each other", or even on a tree -by-tree basis. 
According to the United  States, Canada's  proposition implies that there may be no appropriate basis 
upon which to delineate between conditions in one region and another.79 
7.36.   In response, Canada argues that during the underlying investigation the Canadian interested 
parties "demonstrated, with reference to extensive evidence, that regional markets do exist, and 
that these markets are shaped by their differing prevailing conditi ons".80 Canada asserts that the 
Canadian parties documented differences in prevailing market conditions between Nova Scotia  and 
the other provinces in question, and those between eastern Washington and the British Columbia 
interior . Canada further asserts that it has discussed in detail, during these proceedings, the 
differences in prevailing market conditions among the regions in question.81 These differences 
include regional supply and demand, quality (i.e. species  mix, diameter, etc.), transporta tion 
differences, harvesting costs, and other conditions of purchase and sale.82 For Canada, "regional 
markets" are largely coextensive with provincial boundaries due to geography and the fact that 
provinces are responsible under the Canadian Constitution for establishing the legal and regulatory 
framework for forestry, thus shaping the area in which the forces of supply and demand for standing 
timber interact.83 Further, Canada posits that it has explained that the regional nature of 
Canada's  standing timb er markets is a function of the fact that Crown timber is an immovable good84, 
and the inherently local nature of standing timber.85  
7.37.   We note that the record of the underlying investigation indicates that the Canadian 
respondents had placed before the USDO C vast amounts of evidence purporting to show that distinct 
 
accurately determine the amount of a subsidy" is "uno bjectionable". (United States' first written submission, 
para. 495).  
79 United  States'  opening statement at the first meeting of the Panel (26 February 2019), para.  16 
(referring to Canada's  first written submission, para.  616).  
80 Canada's  response to Pane l question No. 157, para.  44. (emphasis original)  
81 Canada's  response to Panel question No. 157, para.  44. 
82 Canada's  response to Panel question No. 157, para.  46. 
83 Canada's  response to Panel question No. 157, para.  45. 
84 Canada's  response to Panel questi on No. 157, para.  45. 
85 Canada's  response to Panel question No. 157, para.  49. WT/DS533/ R 
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  market conditions prevailed in the regions in question. Investigating authorities are required to 
conduct the necessary analysis to arrive at the appropriate benchmark, and the role of the 
investi gating authority in this context will vary depending on the circumstances of the case, the 
nature, quantity , and quality of information supplied by petitioners and respondents.86 
7.38.   We note that t he evidence placed on the record of the underlying investigatio n by the 
Canadian respondents, on its face, pertains to differences in quality (such as species  mix and 
diameter), transportation and hauling distances, climate, growing seasons, and provincial legislation, 
among others, in respect of stumpage in each of t he regions in question.87, 88 For instance, the 
evidence suggests that the predominant species  mix in Alberta is distinct from that in the other 
regions89, as is the primarily sub -Arctic climate90 in the region, resulting in a short growing season91 
as wel l as slow tree growth.92 The evidence suggests that t his impacts the tree size93, and thus the 
value of timber in that region, considering that smaller trees are more costly to harvest.94 Further, 
as Canada asserts, the record evidence addresses the "inher ently local nature of standing timber" 
based on the fact that it is an immovable good.95 We note that t he evidence that Canada identifies 
indicates that stumpage markets are inherently local and often differentiated by substantial quality 
and locational differences across local areas.96 The evidence suggests that the local nature of 
stumpage renders inter -regional comparisons of timber prices too complex to be meaningful. This is 
because timber prices are a function of many dynamics, such as:  the physical characteristics of the 
trees, the stands that they grow in and the land, the location of the forest relative to the mill and 
market for forest products like lumber or pulp, and the climate and geographic influences on forest 
growth and ecology (e.g. presence of certain wood -eating insects), among others.97 We note that 
the evidence suggests that consequently, inter -regional comparisons of timber pricing require "so 
many empirical adjustments and assumptions, that any resulting conclusions have l ittle real 
meaning".98 
7.39.   Canada has further pointed to the evidence on the record in support of the view that the 
British  Columbia  coast (coast) and the British Columbia interior  (interior) regions had distinct 
prevailing market conditions.99 Canada asserts that the coast is separated from the interior through 
mountain ranges that create differences in the climate, ecology, and transportation conditions 
between the two regions.100 In its questionnaire response, British  Columbia  stated that road access, 
buildin g, and maintenance are generally easier in the interior than on the coast.101 While the record 
evidence indicates that road transport is easier in the interior, we note that the evidence also 
 
86 Appellate Body Report, US – Carbon Steel (India) , para. 4.153.  
87 Alberta, MNP cross -border analysis, (Exhibit CAN -96), pp.  5, 11-12, 14, 20 -22, 24 -26, and 34; 
Alberta initial questionnaire response , (Exhibit CAN -97), pp.  ABIV-26-ABIV-30; Ontario, comparison between 
Acadian and Boreal forest regions , (Exhibit CAN -149), pp.  4-5; Ontario, notes on Maritimes forests , 
(Exhibit  CAN-156), pp.  4-5; Ontario initial questionnaire  response , (Exhibit CAN -155), pp.  ON-10-ON-11; 
Ontario, diameter distribution of timber , (Exhibit CAN -153), p.  3; Ontario, the forests , (Exhibit CAN -147), 
p. 118; Ontario, structure of the softwood lumber industry , (Exhibit CAN -152), pp.  13-14; Hendricks R eport, 
(Exhibit CAN -19 (BCI)), pp.  8 and 19;  Québec initial questionnaire response , (Exhibit CAN -170), pp.  QC-S-14, 
QC-S-20-QC-S-21, and QC-S-23; Québec, description of softwood species , (Exhibit CAN -306), p.  1; Kalt 
Report on Crown timber, (Exhibit CAN-14), pp. 9 and 50 -54; and Canada, Appendix II from the 
Constitution  Act, (Exhibit CAN -13), paras.  92(5) and 92A.  
88 In considering the evidence in question before the USDOC, "on its face", as noted here, we do not 
draw any firm conclusions regarding whe ther th at evidence definitively demonstrate s differences in prevailing 
market conditions among the regions in question. Rather, we note that the evidence suggests  differences in 
prevailing market conditions among those regions.  
89 Alberta, MNP cross -border  analysis , (Exhibit  CAN-96), pp. 14 and  34. 
90 Alberta, MNP cross -border analysis , (Exhibit CAN -96), p.  11. 
91 Alberta, MNP cross -border analysis , (Exhibit CAN -96), p.  12. 
92 Alberta, MNP cross -border analysis , (Exhibit  CAN-96), p. 20; Alberta initial questio nnaire response, 
(Exhibit  CAN-97), pp. ABIV-28 and  ABIV-89. 
93 Alberta, MNP cross -border analysis , (Exhibit  CAN-96), pp. 20-22; Alberta initial questionnaire 
response, ( Exhibit  CAN-97), pp. ABIV-31-ABIV-32. 
94 Alberta, MNP cross -border analysis , (Exhibit  CAN-96), pp. 24 and 37.  
95 Canada's  response to Panel question No. 157, paras.  45 and 49.  
96 Kalt Report on Crown timber , (Exhibit CAN -14), p.  51. 
97 Alberta, MNP cross -border analysis , (Exhibit CAN -96), p.  3; Asker Report, (Exhibit  CAN-15), pp.  9-14. 
98 Alberta,  MNP cross -border analysis , (Exhibit CAN -96), p.  3. 
99 Canada's  first written submission, paras.  65-75.  
100 Canada's  first written submission, para.  67 (referring to British  Columbia  initial questionnaire 
response, (Exhibit CAN -18 (BCI)), pp.  BC-I-46–BC-I-56).  
101 British  Columbia  initial questionnaire response, (Exhibit CAN -18 (BCI)), pp.  BC-I-47–BC-I-48. WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  indicates that truck haul distances and the resulting hauling cos ts limit how far logs can be 
transported in the interior.102 The evidence also suggests  that as a result, the mills operating in the 
interior must be located relatively near to their timber supply, unlike the coast where waterborne 
transportation imposes no  such constraint on the location of the mills .103 Canada also points to the 
record evidence concerning differences between the quality of timber produced in the interior and 
in the coast. According to British  Columbia 's questionnaire response, the timber in the interior is 
generally smaller and the volume  per hectare lower than that on the coast, due to lower rainfall and 
colder winters.104 Canada also argues that wild fires affect forests to a much greater degree in the 
interior than on the coast, and that the quality of certain varieties of timber in the interior has been 
heavily impacted by beetle epidemics.105 We note that the record evidence identified by Canada 
suggests that given these differences in forests, mill design, and transportation costs, there is 
"substantial economic separation between marke ts and activities on the coast and in the interior for 
logs and timber".106 
7.40.   We consider, in that context, that the copious amounts of evidence placed before the USDOC 
in the underlying investigation, purporting to show the existence of regionally distinct p revailing 
market conditions, would have given an objective and unbiased authority pause, and prompted it to 
investigate whether the prevailing market conditions for stumpage were indeed distinct across the 
regions in question. This is particularly so given  the "inherently local nature" of standing timber and 
that the quality, price, marketability, transportation, availability, among other prevailing market 
conditions for standing timber, are so rooted to the unique climatic, geographical, and ecological 
characteristics of the region it grows in, as the evidence that Canada points to underscores.107  
7.41.   In the underlying investigation, the USDOC did address at least some of the evidence 
pertaining to prevailing market conditions in the different Canadian regions in question and found 
that the benchmark price for stumpage in Nova Scotia  reasonably reflected the prevailing market 
conditions for stumpage in Alberta, Ontario, and Québec , and that the adjustments to the 
Nova Scotia  benchmark were "not warranted to address comparability issues".108 However, for 
reasons set out later in this Report109, we have concluded that the USDOC erroneously found that 
the benchmark price for stumpage in Nova Scotia  "reasonably reflected" the preva iling market 
conditions for stumpage in Alberta, Ontario, and Québec . Further, as regards British  Columbia , the 
USDOC did find that the prevailing market conditions for the government -provided good in that 
province differed from the prevailing market condi tions in Nova Scotia .110 The USDOC did not, 
however, make any finding as to whether the British Columbia interior  had its own distinct prevailing 
market conditions, despite respondents submitting evidence in this regard.  
7.42.   Nothing in the USDOC's  determinatio n therefore reasonably and adequately addresses 
whether each of the British Columbia interior , Alberta, Ontario, and Québec  had their own distinct 
prevailing market conditions despite the ample evidence before the USDOC that was directly 
pertinent to that question. As noted earlier, we consider that the Canadian respondents had placed 
enough evidence on the record of the underlying investigation pertaining to differences in prevailing 
market conditions among the regions in question to have led an unbiased a nd objective investigating 
authority to examine the existence of those differences. An objective and unbiased authority would 
have assessed that evidence and adequately explained why it considered that the evidence either 
demonstrated, or did not so demons trate, the existence of regionally distinct prevailing market 
conditions.  
7.43.   If the USDOC considered that the record did not show that each of the British  Columbia  
interior, Alberta, Ontario, and Québec  had their own distinct prevailing market conditions, it  would 
need to have provided a reasoned explanation in that regard. For reasons discussed in 
 
102 Bustard Report, (Exhibit CAN -17), p.  10.  
103 Kalt Report on LEPs , (Exhibit CAN -16 (BCI)), p.  14.  
104 British  Columbia  initial questionnaire response, (Exhib it CAN -18 (BCI)), pp.  BC-I-51 and BC -I-54; 
Bustard Report, (Exhibit CAN -17), p.  10.  
105 British  Columbia  initial questionnaire response, (Exhibit CAN -18 (BCI)), p.  BC-I-49; 
Canada 's first written submission, para.  70.  
106 Kalt Report on LEPs , (Exhibit CAN -16 (BCI)), p.  19.  
107 Kalt Report on Crown timber , (Exhibit CAN -14), p.  51; Alberta, MNP cross -border analysis , 
(Exhibit  CAN-96), p.  3; and Asker Report, (Exhibit  CAN-15), pp.  9-14. 
108 Final determination, (Exhibit CAN -10), p.  125; United  States'  first written  submission, para.  115. 
109 See, below,  paras.  7.397 -7.399 . 
110 Final determination , (Exhibit CAN -10), p.  63; Preliminary determination, (Exhibit CAN -8), pp.  46-47. WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  paragraph  7.31, unless the USDOC gave a reasoned and adequate explanation for why the record 
evidence did not demonstrate the existence of distinct prevailing market conditions for stumpage in 
each of the British  Columbia  interior, Alberta, Ontario, and Québec , Article  14(d) placed the USDOC 
under an obligation to have considered using, as a starting point in its benefit analysis, benchmarks 
from within each of those regions. We consider that the USDOC failed to provide that reasoned and 
adequate explanation, and therefo re it was required to have considered using as a starting point 
those benchmarks before it could turn to using external benchmarks in its benefit determination.  
7.44.   We further note that a sizeable volume of evidence pertaining to differences in prevailing 
market conditions across the regions in question that the Canadian interested parties adduced  before 
the USDOC was solicited by the USDOC itself. The USDOC had itself conducted its investigation on 
a region -specific basis, seeking region -specific benchmark da ta, among other region -specific 
information, from the Canadian interested parties . The USDOC, in its questionnaires to the Canadian 
interested parties  in the underlying investigation, had itself asked them to provide data on stumpage 
and log prices from th e regions in question .111 The USDOC also sought information on the structure 
of the softwood lumber industry including the production, marketing, and selling practices within 
certain of the five provinces.112 Further, the USDOC requested information pertaini ng to provincial 
legislation governing stumpage113, information on terrain, accessibility, size, density, quality, 
species, climatic conditions, and the proximity of timber tracts to mills and of mills to distribution 
centres pertaining to harvest zones in each region114, and species and diameter of standing timber 
for each region115, among others. In light of the fact that the USDOC itself solicited a significant 
volume of evidence pertaining to  differences in prevailing market conditions across the regions i n 
question, we find it perplexing that the USDOC failed to adequately explain the finding based on that 
evidence. We also find it perplexing that the USDOC applied its price distortion analysis on a 
region -specific basis, and yet did not consider it necess ary to complete its benchmarking exercise 
on this basis.116 
7.45.   As regards New Brunswick , the USDOC found that the Nova Scotia  benchmark reasonably 
reflected the prevailing market conditions for stumpage in New Brunswick  and that adjustments to 
the Nova Scotia  benchmark were "not warranted to address comparability issues".117 If that finding 
were proper, it would imply that New Brunswick  did not have its own distinct prevailing market 
conditions, and that therefore the USDOC was not under any obligation to have c onsidered using, 
even as a starting point in its benefit analysis, a benchmark price from within New Brunswick . We 
consider, however, that Canada has not properly made out a claim that the USDOC  incorrectly found 
that the Nova Scotia  benchmark reflected th e prevailing market conditions in New Brunswick .118 
 
111 Ontario initial questionnaire response , (Exhibit CAN -155), p.  ON-150; Québec initial q uestionnaire 
response , (Exhibit CAN -170), pp.  QC-S-135-QC-S-136; Alberta initial questionnaire response , 
(Exhibit  CAN-97), pp.  ABIV-127 and ABIV -130; New Brunswick questionnaire response , 
(Exhibit  CAN-240 (BCI)), p.  NBII-1; and British  Columbia  initial que stionnaire response , 
(Exhibit  CAN-18 (BCI)), pp.  BC-I-241-242.  
112 Ontario initial questionnaire response , (Exhibit CAN -155), p.  ON-7; Québec initial questionnaire 
response , (Exhibit CAN -170), p.  QC-S-11; Alberta initial questionnaire response , (Exhibit CAN -97), p.  ABIV-7; 
and British  Columbia  initial questionnaire response , (Exhibit CAN -18 (BCI)), p.  BC-I-18. 
113 Initial stumpage questionnaire , (Exhibit USA -63), pp.  8-13, 23, 41, and 54; Addendum initial 
stumpage questionnaire , (Exhibit USA -64), p.  2. 
114 Initial stumpage questionnaire , (Exhibit USA -63), p p. 8-9, 24, 41, and 54.  
115 Initial stumpage questionnaire , (Exhibit USA -63), p p. 8-9, 33, 41, and 54.  
116 We note, for instance, that in assessing whether certain prices in each of the regions in question in 
Canada were distorted, the USDOC determined the government's  market share for stumpage for each of those 
regions separately, suggesting that it was treating each of those regions as separate markets for purposes of 
its price distortion analysis. (Final det ermination, (Exhibit CAN -10), pp.  51, 80, 92, and 99; Preliminary 
determination, (Exhibit CAN -8), p.  20). 
117 Final determination, (Exhibit CAN -10), pp.  115 and 125.  
118 We note that Canada's panel request sets out a claim that the United States acted inconsis tently with 
Articles 1.1(b) and 14(d) of the SCM Agreement by failing "to make necessary adjustments to stumpage" to 
reflect prevailing market conditions in assessing adequacy of remuneration when it compared "New  Brunswick 
stumpage", among others, to a No va Scotia stumpage benchmark. (Canada's panel request, para. I.A.2). 
Further, in its comments to the draft descriptive part of this Report, Canada requests the Panel to find that the 
USDOC acted inconsistently with Articles 1.1(b) and 14(d) of the SCM Agre ement by using Irving's purchases 
of Nova  Scotia private timber as a benchmark for determining the adequacy of remuneration for Crown timber 
provided by New  Brunswick. However, we note that, contrary to para. 3(1) of our Working Procedures, Canada 
did not present the relevant facts and arguments to substantiate that claim, "before the first substantive 
meeting of the Panel with the parties". (Working Procedures of the Panel, United States – Countervailing 
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  Accordingly, we have no basis to conclude that the USDOC was under an obligation to have 
considered, as a starting point, using a benchmark price from within New Brunswick . 
7.2.4   Conclusion  
7.46.   As noted above, no re asoned and adequate basis exists in the USDOC's  determination for us 
to conclude that the British Columbia interior , Alberta, Québec , and Ontario did not each have their 
own distinct prevailing market conditions. In the absence of a reasoned and adequate explanation 
in that respect, we consider that the USDOC was under an obligation to have considered using 
market -determined benchmarks from within each of those regions as a starting point in its benefit 
analysis. Based on that consideration, we wi ll next proceed to evaluate whether the USDOC acted 
inconsistently with Article  14(d) in rejecting benchmarks from within the British Columbia interior , 
Alberta, Québec , and Ontario. As regards New Brunswick , for reasons noted in the preceding 
paragraph, w e do not have the legal basis to find that the USDOC was under such an obligation, and 
therefore will not evaluate Canada's  claim pertaining to the USDOC's  rejection of the proposed 
benchmark from within that region.  
7.3  Canada's  claims that the USDOC improper ly rejected "in -market" prices as a 
stumpage benchmark in certain provinces  
7.47.   Canada claims that the USDOC acted inconsistently with Article  14(d)  of the SCM  Agreement 
by improperly rejecting certain "in -market" prices in Ontario, Québec , Alberta, New Brunsw ick, and 
British  Columbia  as a benchmark for determining the adequacy of remuneration for Crown stumpage 
(stumpage benchmark)  in each of those provinces.  
7.3.1   Legal standard  
7.48.   As discussed above119, we have already concluded that the USDOC ( a) was required to have 
considered using market -determined benchmarks from within the British Columbia interior , Alberta, 
Québec , and Ontario  as an initial step in its benefit analysis; and ( b) was permitted to reject those 
prices only where it found that those p rices were distorted as a result of government intervention.120 
We will next evaluate whether the USDOC acted inconsistently with Article  14(d) of the 
SCM Agreement  in rejecting benchmarks from within the British Columbia interior , Alberta, Québec , 
and Onta rio. As regards New Brunswick , as noted earlier, we have no basis to find that the USDOC 
was under an obligation to first consider using a benchmark from within that region before it could 
use an external benchmark.121 We will therefore not evaluate Canada' s claim pertaining to the 
USDOC's  rejection of the proposed benchmark from within New Brunswick .  
 
Measures on Softwood Lumber from Canada , para. 3(1)). In its first written submission, Canada asserts that 
"[i]n New  Brunswick, Commerce improperly used Irving's private purchases of Nova  Scotia standing timber as 
a benchmark".  (Canada's first written submission, para. 599). However, Canada presents no rele vant facts or 
arguments to substantiate that assertion in its first written submission. We further note that the United States 
contends in its first written submission that "Canada does not dispute that the stumpage market in Nova  Scotia 
reflects prevailin g market conditions in New  Brunswick". (United States' first written submission, fn  138 
(referring to Canada's first written submission, para. 600)). Canada did not respond to that assertion from the 
United States with any relevant facts and arguments exce pt in response to a question from the Panel at the 
second substantive meeting. (Canada's response to Panel question No. 186, paras.  97-100). We consider that 
Canada provided its arguments in regard to the claim in question too late in the proceedings to be  consistent 
with para. 3(1) of our Working Procedures, and we therefore reject that claim. This approach is consistent with 
the Appellate  Body's  finding in EC – Fasteners (China)  "that assertions made … only in response to questioning 
by the Panel, [cannot ] comply with either Rule 4 of the Panel's  Working Procedures, or the requirements of due 
process of law". (Appellate  Body Report, EC – Fasteners (China) , para.  574). We note that Rule 4 of the 
working procedures of the panel in that case is equivalent to paragraph 3.1 of the Panel's  working procedures 
in this case.  
119 See, above,  para. 7.46.  
120 We note that the Appellate  Body has found that the concept  of "price distortion" is not equivalent to 
any impact on prices as result of any government intervention. Rather, an investigating authority must 
determine whether in -country prices are distorted on a case -by-case basis, taking into account the 
characteri stics of the market being examined, and the nature, quantity, and quality of the information on the 
record. (Appellate  Body Report, US – Countervailing Measures (China)  (Article  21.5 – China) , para.  5.146).  See 
para. 7.145  below for more detailed discussion.  
121 See, above,  para. 7.45.  WT/DS533/ R 
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  7.49.   In assessing whether the USDOC improperly rejected the prices in question as a stumpage 
benchmark, we must apply a standard that is consistent with Article  11 of the DSU. This provision 
requires that a panel objectively assess the matter before it, including the facts of the case and the 
applicability of and conformity with the relevant  agreements. The Appellate  Body has found that the 
applicable standard of re view in a subsidy determination requires that a panel objectively assess 
whether the investigating authority provided a "reasoned and adequate" explanation as to how the 
record evidence supports its factual findings, and how those findings support its over all 
determination.122 The panel must also conduct an "in -depth" and "critical and searching" assessment 
of whether the record evidence and the explanations support the authority's  conclusions.123 Further, 
the panel must examine whether the explanations provi ded demonstrate that the investigating 
authority took proper account of the data before it, and that it explained why it rejected or discounted 
alternative explanations and interpretations of the record evidence. In particular, the panel must be 
open to th e possibility that the explanations given by the authority are not reasoned or adequate in 
light of other plausible alternative explanations.124  
7.50.   In cases where an investigating authority bases its overall conclusion on its assessment of 
the totality  of mul tiple pieces of circumstantial evidence, a panel may find it appropriate, or 
necessary, to examine the sufficiency of the evidence supporting an investigating 
authority's  conclusion by considering each individual piece of evidence. In addition, the panel m ust 
examine how the totality of the evidence supports the overall conclusion reached. In particular, 
panels must consider, in the context of the totality of the evidence, how the interaction  of certain 
pieces of evidence may justify certain inferences that  could not have been justified by a review of 
the individual pieces of evidence in isolation.125  
7.51.   The Appellate  Body has further found that the standard of review to be applied in a given case 
is also a function of the substantive provisions of the specific  covered  agreements that are at issue 
in the dispute.126 In this regard, we note that the chapeau  of Article  14(d), which is the substantive 
provision at issue in Canada's  claims at hand, requires that an investigating authority's  application 
to each particular case of any method it uses to calculate the benefit conferred to the recipient must 
be "tra nsparent" and "adequately explained".  
7.52.   In evaluating the USDOC's  findings that Canada challenges, we are also guided by the 
Appellate  Body's  finding that the reasoning of the investigating authority must be coherent and 
internally consistent, and the conclu sions reached and the inferences drawn by the authority must 
be based on positive evidence.127 We further note that the USDOC stated in its determination that 
it had accorded less weight in its analysis to certain "purchased commissioned reports" than to ot her 
evidence that had been "prepared in the ordinary course of business" because those reports had 
been produced for the express purpose of submission in the underlying investigation and therefore 
ran the "risk of litigation -inspired fabrication or exagger ation".128 We consider that the 
USDOC's  treatment of the reports in question placed on the record of the underlying investigation 
by the Canadian interested parties  undermines Canada's rights under Article 12.1 of the 
SCM Agreement , which requires, in relev ant part, that "[i]nterested members and all interested 
parties in a countervailing duty investigation shall be given  … ample opportunity to present in writing 
all evidence which they consider relevant in respect of the investigation in question". In our v iew, 
the USDOC was required to have reviewed the evidence set out in the reports in question. It was 
not open to the USDOC to have accorded less weight in its analysis to those reports simply because 
they had been produced for the express purpose of submis sion in the underlying investigation.129 
 
122 Appellate  Body Report, US – Countervailing Duty Investigation on DRAMs , para. 186. 
123 Appellate  Body Report, US – Softwood Lumber VI (Article  21.5 – Canada) , para. 93. 
124 Appellate  Body Report, US – Softwood Lumber VI (Article  21.5 – Canada) , para. 93. 
125 Appellate  Body Report, US – Softwood Lumber VI (Article  21.5 – Canada) , para. 94. 
126 Appellate  Body Report, US – Softwood Lumber VI (Article  21.5 – Canada) , para. 95 (referring to 
Appellate  Body Reports, US – Countervailing Duty Inv estigation on DRAMs , para. 184; US – Cotton Yarn , 
paras.  75-78; and US – Lamb , para.  105).  
127 Appellate  Body Reports, US ‒ Anti -Dumping and Countervailing Duties (China) , para.  344; US ‒ 
Corrosion -Resistant Steel Sunset Review , para.  199. 
128 Final determination, (Exhibit CAN -10), p. 103. 
129 We consider that this approach is generally consistent with the Appellate Body's approach in US – 
Washing Machines . The Appellate Body in that case explained that the fact that the evidence submitted by a 
respondent in the Washers countervailing duty investigation was created ad hoc  for the purposes of the 
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  7.3.2   Whether the USDOC improperly rejected certain private market prices in Ontario as 
an appropriate stumpage benchmark  
7.53.   In the underlying investigation, the Canadian respondents had proposed that the USDOC use 
certain pr ices as a benchmark in determining the adequacy of remuneration for the provision of 
Crown stumpage in Ontario.130 In particular, they had proposed that the USDOC use as a benchmark 
prices of private standing timber, and alternatively prices of logs, in Ont ario. The record shows that 
while the USDOC did consider using these prices in Ontario as a stumpage benchmark, it ultimately 
rejected them. Canada claims that the USDOC acted inconsistently with Article  14(d)  of the 
SCM Agreement in improperly rejecting, as a stumpage benchmark, private standing timber and log 
prices in Ontario.  
7.3.2.1   Factual aspects  
7.54.   The Ontario Government had placed on the record of the underlying investigation certain data 
that it proposed for use as a benchmark to determine the adequacy of re muneration for the 
Crown's  provision of stumpage in the province. In particular, Ontario submitted results of a survey 
conducted by MNP  LLP (MNP) , a Canadian accounting firm, reporting prices of private market 
standing timber in the province.131 In connecti on with the MNP Ontario survey data, Ontario 
submitted the Hendricks Report, which analysed that price data and concluded that the data resulted 
from a competitive process.132 Further, Ontario submitted the results of a KPMG LLP (KPMG) survey 
of log prices in Ontario from private and Crown lands. In addition, Resolute FP Canada Inc. 
(Resolute ), the only respondent company with operations in Ontario, submitted its actual purchases 
of logs sourced from private Ontario land.  
7.55.   The USDOC rejected each of the abov e data sets as a possible stumpage benchmark. At the 
outset, it found that Crown -origin standing timber constituted 96.5% of the total volume of softwood 
timber harvested in Ontario. The USDOC then proceeded to examine whether such government 
predominance in the province's  timber market had distorted private transactions.133 It concluded 
that private timber prices in Ontario are distorted as a result of the government's  involvement in the 
market and that it could not use those prices as a stumpage benchmark for Ontario.134 The USDOC 
declined to use the proposed private stumpage prices as a benchmark mainly for the following 
reasons135: 
a. the Crown stumpage rate, is for the most part, set administratively, and does not account 
for market conditions136;  
b. tenure -holders could harvest Crown -origin standing timber in a year beyond volume 
targets set out in their annual work schedules (AWS).137 The tenure -holders'  flexibility in 
this regard and, the ability of Ontario sawmills to trade Crown timber among themse lves, 
expands the market for Crown timber , which in turn depresses demand, and therefore 
prices, in the private market;  
 
investigation, among others, does not suffice to relieve the USDOC of its duty to review that evidence. 
(Appellate Body Report, US – Washing Machines , paras. 5.281 -5.283).  
130 Ontario initial questionnaire response , (Exhibit  CAN-155), p.  ON-150. 
131 MNP Ontario survey, ( Exhibit  CAN-144 (BCI)).  
132 Hendricks Report, (Exhibit CAN -19 (BCI)), pp.  39-42. 
133 Final determination, (Exhibit CAN -10), p.  92. 
134 Final determi nation, (Exhibit CAN -10), p.  94. 
135 Final determination, (Exhibit CAN -10), pp.  92-94. 
136 The USDOC considered that Ontario's  Crown stumpage charge consists of (a)  an administratively -set 
minimum charge; (b)  a residual value charge assessed on the difference between the price of a basket of 
softwood lumber end -products and the cost of producing and delivering those products; (c)  a forest renewal 
charge; and (d)  a forestry futures charge levied every year to cover the cost of renewing harvested areas and 
protec ting Crown timber land. During the POI, the residual value charge was not levied on Crown -origin timber. 
The USDOC found that of the three remaining stumpage components that Ontario charged during the POI, only 
the forest renewal charge took into account m arket conditions. The minimum charge was adjusted annually for 
inflation. (Final determination, (Exhibit CAN -10), p.  93).  
137 The only effective harvest limit that tenure -holders faced was their allocated harvest area over a 
ten-year period. (Final determin ation, (Exhibit CAN -10), p.  93). WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  c. most of the private standing timber is sold to a small number of consumers, who are 
dominant consumers of both Crown and private timber.  The USDOC considered that this 
demonstrated that the private market in Ontario is not "as independent and free of 
influence from the Crown timber market as the Hendricks report suggests"138; and  
d. the small number of respondents reporting private timber purc hases in the MNP Ontario 
survey makes the survey results unrepresentative and further indicates diminished 
demand for private timber in Ontario.  
7.56.   Further, the USDOC declined using private log prices in Ontario as a stumpage benchmark 
because it considered t hat log prices are not market -determined prices for the "good in question", 
stumpage, and that the Nova Scotia  private stumpage prices were more appropriate in this 
regard.139 
7.3.2.2   Evaluation  
7.57.   Canada argues that the USDOC rejected Ontario's  private prices as a st umpage benchmark 
based on flawed reasoning, which did not take into consideration all record evidence. At the core of 
Canada's  arguments is its assertion that the USDOC concluded that private prices in Ontario were 
distorted based on speculative considerat ions, without engaging with the record evidence.140 The 
United  States contends in response that the evidence evaluated by the USDOC demonstrates that 
the case at hand is one "where the government's  role as provider of goods is so predominant that 
price dist ortion is likely and other evidence carries only limited weight".141 
7.58.   The main issue before us is whether the USDOC properly engaged with the record evidence 
in determining that the private stumpage prices in question in Ontario were distorted. In evaluating  
that issue, we must address the following preliminary questions:  
a. In light of the government's  predominant share in the stumpage market, was the USDOC 
required to assess, and engage with the evidence on the record in analysing whether 
private stumpage pric es in Ontario could be used as a benchmark?  
b. If so, what evidentiary weight was the USDOC required to accord to that record evidence 
in its benchmark analysis, given the large government share in the market?  
c. If the USDOC did accord less weight to the reco rd evidence in light of the 
government's  market share, was it required to explicitly say so in its determination?  
7.59.   In assessing the above issues, we must apply a standard that is consistent with Article  11 of 
the DSU, and Article  14(d)  of the SCM  Agreement,  which is the substantive provision at issue 
pertaining to the claim at hand. As noted earlier, the chapeau  of Article  14(d)  requires that an 
investigating authority adequately explain its application, to each particular case, of any method it 
uses to calc ulate the benefit conferred upon the recipient.  
7.60.   We consider that we must apply the above standard in reviewing an investigating 
authority's  finding of price distortion even in cases where the authority determines that the 
government is the predominant prov ider of the good in question. In applying that standard to such 
cases, we consider that the investigating authority cannot, based solely on evidence of the 
government's  predominant share in the market, conclude that the private prices for the good are 
distorted. The investigating authority must evaluate the remaining evidence on the record before it 
can reach any conclusion. This reasoning accords with the findings of the Appellate  Body and past 
panels that the link between government predominance and price  distortion is evidentiary. When 
the government is the predominant provider of goods, it is likely that private prices are distorted. 
However, the distortion of private prices may not be presumed. The investigating authority must 
 
138 Final determination, (Exhibit CAN -10), p.  94. 
139 Final determination, (Exhibit CAN -10), pp.  95-96. 
140 Canada's  second written submission, paras.  124-125. 
141 United  States'  first written submission, para.  301 (referring to Ap pellate  Body Report, US – 
Anti-Dumping and Countervailing Duties (China) , para.  446).  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  still evaluate the evidenc e on the record to ascertain whether private prices are actually distorted as 
a result of government intervention in the market.142  
7.61.   We note, in this regard, that the United  States concurs that "there is no market share 
threshold above which an investigatin g authority may conclude  per se that price distortion exists"; 
the United  States considers, however, referring to the Appellate  Body's  finding in US – Anti-Dumping 
and Countervailing Duties (China) , that the more predominant a government's  role is in the m arket, 
the more likely it is that the government's  role results in the distortion of private prices.143 The 
United  States, further asserts, citing to the Appellate  Body's  finding, that evidence evaluated by the 
USDOC in the underlying investigation demonstr ates that the case at hand is one "where the 
government's  role as provider of goods is so predominant that price distortion is likely and other 
evidence carries only limited weight".144 We concur with the Appellate  Body's  observation. In certain 
cases, the government's  role as provider of goods is so predominant that price distortion is likely 
and other evidence carries only limited weight. However, the weight to be given to evidence 
necessarily depends on the substance of the evidence, and an investigating authority may only 
ascertain the substance of evidence after properly evaluating it. In all cases, the evidence must be 
properly evaluated. Placing less weight on evidence after properly evaluating it  is different from 
placing less weight on evidence witho ut first properly evaluating it . This reasoning accords with the 
Appellate  Body's  observation that, even in cases where the government is the predominant supplier 
of the goods in question, the investigating authority cannot, based on the 
government's  predo minance, refuse to consider evidence relating to factors other than government 
market share.145  
7.62.   An investigating authority, having considered all the evidence on the record, may find that in 
light of the government's  predominant share, any other evidence on the record is either irrelevant 
or insufficient to override the price distortion , which the government's  predominance in the market 
has likely caused. However, the investigating authority cannot decide upon the relevance of the 
remaining eviden ce or what weight to accord that evidence without first properly evaluating that 
evidence. If upon such evaluation, the investigating authority finds that the evidence indicates that 
private prices are in fact undistorted, the authority may not accord less  weight to that evidence 
simply because of the government's  predominant role. Further, should the investigating authority 
decide that, having considered the government's  predominant share and having properly evaluated 
 
142 In US – Carbon Steel (India), the Appellate  Body observed that:  
The Appellate  Body has emphasized that, although a government's  predominant role as a 
supplier in the market makes it "likely" that private prices will be distorted, the distortion of 
in-country private prices must be established "on a case -by-case basis, according to the 
particular facts underlying each countervailing duty investigation". In US – Anti-Dumping and 
Countervailing Duties (China) , the Appellate  Body emphasized that "an investigating authority 
cannot, based simply on a finding that the government is the predominant supplier of the 
relevant goods, refuse to consider evidence relating to factors other than government market 
share." It clarified that its reasoning in US – Softwood Lumber IV excluded the application of a 
per se rule, according to which an investigating authority could properly conclude in every case, 
and regardless of any other evid ence, that the fact that the government is the predominant 
supplier means that private prices are distorted. The Appellate  Body has therefore cautioned 
against equating the concepts of price distortion and government predominance, and has 
highlighted that the link between the two concepts is an evidentiary one. Thus, there does not 
exist "a threshold above which the fact that the government is the predominant supplier in the 
market alone becomes sufficient to establish price distortion, but clearly, the mor e predominant 
a government's  role in the market is, the more likely this role will result in the distortion of 
private prices."  
(Appellate  Body Report, US – Carbon Steel (India), para. 4.156 (fns omitted)); see also, Appellate Body 
Reports, US – Countervailing Measures (China),  paras.  4.51 and 4.52; and US – Countervailing Measures 
(China) (Article 21.5 – China),  paras.  5.137 -5.146.  
143 United  States'  response to Panel question No. 46, para. 146 (referring to A ppellate  Body Report,  
US – Anti-Dumping and Countervailing Duties (China), para. 444).  
144 United  States'  first written submission, para.  301 (referring to Appellate  Body Report, US – 
Anti-Dumping and Countervailing Duties (China) , para.  446).  
145 We note that  although the Appellate  Body did consider, as the United  States submits, that there may 
be cases where the government's  role as a provider of goods is so predominant that price distortion is likely 
and other evidence carries only limited weight, it nonethe less emphasized that "price distortion must be 
established on a case -by-case basis and that an investigating authority cannot, based simply on a finding that 
the government is the predominant supplier of the relevant goods, refuse to consider evidence rela ting to 
factors other than government market share". (Appellate  Body Report, US – Anti-Dumping and Countervailing 
Duties (China) , para.  446).  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  evidence other than the evidence perta ining to the government's  market share, it will accord less 
weight to such other evidence, that decision should be clearly set out in its determination.  
7.63.   The relevance of record evidence other than government market share, and the weight that 
an investigat ing authority may properly accord to that evidence, will depend on the facts of each 
case.  
7.64.   In light of these considerations, we will proceed to examine whether the USDOC adequately 
evaluated the record evidence in finding that the private stumpage prices in Ontario were distorted 
and provided a reasoned and adequate explanation for that finding. In the case of Ontario, the 
USDOC did not explicitly state in its determination that it had accorded less weight to any record 
evidence because of the government's  predominant market share. However, even if it had made 
that express statement, we will need to examine whether the USDOC had properly evaluated that 
evidence before arriving at that decision.  
7.65.   As noted above, the USDOC made several intermediate findings, other than that the 
government held a predominant market share, that led it to conclude overall that Ontario private 
stumpage prices were distorted. As the United  States asserts, the USDOC concluded that private 
stumpage prices in Ontario were distorted ba sed not solely on the share of Ontario's  ownership or 
control of the stumpage market, but also on other evidence on the record. In particular, the USDOC 
reached its conclusion considering (a)  the method of setting the price for Crown stumpage; (b)  the 
flexible amounts of annual timber supply available to Crown timber tenure -holders; (c)  the ability of 
sawmills to trade Crown timber; and (d)  the fact that the most dominant purchasers of Crown timber 
were also the most dominant purchasers of private -origin ti mber.146 In evaluating whether the 
USDOC properly concluded that Ontario private stumpage prices were distorted, we will examine 
each of the USDOC's  intermediate findings and the evidentiary basis for each.147  
7.66.   We will also examine whether the USDOC improper ly declined using private log prices in 
Ontario as a stumpage benchmark.  
7.3.2.2.1   Administratively -set Crown stumpage prices  
7.67.   The United  States submits that the USDOC concluded that private stumpage prices in Ontario 
were distorted considering, among others, the met hod by which the Crown stumpage price was 
set.148 The United  States emphasizes that more than 96% of the harvest volume in Ontario is subject 
to the Crown's  administrative pricing mechanism.149 We will therefore first examine the 
USDOC's  finding that the Cro wn stumpage rate is, for the most part, set administratively, and does 
not account for market conditions.  
7.68.   The USDOC found that during the period of investigation ( POI), the Crown stumpage rate 
consisted of three components:  a minimum charge, which was adm inistratively set by the Ontario 
Government and intended to provide a secure level of revenue for the government, regardless of 
market conditions; as well as a forest renewal charge; and forestry futures charge, which are levied 
annually to cover the cost of renewing harvested areas and protecting Crown timber land. The 
USDOC observed that of the three components, only the forest renewal charge took into account 
market conditions.150 Canada does not contest that the two components of the Crown stumpage 
price, other than the forest renewal charge, were administratively set, but argues that the manner 
 
146 United  States'  first written submission, para.  298.  
147 The Appellate  Body has found that:  
A key aspect of how a panel must review a determination relates to the evidentiary basis for both 
the intermediate factual findings made by a national authority, as well as for its overall 
conclusions. In its Report in US – Countervailing Duty Investigation on DRAMS , the 
Appell ate Body considered how a panel is to review the evidentiary basis for findings when the 
overall conclusions are based on the authority's  assessment of the totality of multiple pieces of 
circumstantial evidence. The Appellate  Body observed that, even where  the investigating 
authority draws its conclusion from the totality of the evidence, it will often be appropriate, or 
necessary, for a panel "to examine the sufficiency of the evidence supporting an investigating 
authority's  conclusion … by looking at each  individual piece of evidence".  
(Appellate  Body Report, US – Softwood Lumber VI (Article  21.5 – Canada),  para. 94 (emphasis original))  
148 United  States'  first written submission, para.  298.  
149 United  States'  second written submission, para.  255. 
150 Final de termination, (Exhibit CAN -10), pp.  92-93. WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  in which Crown stumpage prices are determined is irrelevant to a distortion analysis. For Canada, 
the government price, simply  because it is administratively set,  cannot distort all other prices in the 
market.151  
7.69.   We agree with Canada that simply  because the government price is administratively set, does 
not necessarily mean that all the other prices in the market are distorted. In our view, the fact that 
the admini stratively -set price governs an overwhelming majority of the market, as the United  States 
asserts, does raise the likelihood  that the administratively -set price may influence prices in the 
private market.152 However, whether the administratively -set price i s actually transmitted to the 
private market will depend on the facts and circumstances of each case. In the present case, as the 
United  States submits153, the USDOC did not base its conclusion of price distortion in 
Ontario's  private market solely on the e xistence of administratively -set prices in the Crown market, 
but also took into consideration other relevant factors. We must, therefore, consider whether the 
USDOC's  finding relating to Ontario's  price setting mechanism, together with its other findings, 
cumulatively demonstrate price distortion.  
7.3.2.2.2   Flexible supply of Crown timber  
7.70.   We will next examine the USDOC's  finding that Ontario's  Crown timber tenure -holders had 
flexible amounts of annual timber supply available to them that depressed private timber pri ces.  
7.71.   Canada argues that in concluding that Ontario tenure -holders'  ability to harvest timber from 
Crown lands at levels above their AWS objectives could depress prices for private timber, the USDOC 
considered only what could, but not what did, happen. Can ada asserts that the Hendricks Report 
showed that in 2014 -2015, Ontario's  cumulative planned harvest across Forest Management Units 
(FMUs)  was 30,576,223  m3, whereas the actual harvest was 13,631,124  m3. All Crown timber that 
could economically be harveste d was harvested, and the sawmills could not have used the 
unharvested Crown areas instead of private standing timber.154 Further, sawmills consumed all 
timber that could be economically consumed, as confirmed by the excess capacity of Ontario 
sawmills durin g the POI.155 Canada contends that the USDOC also asserted without factual support 
that the ability of Ontario mills to transfer Crown timber between one another depresses demand 
for private timber. For Canada, the sale of softwood logs among mills indicate s a robust market for 
harvested logs and KPMG found that a significant proportion (25%)  of Ontario softwood logs destined 
for sawmills, including logs from private timber stands, are purchased from third  parties at 
arm's -length. Therefore, Canada contends that the USDOC's  conclusion that Crown timber supply 
depresses the price of private timber because mills can always purchase additional supply at an 
administered price, is inconsistent with the facts.156 
7.72.   The United  States argues, in response, that the USDOC  analysed the flexible supply of Crown 
timber available to Ontario tenure -holders in the context of the Crown's  majority share of the market 
in the POI. In that context, the additional supply of Crown timber available to Crown tenure -holders 
reduced the te nure-holders'  demand for, and prices of, private timber, therefore distorting those 
prices. The ability of mills in Ontario to transfer Crown timber – in the form of logs – amongst 
themselves had the same effect.157  
7.73.   We note that the parties do not dispute that tenure -holders in Ontario could harvest timber 
from Crown lands at levels above their AWS objectives, and therefore additional Crown timber was 
at least, in principle, available to them. What they disagree over is how the additionally availabl e 
Crown timber affected prices for private timber. We consider that flexible supply of Crown timber 
could  but would not necessarily  lower demand for, and depress prices of, private timber. Whether 
that additional supply of Crown timber would lower private timber prices would depend to a large 
extent on whether that additional supply was economically harvestable, in the sense of being 
 
151 Canada's  second written submission, para.  124(a).  
152 We note, in this regard, that the Appellate  Body has observed that the evidence of direct impact of 
the government intervention on prices such as administrative  price-fixing, among others, may be probative 
and make the finding of price distortion very likely, such that other evidence may be of lesser importance. 
(Appellate  Body Report, US – Countervailing Measures (China)  (Article  21.5 – China ), para. 5.154).  
153 United  States'  second written submission, para.  256. 
154 Canada's  first written submission, paras.  337-338. 
155 Canada's  first written submission, para.  333. 
156 Canada's  first written submission, paras.  339-340. 
157 United States' first written su bmission, paras.  307-308. WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  profitable. In our view, if the record evidence indicates that the additional supply of Crown timber 
may not have been profit able to harvest, tenure -holders may not have relied on that additional 
supply as an alternative to private timber. In that case, the availability of additional Crown timber 
may not have affected tenure -holders'  demand for, and prices of private timber. In this regard, the 
Hendricks Report, available on the record of the underlying investigation, reasoned that the 
additional supply of timber could not have depressed private stumpage prices, as the excess capacity 
of Ontario sawmills during the POI indicated that sawmills consumed all timber that could be 
economically consumed.158 According to the Hendricks Report, had profitable stands of either Ontario 
Crown or private softwood timber been available for lumber production, the sawmills would have 
harvested the m.159 The Hendricks Report therefore suggested that the sawmills did not harvest the 
additional Crown timber because that supply was not economical or profitable to harvest.160 The 
Hendricks Report also noted that in 2014 -2015, Ontario's  cumulative planned harve st across 
FMUs  at 30,576,223  m3 was much higher than its actual harvest at 13,631,124  m3. According to the 
report, this indicated that Ontario harvesters could have harvested a lot more timber than they 
actually did and that they did not harvest more timbe r because that would require them to harvest 
stands that were not economical at the time.161 In its determination, the USDOC, however, did not 
engage with that reasoning and evidence. Nor did the USDOC address the reasoning in the Hendricks 
Report that the supply of timber from Crown stands does not affect the potential revenues from 
private stands, and vice versa . According to the report, private stumpage prices are driven by the 
price of the end -product , which is lumber, and the share of softwood lumber exports from Ontario 
was too small to have affected the US price of softwood lumber.162  
7.74.   We consider that the reasoning and evidence cited in the Hendricks Report regarding the 
effect of flexible Crown timber supply on prices of private timber is, on its face , relevant to the 
USDOC's  finding in that regard.163 An objective and unbiased authority confronted with evidence or 
reasoning that appears relevant to its line of examination, would not, despite any predominance of 
government market share, accord less weig ht to that evidence without first scrutinizing the 
evidence.164 An objective and unbiased investigating authority would have engaged with that 
reasoning and evidence, and further examined whether tenure -holders could indeed have profitably 
harvested the add itional Crown timber available to them before concluding that the additional supply 
depressed private timber prices. This view comports with the Appellate  Body's  observation that 
"independently of the method chosen by the investigating authority, it has to  engage with and 
analyse the methods, data, explanations, and supporting evidence put forward by interested parties" 
in order to ensure that its finding is supported, and not diminished or contradicted by evidence and 
explanation on the record.165 The USDOC , however, did not do so in reaching the finding at issue.  
7.75.   We consider, in particular, that the USDOC did not adequately explain, in light of record 
evidence, how the additional supply of Crown timber available to Ontario tenure -holders because of 
their f lexible AWS objectives actually  depressed the demand for, and prices of, private -origin timber. 
In our view, whether the additional supply of Crown timber depressed private timber prices would 
 
158 The Hendricks Report stated that sawmills in Ontario had been operating below capacity and, 
pointing to industry data, asserted that the capacity utilization rate for the larger sawmills had not exceeded 
65% over the last three years. (Hendricks Report, (Exhibit CAN -19 (BCI)), paras.  13, 62, and 77).  
159 Hendricks Report, (Exhibit CAN -19 (BCI)), paras.  16, 65, and 77.  
160 Hendricks Report, (Exhibit CAN -19 (BCI)), paras.  65, 72, and 77.  
161 Hendricks Report, (Exhibit CAN -19 (BCI)), para . 72. 
162 Hendricks Report, (Exhibit CAN -19 (BCI)), paras.  55-56. 
163 We address in paragraphs 7.93-7.101  below the United  States'  arguments that the USDOC decided 
to accord the Hendricks Report limited weight due to certain assumptions in the report, and because the report 
allegedly ignored certain key  facts about the Ontario stumpage market. For reasons discussed in that part, we 
conclude that the United  States has not established how the Hendricks Report was flawed.  
We further agree with Canada that even if the USDOC was correct in discrediting 
Dr Hendricks'  economic analysis, it was not entitled to reject the underlying evidence, and still had to engage 
with and analyse it, in order to ensure that its finding of price distortion was not contradicted by the record 
evidence. As Canada asserts, Dr  Hendr icks' analysis pertaining to Ontario sawmills'  excess capacity was based 
on certain sources that were appended to the Hendricks Report, that is, the "Profile 2015:  softwood sawmills in 
United  States and Canada by forest economic advisors". (Canada's  commen ts on the United  States'  response 
to the Panel  question No. 165, para. 58 (referring to Hendricks Report, (Exhibit CAN -19 (BCI)), p.  128)).  
164 We agree with the panel in US – Countervailing Measures (China) (Article  21.5 – China),  that "when 
information which appears on its face relevant to [the] analysis under Article  14(d)  is before the investigating 
authority, it must consider this information and, if it concludes it is not probative or relevant to its analysis, 
explain that con clusion". (Panel Report, US – Countervailing Measures (China) (Article  21.5 – China) , 
para. 7.220).  
165 Appellate  Body Report, US – Countervailing Measures (China) (Article  21.5 – China) , para. 5.155.  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  depend on, among others, the Ontario sawmills'  total consumptio n needs for softwood timber and 
whether that supply of Crown timber satisfied that need, in addition to how profitable it was to 
harvest that supply of Crown timber relative to private timber. For instance, if the supply of Crown 
timber in question fully m et the sawmills'  total need and was equally or more profitable to harvest 
than private timber, that supply may have lowered the demand for private timber. However, if the 
supply of Crown timber did not satisfy the sawmills'  total need or was less profitabl e to harvest than 
private timber, that supply would have been unlikely to affect the demand for private timber. 
However, the USDOC analysed neither the consumption needs of Ontario sawmills nor the 
profitability of harvesting Crown relative to private timb er. The USDOC failed to do so, despite the 
evidence of excess capacity of Ontario sawmills during the POI set out in the Hendricks Report.166 
That evidence may have prompted an unbiased and objective investigating authority to at least 
examine whether, as C anada argues, "had there been additional stands of Crown or private timber, 
that could have been profitably harvested, they would have been".167  
7.76.   We also agree with Canada that the USDOC did not engage with the record evidence in finding 
that the ability of  Ontario mills to transfer Crown timber between one another depresses demand 
for private timber. The USDOC did not address the finding in the KPMG report that a significant 
proportion (25%)  of Ontario softwood logs destined for sawmills, including logs fro m private timber 
stands, are purchased from third -parties at arm's -length, and not from other sawmills.  
7.77.   Moreover, we consider that the USDOC also did not adequately explain how the additional 
supply of Crown timber available to Ontario tenure -holders beca use of their ability to sell logs among 
themselves, depressed the demand for, and prices of, private timber. Once again, we consider that 
whether that additional supply of Crown timber depressed private timber prices would depend on, 
among others, the Onta rio sawmills'  total consumption needs for softwood timber, whether the 
inter-mill transfer of logs together with the supply of Crown standing timber satisfied that need, as 
well as whether it made more economic sense for tenure -holders to purchase those lo gs relative to 
harvesting private timber. The USDOC, however, did not make that assessment.  
7.78.   The USDOC also did not support with any concrete evidence its finding that because 
tenure -holders could rely on Crown standing timber for their supply, "private woo dlot owners" or 
owners of private timber stands, "would be forced to price their standing timber at or below the 
Crown -stumpage price, or risk not selling their standing timber".168 In particular, the USDOC did not 
compare the record evidence of actual Crow n and private timber prices to assess whether the latter 
were actually "at or below the Crown -stumpage price". Canada asserts that private market 
transactions in Ontario can and do occur at stumpage prices above Crown stumpage prices. 
According to Canada, the survey of private timber sales found that sales were made regularly at 
prices both above and below the average Crown rates.169 Canada asserts that the record evidence 
shows that private timber was purchased for prices in excess of Crown stumpage prices for 
spruce -pine-fir (SPF) timber during the POI.170 We consider that the USDOC did not engage with 
that pricing data to explain whether that data did indeed show that private timber had been 
purchased for prices in excess of Crown stumpage prices for SPF timber during the POI, and if that 
were the case, wh y it considered that the flexible supply of Crown timber had depressed prices of 
private timber despite that data. The USDOC also did not engage with the finding in the Hendricks 
Report that most landowners of private timber stands are located close to pri mary and secondary 
roads, which would raise the average value of private timber stands relative to Crown timber; and 
that private timber owners were under no obligation to sell their timber at a given point in time and 
could wait to sell in the future when  prices were more favourable.171  
7.79.   We note that the United  States asserts that although Ontario "submitted survey prices for 
standing timber purchased on private lands, along with a study suggesting that these prices may 
serve as a tier -one benchmark price",  the USDOC found that the "private prices in Ontario would 
 
166 Hendricks Report, (Exhibit CAN -19 (BCI)), paras.  62 and  65. 
167 Canada's  first written submission, para. 333. 
168 Preliminary determination, (Exhibit CAN -8), p.  31. 
169 Canada's  first written submission, fn 617 (referring to MNP Ontario survey, (Exhibit CAN -144 (BCI)), 
appendix 4; and KPMG Report, (Exhibit CAN -145), schedule 1).  
170 Canada's  second written submission, para.  122 (referring to MNP Ontario survey, 
(Exhibit  CAN-144 (BCI)), p.  6).  
171 Hendricks Report, (Exhibit CAN -19 (BCI)), paras.  60 and 63.  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  largely track the prices the [government] charges for stumpage on Crown lands".172 We consider, 
however, that the USDOC concluded that private stumpage prices in Ontario "would" track 
government stu mpage prices without citing to any pricing data on the record or providing any 
explanation of that data to show how private prices did in fact track government stumpage prices. 
An objective and unbiased authority would have made that examination before rea ching the 
conclusion that the USDOC did.  
7.80.   The USDOC's  finding that the flexible supply of Crown timber depressed the demand for, and 
price of, private -origin timber is therefore, at best, speculative, not founded on record evidence or 
a reasoned explanatio n. Moreover, as noted above, the USDOC made that finding disregarding 
relevant evidence on the record.173 We, therefore, consider that the USDOC improperly found that 
any flexible supply of Crown timber available to sawmills expands the market for Crown tim ber, 
which in turn depresses demand for, and therefore prices of, timber in the private market. As 
that finding was flawed, it cannot, by itself, or by interacting with any of the USDOC's  other findings 
pertaining to Ontario's  timber market, demonstrate pr ice distortion.  
7.3.2.2.3   Market concentration  
7.3.2.2.3.1   Whether the USDOC explained how market concentration interacts with other 
factors to effect price distortion  
7.81.   We will next examine the USDOC's  finding pertaining to market concentration among a small 
number of tenure -holding companies . The USDOC found that " the five largest tenure -holding 
corporations accounted for approximately 92.6 percent of the allocated Crown -origin standing timber 
volume in [fiscal year] FY 2015 -2016", and "the five largest tenure -holding corporati ons accounted 
for 86.11 percent of the Crown -origin standing timber harvested during FY 2015 -2016".174 The 
USDOC considered that "[t] he concentration of the Crown harvest among a small number of 
companies gives these companies substantial market power over sellers of non -Crown -origin 
standing timber" .175 Further, the USDOC found that "the universe of firms consuming timber from 
private sources in Ontario is heavily concentrated and is dominated by tenure holders".176 In 
particular, the USDOC considered that most of the private standing timber is sold to a small number 
of consumers who are dominant consumers of both Crown and private timber, which demonstrated 
that the private market in Ontario was "not as independent a nd free of influence from the Crown 
timber market as the Hendricks Report suggests".177  
7.82.   Canada argues that the USDOC improperly concluded that market concentration created 
inadequate competition in Ontario's  standing timber market. For Canada, the level of  competition 
among private companies, including the level of market concentration, cannot be relied on, in and 
of itself, to establish that the government has distorted the private market. Canada submits that the 
level of competition is a prevailing market  condition, as is any level of market concentration.178 The 
United  States rejects Canada's  argument, submitting that the level of concentration of firms in the 
market may be a relevant consideration depending on the various circumstances of a case. The 
United States asserts that in the case at hand, the USDOC had found that the same firms dominated 
both the Crown and private timber markets. Further, the USDOC found that Ontario's  data showed 
that only a small number of firms consumed from sources other than Crown land during the POI.179 
The United  States submits that of the 15 largest harvesters of timber from Crown and other sources 
 
172 United  States'  first written submission, para.  295 (referring to Preliminary determination, 
(Exhibit  CAN-8), p.  31). 
173 We agree with the Appellate  Body's  observation in US – Carbon Steel (India)  that "the obligation 
under Article  14 to calculate the amount of subsidy in terms of the benefit to the recipient encompasses a 
requirement to conduct a sufficiently diligent investigation into, and solicitation of, relevant facts,  and to base a 
determination on positive evidence on the record" . (Appellate  Body Report, US – Carbon Steel (India) , 
para. 4.190).  
174 Preliminary determination, (Exhibit CAN -8), p.  31. 
175 Preliminary determination, (Exhibit CAN -8), p.  31. 
176 Final determinati on, (Exhibit CAN -10), p.  94. 
177 Final determination, (Exhibit CAN -10), p.  94. 
178 Canada's  first written submission, para.  342; opening statement at the first meeting of the Panel 
(28 February  2019), para.  132. 
179 United  States'  first written submission, para.  310 (referring to Final determination, (Exhibit CAN -10), 
p. 94). WT/DS533/ R 
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  during the POI, including those harvesters that were dual -source firms180, only a few firms dominated 
the purchase of all timber consumed from other, non -Crown sources.181 Moreover, those dual -source 
firms consumed much more timber from Crown sources than from other, non -Crown sources and 
the USDOC reasonably found, on the basis of that data, that "dual source firms are the most 
important customers of private timberland owners and private timber sellers must compete against 
the much larger Crown timber market when selling timber to their largest customers in Ontario".182  
7.83.   We agree with Canada that an objective and unbiased investig ating authority would not find 
price distortion based solely on the level of competition among private companies, including the 
level of market concentration. In this case, however, as noted earlier, the USDOC did not reject 
private prices in Ontario based  solely on a finding of market concentration. The USDOC had found 
that the Crown held the majority share of the stumpage market in the POI and that most of the 
private -origin standing timber is sold to a small number of consumers who are dominant consumers  
of both Crown and private -origin timber which, according to the USDOC, demonstrated that the 
private market in Ontario was "not as independent and free of influence from the Crown timber 
market as the Hendricks Report suggests".183 Further, the USDOC had f ound that the "ability of the 
majority of tenure -holders in Ontario to purchase significant amounts of standing timber in excess 
of their allocated volume reduces the need of those tenure -holders to source from non -Crown 
sources, such as the private market ", and "private woodlot owners would be forced to price their 
standing timber at or below the Crown stumpage price" .184 
7.84.   We consider, however, that the USDOC did not explain in its determination how market 
concentration, in interaction  with any of the above considerations including government 
predominance in the stumpage market, resulted in prices of private timber in Ontario being distorted, 
or in the USDOC's words, not being "free of influence from the Crown timber market".185 Even if the 
same group of Crown  tenure -holders dominate the purchase of both Crown and private -origin timber 
and rely primarily on the Crown market for their timber supply, those facts do not necessarily  imply 
distortion of private market prices. For instance, where Crown timber does no t fully meet the 
consumption needs of Crown tenure -holders, even if those tenure -holders are the dominant buyers 
of both Crown and private timber, their "market power" over sellers of private timber is diminished 
to the extent that they need to rely on pri vate timber for their consumption needs. The same would 
hold true regardless of the Crown's  predominant share in the timber market and the fact that the 
Crown stumpage rate is mainly administratively set. If the Crown tenure -holders must rely on private 
timber to fulfil their consumption needs, their demand for that timber will not necessarily be 
diminished for any of the following reasons:  their dominance in both the Crown and private timber 
markets, their primary reliance on Crown timber as a source of su pply, the Crown's  predominant 
share in the timber market or the fact that the Crown stumpage rate is administratively set. The 
question arises whether tenure -holders'  dominance in both Crown and private timber markets, taken 
together with certain other fac tors, such as evidence of additional harvestable Crown standing timber 
available to those tenure -holders may indicate price distortion.186  
 
180 "Dual -source firms" were firms that consumed timber from both Crown and "other sources" (private 
land, patent land, native land, and out of province sources)  during the POI. (Ontario marke t memorandum, 
(Exhibit USA -3), p.  1).  
181 United  States'  first written submission, para.  310 (referring to Ontario market memorandum, 
(Exhibit  USA-3), p.  2).  
182 United  States'  first written submission, para.  310 (referring to Ontario market memorandum, 
(Exhibit USA-3), p.  2).  
183 Final determination, (Exhibit CAN -10), p.  94. 
184 United  States'  first written submission, para.  291 (referring to Preliminary determination, 
(Exhibit  CAN-8), p.  31). 
185 We note that the USDOC found that: "[t]he fact that a majority of private origin standing timber is 
sold to a small number of customers, who are dominant consumers of both private and Crown timber, 
demonstrates that the private market in Ontario is not as independent and free of influence from the 
Crown  timber market as the Hendricks Report suggests". (Final determination, (Exhibit CAN -10), p.  94). 
186 The Appellate  Body found that:  
In addition to such review of how the investigating authority treated individual pieces of 
evidence, the Appellate  Body underlined that a panel  must also, with due regard to the approach 
taken by that authority, examine how the totality of the evidence supports the overall conclusion 
reached. In this connection, the Appellate  Body emphasized that panels have "the obligation to 
consider, in the co ntext of the totality of the evidence, how the interaction of certain pieces of 
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  7.85.   We consider however that, as noted earlier, the USDOC did not, in light of the record evidence, 
reasonably and adequa tely explain how any additional supply of Crown timber available to Crown 
tenure -holders, either because of their flexible AWS objectives or their ability to sell timber among 
themselves, depressed demand for private timber. For instance, if the additional  supply of Crown 
timber was not economical to harvest, Crown tenure -holders would not have relied on it and the fact 
that it was available to Crown tenure -holders could not possibly have, either by itself, or together 
with the fact of dominance of certain consumers in both markets, enhanced the market power of 
those tenure -holders in private markets. Therefore, the USDOC's  finding of additional supply of 
Crown timber even when considered together with its finding of market concentration does not, in 
light o f the record evidence, establish price distortion.  
7.86.   Canada further asserts that a past panel found that any decision to reject in -country prices 
must be supported by a reasoned and adequate explanation of how the alleged government 
intervention distorts th e price as well as direct evidence of an effect on price. Canada contends that 
in the case at hand the USDOC provided no indication that the alleged private market concentration 
distorted or had any effect on the private prices of stumpage.187 The United  States contends, in 
response, that Canada's  argument regarding "direct evidence of an effect on price" has no basis in 
the text of Article  14(d)  of the SCM  Agreement or in the facts of this dispute.188 
7.87.   We note that in making the argument set out in the preced ing paragraph, Canada relies on 
the panel's  finding in  US – Countervailing Measures (China)  (Article  21.5 – China).  In that case, the 
panel had observed, in relevant part, that:  
Evidence of widespread government intervention in the economy, without evidenc e of 
a direct impact on the price of the good in question or an adequate explanation of how 
the price of the good in question is distorted as a result, will not suffice to justify a 
determination that there are no "market -determined" prices for the good in  question 
which can be used for purposes of determining the adequacy of remuneration for 
government -provided goods.189  
7.88.   We consider that the panel in the above dispute took the view that in order to demonstrate 
that government intervention has resulted in p rice distortion, an investigating authority must rely 
on evidence of a direct impact on the price of the good in question or a reasoned and adequate 
explanation of how government intervention distorts the price of the good in question. Therefore, in 
order to show that government intervention has resulted in price distortion, it is not necessary that 
an investigating authority must always show a direct effect of government intervention on prices, 
when it has provided a reasoned and adequate explanation of ho w government intervention distorts 
prices, in light of the record evidence. Further, the Appellate  Body also understood the panel in the 
above dispute to have recognized that in the absence of evidence of a direct impact on the price of 
the good in questio n, an adequate explanation of how government intervention distorts the price of 
the good in question would suffice for purposes of the inquiry.190 The Appellate  Body further clarified 
that: 
[B]y requiring in the alternative either "evidence of a direct impa ct on the price of the 
good in question" or "an adequate explanation of how the price of the good in question 
is distorted as a result", the Panel's  statement is in line with our conclusion that, while 
there may be different ways to demonstrate the existen ce of price distortion, the 
investigating authority must choose a method capable of establishing how in -country 
prices are actually distorted as a result of government intervention.191  
 
evidence may justify certain inferences that could not have been justified by a review of the 
individual pieces of evidence in isolation."  
(Appellate Body Report, US – Softwood Lumber VI (Article  21.5 – Canada) , para.  94 (emphasis ori ginal))  
187 Canada's  first written submission, para.  343 (referring to Panel Report, US – Countervailing 
Measures (China)  (Article  21.5 – China) , para.  7.205).  
188 United  States'  response to Panel question No. 46, para.  143. 
189 Panel Report, US – Countervailing Measures (China)  (Article  21.5 – China) , para.  7.205. 
(emphasis  added)  
190 Appellate  Body Report, US – Countervailing Measures (China)  (Article  21.5 – China) , para.  5.145.  
191 Appellate  Body Report, US – Countervailing Measures (China)  (Article  21.5 – China) , para.  5.159 . 
(emphasis original; fns omitted)  WT/DS533/ R 
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  The Appellate  Body also considered that in the absence of evidence of a  direct impact of the 
government intervention on prices, the investigating authority may be required to provide a more 
detailed analysis and explanation. It emphasized nevertheless that "investigating authorities should 
provide a reasoned and adequate expl anation of the basis for their price distortion findings in each 
case, independently of whether their finding is based on evidence of direct or indirect impact of the 
government intervention on in -country prices".192 
7.89.   We agree with the Appellate  Body's  and panel's  observations and consider that investigating 
authorities have discretion to choose the specific method or type of analysis for purposes of 
determining the existence of price distortion. As regards the issue at hand, in the abse nce of 
evidence of a direct impact of government intervention on prices, the USDOC was required to have 
provided a more  detailed  explanation of how market concentration resulted in prices of private 
timber in Ontario being distorted as a result of governme nt predominance in the stumpage market 
than would have been required if the USDOC had relied on evidence of a direct impact of government 
intervention on prices. As set out in paragraph 7.84 above, it is not apparent from the 
USDOC's  determination that it provided such detailed explanation.  
7.3.2.2.3.2   Whether the USDOC was required to consider evidence relating to market 
concentration in the Hendricks Report  
7.90.   Canada contends that the record evidence contradicts the USDOC's  assertion that " there is 
inadequate competition on the basis of market concentration"  in Ontario's  standing timber 
market.193 Canada asserts that the record shows that private timber owners had m ultiple buyers. 
The Hendricks Report explained that competitive timber markets can occur with as few as two mills 
located in sufficient proximity to sellers of timber.194  
7.91.   In our view, the evidence pertaining to competitiveness in the Hendricks Report was, on its 
face, directly relevant to the USDOC's  finding that market concentration indicated that the private 
market in Ontario was not "free of influence from the Crown timber market", and an objective and 
impartial investigating authority would therefore ha ve taken it into consideration. The United  States, 
however, argues that the USDOC decided to accord the Hendricks Report limited weight due to 
certain assumptions in the report that were inconsistent with the record evidence and because it 
ignored several key facts regarding the Ontario stumpage market, including that the market 
contained "one dominant price setter", the Ontario Government .195  
7.92.   Canada disagrees with the United  States'  assertion that certain assumptions in the 
Hendricks  Report were inconsiste nt with the record evidence and that the report ignored the fact 
that the Ontario Government was the "dominant price setter" in the Ontario timber market. Canada 
contends that contrary to the United  States  and the USDOC's  assertion that the Hendricks Repor t 
"ignores the fact that there is one dominant price setter, [Ontario], in the Ontario timber market"196, 
the Hendricks Report does address this issue. Canada asserts that the entire premise of the 
Hendricks Report is that, despite the large role of the Cro wn in Ontario, the conditions of competition 
were such that market forces set private prices for stumpage in Ontario during the POI, without 
distortion.197 Canada further argues that the USDOC's  conclusion that the Hendricks Report ignores 
the fact that the  Ontario Government is the "dominant price setter" in the Ontario timber market is 
incorrect because "Dr. Hendricks explicitly acknowledged that Ontario Crown stumpage rates are 
administratively set" .198 The United  States contends, in response, that acknowledging that Crown 
stumpage rates are administratively set does not undermine the USDOC's  conclusion that the report 
ignores the dominance of the Ontario Government in the stumpage market.199 
7.93.   As regards t he USDOC's  consideration of the Hendricks Report, we will first examine the 
USDOC's  observation that the report ignores the fact that the Ontario Government is the "dominant 
price setter" in the Ontario timber market. We note that Dr Hendricks, in his repo rt, recognized that 
 
192 Appellate  Body Report, US – Countervailing Measures (China)  (Article  21.5 – China) , para.  5.159.  
193 Canada's  first written submission, para.  344. 
194 Canada's  first written submission, para.  344. 
195 United  States'  first written submission, paras.  303-305. 
196 Final determination, (Exhibit CAN -10), p.  94. 
197 Canada's  opening statement at the first meeting of the Panel (26 February 2019), para.  122. 
198 Canada's  responses to the Panel question Nos. 1 -153, annex A, p.  A-10. 
199 United  States'  second written submission, para.  85. WT/DS533/ R 
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  the coalition of US lumber producers, the petitioner in the underlying investigation, had made the 
following claim, in relevant part, regarding prices in the Ontario timber market:  
[W]here a substantial amount of any market is supplied by a government entity at an 
administered price … prices in any non -administered sector will be depressed by the 
administered price.200  
Dr Hendricks then noted that he had been asked to assess, among others, that claim of the 
petitioner. In that context, h e indicated that he would apply certain economic principles to assess 
whether the government's  supply of timber and stumpage programme reduced the demand of 
lumber producers for private timber. He further noted that the absence of any effect would imply 
that transaction prices in the private timber market were not distorted by the "supply of Crown 
timber at administered prices".201 We infer from these statements and references in the 
Hendricks  Report, first, that Dr Hendricks acknowledged, as Canada asserts202, that Ontario Crown 
stumpage prices are administratively set. Second, we agree with Canada203 that these statements 
imply that Dr Hendricks had recognized that his mandate was to examine whether the private timber 
market in Ontario was distorted in light of the petitioner's  claim that "a substantial amount" of the 
Ontario timber market is supplied by a government entity at an administered price. Nowhere in his 
report did Dr Hendricks dispute that the Ontario Government supplied "a substantial amount" of th e 
Ontario timber market at an administered price. Further, as Canada asserts, Dr Hendricks also noted 
that the private timber harvest represented approximately 8% of the total Crown harvest during the 
POI.204 Therefore, we can infer from the above considera tions that Dr Hendricks conducted his 
assessment based on the premise that the Ontario Government supplies a substantial amount of the 
Ontario timber market at an administered price. We, therefore, consider that the United  States has 
not established how th e Hendricks Report ignored the fact that the Ontario Government was the 
"dominant price setter" in the Ontario timber market.  
7.94.   We will next examine the USDOC's  observation that certain assumptions in the 
Hendricks  Report did not accord with the underlying MNP Ontario survey data. We note that the 
Hendricks Report had concluded that private timber prices resulted from a competitive process based 
on, among others, the evidence that private stumpage prices are driven b y prices for end -products 
manufactured from timber, and that private landowners had multiple potential buyers. The USDOC 
found that the Hendricks Report assumed that stumpage prices in southern Ontario would be higher 
than prices in northern Ontario becaus e the distance between the timber stands and sawmills is 
greater in the north than in the south. According to the USDOC, the MNP Ontario survey, on which 
the Hendricks Report relied, however, showed that SPF stumpage prices in 2015 -2016 in southern 
Ontario  were lower than those in northern Ontario. The USDOC concluded that this underlying data 
ran contrary to the "theory of a competitive market for private origin timber in Ontario in the 
Hendricks report".205  
7.95.   Canada contends that the USDOC incorrectly found  that the Hendricks Report assumed that 
stumpage prices in southern Ontario are higher than prices in northern Ontario. Canada also denies 
that Dr Hendricks' analysis relied on that assumption. Canada asserts that, in any event, 
Dr Hendricks noted that "fo r SPF delivered to sawmills, the volume -weighted average prices in the 
two regions are not significantly different from each other in either period".206 The United  States 
responds that the Hendricks Report does suggest that Dr Hendricks made the assumption that 
stumpage prices in southern Ontario would be higher than prices in northern Ontario. The 
United  States asserts that the report discusses data that, it suggests, demonstrate s that "stands in 
the northern regions are often located further away from mill s, have smaller trees due to higher 
latitudes, and are costly to harvest, thus making some portion of the available supply uneconomical 
at current prices", in contrast to the southern regions where harvesting is more economical at current 
prices.207 The Uni ted States adds that Canada has argued throughout this proceeding that smaller 
 
200 Hendricks Report, (Exhibit CAN -19 (BCI)), para.  9. 
201 Hendricks Report, (Exhibit CAN -19 (BCI)), para.  10. 
202 Canada's  responses to the Panel question Nos. 1 -153, annex A, p.  A-10. 
203 Canada's  response to Panel  question No. 43, para. 177. 
204 Hendricks Report, (Exhibit CAN -19 (BCI)), para.  81. 
205 Final determination, (Exhibit CAN -10), p.  94. 
206 Canada's  second written submission, para.  121 and fn 174 (quoting Hendricks Report, 
(Exhibit  CAN-19 (BCI)), para.  98). 
207 United  States'  second written submission, para.  87 (referring to Hendricks Report, 
(Exhibit  CAN-19 (BCI)), pp.  13-14); response to Panel question No. 162, para.  55.  WT/DS533/ R 
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  trees, high harvesting costs, and high transportation costs have a downward effect on price, such 
that trees with these characteristics in Ontario (i.e. trees in the northern re gions)  would command 
a lower price for stumpage than trees without those characteristics (i.e. trees in the 
southern  regions).208 
7.96.   We note first that the United  States has not shown that Dr Hendricks, implicitly or explicitly , 
stated anywhere in his report that because the stands in southern Ontario were located closer to 
mills than in northern Ontario, stumpage prices in southern Ontario would be higher than prices in 
northern Ontario. In response to our question asking the Un ited States where the Hendricks Report 
set out that assumption, the United  States points to certain statements in the MNP Ontario survey.209 
In particular, the United  States asserts that the MNP Ontario survey notes that "SPF stumpage prices 
are lower in th e South region than the North region, which was not expected" and that "[s]urvey 
respondents familiar with SPF markets in Ontario indicated that they expected stumpage prices in 
the South region to be higher than the North region based on an assumption  that timber in southern 
Ontario is in closer proximity to markets, would typically attract lower costs associated with access 
and stump -to-mill transportation, and would result in a higher average stumpage prices".210 For the 
United  States, the Hendricks Repor t relies on this same assumption.  
7.97.   We agree with Canada, however, that the statement that the United  States refers us to in the 
MNP Ontario survey that private stumpage prices in the south should be higher than in the north 
due to the shorter distance betw een timber stands and mills in the south, is based on comments 
from the MNP Ontario survey respondents but does not constitute an assumption made by 
Dr Hendricks himself.211 As Canada asserts, the United  States fails to identify where Dr Hendricks 
himself m ade the assumption in question in his report. On the contrary, as Canada avers, 
Dr Hendricks noted in his report that "for SPF delivered to sawmills, the volume -weighted average 
prices in the [ north and south ] regions are not significantly different from each other in either 
period".212 
7.98.   Canada further asserts that the USDOC looked at the wrong table pertaining to stumpage 
prices in the MNP Ontario survey.213 According to Canada, exhibit 6 of the MNP Ontario survey, which 
the USDOC relied upon in its finding, shows that prices were lower in the south because that table 
reports transaction prices for SPF  delivered to sawmills and to pulp mills, and because SPF prices 
delivered to pulp mills  were much lower in the south than in the north.214 Canada  posits that exhibit  4 
of the MNP Ontario survey, which relates to prices of SPF delivered to sawmills,  in contrast, shows 
that the weighted average stumpage price was indeed higher in the south in 2014 -2015, although 
it was slightly lower in 2015 -2016.215 The United  States asserts that the USDOC did not err in relying 
on exhibit 6 of the MNP Ontario survey to support its observations regarding stumpage prices in 
northern as compared with southern Ontario, as that table summarizes total SPF stumpage prices 
for standing timber on private land in Ontario, and establishes that SPF weighted average stumpage 
prices were lower in southern Ontario than northern Ontario.216 Further, exhibit 4 of the MNP survey 
shows that the sawmill SPF weighted average stumpage price s for the 2015 -2016 period also were 
lower in southern Ontario than northern Ontario. Therefore, for the United  States, regardless of the 
table relied upon, the MNP Ontario survey provides evidentiary support for the USDOC's  conclusions 
regarding price dif ferences for private stumpage between northern and southern Ontario.217 
7.99.   In our view, whether the USDOC should have relied on exhibit 6 or exhibit 4 in drawing 
conclusions regarding price differences for private stumpage between northern and southern 
Ontario , is immaterial to the question at hand, which is whether the Hendricks Report made an 
 
208 United  States'  second written submission, para.  87. 
209 United  States'  response to Panel question No. 162, para. 57. 
210 United States'  response to Panel question No. 162, para. 57 (quoting MNP Ontario survey, 
(Exhibit  CAN-144 (BCI)), p.  5). (emphasis original)  
211 Canada's  comments on the United  States'  response to Panel question No. 162, para.  47. 
212 Canada's  comments on the United  States'  response to Panel question No. 162, para.  47 (referring to 
Hendricks Report, (Exhibit CAN -19 (BCI)), para.  98). 
213 Canada's  second written submission, para.  120. 
214 Canada's  secon d written submission, para.  121 (referring to MNP Ontario survey, 
(Exhibit  CAN-144 (BCI)), p.  7, exhibit 6).  
215 Canada's  second written submission, para.  121 (referring to MNP Ontario survey, 
(Exhibit  CAN-144 (BCI)), p.  7, exhibit 4).  
216 United  States'  respo nse to Panel question No. 163, para. 58. 
217 United  States'  response to Panel question No. 163, para. 59. WT/DS533/ R 
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  assumption that stumpage prices in southern Ontario would be higher than prices in northern Ontario 
because the distance between the timber  stands  and sawmills is greate r in the north than in the 
south. As noted above, the United  States has failed to establish that the Hendricks Report did in fact 
make that assumption.  
7.100.   We further note that Dr Hendricks in his report had explained that the price of a private 
softwood timb er stand is determined on the basis of its "residual value", which is equal to the 
revenue derived from the end -products produced from the stand  less the costs of harvesting the 
trees on the private timber stand (excluding stumpage) , of hauling the logs fr om the forest to the 
sawmill, of processing the logs into end -products, and of delivering the end -products from the 
sawmill to their markets .218 Even if Dr Hendricks suggested that the costs of harvesting private 
timber stands and of hauling logs from the f orest to the sawmill in southern Ontario were lower than 
those in northern Ontario, he said nothing about the remaining costs  that would cumulatively 
determine the prices of the timber stands in question, i.e. costs of processing the logs into 
end-products  (i.e. lumber), and of delivering the end -products to their markets. When the 
Hendricks  Report itself set out these costs as determinants of the stumpage price, the report cannot 
be understood to have assumed that solely because one of the costs was lower in the south, the 
price of timber in the south would necessarily be higher. In any event, we recall that, as Canada 
asserts, Dr Hendricks indicated that for SPF delivered to sawmills, "the volume -weighted average 
prices in the two regions are not significa ntly different from each other" in either of the periods 
assessed, that is, 2014 -2015 or 2015 -2016. It is possible, at least in principle, that if costs of 
accessing and harvesting timber, being lower in the south, put an upward pressure on stumpage 
prices  in the south, the remaining costs that Dr Hendricks had referred to, may have put a downward 
pressure, so that the final prices in the north and the south were, as in Dr Hendricks'  words, not 
significantly different from each other.  
7.101.   We therefore consider  that the United  States has not established how the Hendricks Report 
was flawed. As noted earlier, an objective and unbiased investigating authority would not reject 
evidence without first evaluating it. In the underlying investigation, however, the record  shows that 
the USDOC did reject the Hendricks Report without properly evaluating it.  
7.102.   The United  States asserts, as noted earlier, that the evidence evaluated by the USDOC in 
the case of Ontario demonstrates that this is a case where the government's  role as provider of 
goods is so predominant that price distortion is likely and other evidence carries only limited 
weight.219 As regards the Hendricks Report, we take the view that considering that the USDOC did 
not properly evaluate that report in the first p lace, the USDOC could not reasonably have accorded 
the report less weight prior to such proper evaluation. Furthermore, as noted earlier, it is not evident 
from the USDOC's determination that the USDOC had decided to accord "less weight" to the 
Hendricks R eport based on the Ontario Government's  predominant share in the stumpage market. 
We agree with Canada that the United  States'  assertion that the USDOC was correct to attach less 
weight to Ontario's  record evidence because of the predominance of the Ontari o Government in the 
stumpage market, amounts to ex post rationalization.220  
7.103.   For the reasons stated above, we consider that the USDOC did not reasonably and 
adequately explain, in light of the record evidence, how market concentration, either by itself or i n 
conjunction with other factors, effects distortion of private stumpage prices in Ontario.  
7.3.2.2.4   Representativeness of MNP Ontario survey  
7.104.   We will next examine the USDOC's  finding that the MNP Ontario survey results were 
unrepresentative. The USDOC found, in pa rticular, that the small number of respondents reporting 
private timber purchases in the MNP Ontario survey makes the survey results unrepresentative and 
further indicates diminished demand for private timber in Ontario. Canada argues that the USDOC 
erred in concluding that the MNP Ontario survey results were unrepresentative and indicated 
diminished demand for private timber in Ontario. Canada asserts that the USDOC itself 
acknowledged that "the [ Nova Scotia ] Survey, in terms of the number of respondents a nd the 
absolute volume of SPF timber reported by the survey respondents, is on par with the private -origin 
 
218 Hendricks Report, (Exhibit CAN -19 (BCI) ), paras.  54-57.  
219 United  States'  first written submission, para.  301. 
220 Canada's  opening statement at the first meeting of the Panel (26 February 2019), para.  117. WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  standing timber harvest data contained in the MNP Ontario Survey".221 For Canada, the lower 
number of respondents to the MNP Ontario survey compared with previous surveys of 
Ontario's  private timber market suggests "a consolidation of loggers in the marketplace" rather than 
a reduction in demand for private timber in the pr ovince.222  
7.105.   We note that the USDOC rejected the MNP Ontario survey for purposes of arriving at a 
stumpage benchmark on the basis that the "small number of survey respondents" call s into question 
the representativeness of the survey, among other things. We c onsider that the USDOC's  rejection 
of the MNP Ontario survey on that basis is at odds with its acceptance of the Nova Scotia  survey for 
purposes of arriving at a stumpage benchmark given that the USDOC considered that the latter 
survey was at par with the MNP Ontario survey in terms of the number of respondents and the 
absolute volume of timber they reported.223 In our view, the USDOC therefore provided no 
reasonable basis for finding that the MNP Ontario survey was inadequately representative.224  
7.106.   Further, t he USDOC also did not explain why the number of respondents to the survey 
necessarily suggested diminished demand when the survey indicated that the lower number of 
respondents, in comparison to previous surveys of the Ontario private market suggests a red uction 
in the number of industry participants because of a "consolidation of [loggers] in the marketplace".225 
The MNP Ontario survey indicated that the loggers responding to the survey in 2016 were less than 
half the number of loggers that responded to the survey in 2006, but purchased almost an equal 
amount of private timber as compared to loggers responding to the survey in 2006.226 Considering 
that the USDOC failed to engage with that explanation, we take the view that the USDOC did not, 
in light of the record evidence, provide a reasoned and adequate explanation for its finding that the 
MNP Ontario survey indic ates diminished demand for private timber in Ontario.  
7.3.2.2.5   Log prices in Ontario  
7.107.   Finally, we turn to examine the USDOC's  decision to decline using private log prices in 
Ontario as a stumpage benchmark.  
7.108.   Canada argues that the USDOC improperly rejected as a stum page benchmark the KPMG 
survey data on arm 's-length, third -party private log transaction data in Ontario, sourced from both 
Crown and private land. That data pertains to a good that is similar to standing timber in Ontario 
and therefore reflects actual mar ket conditions for both standing timber and logs in Ontario.227 
Further, the USDOC acknowledged in previous investigations that "in -market" stumpage prices can 
 
221 Canada's  first written submission, para.  330 (referring to Final determination, (Exhibit CAN -10), 
p. 121). (emphasis original)  
222 Canada's  first written submission, para.  347. 
223 Canada's  first written submission, para.  330 (referring to Final determination, (Exhibit CAN -10), 
p. 121). (emphasis original)  
224 We note that the United States argues that Canada draws a  false equivalence between the 
MNP Ontario survey and the Nova  Scotia survey. The United States asserts that the MNP survey was based on 
data from 8 (or in some instances 15) sawmills whereas the Nova  Scotia survey was based on data from 
21 registered buye rs. (United States' second written submission, para. 95). We consider, however, that the 
USDOC itself drew equivalence between the MNP Ontario survey and the Nova  Scotia survey, in finding that 
"the [Nova  Scotia] Survey, in terms of the number of responden ts and the absolute volume of SPF timber 
reported by the survey respondents, is on par with the private -origin standing timber harvest data contained in 
the MNP Ontario Survey". The United States further asserts that "the MNP survey covered 65% of 3.5% of 
Ontario's softwood sawable stumpage market: that is approximately 2.275% of the Ontario softwood sawable 
market". In contrast, the Nova  Scotia survey " 'included approximately 36% of private softwood sawable 
volume purchased in Nova  Scotia ' during the su rvey period i.e. approximately 36 per cent of [[***]] percent, 
that is over [[***]] percent of the Nova  Scotia private softwood sawable stumpage market" . (United  States'  
second  written submission, para. 96 (emphasis added)). We note first that the USDOC di d not itself provide 
this reasoning and the United States' argument is therefore ex post rationalization. In any event, we consider 
that the MNP  Ontario survey's coverage of the total private  timber transacted in the province, standing at 
approximately 65% , was higher than the Nova  Scotia survey's coverage of 36% private  softwood sawable 
volume purchased in Nova  Scotia. We therefore reject the United States' arguments.  
225 MNP Ontario survey, (Exhibit CAN -144 (BCI)), p.  4. 
226 In particular, the survey explaine d that "[i]n 2016, there were 35 loggers responding to the survey 
compared to 83 in 2006. The 35 loggers responding in 2016 accounted for 749,041 m3 of private timber 
purchases, whereas the 83 loggers responding in 2006 accounted for 805,530 m3 of purchase d timber. This 
points to a nearly equal volume of private timber purchased by fewer than half the number of loggers in 2016, 
indicating a consolidation of buyers in the marketplace" . (MNP Ontario survey, (Exhibit CAN -144 (BCI)), p.  4). 
227 Canada's  first wri tten submission, para.  348. WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  be derived by deducting harvesting costs from log prices.228 In response, the United  States conten ds 
that the log prices proposed as a benchmark by the Canadian respondents are not prices for the 
good in question – that is, standing timber – but rather are prices for logs. The log price benchmark 
is not a market -determined price for the good in questio n and, given that the USDOC had identified 
a stumpage benchmark for the good in question in Nova Scotia , which was within Canada, using an 
alternative approach is not required.229  
7.109.   We note that the USDOC considered that the KPMG survey data that the Ontario  Government 
proposed as a benchmark, set out prices for logs, rather than prices for stumpage, which was the 
good in question. The USDOC therefore considered that log prices did not constitute a "tier -one 
benchmark"230 under the US regulatory hierarchy. The  USDOC dismissed as being unnecessary, the 
examination of non -tier-one benchmark data such as the log prices in Ontario when it had already 
found a tier -one benchmark in Nova Scotia  stumpage prices.231 We consider, however, that 
Article  14(d)  of the SCM  Agreement required the USDOC to determine the adequacy of remuneration 
for Crown stumpage in Ontario "in relation to prevailing market conditions  for the good in question ". 
Therefore, Article  14(d)  required not only that the selected benchmark relate to Crown  stumpage  in 
Ontario, which is the good in question, but also to the prevailing market conditions  for that Crown 
stumpage .  
7.110.   We further note that in the underlying investigation the USDOC, in its questionnaire to the 
respondents, had itself asked the respondents to provide data on private log prices in Ontario.232  
7.111.   In our view, an objective and unbiased investigating authority, in light of the above 
considerations and facts of the underlying investigation, would not have dismissed log prices in 
Ontario as a possible stumpage benchmark without explaining whether, and if so why, the 
Nova Scotia  stumpage prices related more closely to the prevailing market conditions for stumpage 
in Ontario than the log prices in question. Such an explanation is pertinent f or several reasons. First, 
the USDOC had itself asked the respondents to submit data on log prices in Ontario. This indicated 
that the USDOC regarded log prices as a potential benchmark. Further, the Appellate  Body has found 
that Article  VI:3 of the GATT 1 994 requires investigating authorities, before imposing countervailing 
duties, to ascertain the precise amount of a subsidy attributed to the imported products under 
investigation.233 Considering that the amount of subsidy is determined based on the amount of 
benefit conferred, which in turn depends on the choice of benchmark, it follows that the investigating 
authority will need to consider using, at least as an initial step in its benefit analysis, a benchmark 
that best reflects the prevailing market condi tions for the government -provided good. The USDOC 
dismissed the log prices on the basis that they did not reflect the price for the good in question, 
which was stumpage, but did not explain why the stumpage prices that could have been derived 
from the log prices may not have better reflected the prevailing market conditions for stumpage in 
Ontario than the stumpage prices in Nova Scotia . In this regard, we note that the United  States 
recognizes that "the use of a log -derived benchmark for stumpage may be pe rmissible in certain 
contexts"234, and has acknowledged in previous investigations that stumpage prices can be derived 
simply by deducting certain costs from log prices.235 Moreover, even in the underlying investigation, 
 
228 Canada's  first written submission, paras.  353-354. 
229 United  States'  first written submission, para.  313. 
230 As noted earlier, US law sets out potential benchmarks in hierarchical order of preference  (a) a 
market -determined pric e for the good in question using actual transactions in the country under investigation 
(tier-one); (b)  world market prices that would be available to the purchasers in the country under investigation 
(tier-two); or (c)  assessment of whether the government  price is consistent with market principles (tier -three). 
The USDOC explained that the preferred benchmark in the hierarchy, the tier -one benchmark price, is an 
observed market price from actual transactions, such as prices from private parties or , in cert ain 
circumstances , government -run auctions, within the country under investigation. (Preliminary determination, 
(Exhibit CAN -8), pp.  26-27). 
231 Final determination, (Exhibit CAN -10), p.  95. 
232 Ontario initial questionnaire response , (Exhibit CAN -155), pp. ON-149-ON-150.  
233 The Appellate  Body further observed that "[a] parallel can be drawn between the obligation of an 
investigating authority under Article  VI:3 of the GATT 1994 to determine the precise amount of the subsidy, on 
the one hand, and the anal ogous obligations that an investigating authority has under Articles  19.3 and 19.4 of 
the SCM Agreement, on the other hand, to determine and levy countervailing duties in amounts that are 
appropriate in each case and that do not exceed the amount of the su bsidy found to exist" . (Appellate  Body 
Report, Anti-Dumping and Countervailing Duties (China) , para. 601). See also, Appellate  Body Report, US – 
Washing Machines, para. 5.268.  
234 United  States'  first written submission, para.  338.  
235 First remand determina tion, (Exhibit  CAN-94), p.  11.  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  the USDOC found that an appropriate s tumpage benchmark for British  Columbia  could be derived 
from Washington State log prices because the timber species and growing conditions in the 
respective jurisdictions were allegedly "similar".236  
7.112.   Therefore, we consider that faced with a choice between log prices in Ontario and standing 
timber prices in Nova Scotia  as potential stumpage benchmarks, an objective and unbiased authority 
would have explained why log prices in Ontario, provided they are market -determined, could not be 
used to derive a benchma rk that would more accurately reflect the prevailing conditions for 
stumpage in the Ontario market than would stumpage prices in Nova Scotia . The United  States has 
not identified where the USDOC provided that explanation in its determination.237 We, therefo re, 
consider that the USDOC did not provide a reasoned and adequate explanation for rejecting as a 
stumpage benchmark the log prices that it had itself requested the respondents to provide.  
7.3.2.3   Conclusion  
7.113.   For the reasons set out above, we consider that the US DOC's findings pertaining to 
Ontario's  stumpage market did not either individually, or collectively, demonstrate price distortion 
in that market. Further, the USDOC did not provide a reasoned and adequate basis for rejecting, as 
a stumpage benchmark, log p rices in Ontario. We, therefore, conclude that the USDOC acted 
inconsistently with Article 14(d) in rejecting Ontario's private stumpage and log prices as a stumpage 
benchmark.  
7.3.3   Whether the USDOC improperly rejected BCTS auction prices in British  Columbia  as 
an appropriate stumpage benchmark  
7.114.   Canada claims that the USDOC acted inconsistently with Article  14(d)  of the SCM  Agreement 
by improperly rejecting British  Columbia 's proposed "in -market" stumpage benchmark. The 
proposed benchmark was the prices paid by log producers in British  Columbia  for rights to harvest 
certain Crown timber allocated via auctions.238 Aside from allocating Crown timber via long -term 
licences for stumpage rates, British  Columbia  also allocated a certain portion of Crown timber via 
auctions. A total of 17% of Crown timber harvested in British  Columbia  during the POI was allocated 
through auctions in the POI.239 In Canada's  view, the price at which timber was allocated to log 
producers in these auctions represented the market value of timbe r that the USDOC ought to have 
treated as the benchmark for assessing the adequacy of the stumpage rates for timber sold via 
long-term licences.  
7.3.3.1   Factual aspects  
7.115.   British  Columbia  uses results from auctions conducted by British  Columbia  Timber Sales 
(BCTS)  to determine stumpage prices for non -BCTS Crown timber through its Market Pricing System 
(MPS).240 The prices paid for the right to harvest from these auctions provide the basis for the MPS, 
which determines the stumpage rates for the remaining Crown stands not sold through auction. 
Stumpage prices in British  Columbia  for all Crown -origin standing timbe r are thus determined 
through either (a)  BCTS auctions, or (b)  British  Columbia 's MPS.241 The MPS uses auction data from 
the BCTS to determine what the winning bid would have been if a timber stand had been sold through 
auction.242 The value of the stand is determined by subsequently adjusting the estimated winning 
 
236 Final determination, (Exhibit CAN -10), p.  63.  
237 We asked the United  States to indicate where in its determination the USDOC explained why log 
prices in Ontario, provided they were market -determined, could not be used to d erive a benchmark which 
would more accurately reflect the prevailing market conditions for stumpage in Ontario than stumpage prices 
in Nova  Scotia. We agree with Canada that in its response, the United  States, rather than pointing to that 
explanation refer red to in our question, simply reiterates the USDOC's  conclusion that it preferred to use a 
stumpage price rather than a log price, based upon the USDOC's  regulatory hierarchy. (United  States'  response 
to Panel  question No. 164, paras.  60-63; Canada's  comm ents on the United  States'  response to Panel  question 
No. 164, paras.  51-52). 
238 British  Columbia  initial questionnaire response, (Exhibit CAN -18 (BCI)) , p. BC-I-6.  
239 Canada's  responses to Panel question No. 79, para.  236, and No. 202, para.  122. 
240 Canada' s first written submission, para.  61. 
241 Final determination, (Exhibit CAN -10), p.  54. 
242 Canada's  first written submission, para.  98. WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  bid to account for the non -BCTS bidders'  obligations, including costs associated with forest 
management, development, road construction and maintenance, and silviculture.243 
7.116.   The USDOC concluded that  prices in British  Columbia , including the stumpage prices from 
BCTS auctions, were not market -determined and thus were not appropriate to use as a stumpage 
benchmark for determining the adequacy of remuneration for non -BCTS Crown -origin standing 
timber in  the province.244 The USDOC reached that conclusion considering (a)  the provincial 
government's  predominant share in the market245; (b) its findings of certain flaws in the BCTS 
auction system; and (c)  the impact on the stumpage market of export restrictions  on logs in 
British  Columbia .246  
7.117.   The USDOC found the BCTS auction system to be flawed in two ways. First, a small number 
of companies dominate the BCTS auction market, thereby inhibiting competition. The five companies 
that dominate the direct allocation a nd harvest of standing timber from Crown lands account for a 
large percentage of the auctioned volume.247 The same five companies also account for 65.23% of 
the Crown harvest while the ten largest companies account for 71.55%.248 Second, the USDOC 
determined  that British  Columbia  had imposed a three -sale limit on auction bidders with the aim of 
encouraging competition in the auction market. This limitation, however, introduces an "artificial 
barrier to participation" in the BCTS auctions because to the extent  that some companies have 
already exhausted the three -sale quota, "any given auction will find fewer bidders that could 
otherwise participate". The USDOC found that "for this reason alone" it could not accept the BCTS 
auction prices as the benchmark stumpa ge price for non -BCTS Crown -origin timber.249  
7.118.   The USDOC also found that the dominant companies, in any event, circumvented the 
three -sale limit by accessing additional auctioned timber through third -party proxies or straw 
purchasers, and therefore maintain ed their dominance in the auctions.250 According to the USDOC, 
these companies, in order to access the timber won by a third party at auction, pay a cutting rights 
fee to the third party. The USDOC reasoned that t he companies therefore incur an additional c ost 
that they would not incur if bidding for the timber directly , and that  this cost would  likely be factored 
into the auction in the form of lower bids, as the bidder would expect the companies to discount 
their purchase price accordingly. The price paid by the BCTS auction winner therefore does not 
reflect the full value of the timber.251  
7.119.   Finally, the USDOC found that the log export regulations in British  Columbia  reduced log 
prices and, therefore, stumpage prices in the province.252  
7.3.3.2   Evaluation  
7.120.   Canada cla ims that the USDOC's  rejection of the BCTS auction prices as a stumpage 
benchmark was inconsistent with Article  14(d)  of the SCM  Agreement. Canada contends that each 
of the grounds on which the USDOC's  overall conclusion about the validity of BCTS auction prices as 
a benchmark was based was not supported by a reasoned or adequate explanation, nor adequately 
supported by record evidence.253 We begin examining Canada's  claim by evaluating each of the 
 
243 Canada's  first written submission, para.  101. 
244 We note that the USDOC used the terms non-market -determined  and price dis tortion  
interchangeably in the underlying determinations.  
245 More than 90% of the total standing timber harvested in British  Columbia during the POI was 
harvested from provincial Crown land. (Preliminary determination, (Exhibit CAN -8), p.  20).  
246 Preliminary determination, (Exhibit CAN -8), p.  36; Final determination, (Exhibit CAN -10), pp.  55-58. 
247 Preliminary determination, (Exhibit CAN -8), p.  38; Final determination, (Exhibit CAN -10), p. 57 and 
fn 341. We note that the five dominant firms referred to by the USDOC consumed auctioned timber, not only 
by purchasing the timber directly in the auctions, but also by purchasing timber from independent bidders. 
Canada's  claim concerns the USDOC's  finding that the fact that a handful of firms consumed a majority of 
auctioned timber – purchased both directly and indirectly – and also held a majority of directly allocated timber 
caused distortion of BCTS auction prices.  
248 Preliminary determination, (Exhibit CAN -8), p. 37. 
249 Final determination, (Exhibit CAN -10), p.  57. 
250 Final determination, (Exhibit CAN -10), p.  57. 
251 Final determination, (Exhibit CAN -10), p.  58. 
252 Final determination, (Exhibit CAN -10), p.  58. 
253 At para.  375 of its first written submission, the Un ited States noted:  
 WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  following three grounds based on which the USDOC rejected the BCTS auction prices as a valid 
benchmark  (a) the nature of British  Columbia 's timber market; (b)  the three -sale limit; and (c)  the 
export regulations operating in British  Columbia . We will reach  an overall conclusion in respect of 
Canada's  claim based on our assessment of the adequacy of the USDOC's  analysis with respect to 
each of these grounds.  
7.3.3.2.1   Nature of the British  Columbia  timber market  
7.121.   Canada claims that the USDOC's  rejection of the BCTS a uction prices as a benchmark on 
grounds of market concentration in British  Columbia 's timber market was inconsistent with 
Article  14(d)  of the SCM  Agreement. Canada argues that the level of competition among private 
enterprises is a prevailing market condi tion and cannot be a basis for a determination that the BCTS 
auction prices were not valid as a benchmark.254 The United  States asserts that the USDOC did not 
analyse the impact of market concentration on BCTS auction prices in isolation, but in light of th e 
government's  predominance as a seller in the British  Columbia  timber market.255 We consider that 
the USDOC examined the impact of market concentration on the BCTS auction prices after having 
found the government to be a predominant supplier of timber in British Columbia , and therefore did 
not examine market concentration in isolation. We note in particular that the USDOC assessed 
whether the BCTS auction prices were distorted in light of the fact that the same few firms that held 
the majority of government -supplied  long-term tenures, which was the largest source of timber in 
British  Columbia , were also the predominant consumers of auctioned timber.256 We therefore reject 
Canada's  concern that the USDOC improperly treated the level of competition in the British  Columbia  
timber market as a standalone basis for rejecting BCTS auction prices as a valid benchmark.257 
Rather, we consider that the USDOC's  rejection of the BCTS auction prices was based on an 
assessment of government predominance combined with market concentration in British  Columbia  
and not government predominance alone, as the United  States itself has acknowledged elsewhere 
in its submissions.258 
7.122.   We also note Canada's  argument that the potential for circular price comparison does not 
arise in context of the factual situation in British  Columbia  despite the existence of government 
predominance, as the government operates a competitive auction for a significant and representative 
portion of the harvest, and uses those auction prices to establish prices for non -auctioned harvest.259 
Canada also contends that because government predominance does not give rise to a potential for 
circular comparison in t he context of the factual situation in British  Columbia , market concentration 
also becomes irrelevant to the USDOC's  analysis, as market concentration was relevant only to the 
extent that government predominance was relevant.260 We disagree with Canada. We consider that 
these arguments by Canada do not adequately address the possibility that government 
predominance taken together  with market concentration in British  Columbia  could have distorted 
BCTS auction prices, even if neither of the two factors on its own would suffice to establish that the 
auction prices were distorted. Hence, we proceed to examine the parties'  arguments concerning 
whether the USDOC properly assessed how the level of market concentration in 
 
The USDOC's  finding that the BCTS auction prices were not a viable tier -one benchmark relied on 
three distinct grounds:  auction prices were limited by the Crown stumpage prices paid by 
dominant tenure -holding firms; the three -[timber sal e licence] maximum artificially limited the 
number of bidders in BCTS auctions and created other, additional distortions; and provincial and 
federal log export restraints suppressed log prices, which impacted stumpage prices.  
254 Canada's  first written subm ission, paras.  163 and 167.  
255 United  States'  first written submission, para.  377; responses to Panel question No.  48, para.  151, 
and No.  82, para.  254 ("[t]he USDOC did not undertake to conduct a market concentration analysis carte 
blanche , but rather as a conditional exercise contingent upon having found the market to be predominantly 
supplied by the government") .  
256 Preliminary determination, (Exhibit CAN -8), p.  38.  
257 For reasons discussed further below, however, we consider that the USDOC did not prope rly explain 
how the interaction of government predominance and market concentration had the effect of distorting the 
BCTS auction prices.  
258 United  States'  response to Panel question No.  82, para.  255 ("the USDOC sought to analyze whether 
the BCTS auction prices were competitive and open and independent, such that they could provide a 
benchmark market price for BC stumpage that was not distorted by the government's  ownership of the vast 
majority of harvestable forest land.")  
259 Canada's  response to Panel que stion No.  212, para.  158.  
260 Canada's  comments on the United  States'  response to Panel question No.  212, para.  199.  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  British  Columbia 's timber market, seen in lig ht of government's  predominance as a supplier, affected 
the BCTS auctions in a manner that would distort auction prices.261 
7.123.   Canada argues that the USDOC did not provide a reasoned and adequate explanation as to 
how the level of market concentration rendered  the BCTS auction prices unfit as a benchmark.262 
The United  States disagrees. The United  States contends that the USDOC properly established that 
because the five firms that consumed the majority of logs produced from auctioned timber were also 
the same fi ve firms that held the majority of the timber allocated through long -term licences, the 
BCTS auction prices "[were] effectively limited by what those [five firms] pay for timber harvested 
from their tenures".263 On such grounds, the USDOC determined BCTS au ction prices were not 
market determined .264  
7.124.   The premise underlying the USDOC's  finding that the level of market concentration 
undermined the validity of the BCTS auction prices as a benchmark is that the domination of the 
five firms in long -term tenure all ocations had the effect of causing auction participants to bid lower. 
We do not consider that this premise was supported adequately by record evidence. The 
USDOC's  reliance on this premise is evident in the following observations in the preliminary 
determi nation:  
[W]e preliminarily find that the prices for standing timber auctioned under the BCTS are 
effectively limited by Crown stumpage prices paid by tenure -holding companies. The 
largest tenure -holding companies purchase the predominant amount of standing  timber 
bought in the auctions by logging companies. The prices that loggers bid at auctions 
are limited by the price they receive from tenure -holding companies. The volume of 
Crown -origin standing timber allocated to tenure -holding companies exceeds the a ctual 
volume of Crown -origin standing timber harvested by tenure -holding companies, which 
supports a finding that the willingness of tenure -holding sawmills to pay for standing 
timber from the BCTS auction will be limited by their costs for obtaining stand ing timber 
from their own tenures. This information leads us to preliminarily conclude that BCTS 
standing timber prices are effectively limited by the prices that large tenure -holders 
paid for Crown stumpage under their own tenures. Therefore, these prices  cannot serve 
as benchmarks to measure the adequacy of remuneration for Crown -origin standing 
timber, because they do not reflect market -determined prices from competitively run 
government auctions.265 
7.125.   In the preliminary determination, the USDOC noted that firms holding the majority of 
long-term licences could limit auction prices because of two factors  (a) the firms were also the 
predominant consumers of auctioned timber; and (b)  the firms were abundantly supplied with timber 
from their own tenure holdings,  as indicated by the fact that a significant portion of the timber they 
held through long -term licences was not harvested.266 We note that the second of these factors was 
explicitly found not to exist in the final determination. In the final determination, the USDOC found 
that no "supply 'overhang'  exists in British  Columbia " and that the portion of tenure that was left 
unharves ted represented timber killed by beetle.267 We consider that the abnegation of the second 
factor in the final determination weakened the premise based on which the USDOC rejected the 
validity of the BCTS auction prices as a benchmark.  
 
261 We also note that the United  States argues that British  Columbia also had the ability to influence 
auction prices because "the provincial  government designed  the BCTS auction system to generate prices for 
the remainder of the government -held stumpage supply". (United  States'  comments on Canada's response to 
Panel question No.  212, para.  136 (emphasis original)). In respect of this argument,  we consider that the 
ability of the British  Columbia government to influence auction prices by virtue of its ability to design the 
auctions was not examined by the USDOC in the determination as a factor that distorted the auction prices. 
Further, the fact  that the government designed the auctions does not ipso facto  establish that the auctions 
were designed in a manner so as to yield distorted auction prices. Hence, we reject this argument by the 
United  States.  
262 Canada's  first written submission, para.  181.  
263 United  States'  first written submission, paras.  378-379.  
264 United  States'  first written submission, para.  381.  
265 Preliminary determination, (Exhibit CAN -8), p.  39.  
266 The USDOC found that "holders of Forest License and Tree Farm License (the two l icense types that 
accounted for the majority of timber allocated and harvested in British  Columbia)  harvested only 72.7  percent 
and 75.1  percent, respectively, of their allocations" . (Final determination, (Exhibit CAN -10), p.  56).  
267 Final determination, ( Exhibit CAN -10), p.  56.  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  7.126.   Notwithstanding the U SDOC's  rejection of the second factor mentioned above in the final 
determination, the USDOC considered that the fact that the five largest long -term tenure -holding 
firms were the largest consumers of auctioned timber meant that auction prices were limited,  or 
suppressed, by what the five firms were willing to pay. Supporting this finding of the USDOC, the 
United  States submits that the dominance of the same firms in long -term tenure allocations as well 
as the auction market shows that auction prices were su ppressed.268 We consider this particular 
argument of the United  States to be unpersuasive because it is unclear why the five long -term 
tenure -holding firms that the United  States refers to would necessarily be in a position of influence 
over other entities that purchase BCTS auction timber, considering that the former would depend on 
the latter to satisfy their demand for timber in absence of a supply overhang. The status of those 
firms as the dominant consumers of auctioned timber as well as timber allocate d via long -term 
licences does not imply that they will have the ability to limit auction prices unless they are 
adequately supplied with timber from their long -term tenures, which, as stated above, was not the 
case during the POI. We note that record evide nce clearly indicates that the investigated exporters 
had to rely on sources of logs other than their long -term tenures to satisfy their demand for logs.269 
7.127.   In addition, we underscore that the USDOC found that BCTS auction prices were suppressed 
not because  the participants in the auctions themselves held long -term tenures, but because the 
entities to which the auction participants sold the logs derived from auctioned timber held long -term 
tenures.270 The USDOC itself acknowledged that most of the bidders wer e logging companies and 
not long -term tenure -holding sawmills.271 This implies that the five firms that according to the 
USDOC cast downward pressure on auction prices by virtue of holding long -term tenures were one 
step removed from the actual bidding tran saction in a majority of cases. Such firms were the 
bidders'  customers, and not the bidders themselves. Hence, their influence on bidding could at best 
have been indirect. We consider that this further weakens the United States' argument that auction 
prices were suppressed because certain sawmills held the majority of long -term tenures – 
particularly as the USDOC did not discuss this aspect  in its determination . 
7.128.   Further, data that the USDOC presented specifies that the five "dominant" firms purchased 
64.8% of cruise -based272 timber and 43.6% of scale -based timber273 that was allocated through the 
BCTS auctions.274 This indicates that a significant portion of auctioned timber – 35.2% of 
cruise -based timber and 56.4% of scale -based timber  – was sold to firms othe r than the five 
ostensibly "dominant" firms alluded to by the United  States.275 We have already noted above that 
being dominant consumers of auctioned logs did not by itself enable the five firms to influence 
auction prices in the absence of a supply overha ng. We also consider that the purchase of a large 
amount of auctioned timber by firms other than the five long -term licence holding firms that the 
USDOC referred to further weakens the United  States'  argument that the five firms were in a position 
to limit  the bids made in the auctions. This is because even if the five firms that consumed the 
majority of auctioned timber were unwilling to pay a sufficient price for the logs, the logs could 
potentially have been sold to any of the other firms in the market, some of whom would not 
necessarily have had access to Crown timber directly.  Again, the USDOC did not discuss this issue  
in its determination . 
7.129.   Canada also contends that the USDOC ignored certain evidence presented in 
Dr Athey's  report that ran contrary to the USDOC's  finding that the five largest long -term 
tenure -holding firms cast a downward pressure on BCTS auction prices.276 In particular, Cana da 
 
268 United  States'  first written submission, para.  378; second written submission, para.  269.  
269 Larry Gardner affidavit , (Exhibit CAN -31 (BCI)); Mark Feldinger affidavit , (Exhibit CAN -34 (BCI)).  
270 Canada's  first written submission, para.  173; United  States'  response to Panel question No.  206, 
para. 177.  
271 Preliminary determination, (Exhibit CAN -8), p.  37. ("data from the GBC indicate that independent 
loggers (and not the Crown tenure -holding sawmi lls) continue to account for the majority of BCTS auction 
purchases.")  
272 The term "cruise -based" timber is applied to timber sales where stumpage payment is billed as a 
lump-sum amount for all of the merchantable stand based on the volume that is determine d through a timber 
cruise conducted prior to the auction. (Canada's  response to Panel question No. 81, para.  243).  
273 The term "scale -based" timber is applied to timber sales where stumpage payment is billed based on 
the volume of timber that is measured at the harvest site after the timber is harvested. (Canada's  response to 
Panel question No.  81, para.  242).  
274 Final determination, (Ex hibit CAN -10), p.  57.  
275 For a list of entities that purchased timber allocated through the BCTS auctions, see Market 
memorandum, (Exhibit CAN -80), tables 1.1 and 1.2.  
276 Canada's  first written submission, paras.  150 and 159.  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  argues that the USDOC did not engage with the following aspects of the Athey Report that contradict 
the USDOC's  reasoning:  
a. BCTS auctions and the British  Columbia  interior MPS produced valid, market -determined 
stumpage prices that reflected the prevailin g market conditions in the British Columbia 
interior277; 
b. the low barrier to entry into the logging sector and the high number of bidders in the BCTS 
auctions create competition leading to higher auction prices and serve as a check against 
potential abuse of  market power278;  
c. in order to attempt to affect BCTS auction prices, a long -term tenure -holding sawmill will 
have to "curtail lumber production to reduce its log demand, or forego more cost -effective 
BCTS timber supply in favour of costlier options". Such action would not be in the 
sawmill's  economic self -interest279; and  
d. long-term tenure -holding sawmills will also have to "make a credible commitment, in 
coordination with others" to undertake measures to lower auction prices. Such action 
would be illegal and would be detected by law enforcement authorities.280 
7.130.   The United  States argues that the USDOC was not required to explicitly mention the 
Athey  Report in the determination if it otherwise considered the report.281 The United  States further 
suggests  that the report had limited probative value because Dr Athey designed the auction system 
under review herself, and because the report relied exclusively upon previous work either of Dr Athey 
herself or of experts commissioned by Canada.282 We note that the  USDOC did not explicitly state 
in its determination that it accorded less weight to the Athey Report. Even if the USDOC had stated 
that expressly, we consider that the USDOC should have demonstrated that the USDOC had properly 
examined the substantive asp ects of the Athey Report referred to above, before deciding what 
weight to place on the substantive analysis contained therein. This is because placing less weight on 
evidence after properly evaluating it is different from placing less weight on evidence w ithout first 
properly evaluating it.283 
7.131.   We note that the USDOC did not evaluate any of the above -mentioned aspects of the 
Athey  Report in the preliminary or the final determination. The USDOC did not, for example, examine 
whether the Athey Report correctly considered collective coordination among the five long -term 
licence holders to be a necessary condition for them to cast downward pressure on auction prices, 
and if so, whether such coordination in fact occurred in British  Columbia . In addition, we also no te 
that the USDOC did not consider the Athey Report's  finding that harvesting logs from timber held 
through a long -term licence may not always be cheaper for a firm than purchasing logs sold by 
successful BCTS auction participants in the open log market.284 If true, this Athey Report finding 
would considerably weaken the USDOC's  reasoning because long -term licence holding firms cannot 
"limit" BCTS auction prices if the cost of deriving logs by harvesting timber from long -term tenures 
is more than the cost of  purchasing logs derived from auctioned timber. An objective and impartial 
investigating authority would have engaged with this evidence, considering its direct relevance to 
the USDOC's  findings. Because the determination does not reveal whether and how th e USDOC 
engaged with the reasoning presented in the Athey Report, which was directly relevant to the 
USDOC's  findings regarding the effect of the level of market concentration in the British  Columbia  
timber market on BCTS auction prices, we consider that t he USDOC overlooked evidence that an 
objective and unbiased investigating authority would not.  
 
277 Canada's  first written subm ission, para.  140.  
278 Canada's  first written submission, para.  174. 
279 Canada's  first written submission, para.  176.  
280 Canada's  first written submission, para.  177. 
281 United  States'  first written submission, para.  388; response to Panel question No.  88, pa ra. 275. 
282 United  States'  first written submission, para.  389; response to Panel question No.  88, para.  277.  
283 See, above,  paras. 7.60-7.61. 
284 Athey Report, (Exhibit CAN -23), pp.  16 and 53.  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  7.132.   Based on the foregoing, we conclude that the USDOC's  finding that the BCTS auction prices 
were distorted due to the nature of the British  Columbia  timber market  was not founded on a 
reasoned and adequate explanation.  
7.3.3.2.2   The three -sale limit  
7.133.   Canada argues that the USDOC improperly concluded that the three -sale limit undermined 
the validity of the BCTS auction prices as a benchmark.285 According to Canada, the USDOC d id not 
demonstrate that the three -sale limit in fact affected bidder behaviour and distorted auction 
prices.286 The United  States argues that the USDOC was justified in finding that the three -sale limit 
rendered the BCTS auctions invalid as a benchmark beca use the exclusion of potential bidders from 
the auctions due to the three -sale limit meant that the BCTS auctions were not "competitively 
run".287 The United  States also argues that how the BCTS auctions would function without the 
three -sale limit is unknow able. Hence, according to the United States, the USDOC could not have 
cited evidence as to whether the three -sale limit in fact distorted auction prices.288 
7.134.   In the final determination, the USDOC found the three -sale limit to render the BCTS auction 
prices i nvalid as a benchmark based on the following two grounds:   
a. the exclusion of certain bidders from specific auctions made the BCTS auctions 
uncompetitive289; and  
b. the circumvention of the three -sale limit by excluded firms through the use of proxy 
bidders res ulted in "market distortion" by introducing a "cutting rights fee" that the firms 
excluded from participating in the auctions paid to their proxies in addition to the auction 
price in exchange for auctioned timber.290 
We will examine both grounds in turn.  
7.135.   As regards the impact of the three -sale limit on competitiveness of the BCTS auctions, the 
United  States argues that the three -sale limit lowered auction prices by excluding bidders from 
participating in the auctions.291 The United  States contends that the correlation between the number 
of bidders and the auction prices is "obvious" and "undisputed".292 To support this contention, the 
United  States relies on certain statements made by British  Columbia  ostensibly acknowle dging a 
correlation between the number of bidders and the auction prices in its questionnaire response and 
during its verification visit.293 We note that the United  States has only partially cited one of 
British  Columbia 's statements in its questionnaire re sponse regarding the correlation between the 
number of bidders and the auction prices. The United  States overlooked the part of that statement 
where British  Columbia  explains that "due to the secret nature of the bid process, the bidders never 
knows how ma ny other bidders may bid on any particular tract of timber" and are therefore required 
"to bid with the expectation that there is other competition for the timber".294 The complete 
statement reveals that British  Columbia  was of the view that given the desig n of the BCTS auctions, 
the three -sale limit would not cause bidders to lower their bids. The USDOC did not engage with this 
reasoning in its determination.  
7.136.   We note that Canada has also argued that the USDOC undermined its own reasoning that 
the three -sale limit made the BCTS auctions uncompetitive by also finding that this rule was 
circumvented by respondent companies through proxy bidding.295 The United  States responds to 
this argument by pointing out that the use of proxy bidders by mills prevented from participating in 
the auctions due to the three -sale limit "does not obviate its finding that the three -sale limit inhibits 
competition, but r ather demonstrates an additional  way in which the BCTS distorts prices", i.e. the 
 
285 Canada's  first written submission, para.  182.  
286 Canada's  first written submission, para.  182.  
287 United  States'  first written submission , para.  382.  
288 United  States'  first written submission, para.  383.  
289 Final determination, (Exhibit CAN -10), p.  57.  
290 Final determination, (Exhibit CAN -10), p.  58.  
291 United  States'  first written submission, para.  384.  
292 United  States'  first written sub mission, para.  384. 
293 United  States'  first written submission, para.  384.  
294 British  Columbia questionnaire response, (Exhibit CAN -18 (BCI)), p.  BC-I-179.  
295 Canada's  first written submission, para.  184.  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  payment of "cutting rights fee" by large firms to proxies bidding on their behalf.296 While we 
separately examine whether proxy bidding did in fact distort prices by necessita ting the payment of 
the cutting rights fee, we do not see anything in the United  States'  response that counters 
Canada's  argument that the circumvention of the three -sale limit by large mills undermines the 
USDOC's  view that the three -sale limit made the a uctions uncompetitive. In response to a Panel 
question after the second substantive meeting , the United  States asserted that the three -sale limit 
made the BCTS auctions uncompetitive by causing large mills that were blocked from participating 
in the auctio ns to partner with independent harvesters to submit joint bids, thus turning potential 
competitors into partners.297 We note that this explanation does not appear in the 
USDOC's  determination and is therefore ex post rationalization. Furthermore, we conside r that  the 
United States' assertion that the three -sale limit turned potential competitors into partners does not 
explain why bids cast in the auction will be lower than would otherwise be the case considering that 
a bidder working with one company will ha ve to bid with the expectation of competition from other 
potential bidders working with other companies.298 We therefore consider that the USDOC did not 
offer a reasonable and adequate explanation as to how the exclusion of certain bidders due to the 
three -sale limit, and their participation in joint bids, was related to auction prices in the specific 
context of the BCTS auctions.299 
7.137.   The USDOC also found the three -sale limit to undermine the validity of the BCTS auctions 
as a benchmark on the ground that it i ntroduced a "market distortion" by necessitating the payment 
of a "cutting rights fee" by firms seeking to circumvent the three -sale limit through proxy  bidding.300 
Specifically, the USDOC found:  
[C]ompanies who pay these cutting rights fees to harvest a [timber sale licence] from 
a third party are incurring an additional cost that they would not otherwise incur if 
bidding for the [timber sale licence] directly – a cost that is likely factored into the 
auction in the form of lower bids, as the bidder would e xpect the companies to discount 
their purchase price accordingly. As we noted in the Preliminary Determination , based 
on a study from the BCLTC, non -harvesting third -party bidders at auction "base their 
auction bids on what the tenure -holding companies are  willing to pay for auction -origin 
logs."301 
The United  States argues that it was reasonable for the USDOC to infer that the bids were 
undervalued from the fact that investigated companies incurred additional "cutting rights" costs to 
acquire auctioned timb er from third parties that they would not incur if they were bidding in the 
auctions directly.302 According to the USDOC and the United  States, these additional costs are "likely 
factored into the auction in the form of lower bids", as "a middle -man must bu ild its own margin into 
its bid by bidding lower than the amount for which it will resell the license to the large firm buyer".303 
7.138.   Before examining the validity of the USDOC's  and the United  States'  reasoning on whether 
the "cutting rights fees" distorted B CTS auction prices, we note Canada's  argument that of three 
respondent companies from British  Columbia , only Tolko paid such fees and even Tolko paid a 
[[***]] amount of fees.304 Further, Canada argues that unlike what the United  States assumes, the 
fees re ported as "cutting rights fees" need not necessarily be a payment made to a third party for 
 
296 United  States'  second written submission, para.  277. (emphasis original)  
297 United  States'  response to Panel question No.  203, para.  164.  
298 Canada's  comments on the United  States'  response to the Panel  question No.  203, paras.  156-157. 
299 The United  States also points to record evidence indicating that 11% of auctioned licences failed to 
sell in their first listing in support of its argument that the three -sale limit undermined the competitiveness of 
the BCTS auction prices. (United  States ' first written submission, para.  384). We note that this reasoning does 
not appear in the preliminary or the final determinations and is therefore, ex post  reasoning. We also consider 
that an objective and unbiased investigating authority would not assume  that certain licences failed to sell in 
the first listing because the three -sale limit made the auctions uncompetitive, without ascertaining that there 
was no other explanation for why those licences were unsold. It is possible, for example, that certain harvest 
areas were less desirable to mills because they had a high beetle -infestation level, or were located in an 
inaccessible area, and hence did not attract any buyers in the first listing. Neither the United States nor t he 
USDOC provided  any reasoning addressing this possibility.  
300 Final determination, (Exhibit CAN -10), p.  58. 
301 Final determination, (Exhibit CAN -10), p.  58. 
302 United  States'  first written submission, para.  386; second written submission, para.  277.  
303 United  States ' responses to Panel question No.  85, para.  264, and No.  205, paras.  171-172.  
304 Canada's  first written submission, para.  187; comments on the United  States'  response to Panel 
question No.  205, para.  159.  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  acting as a proxy bidder.305 In this respect, we disagree with Canada in so far as Canada suggests 
that the record evidence did not indicate the existence of payment s made by Tolko and Canfor that 
could have been considered payments made to third parties for acting as proxy bidders. In case of 
Tolko, while Canada does not dispute that Tolko made such payments, it suggests that those 
payments must be disregarded as the y were [[***]]. We reject this argument by Canada as we see 
no basis for why the USDOC ought to have disregarded a certain payment made to a third  party for 
acting as a proxy bidder simply because the amount of the payment, in Canada's  view, was [[***]]. 
In case of Canfor, we note that the following extract from Canfor's  questionnaire response indicates 
that Canfor did incur an extra expense of the kind that the USDOC characterized as "cutting rights 
fee": 
If [Canadian Forest Products, Ltd.] is bidding dir ectly, it calculates its anticipated 
logging, hauling and any on -block road costs to access the standing timber. If [Canadian 
Forest Products, Ltd.] is bidding indirectly, it works with contractors to establish their 
expectations for their logging and haul ing costs and profit expectations in any successful 
bid which would deliver the logs to one or more of [Canadian Forest Products, 
Ltd.]'s sawmills.306 
The reference to "profit expectations" of the third -party proxy bidder in the extract above clearly 
indica tes that Canfor pays an amount to its proxy that it will not otherwise pay, which is precisely 
the kind of payment that the USDOC referred to as cutting rights fee. As regards West Fraser, 
however, we consider that the United  States has not identified reco rd evidence that would support 
the USDOC's  finding that West Fraser paid any additional amount to a third party to act as a proxy 
bidder. The USDOC points to page 158 of West Fraser  questionnaire response of 14  March  2017 
(Exhibit CAN -52 (BCI))  as the basi s of its finding that West Fraser paid cutting rights fee to third 
parties for bidding on West Fraser's  behalf. Page 158, in relevant part, states:   
As detailed below, these exhibits report the fees West Fraser Mills Ltd. ("West 
Fraser")  paid in CY 2015 fo r (1) stumpage on Crown timber harvested from its own 
tenure (2)  stumpage on Crown timber harvested from British  Columbia  Timber Sales 
("BCTS")  licenses purchased at BCTS auctions by West Fraser, and (3)  stumpage on 
Crown timber harvested from BCTS license s purchased at BCTS auctions by West 
Fraser's  employees (which West Fraser treats the same way it treats BCTS licenses it 
purchases directly, since for these licenses West Fraser assumes all of the financial and 
operational liability associated with the ti mber sale).  
This excerpt does not suggest that West Fraser pays its employees any sort of cutting rights fees, 
but rather states that West Fraser treats licences that it obtains through its employees the same 
way it treats licences that it purchases directly.  
7.139.   Thus, w e are of the view that the record evidence supports the USDOC's  finding that Tolko 
and Canfor paid a certain sum to their proxy bidders that they would not have had to pay if these 
respondents themselves were bidding directly, but does not support such a f inding in respect of West 
Fraser. We will continue to call such payments "cutting rights fees" for the purpose of our analysis 
and make our findings in this section in respect of Tolko and Canfor, but not West Fraser.  
7.140.   Although we reject Canada's  arguments  concerning the existence of cutting rights fees, we 
consider that the USDOC's  finding that the payment of cutting rights fees for proxy bidding distorted 
BCTS auction prices to be flawed. We agree with Canada's  argument that the USDOC's  analysis does 
not establish why a bidder would make a lower bid in the auction even if the bidder intends to 
subsequently resell auctioned timber to a different entity, considering that the bidder would stand 
the risk of losing to any of its rival bidders if it lowers its b id for reasons extraneous to the auction 
itself.307 Further, we see no valid basis for the USDOC's  assumption that any middle -man margin or 
cutting rights fees will be accounted for in form of lower bids. This is because it is entirely possible 
that proxy b idders cast a bid that they consider adequate to win an auction, and then resell 
harvesting rights to larger firms at a mark -up that represents the cutting rights fees. Thus, proxy 
bidders could conceivably make a margin when reselling the timber after the  auction, without having 
 
305 Canada's  comments on the United  States'  response to Panel question No.  205, para.  159; 
second  written submission, para.  68.  
306 Canfor initial questionnaire response , (Exhibit CAN -51 (BCI)), p.  105.  
307 Canada's  second written submission, para.  67.  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  to lower their bids in the actual auction.308 Even assuming that intention to resell the timber being 
auctioned causes one bidder to cast a lower bid, at the risk of losing the bid, there is no reason to 
assume that all bidders in a  specific auction are bidding with such an intention and are consequently 
bidding lower than they ordinarily would. We consider therefore that there is no reason to assume 
that the winning bid in each auction would be suppressed unless all bidders are acti ng as a proxy 
for a firm excluded from direct participation in the auctions, even if we assumed that a proxy bidder 
bids lower than an ordinary auction participant would, as the United  States suggests. Neither the 
United  States nor the USDOC has provided r ecord evidence that all bidders in certain auctions were 
proxy bidders. Hence, the USDOC's  analysis does not explain why the bid at which a licence is sold 
will be lower because of the existence of the practice of proxy bidding, despite the presence of 
competing bidders. In response to a Panel question inviting the United  States to respond to 
Canada's  argument that the cutting rights fee will not lead any bidder to bid lower as "that would 
only open the door to another bidder at a higher price", the United  States responded that a higher 
bid will not exist, as bids are limited by the prices that long -term licence holding sawmills were 
willing to pay.309 We reject this argument because, as explained in section  7.3.3.2.1 , the USDOC 
failed to explain how "bids are limited by the prices that long -term license holding sawmills were 
willing to pay".  
7.141.   We therefore conclude that the USDOC did not properly establish that the three -sale limit 
undermined the validity of BCTS auction prices as a benchmark.  
7.3.3.2.3   Log export regulations  
7.142.   In the preliminary determination, the USDOC found that the log export regulations imposed 
by the governments of Canada and British  Columbia  distort BCTS auct ion prices because "these 
restraints contribute to an overabundance of log supply that, in turn, depresses the prices that 
auction participants are willing to pay".310 In the final determination, the USDOC reaffirmed this 
finding and further elaborated the reasons behind its conclusion that the log export regulations in 
British  Columbia  distorted BCTS auction prices.311 The principal intermediate findings on which the 
USDOC's  conclusion was based were:  
a. logs cannot be exported by default under the law in force  in British  Columbia , and an 
exemption must be sought from the proper authorities in order to export logs;  
b. the length of the process for seeking an exemption discourages exports;  
c. the in -lieu of manufacturing fees that are applied to a request for exempti on before an 
exemption is granted restrain exports;  
d. the existence of the "blocking" system, whereby domestic timber processing firms can 
cause the denial of export authorization, forces log exporters to sell logs to domestic 
timber processors at lowered p rices to prevent them from blocking their export exemption 
requests; and  
e. the export regulations affect timber prices in all of British  Columbia , and not just the 
British  Columbia  coast.312 
 
308 The fact that the entity that purchases a licence from the successful bidder would incur an additional 
expense in form of the cutting rights fee that it would not incur if it was bidding in the auctions directly, is 
immaterial to the validity of the BCTS auctions as a benchmark. If the amount of the winning bid is not lowered 
in spite of disqualification of certain firms from the auctions due to the three -sale limit, BCTS auction prices will 
remain a vali d benchmark regardless of whether the disqualified firms have to incur an additional expense to 
purchase that licence from the actual winner of the auction that the firms would not have had to incur if they 
were participating in the auctions themselves.  
309 United  States'  response to Panel question No.  85, para.  264.  
310 Preliminary determination, (Exhibit CAN -8), p.  39.  
311 Final determination, (Exhibit CAN -10), pp.  139-149.  
312 Final determination, (Exhibit CAN -10), pp.  139-149.  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  7.143.   The USDOC found that considered in their totality, these intermediat e findings establish that 
the export regulations in operation in British  Columbia  restrain exports.313 
7.144.   Canada claims that the USDOC's  conclusion was inconsistent with Article  14(d)  of the 
SCM Agreement.314 According to Canada, the record evidence demonstrated that the export 
regulations neither suppressed log exports, nor cast a downward pressure on timber prices in 
British  Columbia , especially the interior region.315 The United  States argues that the 
USDOC' s analysis conformed to the requirements of Article  14(d)  of the SCM  Agreement and its 
findings were supported by record evidence.316 
7.145.   We note that the central inquiry under Article  14(d)  in choosing an appropriate benchmark 
for assessing benefit is whether government intervention results in price distortion such that 
recourse to out -of-country prices is warranted.317 At the same time, the market from which the 
benchmark is selected need not be completely free of any government intervention.318 The 
Appellate  Body has found that the concept of "price distortion" is not equivalent to any impact on 
prices as a result of any government intervention. Rather, an investigating authority must determine 
whether in -country prices are distorted on a case -by-case basis, tak ing into account the 
characteristics of the market being examined, and the nature, quantity, and quality of the 
information on the record.319 Price distortion can be established based on quantitative as well as 
qualitative methods, provided that the investigating authority engages with and analyses the 
methods, data, explanations, and supporting evidence put forward by interested parties, or co llected 
by the investigating authority, in order to ensure that its finding of price distortion is supported, and 
not diminished or contradicted, by evidence and explanations on the record.320 The Appellate  Body 
has noted that in cases of government interve ntion that indirectly impact prices, a more detailed 
analysis and explanation of how prices are distorted as a result of such government intervention 
may be required.321 We therefore consider that whether an export regulation could constitute a form 
of gove rnment intervention that distorts prices is a case -by-case assessment. The question before 
us, thus, is whether the USDOC provided a reasoned and adequate explanation for its determination 
that the export regulations distorted the BCTS auction prices in li ght of the evidence presented by 
the interested parties, while fully addressing the nature and complexities of the data on the record.   
7.146.   With these considerations in mind, we proceed to examine whether the USDOC adequately 
evaluated the record evidence in f inding that the export regulations in force in British  Columbia  
distorted the BCTS auction prices by supressing log exports and provided a reasoned and adequate 
explanation for that finding. We will examine the USDOC's  intermediate findings as well as its overall 
conclusion and the evidentiary basis for each.322 We first examine the USDOC's  intermediate findings 
regarding how the export regulations suppressed exports, before reviewing its findings concerning 
whether the price distortion, if any, caused by th e export regulations would be limited to the 
British  Columbia  coast or would extend to the interior as well.  
 
313 Final determination, (Exhib it CAN -10), p.  139.  
314 Canada's  first written submission, para.  192.  
315 Canada's  first written submission, paras.  198-201. 
316 United  States'  first written submission, paras.  391-393.  
317 Appellate  Body Report, US – Countervailing Measures (China) (Article  21.5 – China) , para.  5.141.  
318 Appellate  Body Report, US – Countervailing Measures (China) (Article  21.5 – China) , para.  5.135 
(referring to Appellate  Body Report, US – Softwood Lumber IV , para.  87).  
319 Appellate  Body Report, US – Countervailing Measures (China) (Article  21.5 – China) , para.  5.146.  
320 Appellate  Body Report, US – Countervailing Measures (China) (Article  21.5 – China) , 
paras.  5.154 -5.155.  
321 Appellate  Body Report, US – Countervailing Measures (China) (Article  21.5 – China), para.  5.154.  
322 The Appellate  Body has found that:  
A key aspect of how a panel must review a determination relates to the evidentiary basis for both 
the intermediate factual findings made by a national authority, as well as for its overall 
conclusion s. In its Report in US – Countervailing Duty Investigation on DRAMS , the 
Appellate  Body considered how a panel is to review the evidentiary basis for findings when the 
overall conclusions are based on the authority's  assessment of the totality of multiple pieces of 
circumstantial evidence. The Appellate  Body observed that, even where the investigating 
authority draws its conclusion from the totality of the evidence, it will often be appropriate, or 
necessary, for a panel "to examine the sufficiency of the e vidence supporting an investigating 
authority's  conclusion … by looking at each individual piece of evidence".  
(Appellate  Body Report, US – Softwood Lumber VI (Article  21.5 – Canada) , para.  94 (emphasis original))  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  7.147.   The USDOC reasoned that the presence of a law that requires log producers to sell to 
domestic consumers unless an exemption for exportation is gra nted renders exportation uncertain 
and discourages log -sellers from selling logs in the highest paying markets.323 We consider that the 
requirement to obtain an exemption to export that log producers in British  Columbia  are subject to 
does make suppression of log exports likelier than would be the case had such regulations not 
existed. However, the mere existence of export regulations is not in itself sufficient to establish that 
the log export suppression induced by the export regulations distorted log pric es, such that the BCTS 
auction prices could not be used as a benchmark. This is so because record evidence indicates that 
the exemption process is widely used and the vast majority of requests for exemption are approved, 
as evidenced by the fact that over 10,000 applications for exemption were made in the year 2015, 
over 99% of which were approved.324 In order to determine whether the USDOC properly concluded 
that the export regulations suppressed log exports to the point that BCTS auction prices were 
conseq uently distorted, we will have to consider whether the USDOC's  examination of record 
evidence other than the mere existence of the export regulations led to that conclusion.  
7.148.   We now proceed to examine the USDOC's  finding that the operation of the "blocking  system" 
in British  Columbia  restrains exports and suppresses log prices. We note that the USDOC found that 
pursuant to the "blocking system", consumers of logs in British  Columbia  could block a log 
exporter's  application for a log export exemption by maki ng a bid on the logs sought to be exported. 
According to the USDOC, log consumers exploited the "blocking system" by desisting from blocking 
exports as a quid pro quo  for sale of logs by exporters to consumers at below market prices. This, 
in the USDOC's  view, depresses log prices in British  Columbia .325 Canada argues that the fact that 
over 99% of applications for export were approved indicates that the "blocking system" does not 
meaningfully restrain exports.326 We agree with the United  States'  argument tha t the USDOC 
correctly reasoned that this high approval rate does not imply that logs could be freely exported out 
of British  Columbia  if log producers are pressured into negotiating an informal  agreement with 
domestic log consumers to sell logs at a lower price before  applying for an export permit.327 We will, 
however, examine whether the USDOC provided a sufficient evidentiary basis for its reasoning that 
the "blocking system" in operation in British  Columbia  led log exporters to reach such informal 
agreements with log consumers, even before the expor ters initiate the process for obtaining 
authorization for exports, due to which only a small number of export applications were blocked.  
7.149.   The record evidence indicates that only 0.37% of log export applications made under federal 
jurisdiction and 0.46% of applications made under provincial jurisdiction were blocked.328 We 
consider that in order for the USDOC's  reasoning that the number of log export applications that are 
formally blocked is small because of informal agreements between exporters and consumers  to be 
true, multiple prospective log exporters ought to have concluded such  agreements with multiple 
potential domestic log consumers. If a consumer would block an exporter's export application 
without an informal agreement, then in order to avoid having any of its export applications blocked 
by any consumer, a particular log exporter would need to have secured an informal  agreement with 
not just one, but all potential log consumers. If a potential log exporter reaches informal agreements 
only with certain  log consumers and not with others, the export applications of that log exporter 
would remain vulnerable to being blocked by those consumers with whom the exporter did not reach 
an informal  agreement. Thus, if the USDOC's  reasoning is correct, the miniscul e number of blocked 
applications in British  Columbia  would mean that almost all exporters reached informal agreements 
with almost all consumers. Had a significant percentage of exporters not reached informal 
agreements, their export applications would have  been blocked, and the percentage of blocked 
applications for British  Columbia  as a whole would be non -trivial. Therefore, for the 
United  States'  contention that more than 99% of export applications were not blocked because log 
exporters had reached inform al agreements with log consumers prior to the initiation of the 
application to be correct, informal agreements among consumers and exporters need to be widely 
pervasive in British  Columbia . The question before us is whether the evidence offered by the USDO C 
 
323 Final determination, (Exhibit CAN -10), p. 142.  
324 Canada's first written submission, paras.  201 and 203 ; opening statement at the first meeting of the 
Panel (26 February 2019 ), para. 75; and Canada 's presentation at first meeting (26 February 2019) , 
(Exhibit  CAN-525), p. 46. 
325 Final determinati on, (Exhibit CAN -10), pp.  140-141.  
326 Canada's  first written submission, para.  203. 
327 United  States'  first written submission, para.  395.  
328 Overview of the BC export process,  (Exhibit CAN -72 (BCI)), pp.  18-19. (18 out of 4844 export 
applications made under the federal jurisdiction and 28 out of 6049 applications made under the provincial 
jurisdiction were blocked during the POI).  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  establishes the degree of pervasiveness of such  agreements in British  Columbia  that an objective 
and unbiased authority would have relied on in reaching the conclusion that the USDOC did.  
7.150.   We note that the United  States has pointed to the following piece s of evidence from which 
the USDOC inferred that log exporters in British  Columbia  enter into informal agreements with 
domestic log consumers to avoid having their export applications blocked  (a) evidence from log 
exporter Merill & Ring submitted in invest ment arbitration against the government of Canada; (b)  a 
September  2014 article  in a timber industry publication by BC logging company TimberWest; (c)  an 
article  by Eric Miller, Global Fellow at the Woodrow Wilson International Center for Scholars'  Canada 
Institute (Wilson Center article); and (d)  a report entitled "Generating More Wealth from 
British  Columbia 's Timber:  A Review of British  Columbia 's Log Export Policies" ( British  Columbia  Log 
Export Policies Report).329 We will review whether these pieces of  evidence, either individually or 
taken together, suffice to show that such informal agreements were a pervasive occurrence in 
British  Columbia . We note that the evidence concerning Merill & Ring and TimberWest is the only 
firm-specific evidence that the U SDOC cited to in relation to informal agreements. We further note 
that, as Canada points out, the evidence concerning TimberWest is an opinion piece that does not 
explicitly state anything about informal agreements.330 The United  States argues that 
TimberWe st's description of selling "at a loss into the artificially depressed domestic market" to 
"satisfy domestic demand" prior to "obtain[ing]  an export permit" is a description of 
TimberWest's  experience with informal agreements.331 We disagree. We understand the statements 
in the TimberWest piece that the United  States underscores to refer to the effects of the log export 
regulation related processes designed by the government, and not to informal agreements.332 We 
are, therefore, of the view that the TimberWes t article  does not support the USDOC's  findings 
concerning informal agreements. We also note that while the Wilson Center article  does refer 
generally to the existence of informal agreements, it does not provide any citations in support of its 
observations . The article  attributes the observations concerning informal agreements to "a number 
of industry players that spoke on the condition of anonymity", but states that only " some  harvesters" 
are forced to sell at unprofitable prices.333 Thus, this article  does not speak to the pervasiveness of 
informal agreements.334 Further, we ascribe only limited weight to the British  Columbia  Log Export 
Policies Report as that report was prepared in December 2006, that is well before the POI.335 In our 
view, therefore, that r eport may not be a reliable reflection of the situation in the relevant log market 
during the POI. As regards the evidence concerning Merill & Ring, we note that the evidence directly 
states that Merill & Ring was forced to enter informal agreements.336 However, as stated above, the 
question before us is whether the evidence referred to by the USDOC was adequate for an objective 
and unbiased authority to consider that informal agreements existed between a multitude of log 
exporters and log consumers inter se. In our view, none of the evidence referred to by the USDOC, 
individually or taken together, suffices in that respect.337  
 
329 United  States'  response to Panel question No.  78, paras.  245-248.  
330 Canada' s response to the Panel question No.  208, para.  134.  
331 United  States'  comments on Canada's  response to Panel question No.  208, paras.  112-113 (referring 
to Petition , (Exhibit USA -10), exhibit 252: TimberWest article, p. 153).  
332 We note that while the TimberWest article  notes that log exporters are forced to sell logs at 
depressed prices in the domestic market, the article  refers to British  Columbia's  log export regulations that 
mandate fulfilment of domestic demand before export ation could be permitted as the cause of such domestic 
sales. The article  also states that the fairness -review mechanism, whereby a government -appointed committee 
reviews the fairness of the price offered by a domestic purchaser seeking to block an export application, lacks 
transparency and that the committee in some cases deems an offer to be "fair" even if the offer is less than 
half of the price that the international market would pay for the same log at the same place. The article, 
however, does not des cribe "informal agreements" of the sort that in the USDOC's  view caused log exporters to 
lower their export volumes and domestic prices.  
333 Emphasis added.  
334 Petition, (Exhibit USA -10), exhibit 252 : TimberWest article . 
335 Petition, (Exhibit USA -10), exhibit  242, p.  5.  
336 Petitioners ' comments on Canada initial questionnaire response, (Exhibit USA -19), exhibit 11, 
pp. 134-136. We also note that Canada has pointed out that both TimberWest and Merill & Ring operate on the 
British  Columbia coast, and not in the British Columbia interior . (Canada's response to Panel question No. 208, 
para. 138).  
337 We note that Canada has argued that certain affidavits by two log exporters from the 
British  Columbia interior  that were on the record before the USDOC also suggest that  exports were not 
suppressed due to informal agreements. (Canada's  response to Panel question No.  208, para.  138). We 
consider, however, that those affidavits describe the exporters'  experiences with the LEP process designed by 
the government, and are sile nt on whether the exporters entered into any informal agreements with domestic 
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  7.151.   Moreover, we consider that the existence of unutilized export authorizations is contrary 
evidence that the USDOC did not sufficient ly examine.338, 339 The United  States acknowledges that 
domestic log consumers can no longer prevent log exports once an export authorization is 
granted.340 Further, nothing in the USDOC's  determination addresses the possibility that unutilized 
export authori zations indicate that log exporters were able to export as much as the export market 
required.341 This unaddressed possibility further undermines the USDOC's  reasoning that the 
"blocking system" or informal agreements restrained log exports from British  Columbia  because if 
exporters were not able to export all of the logs that they were authorized to e xport, nothing in the 
USDOC's  analysis suggests that they would have been able to export any additional volume of logs 
that may have become available for exportation in absence of the "blocking system" or informal 
agreements.  
7.152.   In light of our analysis of t he specific pieces of evidence concerning informal agreements 
relied on by the USDOC, individually and taken together, and the existence of unutilized export 
authorizations that indicate that informal agreements may not have constrained log exporters from 
exporting the amount of logs they wanted, we consider that the USDOC failed to offer sufficient 
evidence demonstrating the existence of informal agreements among a multitude of log exporters 
and consumers in British  Columbia  inter se . In absence of such ev idence, the USDOC did not have 
any valid basis to find that the high approval rate for export applications was attributable to the 
existence of a multitude of informal agreements between log exporters and log consumers, leaving 
open the possibility that lo g consumers chose not to block export applications despite not having 
informal agreements with certain exporters for commercial reasons. This undermines the 
USDOC's  intermediate finding that the existence of the "blocking system" in British  Columbia  led to  
suppression of log exports.  
7.153.   We next review the USDOC's  findings that (a)  the duration of the process for obtaining the 
log export exemption discouraged exports; and (b)  the in -lieu of manufacturing fees hindered log 
exports and contributed to distortion of log prices in British  Columbia .342 We note that Canada has 
established that the record evidence demonstrates that the processing time for exemption requests 
was frequently considerably less than the 7 to 13 weeks estimated by the USDOC.343 The 
United  States has not rebutted the validity of this evidence.  
7.154.   As regards the USDOC's finding that in -lieu of manufacturing fees contributed to the 
suppression of exports, Canada argues that the in -lieu of manufacturing fee s did not present a 
meaningful obstacle to ex ports.344 Canada points out that the fee does not apply to exports that 
arise from the lands under federal jurisdiction, which represented 43% of all log exports from 
 
log consumers before applying for export authorizations. Hence, we do not consider those affidavits to be 
pertinent to the question at hand.  
338 Canada's  response to Panel questi on No.  123, para.  342. Canada has shown that even after 
obtaining permission to export, exporters in the southern interior did not export [[***]] of the logs that they 
were permitted to export. (Canada's  response to Panel question No.  91, para.  270).  We no te that Canada has 
also referred to the affidavit [[***]] , which noted that " [[***]]". ([[***]] affidavit , (Exhibit CAN -35 (BCI)), 
para. 13). We consider that this evidence indicates that potential log exporters did not fully utilize their export 
authoriza tions because they could find a better price in the domestic market compared to the export market.  
339 We understand the United  States to argue that the combined effect of the export regulations in 
British  Columbia, which allowed domestic log consumers to bl ock export authorization applications from log 
exporters, and the informal agreements between exporters and consumers, was the suppression of log exports 
from British  Columbia. This is because due to the informal agreements, exporters agreed "to lower thei r export 
volumes" to avoid blockage of their export authorization applications by domestic consumers. 
(United  States'  first written submission, para.  394).   
340 United  States ' response to Panel question No.  209, para.  194. 
341 Record evidence indicates that [[***]] of volume of logs authorized to be exported from 
British  Columbia coast and  [[***]] of the volume of logs authorized to be exported from the interior was not in 
fact exported. ( Overview of the BC export process,  (Exhibit CAN -72 (BCI)), p.  20). 
342 Final determination, (Exhibit CAN -10), pp.  141-142 (referring to Preliminary determination, 
(Exhibit  CAN-8), p.  54). 
343 Canada's  response to Panel question No.  124, para.  353. Evidence adduced by Canada shows that 
during the POI, 86.1% of the federal applicatio ns and 86% of the volume of logs advertised provincially were 
authorized for exports within 2 to 3 weeks. ( Time between advertising list date and federal surplus decision 
authorizing export in POI , (Exhibit CAN -91); British  Columbia initial questionnaire response on LEP, 
(Exhibit  CAN-49 (BCI)), p.  LEP-19). Canada also refers to affidavits of exporters from the southern interior who 
also stated that [[***]]. ([[***]] affidavit, (Exhibit CAN -68 (BCI)), paras.  8-9; [[***]] affidavit, 
(Exhibit  CAN-35 (BCI)), paras.  10 and 12).  
344 Canada's  first written submission, para.  204.  WT/DS533/ R 
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  British  Columbia  in 2015, and that exports from the British Columbia interior  are subject to only a 
nominal fee.345 The United  States defends the USDOC's  finding arguing that the in -lieu of 
manufacturing fee s necessarily increased the cost of exporting logs, thereby contributing to 
suppression of exports.346 We consider that the United  States has  not shown why the payment of 
the fee would suppress exports, when a significant proportion of log producers did not export logs 
despite having received the requisite export permits and having paid the in -lieu of manufacturing 
fees.347 We also consider that  the duration of the process for log export exemption was not a 
determinative factor in log producers'  export decisions for the same reason.348 We note that the 
United  States acknowledges that the USDOC did not explain why the in -lieu of manufacturing fee s 
and the duration of the log export exemption process can be considered to suppress exports when 
a significant percentage of log producers'  export authorizations remained unutilized, even though 
the producers paid the fees and went through the export author ization process.349 If the record 
showed that all the export authorizations were in fact utilized by log producers, an investigating 
authority may reasonably have taken the view that in absence of the fees in -lieu or a potentially 
lengthy authorization proc ess, even more export authorizations might have been requested by log 
producers. In such a scenario, the fees and the duration associated with the log export authorization 
process could plausibly be suggested as being suppressive of exports. However, the r ecord before 
us shows that log producers exported less than what they were authorized to export. For this reason, 
we are unable to accept that the USDOC could properly have found that the fees -in-lieu or the 
duration of the process could have contributed to suppression of exports. As log producers did not 
fully utilize the authorizations that they had already acquired, we fail to see how they would export 
more even if they could get authorizations to export additional volumes of logs without pa ying any 
fees. We therefore consider that the USDOC did not establish that the fees  in-lieu and the potentially 
lengthy duration of the export authorization process contributed to the suppression of log exports 
from British  Columbia .  
7.155.   In light of the foreg oing analysis of different individual intermediate findings, which together 
constituted the basis for the USDOC's  conclusion that export regulations operating in 
British  Columbia  restrained log exports and therefore caused the distortion of BCTS auction pr ices, 
we are of the view that the USDOC did not reasonably and adequately explain that conclusion. We 
note that since in this case the alleged link between the government intervention, i.e. the export 
regulations, and the purported price distortion, i.e. l owered BCTS auction prices, was indirect, the 
USDOC was required to provide a particularly detailed analysis and explanation substantiating any 
link between the two.350 We find, for the reasons described above, that the USDOC's  analysis and 
explanation fail ed to satisfy this standard, and thus conclude that the USDOC's finding that the 
export regulations distorted the BCTS auction prices was based on insufficient evidence.  
7.3.3.2.4   Whether the log export regulation impacted the British  Columbia  interior  
7.156.   Having foun d that the USDOC did not provide a reasoned and adequate explanation for how 
log export regulations suppressed exports and distorted log prices, we need not consider the 
parties'  arguments concerning whether the export regulation affected log prices in the 
British  Columbia  interior. However, we examine the parties'  arguments on that issue in this section 
of the Panel Report, keeping in view the possibility that on implementation of our report, the USDOC 
may reaffirm its finding that export regulations in British Columbia  suppressed exports and distorted 
log prices with evidence and explanations that are sufficient to support those findings. In that case, 
whether log export regulations could be considered to distort auction prices from the 
British  Columbia  interior will depend on whether the impact of the regulations will extend to the 
British  Columbia  interior.  
7.157.   Before the USDOC, the Canadian interested parties argued that the impact of log export 
regulations in British  Columbia , assuming arguendo  that there was any, would be limited to the 
British  Columbia  coast, and would not extend to  the British  Columbia  interior. The USDOC, however, 
 
345 Canada's  first written submission, para.  204 and fn 347.  
346 United  States'  response to Panel question No.  124, para.  374.  
347 Canada's  response to Panel question No.  91, para . 270.  
348 We note that Canada has produced record evidence demonstrating that the processing time for 
export authorization request was frequently considerably less than the 7 to 13 weeks estimated by the USDOC. 
(Canada's  response to Panel question No.  124, para. 353; Final determination, (Exhibit CAN -10), fn  851).  The 
United  States has not rebutted the validity of this evidence.  
349 United  States'  response to Panel question No.  209, para.  204.  
350 Appellate  Body Report, US – Countervailing Measures (China) (Ar ticle 21.5 – China) , para.  5.154.  WT/DS533/ R 
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  concluded that the log export regulations in British  Columbia  would also impact the British  Columbia  
interior for the follow ing two reasons  (a) the export regulations affect the interior directly, as a 
significant percentage of British  Columbia 's overall log exports comes from the interior; and (b)  the 
impact of export regulations on the coast would "ripple" through to the inte rior.351 We examine the 
adequacy of the USDOC's  reasoning in respect of both of these reasons in turn below.  
7.3.3.2.4.1   Whether log export regulations impact  the British  Columbia  interior directly  
7.158.   Canada argues that the impact of export regulations would not extend to the 
British  Columbia  interior. According to Canada, the USDOC wrongly relied on exports from the 
Tidewater region of British  Columbia  to support its finding that a significant percentage of exports 
from British  Columbia  came from the interior.352 Canada submits that the USDOC was mistaken in 
treating the Tidewater as a part of the interior, because the Tidewater is economically, 
geographically, and ecologically distinct from the interior.353 Canada also argues that due to 
geographic barriers and high trans portation costs, the exportation of logs from the non -Tidewater 
interior was uneconomic.354 
7.159.   We first examine the parties'  arguments and the USDOC's  findings concerning whether the 
Tidewater region was a part of the interior. The USDOC noted in the final determination that the 
Canadian  interested  parties did not argue before it that the log market in the Tidewater portion of 
the interior is a separate market unique from the rest of the interior.355 The USDOC also found that 
exports from the Tidewater interior account for approximately 8% of the total exports from the entire 
province and exports from the southern interior account for approximately 2% of the total exports 
from the entire province, together constituting a significant amount of total expor ts from the 
province.356 We note that if, as Canada contends, the Tidewater was a separate market that was 
distinct from the interior, the USDOC's  finding that exports from the interior "account for a significant 
amount of the total exports from the entire province" would be undermined.357 This is because 
the 8% of British  Columbia 's overall exports that came from the Tidewater could no longer be 
counted as exports from the interior, thus leaving the interior's  share in overall exports from 
British  Columbia  at 2%.358 In order to determine whether the USDOC properly considered exports 
from the Tidewater as being exports from the interior, we will need to ascertain whether the 
Canadian respondents had put forth evidence before the USDOC that supported the view that the 
Tidewater was not the same market as the interior and whether the USDOC proper ly engaged with 
that evidence.  
7.160.   We note that Canada has pointed to evidence on the USDOC's record  that purported to 
identify differences between the Tidewater and  the interior that make the two regions separate 
markets.359 The USDOC's  determination does not engage substantively with this evidence. Although 
 
351 United States'  first written submission, para.  398. 
352 Canada's  first written submission, para.  209.  
353 Canada's  first written submission, para.  209.  
354 Canada's first written submission, paras.  211-212; second written su bmission, para.  83.  
355 Final determination, (Exhibit CAN -10), p.  147.  
356 Final determination, (Exhibit CAN -10), pp.  147-148.  
357 Final determination, (Exhibit CAN -10), pp.  147-148.  
358 We note that the USDOC also alluded to "some requests to export BC logs to Alberta  during the POI", 
which the USDOC "presume[d]" to have come from eastern portion of the interior. (Final determination, 
(Exhibit CAN -10), fn 884). However, the USDOC does no t specify whether such requests converted to actual 
exports and does not give any indication as to the quantity of logs in respect of which the requests were made 
as a proportion of overall exports from British  Columbia.  
359 Canada's  response to Panel quest ion No.  284, para.  11; first written submission, paras.  211-212. We 
note that Canada has pointed to the following record evidence that was relevant to the issue of differences 
between the Tidewater region and the interior:  Bustard Report, (Exhibit CAN -17), pp. 5, 8-9, and 25 (showing 
difference between the two regions in predominant geographic features, available log transportation methods, 
and diameter of harvested logs, and suggesting that there is low demand for logs from mills in the Tidewater 
region); British  Columbia initial questionnaire response on LEP, (Exhibit CAN -49 (BCI)), pp.  LEP-5, LEP -27, and 
LEP-43 (pertaining to transportation methods and costs, noting that "[m]ost transportation of logs on the 
Coast (and the Tidewater region of the Interior ) is by water, which is relatively inexpensive. In the 
non-Tidewater Interior, on the other hand, most logs are moved by truck, which is a great deal more costly"; 
also explaining that while exports from the Tidewater region are transported to the coast an d exported in the 
same manner as coastal exports, exports from the southern interior are made in an manner that "does not 
differ greatly" from domestic sales); British  Columbia verification of questionnaire response , (Exhibit  CAN-88), 
p. 18 (noting that th e Tidewater was "near enough to the coast that it does not present the same 
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  the USDOC notes that the Canadian interested parties did not argue that the Tidewater was a distinct 
market from the interior, the nature and amount of record evidence before the USDOC would have 
led an obj ective and unbiased investigating authority to examine this issue more closely, engage 
with the evidence, and provide a reasoned and adequate basis for its conclusion on this issue.360 As 
the USDOC did not do so, we consider that the USDOC did not provide a  reasoned and adequate 
basis for its determination that the Tidewater was not a separate market from the interior, and for 
considering that exports from the Tidewater could be counted as exports from  the interior.  
7.161.   Consequently, the USDOC did not have a va lid basis for considering that exports from the 
interior accounted for 10% of total exports from British  Columbia . As exports from the southern 
interior accounted for only 2% of overall exports from British  Columbia , we consider the 
USDOC's  reasoning that log export regulations in British  Columbia  would have a direct impact on log 
prices from British  Columbia  was also flawed. Our view is in keeping with the 
Appellate  Body's  finding that a benchmark need not be completely free of any distortion and that 
not any effect of government intervention on prices could be considered price distortion. Further, 
the Appellate  Body has noted, and we agree, that in cases of government intervention that indirectly 
impact prices, a more detailed analysis and explanation of h ow prices are distorted as a result of 
such government intervention may be required.361 We consider that the USDOC's  analysis and 
explanation concerning whether exports from the interior were "significant" in amount and whether 
log export regulations in British Columbia  will have a direct impact on the interior did not satisfy this 
standard.  
7.162.   Canada has also argued, pointing to record evidence, that the potential for exportation from 
the interior was small.362 Canada offered evidence that suggests that due to geographic conditions 
and the long distances involved, the transportation of logs to the United  States from southern 
British  Columbia  to the border was particularly expensive, thus inhibiting exportation.363 Canada 
argues that due to the high transportation costs and low demand for logs from the interior in export 
markets, less than 0.5% of the interior harvest was permitted for exports, and even less was actually 
exported.364 We note that aside from the foll owing footnote in the final determination that the 
United  States points to, the determination does not address this evidence concerning the 
exportability of logs from the non -Tidewater interior:  
In this exhibit, the petitioner provided a map, in which a 10 0-mile radius is drawn 
around the sawmills in the BC interior, which demonstrates that the BC interior sawmills 
all overlap with each other. We note that this figure is consistent with the findings of 
the [Government of Canada/Government of British  Columbi a] GOC/GBC's  own expert, 
as the Bustard Report states that "[i]n most Interior areas it is economically feasible to 
truck export logs for up to about a 7 -hour return cycle from harvest sites. This 
represents approximately a 228 km (142 mile)  each way."365 
 
transportation challenges as the rest of the interior"); and Kalt Report on LEPs , (Exhibit  CAN-16 (BCI)), pp.  69, 
71, 73, and 76 -77 (noting about transportation conditions that " [t]he Tidewater Interior is that portion of the 
Interior adjacent to the northern Coast of BC and to portions of the panhandle of Alaska that is technically part 
of the Interior but can economically reach Tidewater ports (typically Prince Rupert or Stewart)  on the northern 
Coast due to short enough trucking hauls from point of harvest" and about forest types that "[t]he forest in the 
Tidewater Interior area is much more like Coastal forests than the remainder of the Interior"; describing 
conditions of demand in the Tidewater region).  
360 We note that the fact that the USDOC noted that the Canadian interested parties did not argue that 
the Tidewater was a separate market from the interior indicates that the USDOC was aware that such an 
argument  could conceivably be made. We consider that this awareness would cause an objective and unbiased 
investigating authority to explore this issue substantively.  
361 See, above,  para. 7.145 .  
362 Canada's  first written submission, para.  209 (referring to Kalt Report on LEPs , 
(Exhibit  CAN-16 (BCI)), pp.  51 and 59).  
363 British  Columbia  initial questionnaire response , (Exhibit CAN -18 (BCI)), p.  BC-I-48; [[***]] affidavit, 
(Exhibit CAN -33 (BCI)), para.  53; Larry Gardner affidavit , (Exhibit CAN -31 (BCI)), para s. 43-45; 
Mark Feldinger affidavit, (Exhibit CAN -34 (BCI)), para.  9; and Kalt Report on LEPs , (Exhibit CAN -16 (BCI)), 
p. 62. 
364 Canada's  first written submissio n, para.  212.  
365 United  States ' response to Panel question No.  284, para.  8 (referring to Final determination, 
(Exhibit  CAN-10), fn 886).  WT/DS533/ R 
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  According to the United  States, the overlapping radii of sawmills "transcend [] the British  Columbia  
borders with the United  States and Alberta", thus showing that it is possible to export logs from the 
southern interior .366  
7.163.   We agree with Canada that the mi lls' overlapping radii as drawn on a map do not take into 
account " the realities of actual road miles and mountain ranges that exist in the province".367 
Evidence produced by Canada suggests that even if the distance between two mills as the crow flies 
was less than or equal to 100  miles, the actual path connecting the two mills is intractable due to 
geographical features such as mountains.368 We further note that the USDOC's  reliance on the quote 
from the Bustard Report in the footnote above to support its v iew that it was economic to export 
logs from the interior is erroneous, because the Bustard Report goes on to note that "[t]he long haul 
distance required to transport logs to the point where they can be loaded onto a ship or trucked 
across the BC -US borde r means that few logs from the BC Interior can be economically exported".369 
Thus, the Bustard Report in fact undermines the USDOC's  view instead of supporting it. We therefore 
consider that nothing in the USDOC's  determination properly engaged with the rec ord evidence 
identified by Canada that suggests that exportation of logs from the non -Tidewater interior was 
uneconomic, resulting in the low volume of export logs from the interior.  
7.164.   Because the USDOC did not properly establish that the Tidewater region w as not a separate 
market from the interior, and because the USDOC did not sufficiently engage with the evidence 
concerning the low exportability of logs from the non -Tidewater interior, we consider that the 
USDOC's  finding that "log export restraints direc tly impact the interior region of BC – regardless of 
any ripple effect from the coast to the interior" was not based on a reasoned and adequate 
explanation and was thus flawed.370 
7.3.3.2.4.2   Whether the impact of log export regulations will "ripple" through from the 
coast to the interior  
7.165.   Canada argues that the USDOC's  determination that the effect of log export regulations will 
"ripple" through to the interior (ripple -through analysis)  was flawed for three reasons  (a) the 
ripple -through analysis ignored the physical se paration and the lack of economic transportation 
between these two markets; (b)  the USDOC did not address the point that any alleged price impact 
would be limited to a subset of coastal species; and (c)  the USDOC's  premise that prices for similar 
logs will  equalize across different markets was inaccurate.371 We evaluate the merits of 
Canada's  arguments concerning each of the three alleged flaws in the USDOC's  ripple -through 
analysis below.  
Physical separation between coastal and interior markets  
7.166.   In the final  determination, the USDOC responded to the arguments concerning the lack of 
physical connection and economic transportation options between the coast and the interior by 
finding that the Tidewater region was connected to the coast and that there were no mo untain 
ranges separating these two parts of British  Columbia .372 The USDOC also found that there are at 
least seven highways that cross between the coast and the interior, and the respondents had mills 
along these highways.373  
7.167.   We consider that to the extent that the USDOC's  rejection of arguments concerning the 
availability of transportation options between the coast and the interior was based on the availability 
of transportation options between the Tidewater and the coast, the  USDOC's  reasoning was flawed. 
 
366 United  States ' response to Panel question No.  284, para.  8. 
367 Canada's  comments on the United States ' response to P anel question No.  284, para.  5. 
368 Canada's  comments on the United  States'  response to Panel question No.  284, para.  5 (referring to 
Kalt response  on LEP s, (Exhibit CAN -90 (BCI)), p.  10 (that states that "[p]etitioner's  circles are 'as the crow 
flies' miles which ignore the realities of limited road networks and actual road miles over often mountainous 
terrain, including the series of northwest -to-southeast parallel valleys and mountain ranges in Southern 
Interior BC. Such realities increase haul ing costs, limit east -west transportation in the Southern Interior, and 
reduce economically feasible hauling distances." )) 
369 Bustard Report, (Exhibit CAN -17 (BCI)), p.  12.  
370 Final determination, (Exhibit CAN -10), p.  147. 
371 Canada's  first written submissio n, paras.  215, 217, and 220.  
372 Final determination, (Exhibit CAN -10), p.  147.  
373 Final determination, (Exhibit CAN -10), p.  147. WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  As noted above, the USDOC did not provide a reasoned and adequate basis for treating the Tidewater 
region as a part of the interior. Therefore, we do not consider that the existence of transportation 
linkages between the Tide water region and the coast implies that the coast was sufficiently 
connected to the interior for economic transportation of logs.  
7.168.   As regards the USDOC's  reasoning that there were several highways connecting the coast 
and the interior along which the respo ndents maintained mills, we consider that the 
USDOC's  reasoning was based on an incomplete examination of all relevant evidence. Nothing in the 
USDOC's  determination responds to the evidence on the record identified by Canada that shows that 
there was very  little log flow between the coast and the interior.374 Notwithstanding the presence of 
highways connecting the coast and the interior, we consider that an objective and unbiased 
investigating authority would also engage with evidence that demonstrates that  there was minimal 
log flow between the two markets before reaching a determination that the impact of log export 
regulations on log prices on the coast would ripple -through to the interior. Thus, we conclude that 
the USDOC did not provide a reasoned and a dequate explanation for rejecting the Canadian 
interested parties'  arguments concerning the lack of economic transportation options between the 
coast and the interior.375  
Whether price impact would be limited to a subset of coastal species  
7.169.   In the underlying investigation, the Canadian  interested  parties argued before the USDOC 
that any ripple effect of the log export regulations would be confined to coastal species, which differ 
from the predominant interior species.376 The USDOC found that even tho ugh logs in the coast and 
the interior are not identical in their species composition, they are nevertheless interchangeable, 
and hence any direct impact of the log export regulations on one species will have an indirect impact 
on other species in the prov ince.377 
7.170.   Canada argues that the USDOC's  reasoning was flawed, since most coastal species, including 
Douglas -fir, balsam, cedar, and hemlock, are not used to produce SPF softwood lumber.378 Canada 
also submits that species used to produce SPF lumber comprised  approximate 83% of the interior 
harvest, while those species accounted for less than 1% of the coastal market. Thus, Canada argues 
there is no overlap between coastal species and the interior species with respect to species used to 
produce SPF lumber.379 Canada also asserts that one species that is found in the coast as well as 
the interior, i.e. Douglas -fir, represented 29% of the coastal harvest, but only 9% of the interior 
harvest. Canada argues that the USDOC did not explain why an indirect impact on a species that 
comprised 9% of the interior harvest, that does not produce SPF lumber, can cause substantial 
distortion of prices for logs of all species in the interior.380  
7.171.   Canada also assails the USDOC's  finding that "hemlock and fir species are substituta ble for 
SPF" and that "all three types of species are used to produce similar products, including lumber". 
Canada argues that the substitutability that the USDOC relied on relates to the downstream product, 
i.e. lumber, and not the input product, i.e. logs .381 Canada argues that while hem -fir lumber may be 
substitutable for certain end -use purposes with certain SPF lumber, this does not mean that mills 
treat logs of the two species -sets as interchangeable inputs.  
7.172.   The United  States contends that the USDOC pro perly rejected the Canadian interested 
parties'  argument that any impact of log export regulations will be limited to coastal species as 
(a) some species overlapped between the coast and the interior harvests; and (b)  other species 
 
374 Canada has cited to affidavits from Canfor, [[***]], [[***]], Tolko, and West  Fraser, all of which 
suggest that geographic se paration and transportation costs make transfer of logs between the coast and the 
interior uneconomic. (Canada's  first written submission, para.  215 and table 1).  
375 We note that the USDOC also stated that its ripple -through analysis was not dependent on th e 
existence or absence of transportation corridors. We will therefore make a determination as to the overall 
consistency of the USDOC's  ripple -through analysis only after examining the other bases on which the 
ripple -through analysis rested, and the validi ty of which Canada has disputed.  
376 Final determination, (Exhibit CAN -10), p.  146.  
377 Final determination, (Exhibit CAN -10), p.  146.  
378 Canada's  first written submission, para.  219.  
379 Canada's  response to Panel question No.  86, para.  263. 
380 Canada's  respon se to Panel question No.  86, para.  264.  
381 Canada's  response to Panel question No.  86, para.  265. WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  were substitutable for e ach other and were used to produce similar products, including lumber.382 
The United  States also points to the USDOC's  finding that both the coast and interior had significant 
volumes of balsam, cedar, fir, and hemlock .383 The United  States also points to re cord information 
concerning the substitutability between coastal species and interior species.384  
7.173.   We note that the USDOC found that the species that are found in both regions are "balsam, 
cedar, fir and hemlock".385 Canada produced evidence that indicates t hat these four species taken 
together constituted 93% of coastal harvest, but only 23% of interior harvest.386 Further, we note 
that Canada has argued, and the United  States does not contest, that none of these species is used 
to produce SPF lumber.387 We ag ree with Canada that the interchangeability of lumber products 
created from the coastal species and the interior SPF species for certain end uses does not imply 
that logs of these species are interchangeable as inputs for producing lumber. Canada has point ed 
to record evidence that shows that mills are designed to process the kind of logs that are found in 
their proximity.388 As coastal species constitute only a minority of species in the interior, and the 
dominant species of the interior are not found in th e coast389, the record evidence referred to by 
Canada suggests that mills in the interior are not adapted to process logs of the coastal species as 
their input. Nothing in the USDOC's  determination engages with the evidence referred to by Canada 
in this reg ard, even though that evidence is directly pertinent to the question of whether coastal 
species are substitutable as inputs to lumber production for interior species. We therefore consider 
that the USDOC's  rejection of the Canadian  interested  parties'  argument that the impact of log 
export regulations will be limited to the coastal species and will not affect prices of species used by 
mills in the interior to not be reasoned and adequate.  
Whether prices for logs will equalize across different markets  
7.174.   In the final determination, the USDOC rejected the Canadian  interested  parties'  argument 
that logs do not follow the "law of one price".390 The USDOC noted that there was "conflicting 
evidence" on this question. While the Canadian interested parties had relied o n the Kalt Report and 
the Leamer Report for the proposition that logs do not follow the law of one price, the USDOC noted 
that those reports were prepared specifically for the purposes of the underlying investigation and 
hence were potentially biased. The USDOC decided to ascribe greater weight to "numerous other 
independent reports" that indicated that log markets covering large areas can be integrated.391 The 
USDOC noted as "additional support" that logs harvested in Québec  and New Brunswick  were traded 
across other provinces and the United  States, and the Government of New Brunswick  indicated that 
the log market in New Brunswick  is integrated with the sur rounding region.392 
7.175.   Canada argues that record evidence showed that prices for logs of the same species and 
grade would not be transmitted between the coast and the interior, or even between all regions 
 
382 United  States'  first written submission, para.  400.  
383 Final determination, (Exhibit CAN -10), p.  146.  
384 United  States ' response to Panel question No.  86, para. 267.  
385 Final determination, (Exhibit CAN -10), p.  146. 
386 Summary of BC harvest data, (Exhibit CAN -29).  
387 Canada's  first written submission, paras.  109 and 219 (referring to Summary of BC harvest data , 
(Exhibit CAN -29)). 
388 Canada's  response to Panel question No.  86, para.  265 (referring to British  Columbia  initial 
questionnaire response , (Exhibit CAN -18 (BCI)), p.  BC-I-56 (noting that "[t]o minimize transportation costs, 
mills in British  Columbia Interior and the United  States are not only dispersed, but they also become 
specialized to the use of logs of the type most readily accessible to them. … Even though the predominant 
output of British  Columbia Interior as a whole is SPF, mills specialize to maximize returns from char acteristics 
of the particular region in which they source their input, and thus it becomes costly to alter their input diet"); 
Kalt Report on LEPs , (Exhibit CAN -16 (BCI)), p.  19 (noting that "[i]n both the Interior and the Coast, the 
design and operation o f mills reflect the harvest and logs available to them. Mills match their capital and 
operations to the available log diet, consistent with expectations about prices and demand in the lumber 
markets, and competition from other mills. … Given the large diff erences between the available harvest on the 
Coast and in the Interior, mills show substantial differences in specialization in terms of log diets and 
products"); Jendro and Hart Report, (Exhibit CAN -20 (BCI)), pp.  19-20 ("[t]he mix of species in an area a lso 
affects the types and design of manufacturing facilities installed in that area, which in turn affects the demand 
and price for logs harvested in that area"); and [[***]] affidavit, (Exhibit CAN -33 (BCI)), para.  54 ("[[***]]")). 
389 Canada's  first written submission, para.  110. 
390 Final determination, (Exhibit CAN -10), p.  145. The law of one price, as noted by the USDOC, implies 
that logs of the same species and grade will have the same price at all locations.  
391 Final determination, ( Exhibit CAN -10), p. 145.  
392 Final determination, (Exhibit CAN -10), pp.  145-146.  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  within the interior.393 Canada points to Dr Kalt's  analysis in the Kalt Report that shows that SPF 
sawlog prices varied significantly across different regions of the interior itself.394 Dr Kalt further 
explained that log prices do not transmit from one region to the next due to local changes in supply 
and demand.395 Canada also posits that Dr Kalt showed through a statistical analysis of SPF log 
prices that changes in local log market conditions do not ripple to adjacent markets.396 In support 
of its view, Canada has also referred to the Leamer Report and the  Jendro and Hart Report.397 
Moreover, Canada points to the statements of Mr Gardner of West Fraser, who in an affidavit stated 
that the prices that West  Fraser paid for logs varied substantially between different regions of 
British  Columbia .398  
7.176.   The USDOC re jected the Canadian interested parties'  reliance on the reports on the ground 
that the reports were potentially biased as they were specifically commissioned for the underlying 
investigation.399 We consider that the USDOC's  summary dismissal of the reports that the Canadian 
interested parties relied on was improper. In our view, despite the fact that the reports were 
prepared for the purposes of the underlying investigation, an objective and unbiased investigating 
authority would engage with the contents of the reports and the reasoning and data contained 
therein, and will not reject the reports without doing so.400 The United  States argues that the USDOC 
properly rejected the argument that log prices would not equalize across the coast and the interior, 
as it relied on independent studies that confirmed the existence of the law of one price, contrary to 
the conclusions of the Kalt Report and the Leamer Report.401 We agree with Canada that the studies 
that the USDOC relied upon pertained to markets in Scandinavi a and southeastern states of the 
United  States, and were therefore not directly relevant to the question whether the law of one price 
applies across the coast and the interior regions of British  Columbia .402 On the other hand, the 
reports that Canada relies  on pertained specifically to British  Columbia . In our view, the conditions 
due to which log markets across large areas were integrated in the regions studied in the reports 
that the USDOC relied on need not be the same as the conditions in British  Columbi a. Indeed, the 
USDOC neither made a determination that the conditions in the regions studied in the reports that 
it relied on were the same as those in British  Columbia , nor explained why the conclusions of reports 
concerning distant areas would necessaril y apply to British  Columbia  as well. Furthermore, Canada 
also points to the critiques of the studies relied upon by the USDOC authored by Dr Kalt and 
Dr Leamer.403 We note that the USDOC did not engage with the critiques of the statistical methods 
used in t he studies that the USDOC relied on that Canada has pointed to. We consider that in absence 
of any engagement with those critiques, the USDOC's  determination in respect of the issue of the 
law of one price cannot be considered reasoned and adequate.  
7.3.3.2.4.3   Conclu sion regarding the effect of log export regulations on log prices in the 
Interior  
7.177.   As noted above, the USDOC did not provide a valid basis for treating exports from the 
Tidewater region of British  Columbia  as exports from the interior, and did not engage su fficiently 
with the evidence suggesting that it was uneconomic to export logs from the interior (excluding 
Tidewater). Thus, the USDOC could not properly have found that the log export regulations directly 
impact ed log prices in the interior. Further, we a lso find that the USDOC did not properly evaluate 
the Canadian interested parties'  arguments that any effect of British  Columbia 's log export 
regulations will not "ripple" through from the coast to the interior. The USDOC failed to explain why 
its "ripple"  theory would hold true despite the physical separation between the coast and the interior 
and the differences in the species composition of forests in the two regions. The USDOC's  view that 
 
393 Canada's  first written submission, para.  224.  
394 Canada's  first written submission, paras.  220-221 (referring to Kalt Report on LEPs , 
(Exhibit  CAN-16 (BCI)), p.  81).  
395 Canada's first written submission, para.  223.  
396 Canada's  first written submission, para.  223. 
397 Jendro and Hart Report, (Exhibit CAN -20 (BCI)), pp.  16-17 ("[p]rices for softwood logs vary 
substantially among regions" due to physical characteristics of the log s, variability in contractual terms 
according to which they are sold, and differences in local prevailing market conditions); see also, 
Leamer  Report, (Exhibit CAN -286 (BCI)), p.  48. 
398 Larry Gardner affidavit , (Exhibit CAN -31 (BCI)), paras.  48-49.  
399 Final determination, (Exhibit CAN -10), p.  145.  
400 See, above,  paras. 7.60-7.61.  
401 United  States'  first written submission, para.  401.  
402 Canada's  response to Panel question No.  86, para.  261.  
403 Canada's  response to Panel question No.  86, para.  261 (referring to Kalt response  on LEP s, 
(Exhibit  CAN-90 (BCI)), pp.  9-15; and Leamer Rep ort, (Exhibit CAN -286 (BCI)), paras.  60-68).  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  log markets in the coast and the interior would follow the law of  one price was also based on an 
insufficient consideration of all pertinent record evidence.  
7.178.   Thus, we conclude that the USDOC did not provide a reasoned and adequate explanation for 
its finding that the impact of log export regulations, if any, would exte nd to log prices in the British 
Columbia interior .404  
7.3.3.2.5   Conclusion  
7.179.   Having found that the USDOC's  analysis in respect of each of the three grounds based on 
which the USDOC rejected the BCTS auction prices as a valid benchmark was not reasonably and 
adequately  explained and was insufficiently supported by record evidence, we conclude that the 
USDOC improperly rejected BCTS auction prices as a stumpage benchmark. The USDOC's  finding 
that BCTS auction prices were distorted because the five firms that consumed a m ajor proportion of 
logs derived from auctioned timber also held the majority of Crown timber via long -term licences, 
was based on inadequate engagement with evidence that suggested that the five firms could not 
have induced lower bidding by auction partici pants, as the firms depended on auctioned timber to 
meet their demand for logs economically. The USDOC's  conclusion that the three -sale limit distorted 
auction prices by making the auctions uncompetitive was flawed because it did not adequately 
explain how  the exclusion of certain firms due to the three -sale limit would necessarily lead to lower 
bids in light of the design of the BCTS auctions. The USDOC also did not explain why an auction 
participant would bid lower despite competition from other bidders m erely because that participant 
intends to subsequently resell the timber to another firm for a price that includes a "cutting rights 
fee". Further, t he USDOC did not provide a sufficiently detailed analysis and explanation to establish 
that the log export regulations in operation in British  Columbia  distorted the BCTS auction prices. 
Because the grounds based on which the USDOC reached its overall conc lusion in respect of the 
BCTS auction prices were flawed individually, by necessary implication they cannot support the 
USDOC's  overall conclusion cumulatively. We therefore uphold Canada's  claim that the USDOC 
rejected the BCTS auction prices as a benchma rk inconsistently with Article  14(d)  of the 
SCM Agreement.  
7.3.4   Whether the USDOC improperly rejected auction prices in Québec  as an appropriate 
stumpage benchmark  
7.180.   In the underlying investigation, the Canadian interested parties  had proposed that the 
USDOC use  auction prices for Crown stumpage in Québec  as a benchmark to determine the adequacy 
of remuneration for the Crown's  provision of stumpage in the province.405 Although the USDOC did 
consider using the proposed auction prices in Québec  as a stumpage benchma rk, it declined to use 
them, finding that they were distorted. Canada claims that the USDOC acted inconsistently with 
Article  14(d)  of the SCM  Agreement in improperly rejecting, as a stumpage benchmark, auction 
prices in Québec . 
7.3.4.1   Factual aspects  
7.181.   The auction  prices that the Canadian interested parties  proposed as a stumpage benchmark 
were prices at which Crown standing timber was sold at public auctions conducted by the 
province's  Timber Marketing Bureau, Le Bureau de mise en marché des bois  (BMMB). Québec  used 
those auction prices to set Crown stumpage prices for the rest of the standing timber on Crown land. 
 
404 We note that in its first written submission, Canada also argued that export premia are a normal 
feature of log export markets and cannot be taken to mean that log export regulations distorted log prices in 
the interior. (Canada's  first written submission, para.  208). We consider that even if log exports were priced 
higher than domestic log sales, that in itself will not establish that domestic log prices were distorted. In other 
words, a finding of export pre mium alone is not dispositive to the question of whether domestic log prices were 
distorted when the other findings of the USDOC examined above were flawed.  
405 Public version of joint case brief , (Exhibit CAN -311), pp.  I-21-I-22 and I -25; Canada's  response  to 
Panel question No. 156(a), para s. 22-23; Québec comments on subsidy methodology , (Exhibit CAN -594), 
pp. 10-12; Québec initial questionnaire response, (Exhibit CAN -170), pp. QC-S-3-QC-S-5; Québec comments 
on preliminary determination , (Exhibit CAN-595), pp. 1-8. WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  In particular, the BMMB applied economic regressions to the auction prices to determine those Crown 
stumpage prices.406 
7.182.   In assessing whether the remuneration for Crown stumpage in Québec  was adequate, the 
USDOC declined to use the auction prices in the province as a stumpage benchmark on the basis 
that those auction prices were distorted due to government involvement in the  market. It found that 
the Government of Québec  was "the largest provider of stumpage" in the province as 73.88% of 
Québec 's stumpage harvest for 2015 -2016 was sourced from Crown land. Of that amount, 51.75% 
was sourced through Crown -administered licences,  also known as Timber Supply 
Guarantees  (TSGs), and 22.13% from auctions. The remaining volumes of Québec 's stumpage 
harvest were sourced from the private forest (15.07%)  and log imports from the United  States and 
other Canadian  provinces (11.05%).407  
7.183.   The USDOC considered that the record showed that the Québec  stumpage market is 
distorted because (a)  the government controls the majority of the market, providing long -term 
timber supply rights or TSGs at administratively -set prices to only firms that process the logs within 
the province; and (b)  other circumstances, including the provincial mandate that logs harvested in 
the province be processed in the province, decrease firms'  incentive to pay above that 
administratively -set price for private timber or to bi d above that price at auction.408 
7.184.   In particular, the USDOC relied mainly on the reasoning below to conclude that it could not 
use auction prices as a stumpage benchmark:  
a. overall consumption of non -auction Crown timber is large compared to other sources;  
b. a significant amount of timber (15%)  offered at auction remained unsold during the POI. 
This indicated that TSG -holding corporations and non -sawmills may not be making 
aggressive bids above TSG prices;  
c. a small number of TSG -holding corporations dominate the c onsumption of Crown timber 
sourced through TSGs as well as through auction, and therefore influence the auction 
prices;  
d. under a TSG, a sawmill can source up to 75% of its supply need at a government -set 
price. A sawmill therefore was strongly motivated to  treat its TSG -guaranteed volume as 
its primary source of supply and its auction volume as an additional or residual supply 
source. Record evidence for processed wood during 2015 -2016 indicates that, in 
aggregate, TSG -holding sawmills sourced just 20.6% of  their Crown supply from the 
auction;  
e. TSG-holding corporations can shift their allocations of Crown -origin timber amongst 
themselves, thereby reducing their need to acquire timber in the auction or from 
non-Crown sources. TSG -holders are permitted to trans fer, annually, up to 10% of the 
total volume harvested under their TSGs without government approval, and recipient mills 
may receive up to 10% of their total TSG allocated volume annually without government 
approval;  
f. the ability of sawmills to purchase un harvested volumes from the government at the 
government -set price further diminishes their need to source supply from the auctions or 
other non -Crown sources;  
g. harvested timber purchased at the auction must be processed within Québec , effectively 
limiting bidders. Limiting bidders suppresses auction bids as bidders understand that they 
face lesser competition; and  
 
406 Preliminary determination, (Exhibit CAN -8), p.  24; Québec initial questionnaire response, 
(Exhibit  CAN-170), p p. QC-S-2-QC-S-4. 
407 Final determination, (Exhibit CAN -10), p.  99. 
408 Final determination, (Exhibit CAN -10), p.  98. WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  h. non-sawmills (i.e. independent bidders)  have little incentive to bid above the 
TSG-administered prices  (TSG price) .409  
7.185.   Québec  had placed on the r ecord of the underlying investigation, among others, the Marshall 
Report, a study that it had commissioned, and which provides an analysis of auction prices in the 
province.410 The study concluded that the auction prices are valid market prices free of 
government -induced distortions.411 However, the USDOC, in its assessment, decided to accord less 
weight to that report considering that it was not prepared in the ordinary course of business but for 
"the express purpose of submission in this investigation".412 Further, the USDOC decided to dismiss 
all the findings in that report, for the reasons set out in its determination.413  
7.3.4.2   Evaluation  
7.186.   Canada argues that the USDOC rejected the proposed auction benchmark for Québec  by 
speculating about how auction participants might  act rather than evaluat ing the positive record 
evidence of how they did act. Canada further asserts that no unbiased and objective investigating 
authority would rely on speculation to discount actual evidence, as the USDOC did. For Canada, the 
USDOC's  speculative "observations" do not show a causal link between the government presence in 
the market and, any unproven, distortion.414 The United  States contends, in response, that the 
USDOC's  conclusions were based on record evidence.415 
7.187.   The broad issue before us is whether the USDOC's  finding of price distortion in Québec  was 
reasoned, adequately explained , and supported by evidence. As noted above, the USDOC based its 
overall conclusion that auction prices in Québec  were distorted on the following grounds  (a) the 
government's  market s hare in Québec 's stumpage market, (b)  market concentration, 
(c) sawmills'  access to additional Crown timber, (d)  correlation between auction prices and 
TSG prices, (e)  unsold auction timber, and (f)  log-processing requirements. In evaluating 
Canada's  claim  against the USDOC's  finding of price distortion in Québec , we will assess the 
adequacy of the USDOC's  analysis with respect to each of these grounds.  
7.3.4.2.1   The government's  share in Québec 's stumpage market  
7.188.   We will first examine the USDOC's  finding that the Government of Québec  was "the largest 
provider of stumpage" in the province as 73.88% of Québec 's stumpage harvest for 2015 -2016 was 
sourced from Crown land. The USDOC further noted that of that amount, 51.75% was sourced 
through Crown -administered licences, also known as TSGs, and 22.13% from auctions.416 The 
parties disagree over whether the Crown's  share includes the 22.13% auction -sourced timber. 
Canada argues that the Crown TSG -supply in Québe c cannot be characterized as "predominant" as 
only half the market is supplied at the government TSG price. Canada further asserts  that where 
the government is a "significant" supplier, as is the case in Québec , the investigating authority faces 
a higher b urden in finding price distortion than in cases where it is a predominant supplier and it 
must rely on factors other than the market share.417 The United  States contends that the 
government's  73.88% market share consists not only of TSG stumpage, as Canada argues, but also 
the stumpage it sells at auction.418  
7.189.   We note, at the outset, that the USDOC did not itself characterize the Crown's  market share 
in Québec  as "predominant".419 While the USDOC stated that the government was "the largest 
 
409 Final det ermination, (Exhibit CAN -10), pp.  99-102. 
410 Marshall Report, (Exhibit CAN -171 (BCI)).  
411 Marshall Report, (Exhibit CAN -171 (BCI)), p. 81. 
412 Final determination, (Exhibit CAN -10), p.  103. 
413 Final determination, (Exhibit CAN -10), pp.  103-104. 
414 Canada's  first written submission, para.  414; opening statement at the first meeting of the Panel 
(26 February 2019), para.  141. 
415 United States'  second written submission, para.  257; first written submission, para.  278. 
416 Final determination, (Exhibit CA N-10), p.  99. 
417 Canada's  first written submission, paras.  426-427 (referring to Appellate  Body Report, US – 
Anti-dumping and Countervailing Duties (China) , para.  443).  (emphasis original)  
418 United  States'  first written submission, para.  267. 
419 The USDOC noted that the "majority of the market is controlled by the government" without stating 
whether it based that finding on a consideration that the government market share constituted 73.88% 
or 51.75%. (Final determination, (Exhibit CAN -10), p.  98). WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  provider of stumpage  with 73.88 percent of the stumpage harvest for FY2015 -2016 sourced from 
Crown land", it went on to further indicate that "[o]f that amount, 51.75 percent was sourced via 
administered TSGs and 22.13 percent from the auctions".420 The observations that led t he USDOC 
to conclude, in its preliminary determination, that the Québec  auction prices were distorted, included 
"the overall consumption of non-auction Crown timber ", which the USDOC noted was "large relative 
to other sources". The USDOC considered these o bservations to "remain significant and informative" 
in its final determination.421 This suggests that the USDOC itself was considering the impact of 
non-auction Crown timber separately from auction timber in its assessment. We therefore reject 
Canada's  arguments set out in the preceding paragraph.   
7.3.4.2.2   Market concentration  
7.190.   We will next examine the USDOC's  finding that a small number of TSG -holding corporations 
dominate the consumption of Crown timber sourced through TSGs, as well as through auction, and 
therefor e influence the auction prices.422, 423 The USDOC found that the ten largest TSG -holding 
corporations accounted for 62.43% of the softwood sawlog  auction volume acquired during 2015, 
and 74.87% of logs acquired through Crown supply guarantees during 2015 -2016.424 It further found 
that TSG -holding corporations have "little incentive" to bid for Crown timber  above the TSG price 
when those corporations  do participate in an auction. Under a TSG, a sawmill can source up to 75% 
of its supply need at a  government -set price.425 Further, a sawmill can obtain additional wood at the 
government -set price through transfers from other sawmills and the sale of unhar vested timber by 
the BMMB.426  
7.191.   Canada argues that the USDOC improperly concluded that a small number of TSG -holding 
corporations dominate the consumption of Crown -origin timber and these sawmills have "little 
incentive" to bid above the TSG price. The level  of competition between private participants is a 
"prevailing market condition" and has no bearing on whether auctions produce market -determined 
prices for purposes of Article  14(d).427  
7.192.   We note that market concentration was one among several factors set ou t in 
paragraph s 7.183 -7.184 , including the C rown's  market share, which the USDOC considered as 
contributing to the distortion of auction prices in Québec . We consider, however, that the USDOC 
did not reasonably and adequately explain in its determination how market concentration in 
interaction with any of these factors indicated that auction prices for stumpage in Québec  were 
distorted .  
7.193.   We take the view that market concentration, neither by itself, nor taken together with the 
market share of non -auction Crown timber, is determinative of price distor tion. If the same group 
of consumers dominate the purchase of both non -auction and auction Crown timber, and non -auction 
Crown timber constitutes a large market share, those facts do not necessarily imply that auction 
prices are distorted. Where non -auction Crown timber does not fully meet the consumption needs 
of consumers, the consumers will need to rely on other sources, such as auctions, to secure 
additional timber to fulfil their total demand. In such a case, it will not matter that those consume rs 
are the dominant buyers of both non -auction and auction Crown timber, and that non -auction Crown 
timber constitutes a large market share. Regardless of those factors, consumers will retain their 
incentive to bid for, and win, auction timber to fulfil th eir consumption needs. As such, the dominance 
of consumers in both markets and the market share of Crown timber, would not necessarily affect 
the consumers'  demand and bids for, and therefore prices of, auction timber.  
 
420 Final determination, (Exhibit CAN -10), p. 99. (emphasis original)  
421 Final determination, (Exhibit CAN -10), p.  99. (emphasis added)  
422 Final determination, (Exhibit CAN -10), p.  101. 
423 See our evaluat ion of similar issues in para. 7.84 above . 
424 Final determination, (Exhibit CAN -10), p.  100. 
425 The USDOC also noted that because the first 100,000 m3 of a mill's  residual need is exempt from the 
MFFP's  25% auction ratio, certain mills source more than 75% of their supply needs through TSGs. (Final 
determination, (Exhibit CAN -10), p.  101).  In this regard, Canada asserts that the USDOC failed to address th e 
facts underlying its finding that only six small sawmills – representing approximately 2% of sawmill capacity in 
Québec – have TSGs exceeding 75% of their residual mill need. (Canada's first written submission, para.  437).  
426 Final determination, (Exhibit  CAN-10), p.  101. 
427 Canada's first written submission, paras.  428 and 432.  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  7.194.   In its determination, the USDOC note d that "under a TSG, a sawmill can source up to 75% 
of its supply need at a government -set price".428, 429 The USDOC inferred from this fact that a 
sawmill, had a strong motivation to treat its TSG -guaranteed volume as its primary supply source 
and its aucti on volume as an additional or residual  supply source.430 We note that the 75% of supply 
need that the USDOC referred to relates to the portion of a sawmill's residual supply requirements431 
that remained after subtracting from its total supply need the consu mption need that was already 
supplied by private forests in Québec  and from forests in the United States and other Canadian 
provinces. We consider, however, that even if the TSG guaranteed volume met 75% of a 
sawmill's  residual supply need432, forming the p rimary source of their timber supply, it did not fulfil 
the sawmill's total residual supply need. In addition to first obtaining part of their supply from private 
forests and imports, the sawmill would still need to procure the remaining 25% of its residua l timber 
supply need from any other available sources, including by winning the provincial auctions. The 
sawmills would therefore still be expected to make the highest bid they possibly could in order to 
win the auction to satisfy their remaining consumpti on need.  
7.195.   We therefore conclude that the USDOC did not provide a reasoned and adequate explanation 
for why market concentration, taken together with any other factors considered by the USDOC in its 
analysis, would distort prices in the Québec  market.433  
7.3.4.2.3   Sawmills'  access to additional Crown timber  
7.196.   We note that the USDOC found that TSG -holding sawmills can transfer their allocations of 
Crown timber amongst themselves, thereby reducing their need to acquire timber in the auction or 
from non -Crown sources.434 The USDOC noted that Québec 's law permits TSG -holders to transfer, 
annually, up to 10% of the total volume harvested under their TSGs without government approval, 
and recipient mills may receive up to 10% of their total TSG allocated volume annu ally without 
government approval.435 It further observed that "[g]iven that just 22 percent of the stumpage 
harvested for FY 2015 -2016 came from auctioned Crown timber, the ability of a TSG -holder to obtain 
an additional 10 percent of its TSG volume from an other TSG -holder indicates that the auctions may 
not be a competitive source for wood".436 The USDOC further noted that the ability of sawmills to 
purchase unharvested volumes from the BMMB at the government -set price, further diminishes their 
need to sourc e supply from the auctions or other non -Crown sources. During 2015 -2016, 19.5% of 
 
428 Final determination, (Exhibit CAN -10), p.  99. 
429 We note that the USDOC observed that the Government of Québec's  analysis of "total mill need", is 
an estimated or anticipated amoun t of timber that a sawmill may be able to process in a given year, and not 
an amount that reflects the actual activity of sawmills in a given year. (Final determination, (Exhibit CAN -10), 
p. 100). We consider that if the USDOC took issue with the nature of  the data provided by the Government of 
Québec on "total mill need" it could have asked the Government of Québec to provide the data that the USDOC 
considered most suitable. The USDOC's  determination, however, does not indicate that the USDOC did so.  
430 Final determination, (Exhibit CAN -10), p.  99. 
431 Québec verification report, (Exhibit CAN -184), p.  9.  
432 Canada asserts that the sawmills can obtain no more than 75% of the sawmills'  residual  need from 
a TSG. (Canada's  first written submission, para.  420 (referring to Marshall Report, (Exhibit CAN -171 (BCI)), 
pp. 27-31)). The sawmills'  residual consumption need was what remained after subtracting from their total 
supply need the consumption need that was already supplied by private forests in Québec and from fo rests in 
the United  States and other Canadian provinces. (Marshall Report, (Exhibit CAN -171 (BCI)), p.  24). 
433 The United  States argues further that Canada's  assertion that TSG stumpage does not account 
for 100% of the sawmills'  needs does not address whether prices are distorted through the combination of 
TSG and auction pricing policies. (United  States'  first wr itten submission, para.  267).  We note that, as the 
United  States suggests in its argument above, the USDOC in finding that the predominant consumers would 
have "little incentive" to bid above TSG prices, did not consider only the predominance of those cons umers in 
the auction and non -auction Crown markets, but also considered certain other factors. As noted earlier, the 
USDOC also considered that a sawmill can obtain additional wood at the government -set price through 
transfers from other sawmills and the s ale of unharvested timber by the BMMB. (Final determination, 
(Exhibit  CAN-10), p.  101).  We will next examine this finding of the USDOC.  
434 The USDOC found that pursuant to Sections 92 and 93 of the Sustainable Forest Development Act 
(SFDA), TSG -holders in Québec are permitted to shift allocated Crown timber volumes among affiliated 
sawmills and between corporations. (Final determination, (Exhibit CAN -10), p.  102).  
435 Final determination, (Exhibit CAN -10), p.  102. The verification report that the USDOC relies  on in 
making its findings notes that in certain situations, under Section 93 of the SFDA, subject to approval from the 
Québec Ministry MFFP, a mill or company can effectuate a "larger (greater than 10 percent)" transfer of its TSG 
volumes to another mill or company. (Québec verification report, (Exhibit CAN -184), p.  15). 
436 Final determination, (Exhibit CAN -10), p.  102. WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  unharvested timber was sold to sawmills by the Ministry of Forests, Wildlife , and Parks 
(MFFP)  through one -year contracts under a TSG -administered price.437 
7.197.   Canada argues that  the record evidence contradicts the USDOC's  finding that transfers of 
timber between sawmills could have a meaningful effect on the auctions. The sawmills transfer such 
small amounts of timber that sawmills cannot rely on them as an alternative to the auc tion system.438 
According to Canada, sawmills also have little incentive to transfer timber to other mills, as the 
transferred timber remains part of the transferring sawmill's allocated timber for that year and the 
transferring sawmill pays the stumpage fe es on that timber, as well as any costs for transporting 
the logs to the receiving sawmill.439 The United  States replies that in finding that TSG -holding 
sawmills are permitted to transfer their allocation of Crown timber, the USDOC relied on Section 92 
of Québec 's Sustainable Forest Development Act  (SFDA ). That provision permits a TSG -holder to 
transfer or receive up to 10% of the volume harvested under its TSG and contradicts 
Canada's  assertion that transfers between TSG -holders were relatively limited.440 
7.198.   We consider that, regardless of the quantum of the additional timber supply available to 
sawmills through transfers from other sawmills and the sale of unharvested timber by the BMMB, 
the USDOC did not determine whether that additional supply, together wit h non -auction Crown 
timber, adequately met the sawmills'  total timber need. In the absence of that finding, the USDOC 
had no basis to consider that the additional supply had diminished the sawmills'  need to source 
supply from auctions.  
7.199.   The USDOC also did not explain how the transfer of sawmills'  allocations of Crown timber to 
other mills would increase the total volume of Crown timber available in the market. In response to 
a question from the Panel, the United  States submits that certain Québec  Government  officials 
explained to the USDOC that a sawmill might seek to transfer a portion of its TSG volume in a 
particular year because "it experienced a temporarily [ sic] shut down or it cannot process certain 
types of logs, such as oversized logs".441 For those or other reasons, a mill might seek to reduce its 
supply of wood fibre used to make softwood lumber products, while another mill, because of 
technological improvements, might seek to increase its supply of wood fibre. For the United  States, 
in either insta nce, an individual mill's  needs may change over time, which would affect the 
cumulative need of sawmills throughout Québec .442 In response, Canada asserts that the statement 
of the Québec  Government official at verification that the United  States relies on,  confirms that 
transfers are exceptional and occur, for example, when a sawmill experiences a temporary 
shutdown, or when it cannot process certain types of wood fibre, such as oversized logs, which 
Canada argues do not reduce a sawmill's  cumulative need t o acquire timber from auctions.443  
7.200.   We agree with Canada that the verification report on which the United  States relies, as did 
the USDOC before it, describes certain exceptional circumstances in which the transfers in question 
are allowed. In particular, b efore permitting a transfer under section 93 of the SFDA, the MFFP will 
verify why a sawmill wants to make a change of destination, whether an economic circumstance is 
present that requires the "receiving" sawmill to need more supply, and whether private f orests or 
auction timber could satisfy the mill need. Moreover, the sending sawmill is billed for the stumpage 
and the "transferred" volume will remain as part of the sending sawmill's harvested volume.444  
7.201.   We further consider that the USDOC did not explain  how the transfer of sawmills'  allocation 
of Crown timber to other sawmills specifically in instances when  they cannot process certain logs  
would reduce those sawmills'  total need to acquire timber from the auction or non -Crown sources. 
In such a case, the  transferring sawmills would still need to source additional logs that they are able 
to process, in the amount transferred, from auction or other non -Crown sources, in order to meet 
their total consumption needs. In any event, in the underlying investigati on the USDOC did not 
 
437 Final determination, (Exhibit CAN -10), p.  102. 
438 In fiscal year 2015 -2016, sawmills transferred only [[***]] of non -auction Crown SPF vol umes under 
Section 92 of the SFDA and [[***]] of non -auction Crown SPF volumes under Section 93 of that Act. 
(Canada's  first written submission, paras.  453-454).  
439 Canada's  first written submission, paras.  452 and 455 -456. 
440 United  States'  first written su bmission, para.  276. 
441 United  States'  response to Panel question No. 176, para.  109 (quoting Québec verification report, 
(Exhibit CAN -184), p. 15).  
442 United  States'  response to Panel question No. 176, para.  109.  
443 Canada's  comments on the United  States'  response to Panel question No. 176, para.  95.  
444 Québec verification report, (Exhibit CAN -184),  p. 15. WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  specifically find that any sawmills had transferred a share of their allocated Crown timber to other 
sawmills because they could not process certain types of logs.  
7.202.   It is possible, in principle, that a sawmill that temporarily shuts dow n its operations and 
transfers its unused Crown timber allocation to other sawmills, will not need to source additional 
timber, because it no longer needs additional timber. However, in the underlying investigation, the 
USDOC did not specifically find that  any sawmills had transferred a share of their allocated Crown 
timber to other sawmills because they had experienced a temporary shutdown . In the absence of 
these findings, we consider that the USDOC did not reasonably and adequately explain why the 
additi onal supply of timber available to sawmills had distorted auction prices.  
7.3.4.2.4   Correlation between auction bids and TSG prices  
7.3.4.2.4.1   Whether TSG -holding sawmills and non -sawmills have an incentive not to bid 
at above TSG prices at auction  
7.203.   We will next examine the US DOC's  reliance on its finding that TSG -holding corporations and 
non-sawmills have little incentive to bid for Crown timber above the TSG price.445  
7.204.   Canada argues that the USDOC did not explain why any auction participants would limit their 
bids at TSG prices, thereby lowering their chances of winning an auction.446 The United  States 
argues, in response, that the USDOC did not find that auction participants would "limit" their bids to 
TSG prices. Instead, it found that auction prices for Crown timber "tra ck" the prices for Crown timber 
allocated to TSG -holding sawmills.447 The United  States contends that, moreover, the USDOC also 
explained why auction bids tended to track TSG prices. The USDOC found that TSG -holding sawmills 
have an incentive not to bid at significantly above TSG prices at auction or "have a disincentive to 
bid competitively at auctions" because alternative sources of timber are available to TSG -holders at 
or around the TSG price. These additional sources include transfer timber and unharves ted timber 
resold by the province, as well as private forests.448 
7.205.   We take the view, as noted above, that the USDOC's  determination does not set out a finding 
that TSG -holding sawmills in Québec  had no need to rely on the auctions because the additional 
supply fulfilled their total timber supply needs. As long as the sawmills had unmet supply needs, it 
is unclear, and the USDOC did not explain, why sawmills would have an incentive not to bid at 
"above TSG prices at auction"449 or "have a disincentive to bid competitively at auctions". On the 
contrary, as Canada asserts, record evidence indicates that sawmills cannot source their entire 
residual needs from TSGs and are therefore sufficiently incentivized to participate in govern ment 
auctions.450 The USDOC, however, failed to properly engage with that record evidence.451 Particularly 
in light of that record evidence, we consider the USDOC's  finding that sawmills would have a 
disincentive to bid competitively at auctions, devoid of a  reasonable basis. If sawmills needed to win 
an auction in order to access timber, and if winning the auction required that the sawmills bid above 
the TSG price, they would be expected to bid above that price. In the absence of a finding by the 
USDOC that non-auction supply sources fully met sawmills'  supply needs, or any other reasoned 
explanation, it is difficult to understand why a sawmill would limit its bid at TSG  prices , not 
 
445 Final determination, (Exhibit CAN -10), p.  101. 
446 Canada's first written submission, para.  435. 
447 United  States'  response to Panel question No. 54, para.  175. 
448 United  States'  response to Panel question No. 54, para.  176. 
449 The USDOC found that TSG -holding corporations and non -sawmills have little inc entive to bid for 
Crown timber "above" , and not, as the United  States asserts  "significantly above",  the TSG -administered price. 
(Final determination, (Exhibit CAN -10), p.  101).  
450 Canada's  comments on the United  States'  response to Panel question No. 167, para. 68 (referring to 
Marshall Report, (Exhibit CAN -171 (BCI)), p.  29, figure 14). In particular, the Marshall Report found that the 
vast majority of the total residual capacity of all sawmills with supply guarantees is held by sawmills with 
supply guaran tees equal to or smaller than 75% of their residual capacity. It further noted that for most mills, 
allocated supply guarantee volume accounts for 40% to 50% of their residual capacity. For some mills, supply 
guarantees account for less than 40% of their r esidual capacity. Only six mills in 2015 held supply guarantees 
in excess of 75% of their residual capacity. (Marshall Report, (Exhibit CAN -171 (BCI)), p.  28). 
451 Later in our evaluation, we set out reasons why we consider that the USDOC improperly dismisse d 
consideration of the findings in the Marshall Report.  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  "significantly" above TSG  prices , or, for that matter at any price, and there fore forgo the opportunity 
to win auction timber that it needed to perform its operations.  
7.206.   Further, we consider that an objective and unbiased authority would have analysed actual 
auction bids and TSG prices before concluding that TSG -holding corporations  have an incentive not 
to bid at significantly above TSG prices at an auction. The record does not show that the USDOC did 
so. In its determination, the USDOC stated that the "totality of the evidence on the record" led it to 
conclude that "the auction pri ces for Crown timber track the prices charged for Crown timber 
allocated to TSG -holding sawmills".452 The USDOC however did not cite any pricing data, or any 
other record evidence, indicative of auction prices tracking Crown prices. Further, Canada asserts 
that the data on the record before the USDOC showed a wide dispersion of auction bids above and 
below the TSG prices.453 According to Canada, the record evidence showed "aggressive bidding 
above TSG prices". In particular, in the same tariffing zone, the av erage price for timber sourced 
from auctions is higher for both TSG -holders and non -TSG-holders than the equivalent Crown 
stumpage price.454 We agree with Canada that the USDOC failed to engage with that evidence, which 
was directly relevant to the issue at  hand.455 The USDOC , therefore, in light of the record evidence, 
did not properly establish that TSG -holding sawmills have an incentive not to bid at above TSG prices 
at auction. That finding, therefore, cannot by itself, or together with any of the USDOC's  other 
considerations in question, indicate that auction prices in Québec  were distorted.  
7.207.   The USDOC also found that non -sawmills (i.e. non -TSG-holding independent bidders)  had 
little reason to bid for timber in the auctions above the TSG price. It reasone d that because timber 
purchased at the auction must be processed within Québec , non-sawmills "must be" selling timber 
they purchased at the auction to TSG -holding sawmills within Québec . Considering that the sale of 
timber by the non -sawmills "is competing  with" the timber available to sawmills at the guaranteed 
government price via the TSGs, the USDOC concluded that the "non -sawmills have little motivation 
to bid for timber at a price above which they can sell the wood to the sawmills".456 
7.208.   Canada argues tha t contrary to the USDOC's  consideration that non -sawmills have "little 
reason" to bid for timber in the auction above the TSG -administered price, the record evidence 
shows that non -sawmills bid on average 8% higher for auction blocks than the equivalent TS G price 
in a tariffing zone. Further, the USDOC's  consideration that non -sawmills "must be" selling only to 
TSG-holding mills lacks evidentiary basis given that several mills in Québec  have little to no 
TSG volume.457  
7.209.   We note that the USDOC concluded that non-sawmills "must be" selling timber they 
purchased at the auction to TSG -holding sawmills within Québec , without citing any factual evidence. 
That conclusion was, therefore, speculative, rather than based on facts. An objective and unbiased 
investigating  authority would not have reached that conclusion without verifying whether 
non-sawmills also sold to non -TSG-holding mills within Québec , and if so, the volume of such sales . 
Moreover, as Canada asserts, the USDOC failed to engage with evidence that suggests that there 
are mills in Québec with little to no TSG volume.458 
7.210.   We further consider that an unbiased and objective investigating authority would not have 
concluded that non -sawmills had little reason to bid for timber in the auctions above the TSG price 
without verifying whether non -sawmills did in fact  not bid in the auctions above the TSG price. 
The USDOC, however, reached that conclusion without such  verification.  
7.211.   In resp onse to the Panel's  questioning, the United  States acknowledges that it "may be" the 
case that non -sawmills could sell timber purchased at auctions to non -TSG-holding sawmills in 
Québec . Nevertheless, according to the United  States, the data provided by Québec demonstrates 
that TSG -holders dominate the need for timber in Québec , accounting for [[***]] of the 
 
452 Final determination, (Exhibit CAN -10), p.  99. 
453 Canada's first written submission, para.  443 (referring to Québec auction data file , 
(Exhibit  CAN-211 (BCI)); and Québec stumpage data file , (Exhibit  CAN-213)). 
454 Canada's first written submission, para.  438. 
455 Québec auction data file , (Exhibit  CAN-211 (BCI)); Québec stumpage data file , (Exhibit  CAN-213).  
456 Final determination, (Exhibit CAN -10), pp.  99-102. 
457 Canada's  first written submission,  paras.  442 and 445 (referring to Québec operating 
permit  2015-2016, (Exhibit  CAN-214 (BCI) )). 
458 Québec operating permit 2015 -2016, ( Exhibit  CAN-214 (BCI)); Canada's  first written submission, 
para. 445. WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  province -wide cumulative operating permit size.459 We, however, dismiss the above reasoning as it 
was not provided by the USDOC itself and constitutes ex post rationalization.  
7.212.   Further, even if the USDOC had provided that reasoning, it still needed to examine whether 
as noted above, non -sawmills did in fact  not bid in the auctions above the TSG price. In this regard, 
we agree with Canada that the USDOC fa iled to engage with the data on the record, which showed 
a dispersion of auction bids made by non -TSG holders and TSG -holders above and below the TSG 
prices.460 In particular, the USDOC did not explain why that data showed that auction bids "tracked" 
TSG pr ices, as it stated in its determination, and not that the bids widely deviated from those prices. 
Therefore, we take the view that the USDOC's  finding that non -sawmills had little reason to bid for 
timber in the auctions above the TSG price was not based o n record evidence and could not, either 
by itself, or together with the USDOC's  other considerations in question, have indicated that the 
auction prices were distorted.  
7.213.   We also consider that the USDOC did not explain why any correlation between TSG prices  
and auction prices for Crown timber resulted necessarily from a lack of incentive on the part of 
non-sawmills and TSG -holding sawmills to bid above the TSG prices and not, as Canada asserts461, 
because the TSG stumpage prices are based on the transposition  of auction prices using the 
characteristics of each tariffing zone.  
7.3.4.2.4.2   Whether the USDOC properly evaluated the Marshall Report  
7.214.   Canada further asserts that the USDOC's  findings are contradicted by Dr Marshall's  report, 
which analysed the auction bids and fou nd no evidence that TSG -holders suppress their bids 
compared to non -sawmills or sawmills without TSGs.462 Analysing the potential effect of unilateral 
bid reductions by sawmills, Dr Marshall found that a sawmill reducing the amount of its bid by 10% 
would a ffect the volumes available to the sawmill to harvest, and that "any monetary benefits from 
unilateral bid reductions are small relative to foregone timber volumes".463 Further, Canada posits 
that Dr Marshall demonstrated that winning bids are regularly abo ve the estimated price in an 
auction, which also indicates aggressive bidding in auctions. According to Canada, the USDOC did 
not question these findings.464 The United  States contends, in response, that the USDOC identified 
several flaws in the Marshall Re port.465  
7.215.   We note that the USDOC stated in its determination that it had accorded less weight in its 
analysis to "purchased commissioned reports" than to other evidence that had been "prepared in 
the ordinary course of business" because those reports had be en produced for the express purpose 
of submission in the underlying investigation and therefore ran the "risk of litigation -inspired 
fabrication or exaggeration".466 In our assessment of the USDOC's  treatment of the Marshall Report, 
we will consider (a)  whether the USDOC properly accorded less weight to the report, and (b)  whether 
the USDOC properly found flaws in the report.  
7.216.   Canada argues that the USDOC's  decision t o accord less weight to the Marshall Report on 
the basis that the report was produced for litigation is inconsistent with the USDOC's  duty to seek 
out relevant information and to evaluate it objectively.467 Canada also asserts that the Marshall 
Report place d on the record all data that Dr Marshall had used to draw his conclusions, including all 
of the winning and losing bids and bidder information from the auction system, bid prospectuses, 
 
459 United  States'  response to Panel question No. 55, p ara. 180. 
460 Canada's first written submission, para.  443 (referring to Québec auction data file , 
(Exhibit  CAN-211 (BCI)); and Québec stumpage data file , (Exhibit  CAN-213)). 
461 Canada's first written submission, paras.  428-438. 
462 Canada's first written submi ssion, para.  436 (referring to Marshall Report, (Exhibit CAN -171 (BCI)), 
pp. 59-62). 
463 Canada's first written submission, para.  436 (referring to Marshall Report, (Exhibit CAN -171 (BCI)), 
pp. 62-66). 
464 Canada's first written submission, paras.  439-440. 
465 United States'  first written submission, paras.  269-273. 
466 Final determination, (Exhibit CAN -10), p.  103. 
467 Canada's  first written submission, para.  470 (referring to Appellate  Body Reports, US ‒ 
Corrosion -Resistant Steel Sunset Review , para.  199; US ‒ Anti -Dumping and Countervailing Duties (China) , 
para. 344; US – Wheat Gluten , para.  53; and US – Carbon Steel (India) , para.  4.152).  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  Crown harvest data, and information on mill consumption, among other data. Canada argues that 
the USDOC did not explain why it disregarded in its analysis even that underlying data.468  
7.217.   For reasons set out earlier in this Report469, we consider that it was not reasonable for the 
USDOC to have accorded less weight to the Marsh all Report, on the basis that the report had been 
commissioned for the purposes of the underlying investigation. Further, given that, as Canada 
asserts470, the USDOC had itself asked Québec  "to provide a copy of the empirical study of 
Quebec's  public timber  auction system authored by Robert C. Marshall", it is particularly puzzling 
that the USDOC decided to accord less weight to the Marshall Report on the basis that the report 
was produced for litigation.471 
7.218.   We note that the USDOC recognized that the Marshall  Report analyses auction prices in 
Québec  but dismissed that analysis for certain reasons. It first noted that the Marshall Report did 
not reference the relevant US regulations that required that government auction prices can only be 
used as a benchmark if  the auction is based solely on an open, competitively -run process.472 In this 
regard, Canada argues that the USDOC provided no reasoning to explain "why it needed an 
economist to refer to a U.S. legal standard". For Canada, Dr Marshall's  economic evidence analysed 
the economics of the auction market while it was for Québec 's counsel to show how the legal 
threshold was met, "which they did".473  
7.219.   We do not consider the Marshall Report's  failure to reference the relevant US regulations a 
flaw that would contrib ute to causing a reasonable authority to disregard the report. The Marshall 
Report, as noted above, sought to provide an empirical economic analysis of Québec 's timber 
auctions and concluded that the auction system was open and competitively run. The relev ant 
US regulations, which the Marshall Report did not reference, required that government auction prices 
be used as a benchmark where the auction is competitively run.474 In assessing whether the auctions 
in Québec  were open and competitively run, a failure  to mention that legal provision would hardly 
be fatal to that assessment. This is so because, regardless of the requirement set out in that legal 
provision, the Marshall Report did analyse whether the auctions in Québec  were open and 
competitively run.  
7.220.   The USDOC further considered that because the Government of Québec  "requires that all 
timber sold at auction must be milled within Quebec", Québec 's auction did not meet the 
requirements of an open, competitively -run auction. The USDOC, therefore, found the Marshall 
Report "not relevant" for determining whether the Québec  auction can serve as a benchmark.475 
7.221.   We note, however, that the Marshall Report set out evidence purporting to show that, despite 
the requirement that all timber sold at auction be processed in Québec , the Québec  auction system 
was an open, competitively -run process. The report specifically addressed the impact of 
Québec 's timber processing requirement on the competitiveness of its auction market.476 We agree 
with Canada that the USDOC's  findin g in question is circular in that it implies that the USDOC chose 
to ignore the evidence relating to the competitiveness of the auction market by merely asserting 
that the auction is not competitive.477 It defies reason that the USDOC should have considered  the 
Marshall Report "not relevant" on the basis that the timber processing requirement in Québec  
rendered the auction system uncompetitive, when the report itself addressed, through data and 
analysis, the impact of that very requirement on the competitive ness of the Québec  auction. The 
USDOC engaged neither with that analysis nor with the data underlying that analysis in its 
determination.  
 
468 Canada's  first written submission, para.  471. 
469 See, above,  para. 7.52. 
470 Canada's  second written submission, para.  143 (referring to Québec initial questionnaire response , 
(Exhibit CAN -170), p.  QC-S-98). 
471 Québec initial questionnaire response , (Exhibit CAN -170), p. QC-S-98. 
472 Final determination, (Exhibit CAN -10), p.  103. 
473 Canada's  first written submission, para.  473. 
474 Provision of goods or services, United States Code of Federal Regulations, Title 19, 
Section  351.511(a)(2)(i).  
475 Final determination, (Exhibit CAN-10), p.  103. 
476 Marshall Report, (Exhibit CAN -171 (BCI)), pp.  76-80. 
477 Canada's first written submission, para.  478. WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  7.222.   Another reason that the USDOC took issue with the Marshall Report was because it 
considered that the report did not "provide any analysis of Québec auction prices to stumpage prices 
from markets that have previously been found not to be distorted such as p rivate prices from the 
Atlantic provinces in Canada and stumpage prices in the United  States".478 In response to our 
questions regarding the significance of the comparative analysis in question, the United  States 
asserts that the "additional data points" wo uld have assisted the USDOC in its analysis of the Marshall 
Report as evidence presented by the Government of Québec  to establish that its auction system for 
stumpage operates on a market basis.479 Canada contends, in response, that the comparative 
analysis  in question is "completely irrelevant".480 Canada maintains that Article  14(d)  does not 
permit an investigating authority to reject "in -market" prices as a benchmark because those prices 
do not align with prices in an external market for the good.481 For Ca nada, a cross -market 
comparative analysis would have told Dr Marshall nothing about whether Québec  auction prices were 
market -determined.  Canada posits that any comparison by Dr Marshall between Québec  auction 
prices and the prices arising in an external m arket would merely have measured differences in 
prevailing conditions as between these different markets.482  
7.223.   We consider that it is not entirely clear, and the USDOC did not explain, why the Québec  
auction prices could not be analysed in isolation and had to be compared to stumpage prices from 
"markets that have previously been found not to be distorted", as the USDOC observed.483 The 
USDOC did not make a finding that these markets had the same prevailing market conditions as 
Québec . In the absence of such a  finding, and of a reasoned and adequate explanation from the 
USDOC, the United  States has failed to persuade us that comparing Québec  auction prices to 
stumpage prices from an "external, market -based system"484 such as the Atlantic provinces in 
Canada and the United  States was relevant to the USDOC's  assessment of whether Québec 's auction 
prices were distorted. In our view, the absence of the comparative analysis in question did not imply 
an inherent flaw in the underlying data in the report, nor a flaw in the empirical analysis of that data. 
An objective and unbiased investigating authority would therefore not have disregarded the 
Marshall  Report due to the absence of that comparative analysis.  
7.224.    The USDOC additionally observed that the Marshall Report did not analyse "all of the bid 
prices submitted in the auction, both losing and winning bids, with a comparison between 
TSG-holders and non -TSG-holders".485 Canada argues that the USDOC incorrectly concluded that 
Dr Marshall did not analyse both the losing and winning bids or analyse bids by TSG -holders and 
non-TSG-holders.486 The United  States asserts that the report did ignore the losing bids, and 
therefore failed to account for the full range of bidding behaviour.487  
7.225.   We note that the Marshall Report clearly shows, as Canada asserts, that Dr Marshall did 
examine both winning and losing bids. In particular, Dr Marshall analysed the bids falling below the 
estim ated price set by the government to discern whether those bids represented rational 
behaviour.488 Further, we note that the Marshall Report did examine whether the winning bids of 
TSG-holders were depressed relative to winning bids by non -TSG-holding bidder s.489 The 
Marshall  Report does not, however, as Canada confirms, compare the losing bids of TSG -holding 
bidders against the losing bids of non -TSG-holding bidders.490 Canada asserts that Dr Marshall did 
not undertake that comparison because it was "economica lly uninformative", but he did examine 
losing bids where it was relevant to do so.491 Canada posits that it is the winning, and not the losing 
bids, that are taken into account when transposing the price for non -auction TSG timber.492 The 
 
478 Final determination, (Exhibit CAN -10), p.  103.  
479 United  States'  response to Panel question No. 166(a), para.  68. 
480 Canada's  comments on the United  States'  response to Panel question No. 166, para.  61. 
481 Canada's  comments on the United  States'  response to Panel question No. 166, para.  62. 
482 Canada's  comments on the United  States'  response to Panel question No. 166, para.  64. 
483 Final dete rmination, (Exhibit CAN -10), p.  103.  
484 United  States'  response to Panel question No. 166(b), para.  70. 
485 Final determination, (Exhibit CAN -10), pp.  103-104. 
486 Canada's  first written submission, para.  475. 
487 United  States'  first written submission, para.  273. 
488 Canada's  first written submission, para.  475 (referring to Marshall Report, (Exhibit CAN -171 (BCI)), 
pp. 55-58). 
489 Canada's  first written submission, para.  476 (referring to Marshall Report, (Exhibit CAN -171 (BCI)), 
pp. 58-62). 
490 Canada's  response to  Panel question No. 167, para.  70.  
491 Canada's  response to Panel question No. 167, paras.  70 and 72.  
492 Canada's  response to Panel question No. 167, para.  71.  WT/DS533/ R 
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  United  States argue s in response that the USDOC placed significance on comparing the losing bids 
of TSG -holding bidders against the losing bids of non -TSG-holding bidders because of its finding that 
there is little incentive for TSG -holding bidders and non -TSG-holding bidder s to bid for Crown timber 
at auction above the TSG -administered price. Such incentives rendered comparisons between the 
winning bids of TSG -holding bidders and non -TSG-holding bidders of limited value in assessing 
whether Québec  stumpage auction prices are  distorted. For the United  States, analysing the losing 
bids of TSG -holding bidders and non -TSG-holding bidders would have captured a more fulsome 
range of bidding behaviour that would have enabled the USDOC to better assess the competitiveness 
of Québec 's auction system.493  
7.226.   We agree with Canada that the USDOC itself did not provide in its final determination the 
explanation provided by the United  States, referred to in the preceding paragraph, as a reason for 
placing significance on comparing the losing bi ds of TSG -holding bidders against the losing bids of 
non-TSG-holding bidders.494 That explanation is therefore ex post  rationalization . Further, that 
explanation, even if the USDOC had provided it in its determination, would not have sufficed as a 
basis for necessitating a comparison of the losing bids of TSG -holding and non -TSG-holding bidders 
and for finding fault with the Marshall Report because it did not conduct that comparison. This is 
because, for reasons set out earlier in this Report495, we conclude that the USDOC, in light of the 
record evidence, did not properly establish that TSG -holding bidders and non -TSG-holding bidders 
have an incentive not to bid above TSG prices at auction. That flawed finding in the 
USDOC's  determination could there fore not serve as a valid explanation for necessitating a 
comparison of the losing bids of TSG -holding and non -TSG-holding bidders.  
7.227.   The United  States further argues that the Marshall Report's  comparison of 
TSG-holders'  winning bids to non -TSG-holder's  winning bids was circular. That comparison sought 
to evaluate whether TSG -holders had suppressed their bids, however, as the USDOC found, 
non-TSG-holding non -sawmills have no incentive to bid over TSG -administered prices because 
non-sawmill harvesters of auct ioned timber must sell the timber purchased at auction to TSG -holding 
sawmills.496 
7.228.   We consider that , as noted above , the USDOC's  finding that non -sawmills (i.e.  the 
non-TSG-holding independent harvesters)  have no incentive to bid over TSG -administered price s, is 
not supported by record evidence. We therefore reject the United States' argument in the preceding 
paragraph.  
7.229.   Finally, the USDOC noted that the Marshall Report states that the auctions in Québec  are 
open to bidders from all regions and do not exclud e or otherwise discriminate against potential 
exporters. The USDOC noted that it had, however, verified that harvested timber from the auction 
must be processed in Québec  and that restriction necessarily limited bidders.497  
7.230.   We note that the United  States d oes not disagree with the Marshall Report that, as a matter 
of law, any potential exporter may submit a bid in the auctions. The United  States argues that the 
USDOC had verified that while a potential exporter may, legally, bid on an auctioned block of tim ber, 
it may not export that timber for processing, thus lowering its incentive to participate – and thereby 
undermining the report's  contention that the auction system does not limit bidders.498 The 
United  States'  contention therefore concerns the effects o f Québec 's log-processing requirements  on 
the economic incentives of potential exporters. However, Dr Marshall in his report categorically 
stated that the report addressed that issue.499 The Marshall Report sought to demonstrate that 
Québec 's log-processing  requirements did not restrict bidders. The USDOC, however, concluded 
without engaging with Dr Marshall's  analysis, that the processing requirements "necessarily" limit 
bidders. The USDOC's  criticism of the Marshall Report's  finding that the auctions are o pen to all 
bidders relied on that conclusion. We reject that criticism as being inadequately reasoned considering 
 
493 United  States'  comments on Canada's  response to Panel question No. 167(a), para.  43; response to 
Panel question No. 167(b), paras.  73-74.  
494 Canada's  comments on the United  States'  response to Panel question No. 167, paras.  65-66. 
495 See, above,  paras.  7.205 -7.213 . 
496 United  States'  first written submission, paras.  269-273. 
497 Final determination, (Exhibit CAN -10), p.  104. 
498 United  States'  first written submission, para.  270. 
499 Marshall Report, (Exhibit CAN -171 (BCI)), pp.  76-80. WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  that the USDOC did not engage with the record evidence that sought to show that the requirements 
in question did not restrict bidders.  
7.231.   For th e foregoing reasons, we consider that the USDOC erred in not engaging with the 
findings of the Marshall Report that were relevant to the USDOC's  own line of inquiry in the 
underlying investigation, that is, whether the auction market for Crown timber in Québec was 
distorted.  
7.3.4.2.5   Unsold auction timber  
7.232.   We next turn to examine the USDOC's  reliance on its finding that a "significant" amount of 
Crown timber (15%)  offered at auction in Québec  remained unsold during the POI, and that the 
unsold timber was "an additio nal sign" that TSG -holding corporations and non -sawmills "may not" 
be making aggressive bids above TSG prices.500  
7.233.   Canada argues that the USDOC provided no evidence or analysis for concluding that the 
small volume of unsold timber in the auctions demonstrat es that auction participants were not 
bidding aggressively. Canada asserts that the Marshall Report explained that the small number of 
unsold blocks results from Québec  imposing estimated and reserve prices.501 
7.234.   We note that the USDOC found that the unsold a uction timber indicated that the TSG -holding 
corporations and non -sawmills "may not" be, rather than were not , making aggressive bids above 
TSG prices. Therefore, the USDOC did not find that the existence of unsold timber definitively  showed 
an absence of aggressive bids above TSG prices. Further, the USDOC's  finding in question is at odds 
with the relevant evidence on the record and alternative plausible explanations. First, as noted 
above, the evidence on the record, including the Ma rshall Report, purported to show that the 
TSG-holding corporations and non -sawmills did make aggressive bids above TSG prices.502 Second, 
as Canada asserts, the Marshall Report, among other record evidence, explained that the small 
number of unsold blocks results from Québec  imposing estimated and reserve prices503, which serve 
as a lower limit on how much a block may sell for.504 We note that the Marshall Report found that 
unsold auction timber indicates aggressively -set reserve and estimated prices for the auction 
timber.505 Further, Québec  had explained in its response to the USDOC's  initial questionnaire that 
the unsold auction bloc ks resulted from market conditions, operating difficulties, or incorrect 
evaluation of the estimated price that did not reflect operating conditions.506 The USDOC, however, 
failed to engage with any of that reasoning, omitting to explain why, if at all, it disagreed with that 
reasoning or found fault with that evidence. In particular, the USDOC did not explain why the unsold 
auction timber resulted from TSG -holding corporations and non -sawmills failing to make aggressive 
bids above TSG prices and not from th e Crown having aggressively set reserve and estimated prices 
for the auction timber. We therefore consider that the USDOC did not properly explain, in light of 
the record evidence, the finding in question.  
7.235.   We note that the United  States also confirms that  the USDOC did not find that unsold 
stumpage, in itself, demonstrated distortion of auction prices.507 The question is whether that 
finding, taken together with the USDOC's  other findings regarding the allegedly distorted auction 
market in Québec , could dem onstrate distortion of auction prices. However, the USDOC itself did 
not provide any explanation in that regard. Further, considering that the USDOC did not properly 
arrive at the finding in question, that finding could not, either by itself or taken colle ctively with 
other findings made by the USDOC, indicate that the auction prices for Crown timber in Québec  were 
distorted.  
 
500 Final determination, (Exhibit CAN -10), pp.  101-102. 
501 Canada's  first written submission, paras.  448-449. 
502 Québec auction data file , (Exhibit  CAN-211 (BCI)); Québec stumpage data file , (Exhibit  CAN-213); 
and Marshall Report, (Exhibit CAN -171 (BCI)), pp.  59-62. 
503 In its response to the USDOC's  initial questionnaire, the Government of Québec defined the 
estimated price as "the total price for all the wood to be harvested in an auction block". Further, it defined the 
reserve price as "the lowest price the BMMB is willing to accept for a sale, given the conditions prevailing at the 
time of sale". ( Québec initial questionnaire response , (Exhibit CAN -170),  p. QC-S-90). 
504 Canada's  first written submission, paras.  448-449. 
505 Marshall Report, (Exhibit CAN -171 (BCI)), p.  43. 
506 Québec initial questionnaire response , (Exhibit CAN -170), p.  QC-S-91. 
507 United  States'  first written submission, para.  268. WT/DS533/ R 
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  7.3.4.2.6   Log-processing requirements  
7.236.   We finally turn to examine the USDOC's  finding that Québec 's log-processing requirements 
effectively lim ited bidders, which in turn suppressed auction bids. The USDOC found that the 
requirement that timber purchased at the auctions must be processed in Québec  effectively excludes 
potential bidders that would process the timber outside of Québec  and bidders t hat would want to 
sell the timber for processing outside of the province. Limiting bidders in this manner supressed 
auction bids because bidders understand that they face lesser competition. The USDOC found that 
the log -processing restriction, therefore, d emonstrates that the Québec  auction is not an open, 
competitively -run auction.508  
7.237.   Canada argues that the USDOC did not support with evidence or explain its finding that the 
regulation requiring that timber harvested on Crown lands be processed in Québec  distorts auction 
prices. Canada asserts that the USDOC also disregarded record evidence showing that this regulation 
has no impact on the auction market because there is no export demand for Québec -origin logs. The 
Marshall Report showed that the vast majori ty of the volumes sold in Québec 's Crown auctions are 
located so far from sawmills in the United  States that the export of those logs was not economically 
viable, the distance between them exceeding the 200 kilometres  "profitability circle". That private 
logs, which did not face the export restriction in question, were exported to the United  States in 
negligible amounts further illustrates this point.509  
7.238.   We agree with Canada that the USDOC, considering the record evidence before it, failed to 
adequately exp lain its finding that Québec 's log-processing requirements effectively limited bidders 
in Québec 's auctions. As Canada asserts, the USDOC failed to engage with Dr Marshall's  assessment 
that this requirement had no impact on the auction market because there  was no export demand 
for Québec -origin logs.510 Further, we agree with Canada that the USDOC failed to engage with 
Dr Marshall's  assessment of log imports from the United  States into Québec  as against log exports 
from Québec  to the United  States. Dr Marshall considered that if the overall supply of logs was 
artificially high in Québec , and the prices of private and Crown logs were therefore artificially low, 
sawmills would be expected to purchase Québec 's private logs. Dr Marshall found, however, that 
data showed that there were negligible exports of private logs to the United  States and imports of 
logs from the United  States into Québec  far outstrip exports in the opposite direction.511 The 
United  States asserts, in this regar d, that the data in Exhibit CAN -501, which formed the basis for 
Dr Marshall's  assessment of log imports into and log exports from Québec , "does not speak to the 
existence of the restriction requiring that harvested timber from auctions must be processed in  
Québec ".512 We disagree. Considering that Dr Marshall drew from that data inferences pertaining to 
the impact of the log -processing requirements on the overall availability and prices of logs in Québec , 
that data was relevant to the USDOC's  inquiry into th e impact of the log -processing requirement on 
Québec 's auction market.513  
7.239.   The United  States contends, however, that Québec , by law, restricts export of harvested 
Crown timber for processing outside of the province. Québec 's timber auctions were, therefore,  not 
open to all bidders.514 We consider that the restriction on export of harvested Crown timber for 
processing outside Québec  did not necessarily mean that the province's  timber auctions were not 
open to all bidders. Even if there were a restriction on ex port of harvested Crown timber for 
processing outside Québec , that restriction would not necessarily in practice have an impact on the 
number of bidders participating in the timber auctions. If there was no export demand for 
Québec -origin logs due to the l ocation of the auction blocks, as the Marshall Report sought to 
 
508 Final dete rmination, (Exhibit CAN -10), p.  102. 
509 Canada's  first written submission, paras.  459, 461, and 467.  
510 Marshall Report, (Exhibit CAN -171 (BCI)), p.  77.  
511 Canada's  first written submission, para.  461 (referring to Marshall Report, (Exhibit CAN -171 (BCI)), 
pp. 79-80). 
512 United  States'  response to Panel question No. 175, para.  106. 
513 We also disagree with the United  States that Exhibit CAN -173, showing the distribution of forestland 
in Québec, was not relevant to the USDOC's  inquiry into the impact of log -processing requirements on 
Québec's  auction market. (United  States'  response to Panel question No. 175, paras.  107-108). We agree with 
Canada that the map in that exhibit confirms that the public forest is further north than the private forest and 
far away fro m any export market. (Canada's  comments on the United  States'  response to Panel question 
No. 175, para.  93). We therefore consider that an unbiased and objective authority would have engaged with 
this evidence.  
514 United  States'  first written submission, p ara. 274. WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  indicate, the requirement in question would not have had any impact on the auction market because 
there would be no bidders looking to process the timber outside of Québec , or wanting to sell the 
timber for processing outside of the province. In respect of these particular blocks, effectively, no 
potential bidders would be excluded from the auctions due to the requirement. As noted above, the 
USDOC failed to engage with this reasoning and relat ed evidence.  
7.240.   The United  States further submits that Canada relies on the Marshall Report's  assessment 
of the quantity of import and exports of private -origin logs to argue that there was a lack of export 
demand for Québec -origin logs in the United  States in the POI. For the United  States, the minimal 
volume of private timber that was eligible for export, however, did not constitute an 
appropriate  basis to conclude that the export demand for Québec -origin timber was minimal.515 We 
take the view that the USDO C itself did not make that observation regarding the 
Marshall  Report's  assessment. In the absence of that observation by the USDOC itself, the 
United  States'  argument above constitutes ex post  rationalization. But even if the USDOC had made 
that observatio n, that observation does not undermine the reasoning and evidence set out in the 
Marshall Report purporting to show that the export of logs sold in Québec 's auctions to sawmills in 
the United  States was not economically viable because of the distance betwe en them. Further, even 
in these proceedings, the United  States does not contest the finding in the Marshall Report that the 
auction blocks were located so far from the importers in the United  States that transportation costs 
to export  unprocessed public lo gs from Québec  to those importers would have been prohibitively 
high. 
7.241.   The United  States further argues that the Marshall Report did not address inter -province 
export demand.516 We consider that, as was the case with the United  States'  previous argument, 
the USDOC itself did not make that observation regarding the assessment in the Marshall Report. In 
the absence of that observation by the USDOC itself, the United  States'  argument that the Marshall 
Report did not address inter -province export demand constitut es ex post  rationalization. Further, 
even if the USDOC had made that observation, it would not have been enough to undermine the 
Marshall Report's  assessment. If the USDOC considered that the report should have addressed 
inter-province export demand, in ad dition to demand from importers in the United  States, it could 
have solicited that information from the Canadian interested parties  or could itself have undertaken 
that analysis.  
7.242.   Further, for the reasons stated in paragraph 7.52, we reject the United  States'  argument 
that the USDOC reasonably accorded the Marshall Report limite d weight because Canada had 
commissioned the report to oppose the USDOC's  analysis.517 
7.243.   Canada also asserts that the requirement that Crown timber harvested in Québec  be 
processed in the province is not an absolute rule. That general rule is subject to certa in exceptions 
that allow timber to be processed outside of the province in certain cases.518  
7.244.   We note that Section 118 of the SFDA 2015 -2016, on its face, indicates that, in certain 
cases, the government may allow "incompletely" processed timber to be expor ted outside of Québec . 
Section 118 provides that:   
The Government may, on the conditions it determines, authorize the shipment outside 
Quebec of incompletely processed timber from the forests in the domain of the State if 
it appears to be contrary to the public interest to do otherwise.519 
7.245.   Canada further submits that the ability to authorize timber to be processed outside Québec  
also explains the province's  authorization for export of certain logs from two major regions in 2015, 
Abitibi -Témiscamingue an d Outaouais.520 The United  States contends in response that the 
authorization of exports from the regions in question, was conditional rather than a blanket 
 
515 United  States'  first written submission, para.  277. 
516 United  States'  first written submission, para.  277. 
517 United  States'  first written submission, para.  277. 
518 Canada's  first written submission, para.  458. 
519 SFDA, (Exhibit CAN -169), Section 1 18. 
520 Canada's  opening statement at the first meeting with the panel, (26 February 2019), paras.  176 
and 180. WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  authorization.521 Referring to the Decree522 that authorized the exports from the regions in question,  
the United  States asserts that the export of timber was allowed only when "no operator of a wood 
processing plant located in Quebec has shown interest in purchasing these volumes of timber".523 
Considering that a harvester wishing to export logs for milling outside of Québec  must first 
demonstrate that the harvester could "not find a buyer", sawmills located outside of Québec  would 
be disincentivized from purchasing timber in Québec  at auction.524 Further, the amount of timber 
that could be exported was subject to a volume cap.525 For the United  States, the Decree does not 
eliminate the log -processing restriction, but merely modifies it for two regions of Québec .526 
7.246.   Canada rejects the United  States'  assertions. Canada argues that the Decree authorizing 
exports of logs from the regions in question did provide a blanket authorization. For Canada, the 
Decree demonstrates that the USDOC, in finding that the log -processing requirement deterred 
potential b idders from participating in auctions, ignored evidence related to that blanket 
authorization. Canada submits that the United  States misconstrues the Decree as setting out 
conditions that must be fulfilled prior to the export of timber. The preamble of the  Decree, to which 
the United  States refers in its arguments, sets out "considerations" rather than "conditions".527 
Canada asserts that the preamble makes clear that Québec  has already determined that these wood 
volumes do "not find buyers due to the existi ng industrial structure" and that it is in the interest of 
Québec  that these volumes be processed outside of Québec .528 Canada posits that accordingly, the 
volumes of round wood referenced in the Decree were already approved for export and an exporter 
was n ot required to fulfil any conditions precedent prior to export.529  
7.247.   We note that the USDOC stated in its final determination that "[it had] verified that timber 
purchased at the auctions must be milled within Québec".530 We consider that the 
USDOC's  determin ation therefore does not indicate that the USDOC itself engaged with an 
assessment of the impact of either Section 118 of the SFDA 2015 -2016,  or of the Decree, on bidder 
participation in the auction. Further, as Canada asserts, the USDOC did not make any f indings, or 
engage with Québec , in regard to the Decree or Section 118, despite relevant evidence on the record 
before the USDOC.531 Canada submits that Québec  had informed the USDOC that there was a 
processing requirement but that it was subject to excepti ons, and that logs may be exported with 
government permission.532 The United  States does not dispute that the evidence that Canada refers 
to was before the USDOC.  
7.248.   In our view, an unbiased and objective authority, in examining the impact of the 
log-processi ng requirements on bidder participation in Québec , would have assessed the application 
of those requirements, including any exceptions to those requirements, such as that set out in 
Section  118 of the SFDA 2015 -2016. The USDOC did not do so.  
7.249.   Further, whet her the Decree authorizing exports of logs from the regions in question did 
provide a blanket authorization, or alternatively, set out conditions precedent prior to export, was 
an inquiry that an unbiased and objective authority would itself have embarked upon. Such an 
authority would have solicited further information from the interested parties  as required in order to 
reach its conclusions and would have provided a reasoned and adequate explanation for those 
conclusions in light of the record evidence. Ag ain, the USDOC's determination does not indicate that 
it did so.  
 
521 United  States'  response to Panel question No. 62, para.  196. 
522 Decree 259 -2015, (Exhibit CAN -500), pp.  1-2. 
523 United  States'  response to Panel q uestion No. 62, para.  196. 
524 United  States'  response to Panel question No. 62, para.  197. 
525 United  States'  response to Panel question No. 62, para.  198. 
526 United  States'  comments on Canada's  response to Panel question No. 172, para.  50. 
527 Canada's  second written submission, para.  149. 
528 Canada's  response to Panel question No. 172, para. 78 (referring to Decree 259 -2015, 
(Exhibit  CAN-500), pp.  1-2). 
529 Canada's  response to Panel question No. 172, para. 78. 
530 Final determination, (Exhibit CAN -10), p.  102. (emphasis added)  
531 Canada's  comments on the United  States'  response to Panel question No. 170, para.  74 (referring to 
SFDA, (Exhibit CAN -169), Sections  117-118; Decree 259 -2015, (Exhibit CAN -500); and Québec, sample BMMB 
auction tender package, (Exhibit CAN -193), appendix  A). 
532 Canada's  comments on the United  States'  response to Panel question No. 170, para.  74 (referring to 
Québec initial questionnaire response , (Exhibit CAN -170), p.  QC-S-40). WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  7.250.   We therefore reject the United  States'  arguments as ex post rationalization and find that the 
USDOC failed to take into consideration in its assessment the exceptions to which the log -proces sing 
requirement in Québec  was subject, and thus did not properly investigate the application of that 
requirement in the province.  
7.251.   In conclusion, we find that the USDOC did not properly establish, in light of record evidence, 
that log -processing requireme nts effectively limited bidders in Québec 's auction market for Crown 
timber. That finding therefore cannot, either by itself, or together with the USDOC's  other findings 
pertaining to Québec 's auction market, show that auction prices for Crown timber in th e province 
were distorted.  
7.3.4.2.7   Conclusion  
7.252.   For the foregoing reasons, we conclude that the USDOC improperly rejected using the 
proposed auction stumpage prices in Québec  as a stumpage benchmark.   
7.3.5   Whether the USDOC improperly rejected log prices in Alberta as an appropriate 
stumpage benchmark  
7.253.   The Ca nadian interested parties  had proposed to the USDOC that it use certain log prices in 
Alberta as the basis for a benchmark to determine the adequacy of remuneration for the 
Crown's  provision of stumpage in the province.533 Although the USDOC did consider using the 
proposed log prices in Alberta as the basis for a stumpage benchmark, it declined to use them, 
finding that, among others, they were not "consistent with market principles".534 Canada claims that 
the USDOC acted in consistently with Article  14(d)  of the SCM  Agreement in improperly rejecting log 
prices in Alberta as the basis for a stumpage benchmark.  
7.3.5.1   Factual background  
7.254.   Alberta sets administered prices for Crown stumpage. These prices are set with reference to 
timber dues for normal coniferous timber, as established by Alberta's  Timber Management 
Regulation (TMR), which are adjusted against weekly published prices for North American lumber.535  
7.255.   In the underlying investigation, Alberta had submitted to the USDOC certain price data 
pertaining to logs for use as a benchmark to assess the adequacy of the remuneration for the Crown 
timber purchased by Canfor, Tolko, and West Fraser in the province.536 This data formed part of an 
annual Timber Damage Assessment survey (TDA surv ey).537 The USDOC found that the TDA data 
represents a survey of private log transactions and include s a "very small volume" of private 
stumpage transactions and "many" TDA salvage transactions.538 In its final determination, the 
USDOC rejected the TDA surve y data for use as a comparable benchmark price against which to 
assess whether Alberta had provided stumpage for less than adequate remuneration.539  
7.256.   In assessing whether it could use the TDA survey data as a valid stumpage benchmark, the 
USDOC noted that u nder its tiered -approach540 to benchmark selection, its first preference for 
 
533 Alberta initial questionnaire response , (Exhibit CAN -97), pp.  ABIV-127 and ABIV -130. 
534 Final determination, (Exhibit CAN -10), p.  49. 
535 Alberta verification report , (Exhibit CAN -110 (BCI)), pp.  15-17. 
536 Alberta in itial questionnaire response , (Exhibit CAN -97), pp.  ABIV-127 and ABIV -130. 
537 The TDA survey data is used as a starting point to determine, among other things, the amount of 
compensation that energy and utility companies owed to tenure -holders for using Cro wn lands managed by 
tenure -holders. The TDA values are determined based upon, among other information, data collected from 
tenure -holding firms concerning the volume and value of timber purchases, as well as harvesting and hauling 
costs. (United  States'  first written submission, para.  320).  
538 The USDOC found that TDA salvage transactions occur when Alberta energy and utility companies 
receive concessions on Crown land that is under timber management by tenure -holders, and these concessions 
result in the rem oval of land from timber management. The non -timber concession holders usually ask the 
tenure -holder to "salvage" timber on the concession land. (Final determination, (Exhibit CAN -10), p.  49). 
539 Final determination, (Exhibit CAN -10), pp.  48-53. 
540 As noted earlier, US law sets out potential benchmarks in hierarchical order of preference  (a) a 
market -determined price for the good in question using actual transactions in the country under investigation 
(tier-one); (b)  world market prices that would be availabl e to the purchasers in the country under investigation 
 WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  determining the adequacy of remuneration is to compare the government price to a 
market -determined price " for the good or service  resulting from actual transactions in the country 
in question" ("tier -one" benchmark).541 The USDOC found that because the TDA survey data set s 
out prices for logs, rather than stumpage, which was the "good in question" in this investigation, the 
TDA survey prices did not constitute a "tier -one" benchmark.  According to the USDOC, the 
benchmark it had identified in Nova Scotia , in contrast, did pertain to market -determined prices for 
stumpage and was therefore the appropriate "tier -one" benchmark.542 Having found an appropriate 
"tier-one" benchmark in Nova Scotia stumpage prices, the USDOC nonetheless proceeded to assess 
whether the TDA survey data was appropriate as a benchmark under "tier -three" of its regulatory 
hierarchy.  
7.257.   The USDOC concluded that TDA log prices were not us able even as a "tier -three" benchm ark 
because they did not reflect prices that are consistent with market principles.543 In particular, the 
USDOC reasoned that:  
a. salvage timber is cut without regard to the tenure -holder 's approved cutting plan, and 
therefore the prices do not fairly represent the price of mature standing timber;  
b. further, the salvage transactions involved logs that were not offered for sale on the open 
market. The tenure -holder  is required to take part in salvage transactions at the direction 
of the non -timber concessi on holder;  
c. 60% of the transactions by volume in the TDA survey are sales of Crown -origin logs for 
which Crown stumpage was paid and thus these transactions are unreliable insofar as they 
would yield a circular comparison of Crown stumpage prices with a ben chmark that also 
included Crown stumpage; and   
d. Alberta prohibits exports of timber , which prevents log sellers from seeking the highest 
prices in all markets, and, thus, artificially creates downward pressure on log prices 
throughout the province.544 
7.258.   The US DOC further found that private stumpage transactions contained in the TDA survey 
constitute a relatively inconsequential share (0.3%)  of the total volume of sales and are not 
market -determined. As part of the reasons for concluding that private stumpage pr ices in the 
TDA survey were not market -determined, the USDOC found that in the financial year 2015 -2016 in 
Alberta, Crown timber accounted for 98.48% of the harvest volume, while the harvest volume of 
non-Crown timber accounted for the remaining 1.52%.545  
7.3.5.2   Evaluation  
7.259.   Canada claims that the USDOC improperly rejected using the log prices provided in the TDA 
survey (TDA log prices)  to derive  a benchmark to determine the adequacy of the remuneration for 
Crown timber (stumpage benchmark)  in Alberta.546 The United  States argues, in response, that the 
USDOC rejected the TDA log prices as a stumpage benchmark for Alberta mainly because first, it 
preferred to use in -country benchmark prices for stumpage , which were available from Nova Scotia , 
over prices for logs, which the TDA data provided; and second, it found that the TDA log prices were 
inconsistent with market principles.547  
7.260.   The broad issue before us is whether an objective and unbiased investigating authority would 
have declined using the TDA log prices to determine a stumpage benchmark for Alberta in light of 
 
(tier-two); or (c)  assessment of whether the government price is consistent with market principles (tier -three). 
The USDOC explained that the preferred benchmark in the hierarchy, the tier -one benchmar k price, is an 
observed market price from actual transactions, such as prices from private parties or , in certain 
circumstances , government -run auctions, within the country under investigation. (Preliminary determination, 
(Exhibit CAN -8), pp.  26-27). 
541 Final determination, (Exhibit CAN -10), p.  49. (emphasis original)  
542 Final determination, (Exhibit CAN -10), pp.  48-49. 
543 Final determination, (Exhibit CAN -10), p.  49. 
544 Final determination, (Exhibit CAN -10), p.  50. 
545 Final determination, (Exhibit CAN -10), pp.  51-52. 
546 Canada's  first written submission, paras.  264-265. 
547 United  States'  first written submission, para.  336. WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  the record evidence. In our evaluation, we will need to assess whe ther the USDOC improperly 
rejected the TDA log prices as a valid benchmark on the basis that (a)  stumpage prices from 
Nova Scotia  constituted a preferable benchmark; and (b)  TDA log prices were inconsistent with 
market principles. We must therefore examine  the adequacy of the USDOC's  analysis with respect 
to each of those findings.  
7.261.   Canada also argues that the USDOC rejected TDA log prices as a stumpage benchmark for 
Alberta without first establishing that these prices were distorted by the government, in di rect 
contravention of the United  States obligations under Article  14(d)  of the SCM  Agreement.548 In our 
evaluation, we must therefore also examine whether Article  14(d)  permitted the USDOC to reject 
TDA logs prices as a stumpage benchmark for Alberta withou t first establishing that these prices 
were distorted by the government, as Canada alleges the USDOC did.  
7.3.5.2.1   Whether the USDOC , using its "tier -one" analysis, improperly rejected the 
TDA log prices as a valid benchmark for Alberta  
7.262.   We will first examine wheth er the USDOC improperly rejected the TDA log prices as a valid 
benchmark for Alberta on the basis that those prices were not prices for stumpage and a benchmark 
based on prices for stumpage was available from Nova Scotia .549  
7.263.   Canada argues that the USDOC im properly rejected using the TDA survey data as a 
benchmark, based on the reasoning that the data in question pertained to logs, and not to stumpage, 
and that the two goods are not the same. For Canada, the USDOC, in doing so, provided no coherent 
explanati on and departed from its own past practice where it had used log prices to derive a market 
benchmark for stumpage prices.550 Canada contends that the USDOC's  reasoning is inconsistent with 
its finding even in the underlying investigation that an appropriate  stumpage benchmark for 
British  Columbia  could be derived from Washington State log prices, because the timber species and 
growing conditions in the respective jurisdictions were allegedly "similar".551 Finally, Canada asserts 
that the TDA survey data set s out prices for logs sourced and sold in Alberta, which necessarily 
reflect the prevailing species mix and growing conditions for standing timber in Alberta.552  
7.264.   The United  States responds that the USDOC explained that the TDA log prices are not prices 
"for the good or service in question" provided by Alberta i.e. stumpage.553 For the United  States, 
while log prices may serve as a benchmark in certain contexts, in the case at hand the USDOC had 
identified on the record an in -country benchmark that consist ed of prices for stumpage itself, which 
was the good in question in the underlying investigation. The USDOC considered that "[b]ecause the 
good at issue in this investigation is stumpage, a market -determined stumpage price is the preferred 
benchmark".554 The USDOC did, on the other hand, use log prices as a stumpage benchmark for 
British  Columbia  because a benchmark relating to the good in question itself (i.e. stumpage for the 
larger variety of SPF timber in British  Columbia ) was unavailable on the record.555 
7.265.   We note that the USDOC considered that the TDA log prices that Alberta had proposed as a 
benchmark set out prices for logs, rather than prices for stumpage, which was the good in question. 
The USDOC therefore considered that log prices did not constitute  a "tier -one benchmark" under the 
US regulatory hierarchy. The USDOC dismissed as being unnecessary, the examination of 
non-tier-one benchmark data such as the TDA log prices in Alberta when it had already found a 
tier-one benchmark in Nova Scotia  stumpage  prices.556 We consider, however, that Article  14(d)  of 
the SCM  Agreement required the USDOC to determine the adequacy of remuneration for Crown 
stumpage in Alberta "in relation to prevailing market conditions  for the good  … in question ".557 
 
548 Canada's  first written submission, para.  276; opening statement at the second meeting of the Panel, 
para. 57.  
549 Final determination, (Exhib it CAN -10), pp.  48-49. 
550 Canada's  first written submission, paras.  269-272. 
551 Canada's  first written submission, para.  275 (quoting Final determination, (Exhibit CAN -10), p.  63). 
552 Canada's  first written submission, paras.  274-275. 
553 United  States'  first written submission, para.  332. 
554 United  States'  first written submission, para.  337 (quoting Final determination, (Exhibit CAN -10), 
p. 48). 
555 United  States'  first written submission, para.  338. 
556 Final determination, (Exhibit CAN -10), p.  48 (referring to Provision of goods or services, 
United  States Code of Federal Regulations, Title 19, Section 351.511(a)(2)).  
557 Emphasis added.  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  Therefore, Artic le 14(d)  required not only that the selected benchmark relate to Crown stumpage  in 
Alberta, which is the good in question, but also to the prevailing market conditions  for that Crown 
stumpage .  
7.266.   We further note that in the underlying investigation the USDOC , in its questionnaire to the 
respondents, had itself asked the respondents to provide data on private log prices in Alberta.558  
7.267.   In our view, an objective and unbiased investigating authority, in light of the above 
considerations and facts of the underlyin g investigation, would not have dismissed log prices in 
Alberta as a possible stumpage benchmark without explaining why the Nova Scotia  stumpage prices 
related more closely to the prevailing market conditions for stumpage in Alberta than the log prices 
in question. Such an explanation is pertinent for several reasons. First, the USDOC had itself asked 
the respondents to submit data on log prices in Alberta. This indicated that the USDOC regarded log 
prices as a potential benchmark. Further, pursuant to Arti cle 14(d), a benchmark must reflect the 
prevailing market conditions for the government -provided good. The USDOC dismissed the log prices 
on the basis that they did not reflect the price for the good in question, which was stumpage, but 
did not explain why  the stumpage prices that could have been derived from the log prices may not 
have better reflected the prevailing market conditions for stumpage in Alberta. In this regard, we 
note that the United  States recognizes that "the use of a log -derived benchmark  for stumpage may 
be permissible in certain contexts"559 and has acknowledged in previous investigations, that 
stumpage prices can be derived simply by deducting certain costs from log prices.560 Moreover, even 
in the underlying investigation, the USDOC foun d that an appropriate stumpage benchmark for 
British  Columbia  could be derived from Washington State log prices because the timber species and 
growing conditions in the respective jurisdictions were allegedly "similar".561 Pertinent here also is 
that we hav e concluded elsewhere in this Report562 that the USDOC erroneously found that the 
benchmark price for stumpage in Nova Scotia  "reasonably reflected" the prevailing market 
conditions for stumpage in Alberta, among other provinces.  
7.268.   We further note that the r espondents had placed before the USDOC the MNP supplemental 
report, which provided reasons for why it considered that TDA log prices would constitute the best 
stumpage benchmark for Alberta.563 The report explained, among other  things , that the TDA survey 
data pertained to logs sourced and sold in Alberta and therefore reflected the sizes and species of 
trees common in Alberta and that grew in Alberta's  climate and conditions. The USDOC, however, 
did not engage with those explanations set out in the MNP supp lemental report, dismissing as being 
unnecessary, the examination of a "non -tier-one benchmark data such as the TDA survey prices in 
Alberta"564 when it had already found a "tier -one" benchmark in Nova Scotia  stumpage prices.565 
7.269.   We consider that , faced with a choice between log prices in Alberta and standing timber 
prices in Nova Scotia  as potential stumpage benchmarks, and in light of relevant record evidence, 
an objective and unbiased authority would have explained why log prices in Alberta, pro vided they 
are market -determined, could not be used to derive a benchmark that would more accurately reflect 
the prevailing conditions for stumpage in the Alberta market than would stumpage prices in 
Nova Scotia . The United  States has not identified where the USDOC provided that explanation in its 
determination.566 We, therefore, consider that the USDOC did not provide a reasoned and adequate 
explanation for rejecting as a stumpage benchmark the log prices, which it had itself requested the 
 
558 Alberta initi al questionnaire response , (Exhibit CAN -97), pp.  ABIV-127 and ABIV -130. 
559 United  States'  first written submission, para.  338.  
560 First remand determination , (Exhibit  CAN-94), p.  11.  
561 Final determination, (Exhibit  CAN-10), p.  63.  
562 See, below,  paras.  7.397 -7.399 . 
563 MNP supplemental report, (Exhib it CAN -141), p.  23. 
564 Final determination, (Exhibit CAN -10), p.  49. 
565 As noted above, the USDOC did nonetheless examine whether log prices were usable as a 
"tier-three" benchmark.  
566 We asked the United  States to indicate where in its determination the USDO C explained why log 
prices in Alberta, provided they were market -determined, could not be used to derive a benchmark that would 
more accurately reflect the prevailing market conditions for stumpage in Alberta than stumpage prices in 
Nova Scotia. We agree w ith Canada that, in its response, the United  States, rather than pointing to that 
explanation referred to in our question, simply reiterates the USDOC's  conclusion that it preferred to use a 
stumpage price rather than a log price, based upon the USDOC's  regulatory hierarchy, in addition to referring 
to arguments set out in its previous submissions. (United  States'  response to Panel  question No. 190, 
paras.  140-148; Canada's  comments on the United  States'  response to Panel  question No. 190, para.  125).  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  respondents to pr ovide, on the basis that those prices set out prices for logs, rather than prices for 
stumpage, which was the good in question.  
7.270.   We note that in the underlying investigation, the USDOC did find that the TDA log prices in 
Alberta were inconsistent with mark et principles. In the following section, we examine whether that 
finding was a valid basis to reject using the TDA log prices as a benchmark. However, we consider 
that rejecting the TDA log prices as a benchmark on the basis that they were prices for logs,  rather 
than prices for stumpage, which was the good in question, without addressing whether the 
Nova Scotia  stumpage prices related more closely to the prevailing market conditions for stumpage 
in Alberta than the log prices in question, was not an approa ch an objective and unbiased authority 
would have adopted.  
7.3.5.2.2   Whether the USDOC improperly found under its "tier -three" benchmark analysis 
that TDA log prices were inconsistent with market principles  
7.271.   We will next examine whether the USDOC improperly rejected  the TDA log prices as a valid 
benchmark on the basis that those prices were inconsistent with market principles. The USDOC 
found that TDA log prices were inconsistent with market principles based on the following 
four grounds  (a) salvage transactions in t he TDA survey did not reflect the price of mature standing 
timber; (b)  salvage transactions involved logs that were not offered for sale on the open market 
because the tenure -holder  is required to take part in these transactions at the direction of the 
non-timber concession holder; (c)  60% of the transactions by volume in the TDA survey are sales 
of Crown -origin logs for which Crown stumpage was paid; and (d)  Alberta prohibits exports of timber 
which  artificially creates downward pressure on log prices thro ughout the province. We must 
examine whether the USDOC improperly concluded that TDA log prices were inconsistent with 
market principles based on each of these grounds.  
7.3.5.2.2.1   Salvage timber  
7.272.   At the outset, the USDOC considered that the TDA data represent s "a survey of private log 
transactions" and include s "a very small volume" of private stumpage transactions and "many" TDA 
salvage transactions.567 The USDOC noted that salvage transactions occur when Alberta energy and 
utility companies (non -timber concession hol ders) receive concessions on Crown land that is under 
timber management by tenure -holder s, and these concessions result in the removal of land from 
timber management. Further, the USDOC observed that the non -timber concession holders 
negotiate with the tim ber tenure -holder s to reimburse the latter for their sunk costs of timber 
management on the land base removed from timber management, and usually ask the 
tenure -holder s to "salvage" timber on the concession land.568 It noted that Alberta's TMR requires 
tenure-holder s to salvage timber "under threat" of having the volume charged against their annual 
allowable cut (AAC)  if they refuse. According to the USDOC, the TDA survey data is collected "to 
inform the negotiation of the value of the standing timber, in or der to facilitate the price negotiations 
for salvage, sunk land -use costs and reforestation".569 The USDOC further noted that the 
negotiations for compensating standing timber "damage" are private and do not include the 
government except in an ex officio capacity.570  
7.273.   The USDOC proceeded to find that the TDA survey data did not constitute an appropriate 
stumpage benchmark, because, among others, the salvage timber is cut without regard to the 
tenure -holder 's approved cutting plan, and therefore the prices o f that salvage timber do not fairly 
represent the price of mature standing timber. Further, the salvage transactions of logs were not 
offered for sale on the open market and the tenure -holder  is required to take part in these 
transactions at the direction of the non -timber concession holder.571  
7.274.   We will first examine whether the USDOC improperly found that the salvage transactions in 
the TDA survey do not fairly represent the price of mature standing timber.  
 
567 Final determination, (Exhibit CAN -10), p.  49. 
568 Final determination, (Exhibit CAN -10), p.  49. 
569 Final determination, (Exhibit CAN -10), p.  49. 
570 Final determination, (Exhibit CAN -10), p.  49. 
571 Final determination, (Exhibit CAN -10), p.  50. WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  7.275.   Canada argues that the USDOC cited no evidence to  support its finding that because salvage 
timber is cut without regard to the tenure -holder 's approved cutting plan, salvage timber prices do 
not fairly represent the price of mature standing timber.572 Canada  further asserts that salvaged 
logs are not dama ged nor necessarily prematurely cut.573 Canada notes that while "TDA" stands for 
"Timber Damage Assessment", the name references the use of the TDA survey data and does not 
imply that the transactions reported in the TDA survey are for damaged timber.574 Canada submits 
that the term "salvage" only identifies the source of timber and does not describe the quality of that 
timber or whether that timber is mature or immature.575 Canada submits that "the fact that salvage 
timber originates from an area that may or may not have been cut in accordance with an approved 
cutting plan provides no information on the maturity of that particular stand of trees".576  
7.276.   The United  States contends that Canada "suggests" that whether the timber is cut in 
accordance with the approve d cutting plan is irrelevant because there is little variation in the size 
and species of Alberta timber.577 The United  States further asserts that Alberta, however, explained 
during verification that trees in Alberta may take from 90 to 120 years to reach full growth. The 
United  States submits that, according to Alberta, a commercial rotation takes 120 years and larger 
trees are more valuable by volume because they contain a higher proportion of merchantable timber 
and have lower hauling, handling, and mill ing costs by volume. The United  States contends that 
damaged timber that is prematurely cut cannot form the benchmark for standing timber cleared for 
commercial purposes.578  
7.277.   At the outset, we agree with Canada that the United  States'  argument that salvage timber 
was damaged is ex post rationalization and therefore reject that argument .579 The USDOC did not 
make that determination. Standing timber "damage" for the USDOC meant "the timber removed 
from tenure production by the granting of the non -timber concess ion on tenure land".580  
7.278.   We further note that while Canada contests that the salvage timber in question was 
premature, it does not dispute that the salvage timber was not cut according to the approved cutting 
plan.581 We consider that not following an approved cutting plan in cutting certain trees, as is the 
case with salvage timber, may render it possible, but not necessary  that those trees are prematurely 
cut. It may well have been the case that the tenure land on wh ich the non -timber concession was 
granted, and which was therefore demarcated for removal of timber, could have included mature 
trees. Therefore, without firm evidence of the maturity of the salvage timber in question, the USDOC 
could not have conclusively  determined that the salvage timber was prematurely cut. We agree with 
Canada that the USDOC did not support with record evidence its finding that the salvage transactions 
did not fairly represent the price of mature standing timber.582  
7.279.   Canada submits that  the USDOC did not investigate the issue at hand and ask Alberta and 
forestry companies about the comparative size of timber and logs sourced from salvage. Instead, it 
simply presumed that the salvage timber was prematurely cut.583 Canada posits that if und ersized 
timber from an industrial disposition were included in an arm's -length transaction, it would be 
assigned a timber dues rate pursuant to the TMR and would be disposed of or utilized for products 
other than sawlog production.584 Canada further asserts  that the record establishes that timber 
 
572 Canada's  first writ ten submission, para.  285. 
573 Canada's  opening statement at the first meeting of the Panel, ( 26 February 2019 ), para.  97. 
574 Canada's  first written submission, para.  248. 
575 Canada's  response to Panel question No. 191, para.  105. 
576 Canada's  first written submission, para.  286. 
577 United  States'  first written submission, para.  339 (referring to Canada's  first written submission, 
paras.  285-286). We note however that Canada does  not, in paragraphs 285 and 286 of its first written 
submission, make the suggestion that the United  States asserts it does.  
578 United  States'  first written submission, para.  339 (referring to Alberta verification report , 
(Exhibit  CAN-110 (BCI)) , pp. 4 and  13-14). 
579 Canada's  second written submission, para.  91.  
580 Final determination, (Exhibit CAN -10), p.  49. 
581 Canada submits that Alberta uses the term "approved forest management plan" rather than "cutting 
plan". (Canada's  response to Panel question No. 191 , para.  105).  
582 Canada's  comments on the United  States'  response to Panel  question No. 192, para.  136. 
583 Canada's  second written submission, para.  90. 
584 Canada's  response to Panel question No.  40, para.  160 (referring to Alberta TMR , (Exhibit  CAN-115), 
Sections 81 -82). WT/DS533/ R 
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  removed from industrial dispositions and included in the log price data must adhere to the relevant 
provincial utilization standards.585  
7.280.   We note that the utilization standards that Canada refers to set out certain m inimum tree 
size specifications for purposes of tree utilization. The USDOC's  determination does not show that it 
engaged with that evidence. We asked the United  States to indicate where the USDOC considered 
the utilization standards, to which Canada refer s, in finding that the prices of salvage timber are not 
a fair representation of the price of mature standing timber. In response, the United  States points 
us to a USDOC verification report, where, according to the United  States, the USDOC verified that 
"Alberta provincial utilization standards define a merchantable tree as one that is 16 feet or more in 
length to a four inch top (with no more than a twelve inch stump)".586 We note, first, that this 
observation is not set out in the verification report as a justification for the USDOC's  finding that the 
prices of salvage timber do not fairly represent the price of mature standing timber. More 
importantly, the USDOC did not find that the salvage timber in question did not meet the 
specifications that the verif ication report mentions (i.e. 16 feet or more in length to a 4 inch top 
(with no more than a 12 inch stump )) and that the salvage timber therefore did not fairly represent 
the price of mature standing timber. Absent that finding, we have no basis to consider that the 
USDOC relied on the observation in the verification report that the United  States refers us to .  
7.281.   We therefore consider that the USDOC improperly found that salvage transactions did not 
fairly represent the price of mature standing timber as it based that finding not on record evidence 
but on a presumption.  
7.282.   We will next examine whether the USDOC im properly found that the salvage transactions 
did not pertain to sales of logs on the open market because the tenure -holder  is required to take 
part in those transactions at the direction of the non -timber concession holder.587  
7.283.   Canada contends that none of the log transactions reported in the TDA survey were the 
result of a forced purchase.588 Canada further asserts that the Brattle Report found all these log 
transactions to reflect competitive prices "between independent, private parties and thus represent 
prices established by willing participants independent of government intervention".589 Further, the 
TDA survey would exclude any kind of transaction that tenure -holder s were pressured into because 
of how the survey defined "arm's  length" transactions.590 Canada submits that the TDA survey 
requested respondents not to report salvage transactions [[***]].591 The United  States contends 
that Canada wrongly argues that the salvage log transactions do not involve "required" purchases 
as sales. As the USDOC observed,  Alberta's  TMR require s tenure -holder s to salvage timber under 
threat of having the volume charged against their AAC in case of refusal. The tenure -holder s are 
therefore "pressured to purchase salvage timber to mitigate losses".592 
7.284.   We first consider Canada's  assertion that the Brattle Report found that the log transactions 
in the TDA survey "are between independent, private parties and thus represent prices established 
by willing participants independent of government intervention".593 We note that, as Canada 
submits, the Brattle Report relied on a 2016 update concerning the TDA survey performed by MNP 
to support its conclusion that log prices in question were transacted between independent, private 
parties and represent prices established by willing participan ts.594 As Canada asserts, the MNP 
 
585 Canada's  second written submission, para.  90 (referring to Alberta Timber Harvest  Planning, 
(Exhibit  CAN-114), section 4.2.1, p.  16). 
586 United  States'  first written submission, para.  339 (quoting Alberta verification report , 
(Exhibit  CAN-110 (BCI)), p.  14); response to Panel question No. 192, para.  150. 
587 Final determination, (Exhibit CAN -10), pp.  49-50. 
588 Canada's  first written submission , para.  288. 
589 Canada's  first written submission, para.  284 (quoting Brattle Report, (Exhibit CAN -93), pp.  35-36). 
590 Canada's  first written submission, para.  288 (referring to Alberta JMC survey , 
(Exhibit  CAN-103 (BCI)), p.  2).  
591 Canada's  first written su bmission, para.  288 (quoting Alberta JMC survey , (Exhibit  CAN-103 (BCI)), 
p. 2). 
592 United  States'  first written submission, para.  340. 
593 Brattle Report, (Exhibit CAN -93), pp.  35-36. 
594 Brattle Report, (Exhibit CAN -93), p.  36 (referring to Alberta MNP damage  assessment , 
(Exhibit  CAN-102)); Canada's  response to Panel question No. 197, para.  116. WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  update, which was before the USDOC in the underlying investigation, expressly noted that the 
reported sales in the TDA survey involve "purchases of timber from arms -length [ sic] parties".595, 596 
7.285.   We further consider Canada's  reference to the definition of "arm's  length" in the TDA survey 
and the instruction in the survey to report only arm's -length transactions. The survey defines 
arm's -length transactions as " [[***]]".597 The survey also noted that " [[***]]".598 
7.286.   We con sider that the USDOC did not explain why the TDA survey would include salvage 
transactions in which the tenure -holder  is "required" to take part "at the direction of the non -timber 
concession holder" when the TDA survey categorically instructed respondents  to not report salvage 
transactions [[***]], and further to report only arm's -length transactions, which it defined as 
[[***]].599 Further, we note that, as Canada points out, the USDOC itself stated in its Alberta 
verification report that the TDA survey as ks forest product companies to "report arm's  length  volume 
and value of purchases of timber during their previous fiscal year".600  
7.287.   In our view, therefore, the Brattle Report's  observation that the log transactions in question 
"represent prices established by willing participants independent of government intervention" as well 
as the instructions in the TDA survey to respondents to not  report salvage transactions [[***]] and 
to report only arm's -length transactions, both undermine the USDOC's  finding that the TDA survey 
included salvage transactions in which the tenure -holder  is "required" to take part "at the direction 
of the non -timbe r concession holder".601 
7.288.   Canada further rejects as ex post rationalization the United  States'  argument that the TMR 
allows the government to pressure companies to salvage timber. For Canada, the USDOC "did not 
itself tie any purported pressure from the government  of Alberta (under Section 153 or otherwise)  to 
its findings pertaining to salvage transactions".602  
7.289.   We note that the USDOC did state in its determination that "[t]he Timber Management 
Regulations require [Forest Management  Agreement] holders and Tim ber Quota holders to salvage 
timber under threat of having the volume charged against its AAC for refusal to do so".603 We 
therefore do not consider that the United  States'  argument that the TMR allows the government to 
pressure companies to salvage timber is ex post  rationalization .  
7.290.   We note that the relevant provision in Alberta's  TMR, on its face, indicates that if 
tenure -holder s refuse or neglect a request to salvage timber from the Alberta Governme nt, they 
face the risk that "the volume of salvaged timber may be charged as production against the timber 
quota or forest management  Agreement". Section 153(1)  of the TMR requires that:  
Where the holder of a forest management  Agreement or a timber quota n eglects or 
refuses a request from the director to salvage timber in a management unit in which he 
has a forest management  agreement or timber quota, the volume of unsalvaged timber 
may be charged as production against the timber quota or forest 
management  agreement.604  
7.291.   Canada asserts that the USDOC did not, at any point during the underlying investigation, 
enquire about Section 153 or how it operates. Canada argues that had the USDOC done so, the 
Alberta Government would have confirmed that no demands to sa lvage had been made, much less 
refused, during the POI, and that no unsalvaged volume was charged against AACs. Canada contends 
that this is because "salvage wood is valuable, and companies do not need to be forced to bring it 
 
595 Alberta MNP damage assessment , (Exhibit CAN -102), p.  3; Canada's  response to Panel question 
No. 197, para.  116. 
596 As Canada submits, MNP defined "arm's -length transaction" as " [[***]]". (Alberta JMC survey , 
(Exhibit  CAN-103 (BCI)), p.  1; Canada's  response to Panel question No. 197, para.  117).  
597 Alberta JMC survey , (Exhibit  CAN-103 (BCI)), p.  1. 
598 Alberta JMC survey , (Exhibit  CAN-103 (BCI)), p.  2. 
599 Alberta JMC survey , (Exhibit  CAN-103 (BCI)), pp.  1-2. 
600 Canada's  response to Panel question No. 197, para.  118 (quoting Alberta verification report , 
(Exhibit  CAN-110 (BCI) ), p. 11 (emphasis added by Canada)).  
601 Final deter mination, (Exhibit CAN -10), p.  50. 
602 Canada's  response to Panel question No. 34, para.  139. (emphasis original)  
603 Final determination, (Exhibit CAN -10), p.  49. 
604 Alberta TMR, (Exhibit CAN -115), Section 153(1).  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  to market".605 Canada further contends that "a series of cumulatively unlikely events", as set out in 
Alberta's TMR, must occur before Section 153 becomes operative. First, an oil or gas company (or 
their contractor)  must clear timber and leave the resulting logs "decked" in the forest . Should the 
logs remain decked for over 60 days, they are forfeited to the Crown, after which the Crown must 
request a forestry company to salvage the logs. If the forestry company is a tenure -holder  and 
refuses to do so, the unsalvaged timber may be char ged against their AAC.606 The United  States 
contends that the Alberta Government had submitted the exhibit containing Section  153 at the very 
beginning of the underlying investigation, and the interested parties had the opportunity to address 
that submissio n and comment on the operation of Section 153 from the beginning of the 
investigation. Further, it argues that the Alberta Government could not simply disavow its own law 
and therefore exclude it from consideration.607 
7.292.   We note that in the case at hand, the USDOC did not make any finding of the Alberta 
Government having requested the tenure -holder s to salvage timber during the POI. Further, the 
plain words of Section 153(1)  provide that where a tenure -holder  "neglects or refuses a request" 
from the Alberta Go vernment to salvage timber, the volume of salvaged timber may be charged as 
production against the tenure -holder 's AAC. If the Alberta Government requests the tenure -holder  
to salvage timber, the consequences for refusing that request set out in Section 15 3(1), suggest 
that the tenure -holder  may be under pressure to salvage timber as a result of that request. However, 
it is not clear, and the USDOC did not explain, why a tenure -holder  would be under pressure to 
salvage timber where, in the absence of such a  request from the Alberta Government, the 
tenure -holder  had been asked to take part in salvage transactions by the non -timber concession 
holder. In particular, the USDOC did not explain why a tenure -holder  is "required" to salvage timber 
"at the direction of the non -timber concession holder" even in a situation where no request has been 
made to the tenure -holder  by the Alberta Government to enter into salvage transactions. The USDOC 
did not therefore explain why a tenure -holder  would necessarily  be under pr essure to enter into a 
salvage transaction when it is approached by a non -timber concession holder for that purpose.  
7.293.   We therefore consider that the USDOC did not reasonably and adequately explain its finding 
that the salvage transactions pertained to logs  that were not offered for sale on the open market, 
as the tenure -holder  is required to take part in those transactions at the direction of the non -timber 
concession holder.  
7.294.   Canada further argues that contrary to the USDOC's  findings that the TDA survey d ata 
contained "many" salvage transactions, the record evidence shows that salvage logs amounted to 
only 148,000  m3, which was less than 10% of the total reported volume of 1.8 million m3 of logs in 
the TDA survey in 2015.608 Further, the USDOC improperly dismissed all TDA survey transactions as 
a valid benchmark rather than disregarding only the salvage transactions that were clearly identified 
in the TDA survey data.609 The United  States, in response, does not contest that th e USDOC could 
have eliminated the salvage transactions from the TDA survey data. The United  States argues , 
however, that even if the salvage transactions could be excluded from the TDA data, that does not 
address the USDOC's  other reasons for finding that the TDA log prices were inconsistent with market 
principles.610 
7.295.   In our view, even if the USDOC had properly found that the salvage transactions in the 
TDA survey could not be used as an appropriate market benchmark, that finding could not 
reasonably have fo rmed a basis for the USDOC to disregard all the TDA survey data for use as a 
benchmark. We agree with Canada that, even if the TDA salvage transactions had properly been 
found as being flawed, an objective and unbiased authority would have simply eliminate d the salvage 
data from its assessment.  
7.296.   We next proceed to assess the other grounds on which the USDOC dismissed the TDA survey 
data as being inconsistent with market principles.  
 
605 Canada's  opening statement at the first mee ting of the Panel, (26 February 2019), para.  98.  
606 Canada's  response to Panel question No. 34, para.  142.  
607 United  States'  response to Panel question No. 35, paras.  121-123.  
608 Canada's  first written submission, para.  283. 
609 Canada's  first written submis sion, para.  290. 
610 United  States'  first written submission, para.  340. WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  7.3.5.2.2.2   Sale of Crown -origin logs  
7.297.   The USDOC found that 60% of the transactions by v olume in the TDA survey were sales of 
Crown -origin logs for which Crown stumpage was paid. The USDOC considered that these 
transactions were thus unreliable insofar as they would yield a circular comparison of Crown 
stumpage prices with a benchmark that al so included Crown stumpage.611 The USDOC further found 
that these transactions were encumbered by a Crown lien that had priority over all other 
encumbrances until Crown stumpage is paid; thus, the title did not pass to the buyer until Alberta 
timber dues we re paid in full. This encumbrance created risks for both the tenure -holder  and the 
buyer, which would not exist in an open -market transaction.612  
7.298.   We will first examine the USDOC's  finding that 60% of the transactions in the TDA survey 
were sales of Crown -origin logs and would therefore yield a circular comparison with Crown 
stumpage prices in Alberta.  
7.299.   Canada argues that the USDOC improperly concluded that it could not rely on TDA survey 
transactions involving the sale of Crown -origin logs for which Crown stumpage had been paid, based 
on the reasoning that these transactions would yield a circular comparison of Crown stumpage prices 
with a benchmark that also included Crown stumpage. Canada contends that the source of the logs, 
whether Crown or privat e, is irrelevant, because the log seller, who is an intermediary seeking to 
maximize profit, will retain the incentive to obtain the best price from those logs in an arm's -length 
sale. The price of the harvested log will therefore reflect the supply and de mand for the logs available 
in the marketplace.613  
7.300.   The United  States responds that comparing Crown stumpage prices in Alberta to a 
benchmark that also included Crown stumpage would have been circular. For the United  States, 
contrary to Canada's  argument, t he USDOC did consider the source of the logs as being relevant, 
because the transactions involving Crown -origin logs were encumbered by a Crown lien until Crown 
stumpage is paid, creating a risk for both the tenure -holder  and the buyer that would not exist  in 
the open market. Further, even if Alberta may not be the seller of the Crown -origin logs, the Crown 
stumpage fees is a cost that factors into the pricing of Crown -origin logs.614  
7.301.   We consider that it is possible  but not necessary  that sellers of Crown -origin logs would pass 
on to sawmills that purchase those logs any purported savings with respect to timber dues on those 
logs. In the absence of any evidence to the contrary, it is equally possible that sellers of Crown -origin 
logs would seek to maximize p rofit by securing the best price from those logs in an arm's -length 
sale, regardless of the quantum of stumpage dues that were paid on those logs. Canada submits 
that the Appellate  Body has cautioned that "in cases where logs are sold by a harvester/sawmil l in 
arm's -length transactions to unrelated sawmills, it may not be assumed that benefits attaching to 
the logs (non-subject products)  automatically pass through to the lumber  (the subject 
product)  produced by the harvester/sawmill".615 We agree.616 We furth er note that the USDOC did 
not find that the transactions in question, constituting 60% of the transactions set out in the TDA 
survey did not constitute arm's -length transactions. Bearing in mind these considerations, we take 
the view that it was not open to the USDOC to simply assume, without evidentiary support or 
reasoned explanation, that sellers of Crown -origin logs would pass through to sawmills purchasing 
those logs any benefits attaching to those logs. Because the USDOC relied on that unfounded 
 
611 Final determination, (Exhibit CAN -10), p.  50. 
612 Final determination, (Exhibit CAN -10), fn 308.  
613 Canada's  first written submission, para.  292. 
614 United  States'  first written submission, para.  341. 
615 Canada's  second written submission, para. 97 (quoting Appellate  Body Report, US – Softwood 
Lumber IV, para. 157 (emphasis original)).  
616 This approach is consistent with our conclusions with respect to the USDOC's  consideration of auction 
prices as a valid stumpage benchmark in British  Columbia. In that context, the USDOC had found that most of 
the bidders in BCTS auctions were logging companies and not lon g-term tenure -holding sawmills. (Preliminary 
determination, (Exhibit CAN -8), p.  37). We found that the tenure -holding sawmills that, according to the 
USDOC, cast downward pressure on auction prices by virtue of holding long -term tenures, were therefore one  
step removed from the actual bidding transaction in a majority of cases. Because such sawmills were the 
bidders'  customers, and not the bidders themselves, their influence on auction prices could at best have been 
indirect. (See , above,  para. 7.127 ). WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  assumption in reaching the finding in question, we consider that the USDOC, for that reason alone, 
improperly made that finding.  
7.302.   We further consider that the Kalt Report set out certain economic principles proffering that 
any alleged subsidy conferred on log harvesters does not pass through to log buyers in arm's -length 
log transactions.617 In particular, the report explained that harvesters have the incentive to obtain 
the highest value from the wood they harvest. Further, it noted that logs harvested from sta nds 
subject to Crown stumpage charges are bought and sold at the market price, and the difference 
between the market price and the cost of log production will be kept by the harvester and not passed 
through to the log buyer.618 The USDOC did not engage with  those alternative explanations on the 
record in reaching the finding in question.619  
7.303.   The USDOC thus found that 60% of the transactions in the TDA survey, being sales of 
Crown -origin logs, would yield a circular comparison with Crown stumpage prices in Alb erta simply 
based on an assumption, and without taking into consideration alternative plausible explanations 
that were available on the record. We consider that the USDOC therefore improperly made that 
finding.  
7.304.   We will next evaluate the USDOC's  finding th at the transactions involving Crown -origin logs 
were encumbered by a Crown lien until Crown -stumpage is paid, creating risks for both the 
tenure -holder  and the buyer, which would not exist in the open market. The USDOC, in connection 
with this finding, ref erred to Section 32 of the Alberta Forests Act .620 That provision states that:  
When timber has been harvested as the result of a timber disposition and there are 
unpaid Crown charges owing in respect of it, the Minister has a lien against the timber 
that has priority over all other encumbrances.621 
7.305.   Canada does not contest that the transactions involving Crown -origin logs were subject to a 
Crown lien. Canada argues, however, that the USDOC failed to consider that the Crown lien is simply 
a priority encu mbrance, which may be encountered in any sale of any product, regardless of Crown 
or private ownership.622 Canada disagrees with the USDOC's  finding that liens would not exist in an 
open market situation. For Canada, private timber owners could also encumbe r their timber and 
logs.623, 624  
7.306.   We note that the USDOC did not explain why the encumbrance by a Crown lien creates risks 
for both the tenure -holder  and the buyer , which would not exist in an open market transaction. 
 
617 Kalt Report on LEPs , (Exhibit CAN -16 (BCI)), pp.  90-95. 
618 Kalt Report on LEPs , (Exhibit CAN -16 (BCI)), pp.  90-91. 
619 We note that the United  States argues that the Kalt Report is limited to an analysis of stumpage and 
log markets in British  Columbia and not Alberta, and was therefore not pertinent to the analysis in question. 
(United  States'  comments on Canada's  response to Panel question No. 1 96, para.  85). We disagree. We 
consider, that insofar as the Kalt Report set out general economic principles explaining why it was not in the 
log harvesters'  economic interest to pass through any alleged subsidy conferred on them to log buyers in 
arm's -length log transactions, it was pertinent for the USDOC to consider those economic principles in the 
context of a similar situation involving the possibility of "pass  through" in Alberta. In this regard, we note that 
the Kalt Report states that "[h]arvesters with access to timber subject from Crown lands, who may have log 
production costs lower than that of the marginal log producer, in the same way have the incentive to sell logs 
at the going market price. To do otherwise would cost the harvester profits and be against the harvester's  own 
economic self -interest". ( Kalt Report on LEPs , (Exhibit CAN -16 (BCI)), p.  91). At a minimum, Dr  Kalt's  analysis 
of whether log harvesters in British  Columbia "pass  through" any alleged subsidy conferred on them to log 
buyers in arm's -length log transactions indicates that it is not necessary  that such log harvesters would always 
effect such a pass  through to log buyers, and was therefore relevant to the USDOC's  analysis.  
620 Final determination, (Exhibit CAN -10), fn 308.  
621 Alberta Forest Act, (Exhibit CAN -112), Section 32.  
622 Canada's  first written submission, fn 533.  
623 Canada's  response to Panel question No. 36, paras.  147-148.  
624 The United  States argues, in response, that "[e]ven if Canada could establish (which it has not),  that 
government -mandated liens covering, by default, all log sales had no potentially distortive effect, that would in 
no way undermine the evidence establishing that 60 per cent of TDA transactions by volume are sales of 
Crown -origin logs", which for the U nited States, is the primary basis for the USDOC's  finding of circularity. 
(United  States'  response to Panel question No. 193, para.  151).  We recall, however, that we conclude above 
that the USDOC improperly found that 60% of the transactions in the TDA su rvey, being sales of Crown -origin 
logs, would yield a circular comparison with Crown stumpage prices in Alberta. We therefore reject the 
United  States'  argument.  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  Further, the USDOC did not support that finding with any evidence showing that private transactions 
were not encumbered by liens. Canada asserts that various Canadian provinces, including Alberta 
and Nova Scotia , have legislation that provides for a lien on timber or logs on behalf of any person  
who performs labour or services with respect to those logs or timber, for the amount due for their 
services. Canada notes that this legislation was not put before the USDOC during the underlying 
investigation , as the USDOC first relied on its reasoning pe rtaining to the Crown lien encumbrance 
only in its final determination.625 In our view, an objective and unbiased authority would have 
investigated whether liens could also encumber transactions involving private -origin logs in Alberta 
before making a findi ng that the encumbrance ensuing from the Crown lien creates risks for the 
tenure -holder  and the buyer "which would not exist in an open market transaction".626 The 
USDOC's  determination, however, does not indicate that the USDOC did so. We consider that, in  any 
event, the USDOC did not explain why liens would encumber, and create risks for the tenure -holder  
and buyer in, transactions involving Crown but not private -origin logs.  
7.307.   Canada also argues that the USDOC did not investigate the factual question as to  whether 
the presence of Crown liens creates uncertainty that reduces the value of logs. Canada submits that 
there is no record evidence based on which the USDOC could have determined that such liens have 
an impact on log prices.627 Had the USDOC raised Sec tion 32 pertaining to the lien issue during the 
underlying investigation, which it did not, Alberta would have confirmed that in the last 20 years 
timber had never been seized as a result of a failure to pay stumpage.628 Canada further asserts 
that the buye rs and sellers of Crown -origin logs ensure that Crown timber dues are paid as a 
condition of sale, and the Crown lien in no way factors into the price of logs.629 Canada asserts that 
had the USDOC actually investigated this issue, it would have found that b uyers of Crown -origin logs 
in Alberta typically ensure that the Crown timber dues on the logs are paid by agreeing with the 
seller that the buyer will withhold the Crown timber dues owed from the price paid for the logs, and 
itself remit that payment to th e Crown.630  
7.308.   We note that Canada points to record evidence that suggests that as regards 61% of the 
total volume of logs delivered to the mill, Crown timber dues were paid by the log buyer 
themselves.631 We agree with Canada that the USDOC found that the encumbrance by a Crown lien 
on transactions involving Crown -origin logs created risks for both the tenure -holder  and the buyer 
without investigating, in light of the record evidence, whether Crown timber dues were paid as a 
condition of sale, and whether the Crown lien factors into the price of logs. In the absence of that 
assessment, we consider that the USDOC did not provide a reasoned and adequate explanation for 
that finding. That finding could therefo re not serve as a basis for the USDOC's  conclusion that the 
transactions in the TDA survey involving sales of Crown -origin logs would yield a circular comparison 
with Crown stumpage prices in Alberta.  
7.3.5.2.2.3   Log export prohibition  
7.309.   We will next examine the USDOC's  reliance on its finding that Alberta prohibits log exports 
as a basis for rejecting the TDA log prices as a valid benchmark for the province.  
7.310.   The USDOC found that timber in Alberta is subject to an export prohibition under Section 31 
of the Alberta Fores ts Act , which prevents log sellers from seeking the highest prices in all markets 
and, thus, artificially creates downward pressure on log prices throughout the province.632  
7.311.   Canada rejects the USDOC's  conclusion that Alberta prohibits log exports. Canada a sserts 
that Section 31 of the Alberta Forests Act  does not prohibit, but merely regulates log exports, which 
are expressly permitted with authorization. In 2015, Alberta received 12 export applications, all of 
 
625 Canada's  response to Panel question No. 36, paras.  147-148.  
626 Final determination, (Exhibi t CAN -10), fn 308.  
627 Canada's  response to Panel question No. 36, para.  145.  
628 Canada's  opening statement at the first meeting of the Panel, (26 February 2019), para.  101. 
629 Canada's  response to Panel question No. 36, para.  143.  
630 Canada's  response to Pan el question No. 36, para.  146; comments on the United  States'  response to 
Panel question No. 193, para. 143 (referring to Alberta MNP TDA log transactions overview , (Exhibit CAN -109), 
p. 4).  
631 Canada's  comments on the United  States'  response to Panel question No. 193, para. 143 (referring 
to Alberta MNP TDA log transactions overview , (Exhibit CAN -109), p. 4).  
632 Final determination, (Exhibit CAN -10), p.  50. WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  which were approved.633 The United  States argue s, as the USDOC had reasoned in its determination, 
that Alberta does prohibit exports of timber which  artificially creates downward pressure on log 
prices throughout the province. That Alberta did not invoke that prohibition, and granted 12 export 
authoriz ations during the POI, does not show that the prohibition did not have an impact on log 
prices. The United  States posits that Alberta "presumably" granted those authorizations under one 
of the limited exceptions in the relevant law.634  
7.312.   At the outset, consi dering that the USDOC rejected the TDA log prices as a valid benchmark 
based on, among others, its finding that Alberta's  alleged export prohibition under Section  31 
depresses log prices in the province, we note that the onus fell on the USDOC to show that  Section  31 
did have an impact on log prices. We consider that the plain language of Section  31 of the 
Alberta  Forests Act , as well as the evidence and alternative explanations on the record pertaining to 
the operation of that provision, would have given an objective and unbiased investigating authority 
pause and led it to investigate how the provision in question operates in  practice  before the authority 
could determine conclusively that the provision prohibited log exports.  
7.313.   We note that Section  31(1)  provides that:  
No person shall transport or cause to be transported logs, trees or wood chips, except 
dry pulpwood or Christm as trees, to any destination outside Alberta from any forest 
land. 
Further, Section  31(2)  provides that:  
Notwithstanding subsection (1), the director may  
(a) authorize any person to transport logs, trees or wood chips to be used for research 
or experimenta l purposes to any destination outside Alberta from any forest land, or  
(b) exempt any logs, trees or wood chips from any specified forest land from the 
application of this subsection for a period not to exceed one year.  
7.314.   We note that Section  31(2)(b), on it s face, exempts log exports from the application of 
Section  31(1)  for a period not to exceed one year.635  
7.315.   Canada argues that there is no log export ban in Alberta and interested companies may, for 
example, apply for a one -year commercial export authorizati on or a research export authorization. 
The application is swift and free.636  
7.316.   We consider that Section  31 indicates, and the United  States does not contest, that Alberta 
does permit log exports in certain circumstances. Further, the explanations on the reco rd before the 
USDOC indicated that Alberta did authorize log exports. We note that the Brattle Report described 
Alberta's  log export regime. It noted that Section  31 "regulates" the export of logs harvested from 
Alberta Crown lands. As Canada asserts637, the Brattle Report found that logs can be exported by 
submitting an application to the Alberta Government requesting authorization. The application 
consists of a letter that includes details such as the relevant species, volume, product, and 
destination of t he intended log exports. No fee or tax is levied in connection with log exports. Further, 
the Brattle Report indicated that no log applications have been denied in recent years. Alberta 
approved each of the 12 export authorization applications for logs in 2015.638  
7.317.   In our view, the exemptions under Section  31, and the record evidence that indicated that 
Alberta had approved all applications for export authorization in the POI, would have prompted an 
objective and unbiased investigating authority to enquire i nto how Section  31 operates, and whether 
it did in fact regulate, rather than prohibit, log exports. Such an investigating authority would have 
enquired, for instance, whether companies that had received the export authorization for a year 
 
633 Canada's  first written submission, paras.  294-295. 
634 United  States'  first written submission, para.  342. 
635 Alberta Forest Act, (Exhibit CAN -112), Section 31.  
636 Canada's  opening statement at the first meeting of the Panel, (26 February 2019), para.  102. 
637 Canada's  first written submission, p ara. 294 (referring to Brattle Report, (Exhibit CAN -93), p.  25).  
638 Brattle Report, (Exhibit CAN -93), p.  25. WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  could, upon a su bmitting a new application, receive it again, for instance in the following year, 
without any complications. If companies could regularly renew their export authorizations, 
Section  31 could not be considered to necessarily prohibit log exports and create d ownward pressure 
on log prices throughout the province. Canada asserts, however, that the USDOC did not ask any 
questions in its questionnaires or at verification concerning Alberta's  log export policies or any 
potential effect they had on the log market a nd prices.639 The United  States does not contest that 
assertion.  
7.318.   The United  States argues that Alberta "presumably" granted the export authorizations in 
question under one of the limited exceptions in the relevant law. For the United  States, the fact that 
Alberta did not need to enforce the prohibition during the POI suggests that the log sellers are aware 
that they are unauthorized to export logs except in the "limited" circumstances covered by the two 
exceptions.640 First, we note that the USDOC itself did not provide that reasoning in its 
determination, much less ascertain whether those authorizations were granted under one of the 
two exceptions in Section  31, and if so, which one of the two. We therefore reject as ex post 
rationalization  the United  States'  argument that Alberta "presumably" granted those authorizations 
under one of the limited exceptions in the relevant law. We further consider that even if the USDOC 
had reasoned that the export authorizations were granted under one of the two exceptions, the 
USDOC did not explain why those exceptions pertained to "limited" circumstances and not a situation 
where companies could apply for, and be granted swiftly and without charge, export authorization 
year after yea r.  
7.319.   Second, we consider the United  States'  argument that the fact that Alberta did not need to 
enforce the export prohibition during the POI suggests that the log sellers are aware that they are 
unauthorized to export logs except in the limited circumstanc es covered by the two exceptions under 
Section  31.641 In our view, in making that argument, the United  States suggests that log sellers 
whose intended log exports are not covered by the two exceptions did not seek export authorization 
in the first place bec ause they expected their request to be refused. Canada asserts that the USDOC 
did not provide any evidence to support its finding that companies in Alberta are in any way 
dissuaded from requesting an export authorization.642 We consider that the USDOC did n ot explain 
why companies in Alberta were dissuaded from requesting an export authorization, when the record 
evidence indicated that interested companies could receive a one -year commercial export 
authorization, or, in certain cases where the logs were to b e used for research or experimental 
purposes, a research export authorization, and authorizations were swift and free. Further, if the 
one-year commercial export authorizations could be renewed upon submission of a new application, 
companies would have eve n less reason to be dissuaded. However, the USDOC did not investigate 
that question.  
7.320.   In our view, the USDOC, therefore, did not, in light of the record evidence, provide a 
reasoned and adequate explanation for concluding that Alberta is subject to an expo rt prohibition 
under Section  31 of the Alberta Forests Act , which creates downward pressure on log prices in 
Alberta.  
7.3.5.2.2.4   The Brattle and Kalt Reports  
7.321.   We will next examine Canada's  argument that the USDOC failed to consider the Brattle and 
Kalt Reports in reje cting the TDA survey log prices as a valid benchmark for Alberta.643 Canada 
asserts that the Brattle Report set out relevant evidence showing that the TDA log prices were 
 
639 Canada's  response to Panel question No. 38, para.  150; second written submission, para.  101.  
640 United  States'  first written submission, para.  342. 
641 United  States'  first written submission, para.  342. 
642 Canada's  second written submission, para.  102. 
643 We note that Canada asserts that the USDOC failed to consider two separate reports prepared by 
Professor Joseph P.  Kalt in the USDOC's  assessment of TDA survey log prices as a valid benchmark for Alberta. 
The first of those reports is entitled "Economic A nalysis of Remuneration for Canadian Crown Timber:  Are 
In-Jurisdiction Benchmarks Distorted by Crown Stumpage?"  (Kalt Report on Crown timber , (Exhibit CAN -14)), 
and the second "An Analysis of Certain Economic Issues Relating to Petitioner's  Claims About th e Operation of 
Stumpage and Log Markets in British  Columbia" ( Kalt Report on LEPs , (Exhibit  CAN-16 (BCI)). In this section, 
we address the parties'  arguments pertaining to the USDOC's  treatment of the first Kalt Report. We have 
addressed the parties'  argum ents pertaining to the USDOC's  treatment of the second Kalt Report in 
para. 7.302  above .  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  market determined, which was reinforced by the general conclusions in Dr Kalt's  report .644 The 
United  States replies that contrary to Canada's  argument that the USDOC completely ignored the 
Brattle and Kalt Reports, the USDOC did address these reports in its determination.645  
7.322.   We note that, as the United  States asserts646, the USDOC found that  the Alberta Government 
had commissioned the Brattle Report for the purposes of the underlying investigation and therefore 
considered that the report carried only limited weight "given its potential for bias, with data and 
conclusions that may be tailored to generate a desired result".647 
7.323.   The USDOC further set out certain reasons for concluding that the Brattle Report did not 
inform the USDOC's  private stumpage market distortion analysis.648 The USDOC noted that the 
Alberta Government had relied on the Brattl e Report to argue that "the existence of supply overhang 
[in the Crown stumpage market] is consistent with Crown stumpage rates being too high, rather 
than too low".649 The USDOC considered that it was not, in its distortion analysis, looking to measure 
whether Crown stumpage prices are too "high" or "low" but whether private prices are "effectively 
determined" by Crown stumpage prices, rendering any price comparison circular.650  
7.324.   Canada contends that the USDOC focused on the Brattle Report's  analysis of the alleged 
supply overhang issue, which relates to private market stumpage prices, but not to 
Alberta's  proposed log benchmark. For Canada, the USDOC completely ignored the 
Brattle  Report's  most relevant evidence and analysis, which c oncluded that the TDA log prices 
constitute an appropriate benchmark.651 In response, the United  States argues that the USDOC 
found that the appropriate benchmark for respondents'  purchases of Crown stumpage was a 
stumpage,  rather than a log, benchmark. For  the United  States, the USDOC therefore had no reason 
to address what Canada describes as "the Brattle report's  most relevant evidence and analysis".652 
7.325.   We agree with Canada that the USDOC did not address the Brattle Report's  assessment of 
why the TDA log p rices in Alberta constitute an appropriate benchmark for stumpage. In our view, 
insofar as the Brattle Report provided evidence that was relevant to the USDOC's  line of enquiry, 
the USDOC was required to have to considered that evidence in its price distor tion analysis. Further, 
considering that we have found, as discussed above, that the USDOC improperly concluded that the 
appropriate benchmark for respondents'  purchases of Crown stumpage was a stumpage,  rather than 
a log, benchmark, we consider that that improper conclusion could not justify the USDOC's  failure 
to address relevant evidence set out in the Brattle Report. In any event, the USDOC did not cite that 
conclusion as a reason to not have considered the findings in question in the Brattle Report, an d 
therefore we reject the United  States'  assertion in question as ex post rationalization .  
7.326.   Canada contends that the Brattle Report found that because log demand is determined by 
lumber prices, "the Province cannot exert influence on the demand for logs".653 The report found 
that, if anything, Alberta's  Crown stumpage system actually tends to increase log prices by 
decreasing the volume of logs supplied to mills.654 The Brattle Report concluded that the proposed 
benchmark derived from the TDA log prices provi des a conservative estimate of the value of Alberta 
standing timber.655 Further, Canada asserts that the Brattle Report found that "Alberta has a 
reasonably competitive log market".656 
 
644 Canada's  first written submission, paras.  277-279. 
645 United  States'  response to Panel question No. 37, paras.  125-126. 
646 United  States'  second written submission, para.  39. 
647 Final determination, (Exhibit CAN -10), p.  53. 
648 Final determination, (Exhibit CAN -10), pp.  53-54. As noted in the factual background section, the 
USDOC had also found that the private stumpage market prices in Alberta were distorted.  
649 Final determination, (Exhibit CAN -10), p.  53. 
650 Final determination, (Exhibit CAN -10), pp.  53-54. 
651 Canada's  responses to the Panel question Nos. 1 -153, annex A, p. A-2. 
652 United  States'  second written submission, para.  40. 
653 Canada's  first written submission, para.  278 (quoting Brattle Report, (Exhibit CAN -93), p. 27). 
654 Canada's  first written submission, para.  278 (referring to Brattle Report, (Exhibit CAN-93), 
pp. 32-34).  
655 Canada's  first written submission, para.  278 (referring to Brattle Report, (Exhibit CAN -93), 
pp. 37-39). 
656 Canada's  first written submission, para.  277 (referring to Brattle Report, (Exhibit CAN -93), 
pp. 26-34). WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  7.327.   We note that the Brattle Report found that demand for logs is a function of the costs of 
milling them into lumber and the price that mills can obtain for finished lumber in the international 
market. Therefore, the Alberta Government could not have influenced that demand.657 It further 
found that the supply of logs is a function of the costs of harvesting and transporting logs.658  
7.328.   We consider that the findings in the Brattle Report, referred to in the two preceding 
paragraph s, pertain to whether log prices in Alberta were market determined. These findings are, 
on their face, relevant to the USDOC's  inquiry into whether the TDA log prices reflect market prices 
that were consistent with market principles. The Brattle Report also discussed Alberta's  log export 
policies, which was directly relevant to the USDOC inquiry into whethe r the TDA log prices were 
consistent with market principles.659 An objective and unbiased authority would therefore have 
engaged with the assessment in question in the Brattle Report. The USDOC, however, failed to do 
so.  
7.329.   As regards the Kalt Report, the USD OC referred to an attachment appended to the Kalt 
Report, an affidavit from Dan Wilkinson660 (Wilkinson affidavit), Director of the Alberta Forest 
Products Association, in the context of its finding that a supply overhang exists in Alberta's  Crown 
stumpage market. The USDOC noted elsewhere in its determination that the report carried only 
limited weight because it had been commissioned for purposes of the underlying investigation.661 As 
the United  States asserts662, the USDOC also, elsewhere in its final deter mination, addressed the 
Kalt Report in the context of issues not directly related to the USDOC's  conclusion to reject the TDA 
log prices as a benchmark for the provision of Crown stumpage in Alberta.663  
7.330.    Canada asserts that Dr Kalt's  conclusions confirmed that the proposed benchmark was 
derived from market -determined log prices.664 In particular, Canada points to Dr Kalt's  finding that 
"local in -jurisdiction log prices and market -determined stumpage rates provide valid and useable 
benchmarks for assessing the adequacy of remuneration for government -supplied timber".665 The 
United  States notes that Canada argues that instead of addressing the Kalt report, the USDOC 
focused on one of the report's  attachments, the Wilkinson affidavit. The U nited States asserts that 
the USDOC focused on the Wilkinson affidavit precisely because Alberta relied upon the Wilkinson 
affidavit – not the general Kalt Report – to support its argument.666  
7.331.   We note however that, as Canada asserts667, Alberta did draw the  USDOC's  attention to the 
analysis in the general Kalt Report in proposing that the USDOC use the TDA log prices as a 
benchmark for the provision of Crown stumpage in Alberta.668 We therefore reject the 
United  States'  argument.  
7.332.   We consider that Dr Kalt's  analysis provides economic reasoning on whether, as Canada 
points out, "local in -jurisdiction log prices and market -determined stumpage rates provide valid and 
useable benchmarks for assessing the adequacy of remuneration for government -supplied 
timber".669 Insofar as that assessment pertains to whether log prices were market determined, it 
appears, on its face, to be relevant to the USDOC's  finding that the TDA log prices do not reflect 
market prices that are consistent with market principles. We consider tha t the USDOC was therefore 
required to have engaged with that reasoning in its finding.  
 
657 Brattle Report, (E xhibit CAN -93), pp.  27-28. 
658 Brattle Report, (Exhibit CAN -93), p.  29. 
659 See the Brattle Report's  discussion of Alberta's  export policies at Brattle Report, (Exhibit CAN -93), 
p. 25. 
660 Kalt Report on Crown timber , (Exhibit CAN -14), Dan Wilkinson affidavit.  
661 Final determination, (Exhibit CAN -10), pp.  143-144. 
662 United  States'  response to Panel question No. 37, para.  127. 
663 Final determination, (Exhibit CAN -10), pp.  103 and 145 -148. 
664 Canada's  first written submission, para.  279 (referring to Kalt Report on Cr own timber , 
(Exhibit  CAN-14), pp. 5-9 and 24 -30). 
665 Canada's  first written submission, fn 518 (quoting Kalt Report on Crown timber , (Exhibit CAN -14), 
p. 9). 
666 United  States'  comments on Canada's  response to Panel question No. 196, para.  84.  
667 Canada's  response to the Panel question No. 196, para.  110. 
668 Alberta case brief , (Exhibit  CAN-92), pp. 8-9, fn 9 (referring to Kalt Report on Crown timber , 
(Exhibit  CAN-14), pp. 5-9), and p.  22. 
669 Canada's  first written submission, fn 518 (quoting Kalt R eport on Crown timber , (Exhibit CAN -14), 
p. 9). WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  7.333.   Finally, for reasons set out earlier in this Report670, we consider that the USDOC could not 
have entirely disregarded the findings in the Brattle and Kalt Reports that were relevant to its 
assessment, on the basis that those reports had been commissioned for the purposes of the 
underlying investigation and that the reports therefore carried only limited weight.  
7.334.   We therefore find that the USDOC did not adequately and reas onably explain why it did not 
engage with the analysis and data set out Brattle and Kalt Reports, which were, on their face, 
relevant to the USDOC's  assessment of whether the TDA log prices were consistent with market 
principles.  
7.3.5.2.2.5   Conclusion  
7.335.   For the forego ing reasons, we conclude that the USDOC did not properly conclude that the 
TDA log prices were inconsistent with market principles.  
7.3.5.2.3   Whether the USDOC needed to assess that the TDA log prices were distorted as 
a result of government intervention  
7.336.   Canada argu es that the USDOC rejected the TDA log prices as a stumpage benchmark for 
Alberta without first establishing that these prices were distorted by the government, in direct 
contravention of the United  States'  obligations under Article  14(d)  of the SCM  Agreem ent.671 For 
Canada, in doing so, the USDOC ignored the Appellate  Body's  finding that an investigating authority 
may only resort to an out -of-market benchmark in very limited circumstances. Canada posits that 
this could occur, for example, when the governmen t, as a predominant supplier of the good, 
exercises market power in a manner that distorts in-market  prices for that good so that they can no 
longer be considered market -determined .672 Canada further asserts that an investigating authority 
may only reject " in-market" prices for the same or similar good as a benchmark under Article  14(d)  if 
it finds that government intervention in the market caused the distortion of those prices.673 For 
Canada, the USDOC was therefore required to find that private log prices i n Alberta were distorted 
in order to reject the proposed benchmark.674 Canada asserts that the TDA log prices were 
market -determined prices for a good that was very similar to standing timber.675  
7.337.   The United  States contends in response that the USDOC did not evaluate whether the TDA 
log prices were distorted by the dominance of the government in the market for stumpage. The 
United States  argues , however, that even if no in -country stumpage prices were on the record, the 
log prices from the TDA survey data could not be used as a benchmark because those log prices 
were not consistent with market principles. The United  States asserts that in evaluating the log 
prices from the T DA survey data, "the USDOC concluded that those prices were not consistent with 
market principles (i.e., were distorted)".676  
7.338.   We agree with Canada that the USDOC could not properly have rejected the TDA log prices 
as a valid stumpage benchmark for Alberta under Article  14(d)  of the SCM  Agreement without 
investigating whether those log prices were distorted as a result of  government intervention.677 The 
Appellate  Body has observed that the text of Article  14(d)  does not qualify in any way the 
"market"  conditi ons that are to be used as the benchmark. It further considered that the text of that 
provision does not explicitly refer to a "pure"  market, to a market "undistorted by government 
 
670 See, above,  para. 7.52. 
671 Canada's  first written submission, para.  276; opening statement at the second meeting of the Panel, 
para. 57.  
672 Canada's  first written submission, para.  276 (referring to Appellate  Body Report, US – Carbon Steel 
(India) , para.  4.155).  
673 Canada's  response  to Panel question No. 200, para.  120.  
674 Canada's  response to Panel question No. 200, para.  120.  
675 Canada's  first written submission, para.  276. 
676 United  States'  response to Panel question No. 39, paras.  130-131. 
677 We note further that according to the A ppellate  Body the concept of "price distortion" is not 
equivalent to any impact on prices as result of any government intervention. Rather, an investigating authority 
must determine whether in -country prices are distorted on a case -by-case basis, taking into account the 
characteristics of the market being examined, and the nature, quantity, and quality of the information on the 
record. (Appellate  Body Report, US – Countervailing Measures (China)  (Article  21.5 – China) , para.  5.146).  We 
agree with the Appellate  Body's  considerations.  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  intervention"  or to a "fair market value".678 We agree with the Appellate  Body and consider that 
Article  14(d)  thus does not require using as a benchmark prices that emanate from a perfectly 
competitive market; those prices may reflect certain imperfections, and yet form a suitable 
benchmark, unless the investigating authority sho ws that the imperfections result from the fact of 
government intervention in the market. In our view, an investigating authority may not reject a set 
of prices as a valid benchmark simply on the basis that those prices reflect certain flaws, unless it 
can show that those flaws flow directly from the fact of government intervention in the market. In 
the absence of a finding that the log prices were distorted as a result of government intervention, 
the investigating authority has no basis to show that any imp erfections in the log prices were not 
simply part of the prevailing market conditions. We consider that our views are consistent with the 
Appellate  Body's  finding that the central inquiry under Article  14(d)  in choosing an appropriate 
benefit benchmark is whether government intervention results in price distortion such that recourse 
to an alternative benchmark  is warranted.679  
7.339.   We note that the USDOC stated in its determination that it had not made a finding concerning 
"distortion in the Alberta log market".680 The USDOC also noted that it "need not evaluate whether 
log prices are also distorted as a result of the dominance of the government in the market for 
stumpage".681 We consider that the USDOC made these findings in the context of assessing whether 
the TD A log prices could be used as a "tier -one" benchmark. This follows from the 
USDOC's  consideration that it need not evaluate whether log prices were also distorted because of 
the dominance of the government in the stumpage market "as a result" of the fact t hat it did not 
consider the TDA log prices as a "tier -one" benchmark.682, 683 We recall, that in the underlying 
investigation, the USDOC did, nonetheless, examine whether the TDA log prices would be us able as 
a "tier -three" benchmark. It rejected the TDA log  prices as a "tier -three" benchmark because, in its 
view, those prices did not "reflect market prices that are consistent with market principles".684 We 
consider that in assessing whether the TDA log prices were consistent with market principles and 
therefo re us able as a "tier -three" benchmark the USDOC did, as the United  States asserts685, 
examine whether log prices were distorted.  
7.340.   In our view, in assessing whether the TDA log prices were "consistent with market 
principles", the USDOC examined the impact of  government intervention on log prices in Alberta. 
The USDOC evaluated, for instance, the impact on log prices of an "export prohibition" under 
Section  31 of the Alberta Forests Act . The USDOC found that the alleged export prohibition "prevents 
log sellers  from seeking the highest prices in all markets and, thus, artificially creates downward 
pressure on log prices throughout the province".686 Therefore, in assessing whether the TDA log 
prices were consistent with market principles, the USDOC did assess whet her those prices were 
distorted as a result of  government intervention. We therefore reject Canada's  argument that the 
USDOC declined using TDA logs prices as a stumpage benchmark for Alberta without making any 
findings that these prices were distorted by the government.687 
7.341.   We recall, nonetheless, that  we have found that the USDOC improperly concluded that TDA 
log prices were inconsistent with market principles. In particular, we have found that the USDOC 
improperly concluded that Alberta is subject to an export prohibition under Section  31 of the Alberta 
Forests Act , which creates downward pressure on log prices in Alberta. We note therefore that 
although the USDOC did investigate whether log prices in Alberta were inconsistent with market 
principles, the USDOC did not properly reach a conclusion in tha t regard. Our finding that the 
USDOC's  assessment of whether log prices in Alberta were inconsistent with market principles could 
 
678 Appellate  Body Report, US – Softwood Lumber IV, para. 87. 
679 Appellate Body R eport, US – Countervailing Measures (China)  (Article  21.5 – China) , 
paras.  5.139 -5.141.  
680 Final determination, (Exhibit CAN -10), p.  50. 
681 Final determination, (Exhibit CAN -10), p.  50. 
682 This is evident from the USDOC's  statement that "[t]he GOA and West Fr aser's  arguments 
concerning distortion presupposed that we would consider TDA survey data as a tier one benchmark, however 
we have not done so" . (Final determination, (Exhibit CAN -10), p.  50). 
683 We recall that the USDOC did not consider the TDA survey data  as a "tier -one" benchmark on the 
basis that the TDA survey data pertained not to the good at issue, stumpage, but to a different product 
i.e. harvested logs.  
684 Final determination, (Exhibit CAN -10), p.  49. 
685 United  States'  response to Panel question No. 39, paras.  130-131. 
686 Final determination, (Exhibit CAN -10), p.  50. 
687 Canada's  response to Panel question No. 200, para.  120. WT/DS533/ R 
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  be considered to constitute an inquiry into whether those prices were distorted, is without prejudice 
to our finding that the USDOC improperly concluded that TDA log prices were inconsistent with 
market principles.  
7.3.5.3   Overall conclusion  
7.342.   For the reasons set out in  sections 7.3.5.2.1  and 7.3.5.2.2  above, we find that the USDOC 
did not provide a reasoned and adequate explanation for why it declined using the TDA log prices as 
a valid benchmark for determining the adequacy of remuneration for Crown stumpage in Alberta. 
We therefore conclude that the USDOC acted inconsistently with Article  14(d)  in rejecting the TDA 
log prices in Alberta as a valid stumpage benchmark for the provin ce. 
7.4  Whether the Nova  Scotia  Benchmark relates to the prevailing market conditions in 
Alberta, Ontario, and Québec  
7.343.   Canada argues that the USDOC acted inconsistently with Article  14(d)  of the 
SCM Agreement in concluding that the Nova Scotia  benchmark relates  to the prevailing market 
conditions in Alberta, Ontario, and Québec  (other provinces)  simply because Nova Scotia  is a part 
of Canada.688 Canada contends that standing timber markets in Canada are inherently regional, as 
logs cannot be moved over long dista nces between provinces and because the majority of forests in 
Canada are provincially owned and regulated.689 Thus, in Canada's  view, Nova Scotia  being a part 
of Canada is irrelevant to the assessment of whether the benchmark from Nova Scotia  relates to the 
prevailing market conditions in the other provinces.690 
7.344.   Canada contends that the prevailing market conditions in Nova Scotia  differed from those in 
the other provinces in a number of ways, including differences in  growing conditions for timb er, 
species mix in forests, diameter of trees, the manner in which timber is classified and utilized, 
transportation costs, and conditions of supply. In light of these differences in the prevailing market 
conditions, in Canada's  view, the USDOC should not have used a benchmark from Nova Scotia , or 
should have made adjustments to the benchmark prices reflecting these differences.691 The 
United  States argues that the Nova Scotia  benchmark satisfied the requirements of Article  14(d)  of 
the SCM  Agreement, as it was a market -determined price for the same or similar good in the country 
of provision.692 The United  States also argues that the USDOC concluded that the stumpage market 
in Nova Scotia  reflected the prevailing market conditions in the other provinces based on positive 
record evidence that forests in the other provinces had a similar species mix and average diameter 
at breast height (DBH)  as forests in Nova Scotia .693 According  to the United  States, Canada has also 
failed to establish that any of the other alleged differences between conditions in Nova Scotia  and 
the other provinces to which Canada points caused the stumpage prices in the two provinces to be 
incomparable.694 The United  States asserts that the Nova Scotia  benchmark therefore related to the 
prevailing market conditions in the other provinces.  
7.4.1   Evaluation  
7.345.   In respect of the parties'  arguments concerning whether the Nova Scotia  benchmark price 
related to the prevailing market conditions in the other provinces simply because it was a 
market -determined price from within Canada, we recall that this issue has already been addressed 
in section 7.2 above. Consistent with our analysis of Article  14(d)  of the SCM  Agreement as set out 
in that section, we consider that the USDOC could not have chosen a benchmark from Nova Scotia  
to assess the adequacy of remuneration for stand ing timber in the other provinces simply because 
Nova Scotia  and the other provinces are all in the same country, but only if the USDOC properly 
established that the Nova Scotia  benchmark price related to the prevailing market conditions in the 
other provi nces. The question that we examine in this section, therefore, is whether Canada has 
 
688 Canada's  first written submission, para.  745.  
689 Canada's  first written submission, paras.  747-748 and 752.  
690 Canada' s first wr itten submission, para.  744.  
691 Canada's  first written submission, para.  821.  
692 United  States'  first written submission, para.  114.  
693 United  States'  first written submission, para.  115.  
694 United  States'  first written submission, paras.  125-129.  WT/DS533/ R 
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  established that the record evidence does not support the USDOC's  conclusion that stumpage prices 
in Nova Scotia  related to the prevailing market conditions in the other p rovinces.  
7.346.   We address this question by examining in turn the parties'  arguments and the 
USDOC's  analysis concerning the implication of the following factors that, in Canada's  view, 
distinguished the prevailing market conditions in Nova Scotia  from those in  the other 
provinces  (a) difference in species mix, (b)  difference in DBH, (c) implications of exclusion of 
pulpwood from benchmark price, (d)  difference in transportation -related costs, (e)  impact of 
declining supply of timber in Nova Scotia , and (f)  differences in growing conditions. Depending on 
the outcome of our analysis of such individual factors, we will reach an overall conclusion as to 
whether Canada has established that the USDOC improperly concluded that the stumpage prices in 
Nova Scotia  related to the prevailing market conditions in the other provinces. Finally, we will 
consider Canada's  arguments concerning the USDOC's  failure to make adjustments to the 
Nova Scotia  benchmark and consider alternative benchmarks.  
7.4.1.1   Difference in species mi x 
7.347.   In the preliminary determination, the USDOC found that the standing timber in Nova Scotia  
is harvested from similar forests and comprises the same core species group, i.e. SPF, as that in 
Québec , Ontario, and Alberta.695 The USDOC also found that "minor v ariations in the relative 
concentration of individual species across provinces" did not render the standing timber in 
Nova Scotia  incomparable to Crown timber in other provinces.696 The USDOC offered two reasons in 
support of this view  (a) SPF lumber in Nova Scotia  and the other provinces has sufficiently common 
characteristics to be treated interchangeably in the lumber market; and (b)  the governments of 
other provinces treat SPF  timber as a single category for data collection and pricing purposes.697 
Canada  refutes the validity of this reasoning.698  
7.348.   Canada asserts that the dominant species in Nova Scotia  is red spruce, which is considered 
the most valuable timber species in Nova Scotia , while this species is completely absent in other 
provinces. The most dom inant species of Ontario and Québec , i.e. black spruce, comprises less 
than 6% of standing timber in Nova Scotia . Similarly, the most common species of Alberta, 
i.e. lodgepole pine, is not found in Nova Scotia .699 We note that the United  States has not cont ested 
the validity of evidence put forth by Canada regarding the existence of differences in the individual 
SPF species mix within Nova Scotia  and the other provinces. Canada argues that these different 
species have different properties that affect the cos t of harvesting and the value of each tree.700 
Canada contends that the reasons put forth by the USDOC for disregarding such differences between 
individual species were flawed.  
7.349.   We first consider Canada's  arguments regarding the USDOC's  finding that the oth er 
provinces treat SPF  lumber as a single category for pricing purposes. Canada contends that this 
finding was invalid because Québec  uses an equation for setting stumpage prices that takes into 
account the zone -specific variation in species mix, thus show ing that the province does distinguish 
between SPF  species when setting Crown stumpage prices.701 Canada also argues that in Alberta 
and Ontario, where all Crown stumpage is sold at a single price, price is a function of the kind of 
species mix that is foun d within the particular province in question.702 According to Canada, Alberta 
and Ontario take into account "the differences in the species harvested in their regional market 
through the cost surveys of the provincial softwood industries, which are used to set stumpage rates 
in these provinces".703 Canada further asserts that Alberta also charges lower stumpage rates for 
certain lower  quality SPF  timber.704  
 
695 Preliminary determination, (Exhibit CAN -8), pp.  44-45; Final determination, (Exhibit CAN -10), 
p. 110.  
696 Final determination, (Exhibit CAN -10), p.  110. 
697 Final determination, (Exhibit CAN -10), p.  111. 
698 Canada's  first written submission, para.  767.  
699 Canada's  first written submission, para.  763.  
700 Canada's  first written submission, paras.  764-765; response to Panel question No. 8, para.  45.  
701 Canada's  first written submission, para.  769.  
702 Canada's  first written submission, para.  770.  
703 Canada's  response to Panel question No. 8, para.  44.  
704 Canada's  response to Panel question No. 8, para.  44. WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  7.350.   We consider that the evidence put forth by Canada clearly illustrates that the equation that 
Québec  uses for setting the stumpage rate for a given tariffing zone705 does take into account the 
proportion of various individual species in that tariffing zone.706 Canada has also put forth evidence 
that the bidders in the auctions that form the basis for the Crown  stumpage rate value individual 
species differently.707 Based on this evidence, we consider that Canada has shown that the stumpage 
rates for different tariffing zones in Québec  will depend on the proportion of different species in that 
zone.  
7.351.   The United  States contends that although  Québec 's transposition equation takes individual 
species' differences into account, the Crown stumpage price that is calculated using the equation 
applies to all species in a given tariffing zone, due to which Canada's  argument fails.708 We consider 
that even though the final stumpage price for a particular tariffing zone in Québec  calculated through 
the transposition equation applies to stumpage of all SPF  species in that zone alike, the fact that the 
proportion  of each individual species in that zone is a variable based on which the common stumpage 
rate is calculated establishes that Québec  does ascribe weight to difference in the values of different 
SPF species in setting the stumpage rate.709 Although the stumpage rate for a given zone applies to 
all SPF  standing timber in that zone, the stumpage rate itself is a function of the proportion of 
different SPF  species in that zone. We therefore reject the United  States'  argument and consider 
that Canada has established that Québec  ascribes significance to differences between individual 
SPF species in calculating stumpage rates.   
7.352.   With respect to Alberta and Ontario, we agree with Canada that the respective stumpage 
prices in these provinces reflect the predominant SPF  species in these provinces , as the differences 
in the quality of the SPF  species in each province would result in differences in the value of the 
SPF "basket" in each province, limiting comparability between provinces.710 We consider that Canada 
has pointed to a sufficient amount of record evidence demonstrating that individual species of 
SPF timber have distinct properties that have a bearing on their value. Therefore, we disagree with 
the USDOC's  finding that there was no "evidence that  differences in quality or species prevalence 
precludes a comparison between the Nova Scotia  benchmark and reported Crown stumpage in the 
other provinces".711 The USDOC did not closely examine whether such differences existed between 
Nova Scotia  on the one hand and Alberta/Ontario on the other, but rather limited its analysis to 
finding that the imposition of a single stumpage rate by certain provinces proved that differences 
between species mix in different provinces are immaterial. We thus consider that th e 
USDOC's  reasoning that differences between individual species of SPF  timber was not material to 
the question of comparability of Nova Scotia  stumpage prices to those in other provinces because 
certain provinces levied a single stumpage rate for all speci es of timber was flawed.  
7.353.   We therefore consider that the USDOC was mistaken in considering that the differences in 
the species mix of different provinces cannot have a bearing on comparability of the benchmark to 
the examined Crown prices "as the provinces  do not distinguish between SPF  species when setting 
Crown timber prices".712 This is because the USDOC improperly construed the imposition of a 
 
705 Québec's  Crown timber market is divided in 187 different tariffing zones.  
706 Québec initial questionnaire response , (Exhibit CAN -170), p.  QC-S-53.  
707 Canad a's response to Panel question No. 8, para.  43 (referring to Québec data file, 
(Exhibit  CAN-211 (BCI) )).  
708 United  States'  first written submission, para.  119.  
709 Québec initial questionnaire response , (Exhibit CAN -170), p.  QC-S-53.  
710 Canada's  response to Panel question No. 8, para.  45. 
711 Final determination, (Exhibit CAN -10), p. 110. For instance, Canada has shown that jack pine, 
which  constitutes a significant percentage of the species mix in Ontario and Québec but not in Nova  Scotia , is 
irregular in shape and prone to defects, due to which it is costlier to process into lumber. 
(Canada's  first written submission, para.  764 (referring to Québec, description of softwood species , 
(Exhibit  CAN-306), p.  7; and Resolute new factual informa tion declaration , (Exhibit CAN -307 (BCI)), p.  2)). 
Canada has also illustrated that different SPF  species have different DBH and produce a different amount of 
wood fibre per tree. (Canada's  first written submission, paras.  765-766 (referring to Québec init ial 
questionnaire response , (Exhibit CAN -170), p.  QC-S-24)). Canada has also demonstrated that red spruce, 
which comprises nearly one -third of the species mix in Nova  Scotia and is considered the most valuable species 
in Nova  Scotia, is not found in the ot her provinces. (Canada's  first written submission, para.  763 (referring to 
Nova Scotia tree identification guide , (Exhibit CAN -304), p. 23)).  
712 Final determination, (Exhibit CAN -10), p.  111.  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  common stumpage rate to all SPF  timber by these provinces to reflect those provinces'  view that 
individual SPF  species cannot have different values.713  
7.354.   We now proceed to examine the second reason given by the USDOC in support of its finding 
that the Nova Scotia  benchmark was related to the prevailing market conditions in the other 
provinces notwithstanding the diffe rences in species mix, i.e. that "SPF  lumber 'has sufficiently 
common characteristics to be treated interchangeably in the lumber market'".714 Canada contends 
that this reasoning of the USDOC was flawed because the fact that an end -product, i.e. SPF  lumber,  
is treated interchangeably does not imply that its inputs, i.e. different species of SPF  timber, are 
also interchangeable.715 Neither the USDOC nor the United  States have explained why the 
interchangeability of SPF  lumber in the lumber market would imply t hat SPF  timber of different 
species cannot differ in value as an input in the production of SPF  lumber. We agree with Canada 
that the fact that SPF  lumber is treated interchangeably does not ipso facto  mean all forms of 
SPF timber have the same value, such  that stumpage prices in two forests with different mixes of 
individual SPF  species could be considered comparable without taking the difference in mixes into 
account.   
7.355.   Thus, we consider that both reasons offered by the USDOC for disregarding  the differenc e 
in distribution of individual SPF  species in Nova Scotia  and the other provinces – i.e. that the 
provinces set the same stumpage price for all species and that SPF  lumber is interchangeable – were 
flawed . We therefore conclude that the USDOC did not reas onably and adequately explain why a 
benchmark price arising from the species mix in Nova Scotia  could be considered to be related to 
the prevailing market conditions in other provinces that have a different species mix.  
7.4.1.2   Difference in diameter at breast he ight 
7.356.   The USDOC found that the DBH  of SPF  timber in Alberta, Ontario, and Québec  was 
comparable to the average DBH of SPF  standing timber that grows in Nova Scotia .716 Canada claims 
that the USDOC was mistaken and that the average DBH of SPF  standing timber in Nova Scotia  and 
the other provinces were incomparable.717 According to Canada, the USDOC's  conclusion was 
incorrect for two reasons:   
a. the USDOC improperly considered Nova Scotia 's DBH for "merchantable" standing timber, 
including pulpwood, but did not in clude pulpwood in the Nova Scotia  benchmark.718 We 
understand Canada to argue that the set of trees in Nova Scotia  from which the USDOC 
derived the average DBH was not the same as the set of trees in Nova Scotia  from which 
the USDOC derived the benchmark price719 (intra -province inconsistency); and  
b. while the USDOC considered the DBH of only harvested timber in Alberta  and Ontario, its 
calculation of the DBH for trees in Nova Scotia  included timber that was still growing 
(inter -province inconsistency).720  
We examine these two grounds on which Canada disputes the USDOC's  conclusion in respect of 
comparability of DBH of s tanding timber in Nova Scotia  and the other provinces in turn.  
 
713 We consider that an objective and unbiased investigating auth ority would not have made such an 
inference because a province's  decision to set a common stumpage rate could potentially be based on a 
consideration such as ease of administrative convenience, instead of being a sign of that province's  view that 
all SPF  species have the same value. The USDOC overlooked this possibility.  
714 Final determination, (Exhibit CAN -10), p.  111.  
715 Canada's  first written submission, para.  771.  
716 Preliminary determination, (Exhibit CAN -8), p.  46; Final determination, (Exhibit CAN -10), 
pp. 112-113.  
717 Canada's  first written submission, para.  773.  
718 We note that, while this argument does not pertain directly to the question whether the DBH of 
timber in Nova  Scotia was comparable to those in the other provinces, it alleges that there wa s a certain flaw 
in the process followed by the USDOC in making such comparability analysis.  
719 Canada's  first written submission, para.  774.  
720 Canada's  first written submission, para.  777.  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  7.4.1.2.1   Intra -province inconsistency  
7.357.   We first examine Canada's  contention that the average DBH figure for Nova Scotia  
SPF timber did not relate to the average DBH of the subset of Nova Scotia  timber, the price of which 
constituted the benchmark.721 In Canada's  view, the exclusion of pulpwood in the determination of 
the benchmark price and the inclusion of pulpwood in the determination of the average DBH for 
SPF timber in Nova Scotia  was problematic beca use pulpwood is smaller in diameter and lower in 
value than sawable logs. This meant, according to Canada, that while the USDOC calculated the 
average DBH for SPF  timber based on an assessment of all forms of timber, it considered only the 
more expensive a nd bigger timber in calculating the benchmark price.722  
7.358.   The United  States responds to Canada's  argument by asserting that Canada incorrectly 
states that the average DBH for Nova Scotia  timber was derived from "all of the timber" in 
Nova Scotia .723 Rather, [[***]].724 We consider that this argument of the United  States is not 
relevant to the issue of whether the average DBH figure for Nova Scotia  timber included sawable 
timber as well as pulpwood or not. This is because the United  States has not show n that the 
categorization of standing timber as "merchantable" means that timber is not pulpwood. Hence, we 
reject this argument by the United  States.  
7.359.   The United  States also contends that Canada's  argument implies that the other provinces 
calculated the a verage DBH figure for timber in their territory based on sawable timber alone, to the 
exclusion of pulpwood. This implication, in the United  States'  view, is incorrect because the record 
is not clear as to whether the average DBH calculated by other provin ces was derived from sawable 
timber alone, or also included pulpable timber.725 We consider that this argument of the 
United  States is also irrelevant to the issue raised by Canada. The issue raised by Canada is that the 
average DBH figure for SPF  timber in  Nova Scotia  and the benchmark price in Nova Scotia  was 
determined based on dissimilar categories of timber. While the former was determined based on 
both sawable and pulpable timber, the latter was based on sawable timber alone. Whether or not 
the other p rovinces calculated the average DBH based on sawable timber alone is immaterial to the 
issue of mismatched categories of timber used for determination of average DBH and benchmark 
price within  Nova Scotia . 
7.360.   We nevertheless reject Canada's  contention that th e average DBH figure for Nova Scotia  
SPF timber did not relate to the average DBH of the subset of Nova Scotia  timber, the price of which 
constituted the benchmark. We consider that Canada has not established that the benchmark price 
and the average DBH we re calculated based on two distinct sets of trees. This is because Canada 
has itself contended that sawlog, studwood, and pulpwood are three different forms of timber 
produced from the same tree .726 If pulpwood is produced from the same tree as sawlog and 
studwood, the exclusion of pulpwood from the determination of the benchmark price would not mean 
that the benchmark and the average DBH of timber in Nova Scotia  were calculated based on different 
sets of trees. Canada's  arguments appear to indicate that the term "pulpwood" refers to a particular 
category of tree that was not considered in the determination of the benchmark price. However, this 
is contradicted by Canada's  own submission that "pulpwood" refers to a portion of a tree that is used 
by pulp mills, and not to a whole tree.727 Thus, we reject Canada's  contention.  
7.4.1.2.2   Inter -province inconsistency  
7.361.   We next examine Canada's  contention that while the USDOC calculat ed DBH figures for 
SPF timber in Alberta and Ontario based on harvested timber only, it calculated the DBH figure for 
SPF timber in Nova Scotia  based on standing timber that was still growing. The United  States refutes 
Canada's  contention asserting that "i t is not evident that all provinces reported the diameter at 
breast height for harvested trees".728 The United  States posits that Québec  reported DBH for 
 
721 Canada's  first written submission, para.  775.  
722 Canada's  first written submission, para.  774.  
723 United  States'  response to Panel question No. 12, para.  41.  
724 United  States'  response to Panel question No. 12, para.  41. 
725 United  States'  response to Panel question No. 12, para.  43.  
726 See, below,  para. 7.369 .  
727 Canada's  response to Panel question No. 224, para.  258.  
728 United  States'  first written submission, para.  123.  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  SPF trees based on "official forest inventory data for stand[s] that contain a minimum of 25% of 
softwo od" without any indication as to whether those stands measured only harvested trees.729 
7.362.   We note that while Canada's  contention regarding this inter -province inconsistency in the 
type of trees considered for DBH comparison is limited to Alberta and Ontario, the evidence 
presented by the United  States indicating absence of clarity regarding whether other provinces took 
into account the DBH of growing timber or harvested timber pertains only to Québec .730 The 
United  States has not provided any evidence counterin g Canada's  contention that Alberta and 
Ontario calculated the average DBH based on harvested timber.731 The evidence provided by Canada, 
on the other hand, makes it amply clear that Alberta and Ontario calculated the average DBH for 
timber in their province s based on harvested timber, and not growing timber.732  
7.363.   We also note that the United  States has not denied that the average DBH for SPF  timber in 
Nova Scotia  was not calculated based on harvested timber. Rather, the United  States contends that 
[[***]].733 According to Canada, "merchantable" trees [[***]] include trees that are not necessarily 
mature enough to be economically harvestable.734 We consider in this regard that the United  States 
has failed to identify record evidence that would establish that "merc hantable" timber is always 
economically harvestable. Neither the USDOC's  finding that trees [[***]] were "large enough to be 
sold for stumpage" nor the evidentiary basis for that finding identified by the United  States makes 
it clear to us that such trees are necessarily economically harvestable.735 Canada, on the other hand, 
has pointed to record evidence that suggests that the minimum DBH a tree must have to produce a 
sawlog is 17.8 centimetres736, while the minimum inside -the-bark diameter of a studwood lo g is 
10.16 centimetres737, thus indicating that a tree with a DBH of [[***]] cannot necessarily be 
harvested to produce sawlogs or studwood, i.e. the type of timber that was included in the 
Nova Scotia  survey .738  
7.364.   Therefore, we consider that the average DBH for Nova Scotia  calculated by the USDOC was 
not comparable to the DBH figures provided by Alberta and Ontario. This is because Canada has 
shown that Alberta and Ontario calculated the average DBH for SPF  timber in their territory from 
timber that had alrea dy been harvested, and hence Alberta's  and Ontario's  average DBH figures 
cannot be compared with a Nova Scotia  average DBH figure that includes trees that cannot 
necessarily be economically harvested to produce the kind of timber that was included in the 
Nova Scotia  survey.  
7.365.   We note the United  States'  argument that even if the minimum DBH for sawlogs in 
Nova Scotia  is taken to be 17.8 centimetres as Canada suggests, it would still be proximate to the 
DBH reported by the other provinces.739 In this regard, we  agree with Canada that the minimum 
DBH for a tree to be harvested to produce a sawlog in Nova Scotia  does not correspond to the DBH 
 
729 United  States ' first written submission, para.  123.  
730 Canada confirmed that the DBH figure for Québec was not based on harvested trees. 
(Canada's  response to Panel question No. 243, para.  326).   
731 We note that the United  States has asserted that Alberta did not clarify  whether the average DBH 
that it provided was calculated based on sawable timber alone, or also included pulpable timber. 
(United  States'  response to Panel question No. 12, para.  43). However, we consider that this argument of the 
United  States is not rele vant to the inquiry whether Alberta calculated the DBH based on timber that was still 
growing, or timber that had been harvested. The sawable/pulpable distinction is not the same as 
growing/harvested distinction. Canada's  argument being examined in this se ction only concerns the latter 
distinction.  
732 Alberta, MNP cross -border analysis , (Exhibit CAN -96), fn 27; Ontario, diameter distribution of timber , 
(Exhibit CAN -153), pp.  2-3.  
733 United  States'  response to Panel question No. 12, para.  41.  
734 Canada's  second written submission, para.  235.  
735 United  States'  response to Panel question No. 244, para.  327 (referring to Nova Scotia verification 
exhibit NS -VE-4, (Exhibit USA -26 (BCI))).  
736 Nova Scotia forest inventory , (Exhibit CAN -305), p.  12.  
737 Mill specificat ions, (Exhibit CAN -310), p.  5.  
738 Canada's  response to Panel question No. 234, paras.  306-307. We note in this regard that Canada 
has asserted that the DBH of [[***]] required for a tree to be considered "merchantable" is measured outside 
the bark. (Canada 's comments on the United  States'  response to Panel question No. 244, para.  278).  
739 United  States response to Panel question No. 15, para.  54. (" Alberta reported that the DBH of 
SPF standing timber species in Alberta ranges from 18.2 cm to 24.6 cm (slightl y larger than 17.8 cm), Ontario 
reported that the DBH of SPF  logs destined to sawmills and pulpmills in 2015 was 15.32 cm (only 2.5 cm 
smaller than 17.8 cm), and Quebec reported that the DBH of SPFL standing timber species ranges from 16 cm 
to 24 cm (a ran ge which encompasses 17.8 cm).")  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  figures for Québec , Alberta, and Ontario that the USDOC relied on. This is because the DBH figures 
for those provinces did not represent the minimum DBH for a softwood tree to be harvested for use 
by sawmills. Rather the DBH figures represented  (a) in case of Alberta, the s mallest and the largest 
average DBHs, by species, of softwood trees harvested; (b)  in case of Québec , the smallest and the 
largest average DBHs, by species, of softwood trees standing in Québec ; and (c)  the average 
inside -the-bark diameter  for all SPF  trees harvested during the period on investigation in Ontario.740 
We note that the United  States has not contested the factual accuracy of Canada's  description of 
what the DBH figures for various provinces at issue represented. In other words, although the 
United States argues that DBHs of softwood trees across the provinces at issue were proximate and 
hence comparable, the underlying measurements that it relies on in making this argument were not 
consistent.741 We therefore conclude that the USDOC did not proper ly establish that the DBH of 
SPF species in Nova Scotia  was comparable to those in other provinces.742  
7.366.   The United  States also contends that we must reject Canada's  arguments concerning 
comparability of average DBH in Nova Scotia  and the other provinces that the USDOC took into 
account because the Canadian respondents had failed to establish that any "small variations" in the 
DBH in Nova Scotia  compared to that in other provinces meant that timber in Nova Scotia  did not 
reflect the prevailing market conditions in the other provinces.743 We reject this argument of the 
United  States. As the USDOC compared dissim ilarly calculated DBH figures for the provinces at issue, 
we cannot conclude whether the difference between the DBH of timber in Nova Scotia  and in the 
other provinces could properly be characterized as "small variations" as the United  States suggests. 
Further, we consider that in light of the significance that the USDOC itself ascribed to comparability 
of DBH of timber across provinces to establish similarity in the prevailing market conditions, the 
importance of variation in DBH cannot be underestimated.   
7.4.1.3   Implications of exclusion of pulpwood from benchmark price  
7.367.   Canada claims that by relying on the Nova Scotia  survey that measured the prices of only 
"sawlogs" and "studwood" and not "pulpwood", the USDOC failed to take into account the prevailing 
market co nditions for the good in question when determining the benchmark price.744 Canada asserts 
that the exclusion of pulpwood from the Nova Scotia  survey was problematic for three reasons:   
a. the exclusion of pulpwood caused the price for the highest quality timbe r in the 
Nova Scotia  market to be compared to the price for mixed  quality timber in the other 
provinces745;  
b. the exclusion of pulpwood from the survey caused the USDOC to overlook certain 
differences between the conditions of sale of timber in Nova Scotia  and the other 
provinces746; and  
 
740 Canada's  response to Panel question No. 234, para.  305.  
741 Canada's  response to Panel question No. 234, paras.  309-310. 
742 We note that the United  States responds to Canada's  arguments concerning the inconsistency in the 
measurements used by the USDOC in comparing the DBH of SPF  species across the provinces at issue by 
asserting that the USDOC used the DBH for SPF  trees that grew on private land in Nova  Scotia, and not on 
SPF trees that grew in all of Nova  Scotia. We do not  understand, and the United  States does not explain, why 
the fact that the DBH figure for Nova  Scotia was determined based on trees that grow on private land only and 
not on all lands in Nova  Scotia is material to Canada's  contention.  
Further, the United  States also reiterates the actual DBH figure for Nova  Scotia that the USDOC relied 
on was 15.9 centimetres and not 17.8 centimetres. We consider, however, that the actual DBH figure for 
Nova Scotia determined by the USDOC was unsuitable to establish the co mparability of SPF  trees in 
Nova Scotia to those in the other provinces at issue because of reasons discussed in para.  7.364  above . We 
also reject th e United  States'  argument that the data that the USDOC relied on to arrive at the DBH figure of 
15.9 centimetres for Nova  Scotia is more contemporaneous than the data that Canada relies on to argue that 
the minimum DBH for a softwood tree to be harvested t o produce sawlogs, and hence the USDOC's  DBH figure 
is more reliable. This is because the United  States has not identified any record evidence that suggests that the 
DBH of SPF  trees in Nova  Scotia changed in any manner between the time when the data relie d on by Canada 
was prepared and the time when the data relied on by the USDOC was prepared. (United  States'  comments on 
Canada's  response to Panel question No. 234, para.  204).  
743 United  States ' first written submission, para.  124.  
744 Canada's  first written submission, para.  787.  
745 Canada's  first written submission, para.  787.  
746 Canada's  first written submission, paras.  798-799.  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  c. the USDOC did not consider the impact of the high demand for timber from pulp mills in 
Nova Scotia  on timber prices.747  
7.368.   We examine the merits of these three arguments by Canada in turn before reaching a 
conclusion regarding w hether the exclusion of pulpwood from the Nova Scotia  survey led to the 
establishment of a benchmark price that did not relate to the prevailing market conditions in other 
provinces.  
7.4.1.3.1   Mismatch in the conditions of sale  
7.369.   Canada contends that the exclusion of  pulpwood from the benchmark price was problematic 
because by relying on the benchmark data for only sawlogs and studwood, the USDOC failed to 
consider the whole stumpage transaction, which includes pulpwood.748 Canada explains that each 
tree can produce al l three types of timber, and in Nova Scotia  different types of timber produced 
from a single tree were sold for different prices.749 According to Canada, stumpage sellers sell 
pulpwood for no profit, but offset the absence of profit from pulpwood by selling  sawlogs and 
studwood at a higher price.750 Canada cites to certain surveys that indicate that pulpwood was priced 
less than sawlogs in Nova Scotia  in support of its contention.751 Canada explains that this differential 
pricing of different forms of timber derived from the same stumpage transaction was not a condition 
of sale in the other provinces, where there is no distinction between "sawlogs" and "pulpwood" for 
the purposes of s etting SPF stumpage rates .752 Thus, in Canada's  view, a benchmark price based 
solely on the price of sawlogs and studwood was not representative of the whole stumpage 
transaction and could not be compared to stumpage prices in the other provinces.  
7.370.   In respo nse, the United  States contends that Canada is wrong in asserting that the 
Nova Scotia  benchmark price took into account data concerning a subset of logs derived from a 
whole tree.753 According to the United  States, "[t]he record is clear that the benchmark  prices from 
the Deloitte survey consist of stumpage prices", and not prices of specific types of logs alone.754 The 
United  States points to the following observations of the USDOC in the final determination in this 
regard:   
[The] NS  [Nova Scotia ] Survey ex plicitly instructed the respondents to submit data on 
purchases of standing timber and not for harvested logs. … [T]he source documents 
demonstrate that the non -sawmills paid a stumpage price for standing timber, and not, 
as the Canadian Parties'  claim, a price that reflects only a portion of a harvested log. 
Our review of source documents for other transactions contained in the NS Survey also 
reflect the purchase of standing timber, as opposed to the purchase of a portion of 
harvested log.755  
7.371.   We note that before we can assess whether the Nova Scotia  benchmark price was based on 
conditions of sale in Nova Scotia  that were not the same as those in the other provinces, we must 
ascertain whether the benchmark price was based on prices of stumpage as a whole, as  the 
United  States contends, or only on prices of a subset of logs produced upon harvesting stumpage, 
as Canada contends.756 The United  States points to the Nova Scotia  verification report, which notes 
that "Deloitte officials provided supporting documentat ion confirming that the prices in the survey 
only reflected the purchase prices for private origin standing timber in Nova Scotia ".757 The 
United  States also points to references to the terms [[***]] in source documents for transactions 
that were examined by the USDOC at the verification in support of its view that the Nova Scotia  
 
747 Canada's  first written submission, para.  800.  
748 Canada's  first written submission, para.  796.  
749 Canad a's response to Panel question No. 11, paras.  61-62.  
750 Canada'  first written submission, para.  797.  
751 Canada'  first written submission, fn 1332.  
752 Canada's  response to Panel question No. 11, para.  63. 
753 United  States'  comments on Canada's  response to Pan el question No. 219, para.  175.  
754 United  States'  comments on Canada's  response to Panel question No. 219, para.  175.  
755 United  States'  second written submission, para.  180 (quoting Final determination, (Exhibit CAN -10), 
p. 117).  
756 United  States'  comments on Canada's  response to Panel question No. 219, para.  187; 
Canada's  response to Panel question No. 219, para.  194.  
757 United  States'  comments on Canada's  response to Panel question No. 219, para.  175 (referring to 
Nova Scotia verif ication report , (Exhibit CAN -511 (BCI)), pp.  6-7). WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  benchmark price was based on stumpage prices.758 The United  States underscores that the survey 
through which the benchmark price was determined instructed the participants to [[***]].759 The 
United  States also refers to verification documents that indicate that [[***]] by one of the verified 
survey participants.760 In support of its view that the benchmark price was based on the  price of a 
subset of logs produced from a tree rather than the price of the whole tree, Canada argues that 
"studwood" and "sawlogs", the prices of which were included in the survey, and "pulpwood", the 
prices of which were excluded , are types of logs rath er than types  of trees.761 According to Canada, 
given that Deloitte collected prices for "sawlogs" and "studwood", i.e. particular log products, the 
Nova Scotia  benchmark price was based on "piece rate transactions", i.e. transactions in which 
payment is ma de "of agreed -upon per -unit prices for each of the specific types of products that are 
actually harvested from the woodlot" and not "lump -sum transactions", i.e. transactions that 
"involve payment of a single price for the right to harvest all economically harvestable timber on the 
woodlot".762 Canada also notes that the USDOC itself quoted Nova Scotia  officials as saying that 
"trees can produce several different types of logs … [and] the seller would sell the section of the tree 
to the appropria te mill for that quality of the wood". In Canada's  view, "section of the tree" being 
sold is a reference to sales of harvested logs, and not standing timber.763 Canada also argues that 
the fact that Deloitte "surveyed initial studwood and sawmill grade purc hases, as brought through 
the mill gate from the logging site" indicates that the prices being surveyed were necessarily those 
of logs, as only logs and not standing timber can be "brought through the mill gate from the logging 
site".764  
7.372.   Based on a review of the record evidence submitted by both parties on the nature of 
transactions that formed the basis for the benchmark price, we consider that Canada has failed to 
establish that the benchmark price was based on the price of a subset of logs produced upon 
harvesting timber, instead of standing timber itself. We consider that nothing in 
Canada's  submissions sufficiently rebuts the record evidence referred to by the USDOC that indicates 
that the benchmark price was purported to measure prices paid for standin g timber, especially given 
that the survey [[***]] .765 In our view, Canada's  argument that because  the survey included prices 
of "sawlogs" and "studwood" – terms that refer to types of logs and not types of trees – the 
benchmark price was not a stumpage pri ce is not dispositive. As the United  States points out, 
Québec 's auction system lists auction prices for standing timber in terms of "pulplogs" and 
"sawlogs".766 To us, this indicates that the description of a price as the price for "sawlogs", for 
example, does not establish that the price is a price for logs and not the stumpage price.767 
 
758 United  States'  comments on Canada's  response to Panel question No. 219, para.  175 (referring to 
Nova Scotia verification exhibit NS -VE-7, (Exhibit CAN -551 (BCI)); and Nova  Scotia verification 
exhibit  NS-VE-8-C, (Exhibit CAN -552 (BCI))).  
759 United  States'  comments on Canada's  response to Panel question No. 219, para.  178 (referring to 
Nova Scotia verification exhibit NS -VE-6, (Exhibit CAN -512 (BCI)), p.  33).  
760 United  States'  comments on Canada's  response t o Panel question No. 219, para.  186 (referring to 
Nova Scotia verification exhibit VE -9-C, (Exhibit USA -51 (BCI)) ). We note that the United  States also asserts 
that Nova  Scotia verification exhibit VE -8-F indicates that [[***]]. (United  States comments on 
Canada's  response to Panel question No. 219, para.  186). We, however, do not see how that exhibit shows 
what the United  States asserts it does.  
761 Canada's  response to Panel question No. 219, para.  195.  
762 Canada's  response to Panel question No. 219, para.  206.  
763 Canada's  response to Panel question No. 219, para.  195. 
764 Canada's  response to Panel question No. 219, para.  196.  
765 We note that Canada has also argued that because the survey did not properly define the term 
"transaction", participants to the su rvey [[***]], raising serious doubts about whether the survey in fact 
measured only stumpage prices. Further, Canada argues that certain surveyed transactions included additional 
elements like brokerage fees and logging costs. (Canada's  response to Panel q uestion No. 219, paras.  205 and 
224). We address these arguments in the section on Canada's  claims concerning the reliability of the 
Nova Scotia survey. We note that our analysis in this section is limited to the parties'  arguments and record 
evidence conc erning what the survey purported to do. Our conclusion in this respect is without prejudice to our 
separate analysis of whether the survey could reliably be considered to have in fact executed what it purported 
to do.  
766 United  States'  comments on Canada's  response to Panel question No. 219, para.  180 (referring to 
Québec verification exhibit VE -QC-29, (Exhibit USA -92 (BCI)), p.  4).  
767 We note in this regard Canada's  submission that in Québec logs are categorized objectively based on 
their physical characte ristics, unlike in Nova  Scotia , where a log is categorized based on the subjective intent of 
the purchaser as to how the purchaser intends of use the log. (Canada's  response to Panel question No. 219, 
para. 212). We nevertheless do not see why "sawlog pric e" in context of Nova  Scotia could not refer to the 
stumpage price paid by a sawmill for harvesting that tree into, inter alia , sawlogs, when the same term could 
in context of Québec be used to refer to the stumpage price of a tree categorized on the basis  of its physical 
characteristics.  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  Canada's  argument that the fact that Deloitte purported to measure prices of purchases "brought 
through the mill gate" indicates that the prices surveyed were those of logs  and not standing timber 
is also not persuasive.768 We note that Canada's  argument does not account for the possibility that 
sawmills and studmills paid the price for standing timber and harvested that timber to produce all 
types of logs. Given that the rec ord evidence indicates that mills can sell the portion of the harvest 
not suited to them as roadside sales, sawmills and studmills could have sold off logs not suited for 
their purposes to other mills subsequently.769 The mere assertion that Deloitte sought  to measure 
prices at the mill gate does not negate this possibility.  
7.373.   We therefore consider that Canada has failed to establish that the USDOC established a 
benchmark price for Nova Scotia  based on prices of a subset of logs produced upon harvesting 
standi ng timber rather than prices of standing timber itself.   
7.4.1.3.2   Mismatch in the quality of timber compared  
7.374.   Canada contends that the exclusion of pulpwood from the Nova Scotia  survey led the USDOC 
to compare the price of "a subset of larger logs in Nova Scotia "770 that represented the "highest 
quality of timber in … Nova Scotia "771 to the price of "virtually all timber"772 that represented 
"mixed -quality timber"773 in the other provinces. In support of this argument, Canada points out 
that of the "total primary forest product harvest purchased in [ Nova Scotia ] … only 48% was 
classified as either sawlogs or studwood", whereas a much greater proportion of the Crown softwood 
timber harvest in other provinces was used by sawmills in the other provinces, with the figure bein g 
virtually 100% for Québec , approximately 85% for Alberta, and 74% in Ontario.774 From these 
figures, Canada infers that the benchmark reflected the price for the timber of the highest quality in 
Nova Scotia , which could not be equated with the quality of standing timber purchased by 
respondents in other provinces.775 The United  States responds that the USDOC compared the price 
paid for standing timber by sawmills in the other provinces to that paid by sawmills in Nova Scotia , 
and the inclusion of timber tha t was not used by sawmills in Nova Scotia  in the benchmark would 
have distorted the comparison.776 
7.375.   We note that Canada's arguments rely on the assumption that "[t]he Nova Scotia  Survey 
only measured 'sawlogs' and 'studwood'".777 In the section above, we reached the conclusion that 
Canada has failed to establish that the USDOC used a benchmark price for Nova Scotia  based on 
prices of a subset of logs produced upon harvesting standing timber rather than prices of standing 
timber it self.778 In light of that finding, we consider that Canada's assumption is invalid. As the 
record evidence indicates that the Nova Scotia  survey purported to examine the prices of standing 
timber, and not of a subset of harvested logs, we consider that Cana da's concern that the USDOC 
compared only a subset of higher quality logs to timber of mixed  quality in the other provinces does 
not have a valid basis. We therefore reject Canada's argument.  
7.376.   We also consider that Canada's  view that the USDOC compared "hig hest quality of timber 
in … Nova Scotia " to "mixed -quality timber" in the other provinces is mistaken. This view assumes 
that the logs used by sawmills and studmills in Nova Scotia  exclusively comprised the highest quality 
timber. We consider that, even if  inferior quality timber is mostly used by pulp mills, and sawmills 
and studmills mostly use timber of a higher quality, Canada has not fully addressed the possibility 
that there might have been lower quality logs that were used by sawmills and studmills, the price of 
which was therefore included in the benchmark. Likewise, pulp mills may have used some higher 
quality logs due to which the price of those logs would be excluded from the benchmark. As Canada 
itself observes, the kind of timber that is used by  pulp mills and is hence considered "pulpwood" in 
 
768 Canada's  response to Panel question No. 219, paras.  196-197 (referring to Redacted version of 
Nova Scotia verification report, (Exhibit CAN -318), p.  8). 
769 Nova Scotia verification report , (Exhibit CAN -511 (BCI)), p.  8.  
770 Canada's  first written submission, para.  792.  
771 Canada's  first written submission, para.  787.  
772 Canada's  first written submission, paras.  792 and 794.  
773 Canada's  first written submission, para.  787. 
774 Canada's  first written submission, para.  793; response to Panel question No. 11, paras.  65, 68, 
and 70.  
775 Canada's  response to Panel question No. 11, para.  71.  
776 United  States'  first written submission, para.  128.  
777 Canada's first written submission, p ara. 787.  
778 See, above,  para. 7.372 . WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  Nova Scotia  does not depend on size or quality.779 This understanding is confirmed by 
Canada's  assertions that "it would be possible for sawmills (and studmills)  in Nova Scotia  to produce 
lumber from logs of the quality that is generally used by pulp mills in Nova Scotia " and that "there 
is significant ov erlap in the dimensions of logs that may be classified as pulpwood, studwood, and 
sawlogs".780 Canada also noted that "in Nova Scotia , pulp and paper mills sometimes 'choose to 
process logs that would meet sawmills'  specifications'".781  
7.377.   For the foregoing re asons, we therefore consider that Canada has failed to establish that the 
exclusion of pulp wood from Nova Scotia  benchmark price led to a comparison between mismatched 
qualities of timber in Nova Scotia  and the other provinces.  
7.4.1.3.3   Demand for timber from pap er mills in Nova  Scotia  
7.378.   Canada argues that the USDOC improperly refused to consider the impact of demand for 
pulpwood from pulp mills in the Nova Scotia  market as a difference in the prevailing market 
conditions between Nova Scotia  and the other provinces.782 Canada argues that the strong presence 
of the pulp and paper industry created an upward pressure on timber prices in Nova Scotia  for 
two reasons  (a) pulp mills competed with sawmills for timber, increasing competition in the timber 
market; and (b)  pulp mills could purchase residual chips from sawmills, thus allowing sawmills to 
pay more for standing timber.783 We examine the merits of each of these two reasons in turn.  
7.379.   We consider that Canada has not established that the mere presence of pulp mills in 
Nova Scotia  and the absence of pulp mills in the other provinces implies that there was more 
competition for standing timber in Nova Scotia  than in the other provinces. This is because the 
degree of competition depends on the number and the size  of entities competing for a resource and 
the cumulative demand for that resource from those entities relative to the available supply, and 
not necessarily only on diversity in the types  of competing entities. While the presence of pulp mills 
in Nova Scotia would increase the degree of competition for standing timber in Nova Scotia  relative 
to a scenario where those pulp mills did not exist, Canada has provided no evidence that this caused 
the degree of competition in Nova Scotia  to be higher than that in the other provinces . Thus, we 
reject Canada's  argument that the presence of pulp and paper mills in Nova Scotia  implies that there 
was greater competition for stumpage in Nova Scotia  than in the other provinces.  
7.380.   We now turn to Canada's  argument that the pr esence of a pulp and paper industry in 
Nova Scotia  exerted an upward pressure on stumpage prices by providing sawmills a market to sell 
their residual products – a prevailing market condition that, in Canada's  view, distinguishes 
Nova Scotia  from the other  provinces. Citing to the Asker Report, Canada argues that "[a] 
sawmill's  ability to obtain value for these other log by -products contributes to the price that it is 
willing to pay for logs, and can affect stumpage prices".784 Pointing to record evidence, C anada 
further argues that the ability of sawmills  in Nova Scotia  to sell certain by -products to pulp mills 
increases the residual value of timber stands, by saving the sawmills the costs of disposing of those 
by-products.785 Canada has also produced record evidence that indicates that the revenue generated 
by sawmills by selling residual products to pulp mills is vital to the sawmills'  financial viability and in 
the absence of this revenue, "sawmills could not sustain the prices they pay for logs [and 
stumpa ge]", causing a decline in the demand for logs.786 Moreover, Canada supports its argument 
that the presence of a strong pulp industry in Nova Scotia  will be linked to higher stumpage prices 
in Nova Scotia  by pointing to record evidence that shows that the t ransposition equation used by 
Québec  to establish stumpage prices includes a variable accounting for the proportion of balsam fir 
in the stand. The price of the stand is inversely proportion al to the amount of fir trees in the stand 
 
779 Canada's  opening statement at the first meeting of the Panel (26 February 2019), para.  270. 
780 Canada's  respon se to Panel question No. 233, paras.  297 and 301.  
781 Canada's  first written submission, para.  793.  
782 Canada's  first written submission, para.  800.  
783 Canada's  first written submission, para.  803.  
784 Canada's  response to Panel question No. 222, para.  243 (referring to Asker Report, 
(Exhibit  CAN-15), p.  16). 
785 Canada's  response to Panel question No. 222, paras.  241, 243, and 247 (referring to Asker Report, 
(Exhibit CAN -15), p.  16; and Miller Report, (E xhibit CAN -303 (BCI)), p.  22).  
786 Canada's  response to Panel question No. 222, paras.  244-246 (referring to Attachment 62 to 
Asker  Report , (Exhibit CAN -331), p  .4; and Attachment 30 to Asker Report , (Exhibit CAN -330), p.  39).  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  because, inter alia , fir chips are lower in value than spruce chips and reduce revenues associated 
with sale of wood chips.787  
7.381.   We consider that the USDOC's  determination does not provide a reasoned and adequate 
explanation as to why the availability of pulp mills as consumers of  by-products of sawmills did not 
constitute a difference in prevailing market conditions between Nova Scotia  and the other provinces, 
although the record evidence identified above suggests so.788 We note that the USDOC dismissed 
this argument by Canadian interested parties in the determination by asserting that the "they fail to 
quantify the extent of the purported difference or even to demonstrate that such a difference 
exists".789 In our view, an objective and unbiased investigating authority would engage m ore closely 
with the record evidence identified by Canada in support of its position. If the USDOC considered it 
necessary to gauge the magnitude of the difference in prevailing market conditions caused by the 
presence of pulp mills as consumers of sawmill s' by-products, it could have questioned the Canadian 
interested parties further in that respect. The United  States has not identified any legal basis 
regarding why the Canadian interested parties ought to have quantified the impact of this factor on 
stumpage prices in order to establish that the prevailing market condi tions in Nova Scotia  and the 
other provinces differed in this respect.  
7.382.   We therefore consider that the USDOC did not provide a reasoned and adequate explanation 
in light of the record evidence as to whether the availability of pulp mills as consumers of by -products 
of sawmills created a difference between the prevailing market conditions in Nova Scotia  on the one 
hand and the other provinces on the other.  
7.4.1.4   Difference in transportation -related costs  
7.383.   Canada contends that the USDOC improperly overlooked the diff erence between 
transportation conditions in Nova Scotia  and the other provinces in determining whether the 
Nova Scotia  benchmark was related to the prevailing market conditions in other provinces.790 
According to Canada, it was important for the USDOC to co nsider the difference in transportation 
conditions between Nova Scotia  and the other provinces because transportation is a market 
condition that is explicitly mentioned in the text of Article  14(d)  of the SCM  Agreement, and because 
transportation costs sig nificantly impact the price that timber purchasers are willing to pay for 
timber.791  
7.384.   We note that the USDOC rejected the Canadian  interested  parties'  arguments concerning 
transportation on the following grounds:   
a. the Asker Report, which formed the basis fo r the Canadian  interested  parties'  arguments 
concerning road density difference between Nova Scotia  and the other provinces was 
"based on speculation and not substantial evidence";  
b. some of the respondents'  mills were found to be located close to their tim ber sources, thus 
resembling conditions that Canadian interested parties claimed existed in Nova Scotia ; 
and  
c. the Canadian interested parties did not adequately substantiate and quantify the extent 
of the purported differences.792 
 
787 Canada's  response to Panel question No. 222, para.  249 (referring to Québec initial questionnaire 
response , (Exhibit CAN -170), p.  QC-S-53; and Québec, description of softwood species , (Exhibit CAN -306), 
p. 1).  
788 The United  States argues that the evidence put forth by Canada in this  respect does not include 
"actual instances in which a sawmill adjusted the amount it was willing to pay for stumpage to account for the 
residual value of chips". (United  States comments on Canada's  response to Panel question No. 222, para.  192). 
We consid er that, even though this specific type of evidence has not been put forth by Canada, the record 
evidence that Canada has identified pertains directly to the mechanism through which, in Canada's  view, the 
availability of pulp mills to buy sawmills'  by-products would impact stumpage prices. Further, we note that the 
Canadian interested parties may not have had access to accounting books of sawmills in Nova  Scotia.  
789 Final determination, (Exhibit CAN -10), p.  114.  
790 Canada's  first written submission, para.  804.  
791 Canada' s first written submission, para.  804; second written submission, para.  252.  
792 Final determination, (Exhibit CAN -10), para.  114.  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  7.385.   The United  States argues that these grounds offered by the USDOC for rejecting the 
Canadian interested parties'  arguments concerning cost differences were based on objective 
evaluation of record evidence and thus the USDOC properly rejected those arguments .793 
7.386.   We first examine the validity of the reasons for which the USDOC dismissed the Asker Report. 
We note that the aspect of the Asker Report that the USDOC dismissed as being based on speculation 
was the Report's  findings regarding road construction costs.  The Report noted that the overall cost 
of constructing a road to the forest that a sawmill will have to incur will be lower in Nova Scotia  than 
it would be in the other provinces because sawmill -to-forest distance is lower and the road density 
is higher i n Nova Scotia  compared to other provinces, assuming that the cost of constructing one 
metre of road is the same in all provinces and the road density difference between the provinces 
holds true for forest regions as well .794 We consider that even if the USD OC properly regarded the 
Asker Report's  finding regarding road construction costs to be speculative because it was based on 
these two assumptions, the USDOC did not engage with other aspects of the Asker Report that were 
definitive and not based on any ass umptions. Specifically, the following findings of the Asker Report 
that led it to conclude that costs related to transportation are lower in Nova Scotia  were not based 
on assumptions but on definitive evidence  (a) Nova Scotia  has a relatively low woodlot -to-sawmill 
distance; (b)  trucker wages and the cost of purchasing trucks in Nova Scotia  is among the lowest in 
Canada; and (c)  road density in Nova Scotia  is higher than that in the other provinces.795 We 
consider that the USDOC's  dismissal of one aspect of the Report as being based on speculation did 
not invalidate the other findings of the Asker Report that were not based on assumptions.  
7.387.   The USDOC noted that any difference in woodlot -to-sawmill distance between Nova Scotia  
and the other provinces was immat erial because "information from the respondent parties indicates 
that some mills are located close to their respective timber sources, thereby resembling the 
conditions that Canadian Parties claim exist in Nova Scotia ".796 We consider this observation of th e 
USDOC to not be a reasonable and adequate basis to reject the significance of difference between 
woodlot -to-sawmill distances in Nova Scotia  and the other provinces. This is because the 
USDOC's  observation is limited to "some mills", without revealing th e specific percentage of mills or 
which province those mills were located in. Further, this observation does not reveal whether the 
average  woodlot -to-sawmill distance in the three other provinces was comparable to that in 
Nova Scotia .797  
7.388.   We note that ther e was extensive evidence before the USDOC demonstrating the correlation 
between transportation costs and stumpage prices.798 We agree with Canada that in light of the 
evidence that was before the USDOC showing differences between transportation costs in 
Nova Scotia  and the other provinces and the correlation between transportation costs and stumpage 
prices, the USDOC ought to h ave considered the impact of transportation on the suitability of the 
Nova Scotia  benchmark more closely than it did.799 
7.4.1.5   Impact of declining supply of timber in Nova  Scotia  
7.389.   Canada contends that the USDOC improperly disregarded the impact of a declining supp ly 
of timber in Nova Scotia  in its assessment of the prevailing market conditions.800 Canada argues 
that the USDOC ought to have taken into account the declining number of loggers who harvest 
 
793 United  States'  first written submission, para.  134.  
794 Asker Report, (Exhibit CAN -15), p.  52.  
795 Asker Report, (Exhibit CAN -15), p.  52. 
796 Final determination, (Exhibit CAN -10), p.  114.  
797 We note that Canada has also argued that the USDOC improperly rejected Alberta's  argument that 
the Nova  Scotia benchmark w as unsuitable because the cost of transporting manufactured lumber from 
sawmills to the market was higher for Alberta sawmills than it was for sawmills in Nova  Scotia. 
(Canada's  first written submission, para.  812). We reject this argument by Canada for th e same reasons 
as those set out in para.  7.548  of section 7.7.3.2.4 .  
798 Canada's  second written submission, para.  252.  
799 In this regard, we reject the United  States'  argument that the Canadian respondent parties did not 
quantify the impact that any transportation -related differences may have had on the suitability of the 
Nova Scotia benchmark. We consider that the absence of quantification of such impact by the Canadian 
interested parties  does not negate the evidence that was already there before the USDOC , which  indicat ed that 
there were differen ces in transportation costs between the two provinces that the USDOC should have 
addressed reasonably and adequately.  
800 Canada's  first written submission, para.  814. WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  timber in Nova Scotia801, the low participation by private woodlot  owners in the standing timber 
market802, the effects of a major hurricane803, and the increased designation of forests as protected 
areas by the Nova Scotia  government in examining whether the prevailing market conditions in 
Nova Scotia  were comparable to t hose in the other provinces.804  
7.390.   We reject this argument by Canada. We consider that the supply of the good in question in 
the market where the benchmark is being derived from is pertinent to the inquiry of whether the 
benchmark relates to the prevailing ma rket conditions for the good in question, but that in this 
particular case Canada has not established a prima facie  case suggesting that the supply side 
conditions it points to had a bearing on stumpage prices in Nova Scotia . Canada has not shown or 
even a rgued that sawmills in Nova Scotia  experienced supply shortages or that they had more 
difficulty procuring timber than sawmills in the other provinces. We consider that in the absence of 
any evidence to this effect, Canada has failed to show that the suppl y side conditions that it points 
to could have had an impact on stumpage prices in Nova Scotia . We therefore find that Canada has 
not established that the USDOC erred by not sufficiently accounting for supply side conditions in 
Nova Scotia .  
7.4.1.6   Differences in  growing and harvesting conditions  
7.391.   Canada argues that differences in the following factors in growing and harvesting conditions 
between Nova Scotia  and the other provinces caused the prevailing market conditions in Nova Scotia  
to be different from those in  the other provinces (a) the length of forest regeneration periods, (b)  the 
differences in terrain in various provinces, and (c) the length of the period over which harvesters 
can access timber in a given year. We examine Canada's arguments concerning each  of these factors 
in turn in this section.  
7.392.   Canada contends that the growing season in the other provinces was shorter than the 
growing season in Nova Scotia , due to which standing timber regenerates more quickly in 
Nova Scotia  than in other provinces.805 According to Canada, the consequences of the difference in 
the length of the growing season and the regeneration period is that Nova Scotia  sawmills will "likely 
require a smaller forested geographic area to sustain their operations and will have lower 
transportation costs".806 Canada argues that the USDOC improperly disregarded these differences 
in growing conditions between Nova Scotia  and the other provinces.807 The United  States contends 
that growing conditions are only relevant insofar as they affect the D BH and species of the trees, 
and that the USDOC properly considered that the evidence did not demonstrate that the growing 
conditions in Nova Scotia  and the other provinces were different and affected the comparability of 
the trees from those regions.808  
7.393.   We note that Canada has pointed to record evidence that shows that forest land regenerates 
in 60 -75 years in Nova Scotia , whereas the corresponding figure for Alberta is 83 -129 years.809 
Canada has also pointed to record evidence that suggests that "[t]he fa ster growing the forest, the 
smaller the area required to support sawmills of a given size".810 Further, record evidence also 
suggests that higher stand density associated with faster regeneration is a factor that influences 
stumpage pricing, as denser stands bring down harvesting costs, thus increasing the residual value 
of timber.811 In light of this evidence, we consider that the USDOC did not provide a reasoned and 
 
801 Canada asserts that the number of loggers in Nova  Scotia had declined during the econom ic 
recession of 2008, and had not recovered since that time. (Canada's  first written submission, para.  817 
(referring to Asker Report, (Exhibit CAN -15), p.  48)).  
802 Canada's  first written submission, para.  816 (referring to Attachment 60 to Asker Report , 
(Exhibit  CAN-329), p.  2). 
803 Canada argues that Hurricane Juan destroyed approximately 100 million trees in Nova  Scotia 
in 2003. (Canada's  first written submission, para.  818 (referring to Asker Report, (Exhibit CAN -15), 
pp. 49-50)).  
804 Canada's  second writt en submission, para.  255.  
805 Canada's  first written submission, paras.  760 and 782.  
806 Canada's  first written submission, para.  782.  
807 Canada's  first written submission, para.  784.  
808 United  States'  response to Panel question No. 21, paras.  68-70; Final de termination, 
(Exhibit  CAN-10), p.  113.  
809 Canada's  first written submission, para.  782.  
810 Alberta, MNP cross -border analysis , (Exhibit CAN -96), p.  37.  
811 Canada's  response to Panel question No. 226, paras.  273-274 (referring to Québec initial 
questionnair e response , (Exhibit CAN -170), p.  QC-S-53; and Attachment 6 to Kalt Report , (Exhibit CAN -608)).  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  adequate basis for rejecting the Canadian interested parties'  arguments concerning the differences 
in the regeneration periods in Nova Scotia  and Alberta. We consider tha t the USDOC's  reasoning 
that the differences in regeneration periods are relevant only to the extent that they affect the DBH 
and species of trees is flawed. Even stands comprising trees of the same species and DBH but of 
different stand density may entail  different harvesting costs because, as the evidence submitted by 
Canada suggests, stand density has an impact on harvesting costs. As the USDOC's  determination 
does not engage with this evidence sufficiently, we find that the USDOC failed to properly cons ider 
whether the prevailing market conditions in Nova Scotia  related to those in Alberta despite the 
differences in the length of growing seasons and forest regeneration periods in the two provinces.812  
7.394.   Canada also argues that the terrain and climate in Nova Scotia  allows for harvesting access 
all around the year, as opposed to Alberta and Québec  where access to forests is limited to certain 
seasons.813 As regards harvesting access, Canada asserts, pointing to record evidence, that the 
harvesting season in A lberta is typically 88 days long and Tolko can only harvest standing timber in 
Alberta after the construction of ice roads during this period.814 Canada also argues that Resolute 
can only access some Crown forests in Québec  via a winter ice bridge.815 We con sider that the 
USDOC's  determination did not provide a reasoned and adequate explanation for why the shortness 
of the harvesting season and cost of construction of ice roads during this period did not constitute a 
difference in the prevailing market condit ions in Nova Scotia  on the one hand, and those that Tolko 
operated in on the other. However, we reject Canada's  arguments concerning Québec , as Canada 
has not provided us with any information other than the assertion that Resolute can only access 
"some" of  its Crown timber via a winter bridge. This information is not sufficient for us to consider 
that the USDOC failed to properly consider a difference between the prevailing market conditions in 
which Resolute operated in Québec  as a whole and Nova Scotia .  
7.395.   Canada also argues that Nova Scotia  and each of the other provinces also differed in the 
type of forest terrain, that increased the harvesting costs for producers in the other provinces, and 
consequently the stumpage prices in those provinces.816 Canada ass erts that in Québec  "[p]ublic 
forest terrain is either swampy or hilly and rocky", black spruce in Ontario's  forests "is associated 
with swampy, or wet, harvest sites", and that "parts of Alberta feature harsh terrain, with steep 
slopes in particular regio ns".817 Canada has also put forth evidence in support of its argument that 
the nature of terrain has an impact on harvesting costs.818 The United  States has argued in response 
that Canada has not shown that the differences in terrain identified by Canada ref lect distinct 
prevailing market conditions for the good in question that would compel a different result in this 
case.819 The United  States also asserts that the USDOC properly concluded that none of the alleged 
differences in terrain resulted in difference s that were not captured by the species and 
DBH characteristics.820 We evaluate Canada's  arguments concerning differences in quality of the 
terrain in each of these provinces separately.  
7.396.   In case of Québec , other than pointing to Québec 's questionnaire respo nse where Québec  
states that public forest terrain is "either swampy or hilly and rocky", Canada does not provide any 
further evidence as to whether this specific feature of Québec 's terrain led to a difference between 
the prevailing market conditions in Québec  on the one hand and Nova Scotia  on the other. Canada 
has not, for example, compared the average ground solidity and average slope of the terrain in 
 
812 We note that Canada has presented specific evidence concerning differences in forest regeneration 
periods only between Nova  Scotia and Alberta. We also note that Canada has made arguments concerning the 
impact of regeneration periods on transportation cos ts as well. However, we do not examine those arguments 
in this section , as we consider that any differences in transportation costs caused by different regeneration 
periods would be accounted for by comparing the transportation costs directly. Hence, our a nalysis in 
section  7.4.1.4  is sufficient to address Canada's  arguments concerning differences in transportation costs that 
arise as a result of diffe rent regeneration periods.  
813 Canada's  first written submission, para.  783.  
814 Canada's  response to Panel question No. 229, para.  283 (referring to Tolko verification report , 
(Exhibit CAN -316 (BCI)), p.  9).  
815 Canada's  response to Panel question No. 229, para.  283.  
816 Canada's  response to Panel question No. 229, paras.  284-285.  
817 Canada's  response to Panel question No. 229, para.  284.  
818 Canada's  response to Panel question No. 229, paras.  285-287.  
819 United  States' comments on Canada's  response to Panel question No. 229, para.  198.  
820 United  States'  comments on Canada's  response to Panel question No. 229, para.  198. WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  which Québec 's public forests are located to the corresponding figures for Nova Scotia .821 In the 
absen ce of such evidence, we consider that Canada has not established that there were differences 
between the terrain in Québec  and Nova Scotia  that had a bearing on the prevailing market 
conditions in these provinces that the USDOC did not properly take into a ccount. In case of Ontario, 
even though Canada argues that black spruce – the most common species in Ontario – is associated 
with swampy or wet harvest sites, the evidence that Canada relies on in this regard also states that 
black spruce is also "found on  dry and sandy areas".822 Canada has not put forth any evidence 
concerning the relative distribution of black spruce in swampy and dry areas. Canada has also not 
argued that species other than black spruce are also located in difficult terrain in Ontario. T hus, we 
do not consider that Canada has established that there were differences between the terrain in 
Ontario and Nova Scotia  that had a bearing on the prevailing market conditions in these provinces 
that the USDOC did not properly take into account. We reach the same conclusion in respect of 
Canada's  argument concerning Alberta, where Canada has simply asserted that "parts of A lberta" 
feature harsh terrain, without providing any indication as to what percentage of Alberta's  total terrain 
features that type of terrain. Hence, we consider that Canada has not established that the USDOC 
failed to consider any differences in the prev ailing market conditions between Nova Scotia  and the 
other provinces that came into existence as a result of differences in terrain between these 
provinces.  
7.4.1.7   Conclusion  
7.397.   We consider that Canada has established that the USDOC did not provide a reasoned and 
adequate explanation for its finding that the different species mix of SPF  timber in Nova Scotia  and 
the other provinces did not constitute a difference in the prevailing market conditions. We also 
consider that the USDOC did not properly establish that the  DBH of standing timber in Nova Scotia  
was comparable to that in Alberta, Ontario, and Québec  because the USDOC calculated a DBH figure 
for these provinces on dissimilar bases. The USDOC also erred by calculating the DBH figures for 
Alberta and Ontario bas ed on harvested trees, while it calculated the DBH figure for Nova Scotia  
based on trees that were not necessarily economically harvestable. Further, we consider that the 
USDOC did not provide a reasoned and adequate explanation as to whether the availabil ity of pulp 
mills as consumers of by -products of sawmills created a difference between the prevailing market 
conditions in Nova Scotia  on the one hand and the other provinces on the other.  
7.398.   Likewise, we consider that the USDOC's  analysis did not properly r eflect the differences in 
transportation -related costs in Nova Scotia  and the other provinces. Finally, we find that the USDOC 
failed to properly consider whether the prevailing market conditions in Nova Scotia  related to those 
in Alberta despite the diffe rences in the length of harvesting seasons and forest regeneration periods 
in the two provinces. We conclude the USDOC acted inconsistently with its obligation under 
Article  14(d)  of the SCM  Agreement to determine the adequacy of remuneration in relation t o the 
prevailing market conditions in which the good in question was provided by erroneously finding that 
the Nova Scotia  benchmark price reasonably reflected the prevailing market conditions in the other 
provinces.   
7.399.   As Canada has established that the abov ementioned differences existed between the 
prevailing market conditions in Nova Scotia  and in the other provinces, we agree with Canada that 
the USDOC should have made necessary adjustments to the benchmark price such that the 
benchmark price related or re ferred to the prevailing market conditions in the market where the 
good was provided.823 The USDOC acted inconsistently with Article  14(d)  of the SCM  Agreement by 
failing to make such adjustments to the Nova Scotia  benchmark.  
7.400.   We also note that Canada argue s that the USDOC acted inconsistently with its obligation to 
find an "out -of-market" benchmark that is "as comparable as possible" to the prevailing market 
 
821 In this regard, we note that the record evidence indicates that the average ground solidity an d the 
average slope were known in case of Québec. ( Québec initial questionnaire response , (Exhibit CAN -170), 
p. QC-S-127 ("if a specific tariffing zone presents an average slope higher than the provincial average, the 
value of the harvesting difficulty ind ex will be higher. The same approach is used for the impact of ground 
roughness and of ground strength.") )  
822 Ontario, the forests , (Exhibit CAN -147), p.  86.  
823 Canada's  first written submission, para.  820 (referring to Appellate  Body Report, US – Softwood  
Lumber IV , para.  108). Before applying an adjusted Nova  Scotia benchmark to the other provinces, however, 
the USDOC was obliged to consider using a market -determined benchmark from within those provinces, in 
accordance with our discussion in section 7.2 of this Report.  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  conditions in Alberta and Ontario.824 However, Canada has presented this argument "in the 
alternative " to its contention that the USDOC ought to have used private market and log benchmarks 
from within Alberta and Ontario rather than the Nova Scotia  benchmark.825 As we have upheld 
Canada's  contention that the USDOC should have considered benchmarks from wit hin Alberta and 
Ontario, we need not make findings with respect to Canada's  arguments concerning alternative 
external benchmarks.  
7.5  Canada's claim concerning the r eliability of the Nova  Scotia  survey  
7.401.   Canada claims that the Nova Scotia  survey (survey)  from wh ich the US DOC derived the 
benchmark, failed to meet the requirements of reliability, accuracy, transparency, and adequate 
explanation.826 Canada claims that the survey and its methodology were not clear and intelligible, 
in contravention of the chapeau  of Article  14 that requires the method used to determine benefit to 
be "adequately explained" and "transparent".827 The United States contend s that 
Canada's  arguments concerning the reliability of the survey lack merit as the USDOC did not act 
inconsistently with its obligations under the SCM Agreement in using the Nova Scotia  benchmark.828  
7.5.1   Legal basis for Canada's  claim  
7.402.   Canada contends that by  relying on an unreliable survey for determining the benchmark 
price, the USDOC acted inconsistently with Articles  14 and  19.4 of the SCM Agreement and 
Article  VI:3 of the GATT 1994.829 Canada explains that the chapeau  of Article  14 requires that the 
method used to determine whether a benefit exists must be "adequately explained" and 
"transparent". Hence, by adopting the intransparent survey and its flawed methodology for 
determining the benchmark, the USDOC acted incon sistently with Article  14 of the SCM Agreement.  
7.5.2   Evaluation  
7.403.   We note that Canada has advanced several arguments questioning the objectivity of the 
survey based on its view that the survey was " [[***]]".830 Canada's  arguments that question the 
reliability of the survey based on the alleged [[***]] behind creation of the survey 
include  (a) [[***]]831; (b) [[***]]832; (c) [[***]]833; and (d)  the survey was commissioned and 
[[***]].834 According to Canada, the USDOC erred by considering the survey to have been made i n 
the ordinary course of business notwithstanding the foregoing factors pertaining to the survey.835 
7.404.   We consider that notwithstanding [[***]] with which the survey was conducted, Canada 
must point to the flaws in the substantive content of the survey in ord er to establish that the survey 
was unreliable. We agree with Canada that "regardless of whether [the survey] was [[***]], [it] 
needs to be assessed on its own merits".836 We therefore examine whether the USDOC reasonably 
considered the evidence that was be fore it concerning various flaws in the content of the survey in 
order to determine whether the survey was reliable.  
7.5.2.1   Specific flaws in the Nova  Scotia  survey  
7.405.   Canada points to the following specific aspects of the content of the Nova Scotia  survey that, 
in Canada's  view, establish the survey's  unreliability  (a) uncertainty regarding representativeness of 
the data; (b) absence of information regarding what survey respondents reported as a stumpage 
"transaction"; (c)  exclusion of lower value pulpwood transact ions; and (d) use of an inaccurate 
 
824 Canada' s first written submission, para.  823.  
825 Canada's  first written submission, paras.  822-823.  
826 Canada's  first written submis sion, para.  825.  
827 Canada's  first written submission, para.  827.  
828 United States'  first written submission, para.  155.  
829 Canada's  first written submission, para.  862.  
830 Canada's  first written submission, para.  833. We note that the Nova  Scotia survey w as conducted by 
the firm Deloitte .  
831 Canada's  first written submission, para.  834. 
832 Canada's  first written submission, para.  835.  
833 Canada's  first written submission, para.  836.  
834 Canada's  opening statement at the first meeting of the Panel ( 28 February  2019), paras.  103-106.  
835 Canada's  opening statement at the first meeting of the Panel ( 28 February  2019), para.  117.  
836 Canada's  opening statement at the first meeting of the Panel  (28 February  2019), para.  99. WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  conversion factor.837 We will examine Canada's  submissions with respect to each of these aspects of 
the survey in turn and will then form a view on whether Canada has established that the survey was 
unreliable.  
7.5.2.1.1   Representa tiveness of data in the survey  
7.406.   Canada argues that the Nova Scotia  survey was unrepresentative in two ways  (a) in terms 
of the number of registered buyers in Nova Scotia  covered by the survey; and (b)  in terms of the 
geographic representativeness of the sur vey. Canada contends that due to its unrepresentativeness, 
the survey did not provide adequate information on "market conditions in Nova Scotia ", and 
therefore the USDOC could not have relied on the Nova Scotia  survey to determine whether the 
provision of standing timber in other provincial markets was for adequate remuneration "in relation 
to prevailing market conditions".838 We will examine in turn Canada's  arguments concerning both 
ways in which the Nova Scotia survey was allegedly unrepresentative.  
7.407.   As regards the survey's  representativeness in terms of number of participants covered, 
Canada asserts that the survey was based on data collected from 21 registered buyers that 
represented only 13% of registered buy ers in the province.839 Canada also underscores that of the  21 
registered buyers who responded to the survey, [[***]].840 Canada argues that the USDOC did not 
provide any information as to the basis on which the surveyed buyers were chosen and asserts that 
the record indicates that "sample volumes were not representative, geographically, of the harvest 
volumes in Nova Scotia ".841 Canada contends that because the survey was not representative, the 
survey did not have enough information about "market conditions" in Nova Scotia  and could not 
have been used to determine the adequacy of remuneration in the other provinces "in relation to 
prevailing market conditions".842 In response, the United States points to the USDOC's  finding that 
the survey represented approximately 36% of the private softwood volume purchased in Nova Scotia  
during the survey period, which the USDOC considered to b e a "sufficiently robust and 
representative" sample size of Nova Scotia 's private harvest.843  
7.408.   We note that Canada has not challenged the USDOC's  finding that the survey was based 
on 36% of Nova Scotia 's private timber harvest and does not argue that a surv ey based on 36% of 
the private harvest would be unrepresentative. Canada has only focused on the number of registered 
buyers  that were included in the survey to argue that the survey was unrepresentative. We consider 
that the percentage of the volume of pr ivate timber harvested in Nova Scotia  that the survey 
represented was a more appropriate metric for judging the representativeness of the survey than 
the percentage of registered buyers that the survey included. If a small number of buyers purchase 
a repre sentative volume of private timber harvest in Nova Scotia , the survey should not be 
considered unrepresentative because of the small number of buyers alone. Conversely, a survey 
that considers a large number of buyers that purchase small volumes of timber could arguably be 
considered unrepresentative, notwithstanding the number of buyers it includes. As Canada has not 
disputed the USDOC's  finding that the survey was representative because it included a sufficiently 
high percentage of volume of private timbe r harvest in Nova Scotia , we reject Canada's  argument 
that the survey was unrepresentative because it considered data from only [[***]]. 
7.409.   Canada also contends that "the sample volumes were not representative, geographically, of 
the harvest volumes in Nova Scotia".844 Canada argues that the geographical representativeness of 
the survey matters because the location of the timber has a significant effect on its value.845 In 
response, the United States points to record evidence that indicates that Deloitte underto ok steps 
to ensure that survey results were geographically representative.846  
 
837 Canada's  first written submission, para.  837.  
838 Canada's  first written submission, para.  840. 
839 Canada's  first written submission, paras.  831 and 841.  
840 Canada's  comments on the United States'  response to Panel  question N o. 237, para.  266. 
841 Canada' s first written submission, para.  841.  
842 Canada's  first written submission, para.  840.  
843 United States'  first written submission, para.  165.  
844 Canada's  first written submission, para.  841 (referring to Deloitte Report, (Exhibit CAN -312), p.  8).  
845 Canada's  comments on the United States'  response to Panel  question No. 237, para.  267.  
846 United States'  response to Panel  question No. 237, para.  314 (referring to Nova  Scotia verification 
exhibit NS -VE-6, (Exhibit CAN -512 (BCI)), pp.  7 and 17 ( [[***]])). WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  7.410.   In support of its argument that the Nova Scotia  survey was not geographically 
representative, Canada points to the following excerpt of the Deloitte Report:  
[A]s noted previously in this report, the sample volumes are not a constant share of the 
total actual harvest volumes in Nova Scotia 's three regions during 2015. We therefore 
employed a methodology whereby:  (1) the average stumpage price by product categor y 
and species was calculated based on the region of harvest reported; and (2)  these 
averages were then reweighted based on NSDNR [Nova Scotia  Department of Natural 
resources] actual harvest volumes, creating a new provincial weighted average. This 
regional  reweighting approach accounts for price -by-distance economics inherent in the 
forestry industry.847 
We note that in this excerpt, Deloitte acknowledges that "the sample volumes are not a constant 
share of the total actual harvest volumes in Nova Scotia 's three regions". However, Deloitte also 
goes on to describe the methodological steps that it took to address this imbalance in the sampled 
volume. We note that Canada has not argued that the survey would remain geographically 
unrepresentative despite the met hodological steps taken by Deloitte to create a "provincial weighted 
average" price. Rather, Canada takes issue with the fact that the USDOC [[***]].848 Canada asserts 
that the USDOC [[***]] Deloitte's  attempt to control for its unrepresentative sample and [[***]].849 
We consider that Canada's  arguments in this regard do not relate to the geographical 
representativeness of the Nova Scotia  survey per se , but to the USDOC's  alleged decision to depart 
from the survey in a certain manner. Canada has not argued th at the survey remained geographically 
unrepresentative even after "Deloitte's  attempt to control for its unrepresentative sample". As the 
claim that we are currently examining concerns the reliability of the survey itself, and not with the 
manner in which the USDOC itself [[***]], we reject Canada's  argument. We note that as Canada 
did not challenge this aspect of the USDOC's  determination before commenting on  the 
United  States'  response to a question posed after the second substantive meeting, we will not rule 
on whether the USDOC erred by [[***]].  
7.411.   Thus, we consider that Canada has not established that the Nova Scotia  survey was 
unreliable on account of being unrepresentative, either numerically or geographically.   
7.5.2.1.2   Definition of "transaction"  
7.412.   Canada argues  that the USDOC failed to assess whether the transactions that made up the 
survey accurately reported the price of the right to access private timber, because the survey did 
not unambiguously define the meaning of the term "stumpage transaction".850 Canada asserts that 
absence of certainty and uniformity in what the surveyed buyers reported as a "transaction" was 
problematic, given that timber transactions in Nova Scotia  can be structured in many different ways 
and hence some reported transaction prices coul d have included elements in addition to the 
consideration paid to the landowner for standing timber, thus skewing the stumpage prices 
upwards.851 The United States argues that Canada's  concerns regarding the surveyed 
buyers'  potential misinterpretation of t he term "stumpage transactions" are unwarranted, as the 
USDOC found no evidence of misreporting during the verification visit.852 The United States also 
asserts that there was no discrepancy in the manner in which transactions were reported as the 
survey conductor also conducted on -site verifications of survey respondents to ensure accurate 
reporting.853 
7.413.   We consider that the general definition of a "transaction" employed by Deloitte when 
collecting data for the survey, did not indicate that only the stumpage price must be reported, leaving 
open the possibility for survey participants to report prices for differently structured transac tions.854 
In this regard, we note the United States'  assertion that the "survey clearly instructed survey 
 
847 Deloitte Report, (Exhibit CAN -312), p.  8. 
848 Canada's  comments on the United States'  response to Panel  question No. 237, para.  269.  
849 Canada's  comm ents on the United States'  response to Panel  question No. 237, para.  269.  
850 Canada's  first written submission, para.  843.  
851 Canada's  first written submission, para.  847; response to Panel  question No. 13, para.  73; and 
opening statement at the first meet ing of the Panel (28  February  2019), para.  126.  
852 United States'  first written submission, para.  168.  
853 United States'  first written submission, para.  168.  
854 The general definition that Deloitte employed was:  [[***]]. (Nova  Scotia verification 
exhibit  NS-VE-6, (Exhibit CAN -512 (BCI)), p.  40).  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  respondents to report the 'stumpage rates'  they paid for 'softwood sawlogs'".855 However, we note 
that Deloitte itself indicated that the term "transact ion" was [[***]].856 In light of the fact that the 
record evidence clearly indicates that there are many different ways in which timber transactions 
could be structured in Nova Scotia , we consider that the rather ambiguous definition of the term 
"transactio n" that the survey provided could have led the survey participants to report prices based 
on different understandings of that term.857 This view is supported by the outcome of a verification 
of transactions reported by survey participants conducted by Deloi tte, as explained below.  
7.414.   Deloitte conducted a verification in which it sought "[c]onfirmation  that the reported value 
included only the transaction price for the private stumpage, excluding the payment of private 
silviculture fees, and excluding any non -stumpage charges that may have been 'bundled'  in the 
Registered Buyer's  records".858 It found, h owever, that "[i]n some limited cases, Registered Buyers 
recorded a single entry for the price they paid for stumpage, along with other costs incurred in 
harvesting the standing timber, such as brokerage fees or commissions paid to third parties, 
harvestin g costs, trucking costs, etc" .859 We note that Deloitte did not indicate what percentage of 
the transactions contained in the survey they examined in this verification process.860 We also note 
that Deloitte did not specify what percentage of the examined tra nsactions the "limited cases" in 
which prices for standing timber were found to be lumped with other costs represented.861 Further, 
there is no evidence on the record that suggest s that any rectification to such erroneously reported 
"limited cases" made by Deloitte pursuant to its verification exercise was also extended to the rest 
of the data set.862 We also agree with Canada that the fact that the USDOC found errors concerning 
the basis on which prices were recorded in the survey, even during its own verifi cation visit, indicates 
that Deloitte [[***]].863 These considerations concerning the presence of erroneously reported 
transactions in the survey indicate to us that even though Deloitte may have purported to collect 
pure stumpage prices from survey transac tions, the ambiguity in the definition of "transaction" in 
the survey caused the survey participants to report prices based on different understandings of that 
term.864  
7.415.   In light of the evidence referred to above, we consider that Canada has made a prima fa cie 
case that the survey was unclear as to the definition of "transactions", and hence unreliable. We 
consider that the United States has not sufficiently rebutted Canada's  contention, and hence we 
uphold Canada's claim.  
7.5.2.1.3   Exclusion of pulpwood transaction  
7.416.   Canada argues that the survey was unreliable because the USDOC had no indication of how 
the survey respondents understood and applied the definitions of the terms "sawlog", "studwood", 
and "pulpwood".865 Canada also argues that the market for pulpwood was e ssential to understanding 
 
855 United States' response to Panel question No. 13, para. 46 (referring to Nova  Scotia verification 
exhibit NS -VE-6, (Exhibit CAN -512 (BCI)), p. 27 (which contains email instructions sent to survey 
participants )). 
856 Nova Scotia verification exhibit NS -VE-6, (Exhibit CAN -512 (BCI)), p.  40. 
857 Nova Scotia addendum questionnaire response , (Exhibit CAN -313), pp.  9-10 (providing multiple 
examples of ways in which private stumpage is sold in Nova  Scotia).  
858 Deloitte Report, (Exhibit CAN -312), p.  4. 
859 Deloitte Report, (Exhibit CAN -312), p.  4.  
860 United States'  response to Panel  question No. 235, para.  300. 
861 United States'  response to Panel  question No. 235, para.  302. 
862 United States'  response to Panel  question No. 235, para.  306. 
863 Canada's  comments on the United States'  response to Panel  question No. 235, para.  260. See 
section 7.5.2.1.5  below.  
864 We note that Canada has also argued that an indication that the survey contained transactions 
reported on a lump -sum basis is that Port Hawkesbury paper, a company that was likely included in the 
survey, most commonly purchased stumpage on a lump -sum basis. (C anada's  response to Panel  question 
No. 13, para.  76). The United States contends that this argument by Canada is speculative and is not 
supported by positive record evidence. The United States also points out that in the final determination, the 
USDOC note d that it is not clear whether Port Hawkesbury participated in the survey at all. 
(United  States'  second written submission, para.  204 (referring to Final determination, (Exhibit CAN -10), 
pp. 117-118)). We consider that having found, for reasons explained above, that the ambiguous definition of 
"transaction" rendered the survey unreliable, we need not rule on whether the Port Hawkesbury paper also 
reported transactions based on a mistaken understanding of that term.  
865 Canada's  first written submission, par a. 851.  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  the market for sawlogs and studwood in Nova Scotia  and for determining how the market was to be 
compared to the other provinces.866  
7.417.   With respect to Canada's  first argument, we consider that Canada has provided no evidence 
that ind icates that the definitions of the terms "sawlog", "studwood", and "pulpwood" were not 
properly applied by survey participants. With respect to Canada's  second argument, we consider 
that the issue raised by Canada has been dealt with in the context of Cana da's arguments concerning 
comparability of the Nova Scotia  benchmark to stumpage prices in the other provinces.867  
7.5.2.1.4   Conversion factor used to convert tonnes to cubic metres  
7.418.   Canada argues that the conversion factor that the survey used to convert quantity o f logs 
from tonnes to cubic metres tended to understate the volumes actually purchased by survey 
respondents, leading to an imprecise benefit calculation.868 Canada argues that the Canadian  
interested  parties presented the USDOC with conversion factors that  were designed to take into 
account differences in log types, species, and seasons, while the conversion factor that the survey 
used and the USDOC accepted was not sensitive to these differences.869 The United States argues 
that the conversion factor that t he USDOC used was reliable, as the USDOC found this conversion 
factor to have been used by Nova Scotia  in the ordinary course of business.870  
7.419.   We note that the USDOC rejected the Canadian  interested  parties'  concerns regarding the 
conversion factor used in the Nova Scotia  survey based on two reasons  (a) the government of 
Nova Scotia  relies upon the conversion factor in question as part of its ordinary course of business; 
and (b)  the conversion factor  in question was found to be accurate pursuant to a sampling 
programme conducted between the years 2001 and 2005.871 Canada contests the validity of both 
reasons that the USDOC offered in defence of the conversion factor use d in the Nova Scotia  survey.  
7.420.   Canada argues that while the government of Nova Scotia  did use this conversion factor, 
there was no evidence that the Nova Scotia  industry, that had the incentive to accurately measure 
and price private timber, also used this conversion factor.872 We note that  the premise underlying 
Canada's argument is that the government does not have the incentive to use an accurate conversion 
factor. In response to a question from the Panel asking Canada to substantiate this premise, Canada 
asserted that "as long as the sam e conversion factor is used both to derive the rates from per -tonnes 
prices and to convert harvested tonnes to cubic metres, the choice of conversion factor is effectively 
arbitrary and has no effect on pricing".873 Canada illustrated this assertion with hy pothetical figures, 
and inferred therefrom that there was "no business or other incentive for the Government of 
Nova Scotia  to develop or use an accurate and precise conversion factor within Nova Scotia ".874 We 
consider that this assertion and the inference  Canada draws therefrom is not sufficient to 
substantiate Canada's  view that the government of Nova Scotia  has no incentive to use an accurate 
conversion factor. We also note that Canada has not explained why the same considerations will not 
apply to priva te stumpage transactions that take place within Nova Scotia . We therefore reject this 
argument by Canada.  
7.421.   Canada has also argued that the USDOC improperly considered the conversion factor used 
in the survey to be reliable, based on its reasoning that the accuracy of the survey was confirmed 
in 2005. Canada argues that Nova Scotia  adopted a new scaling manual in 2007, due to which the 
logs measured to calculate Nova Scotia 's 1.167 conversion factor would generate a different 
 
866 Canada's  first written submission, para.  853. 
867 See section 7.4.1.3.1 . 
868 Canada's  first written submission, para.  855.  
869 Canada's  first w ritten submission, para.  860.  
870 United States'  first written submission, para.  170.  
871 Final determination, (Exhibit CAN -10), p.  119. We note that while the final determination states that 
the accuracy of the conversion factor was confirmed between the years 2001 and 2009, the reference that the 
USDOC provided for this statement indicates that the sampling programme to verify the accuracy of the 
conversion factor took place between 2001 and 2005. We therefore consider that the USDOC's  finding that the 
accuracy of the conversion factors was ascertained between 2001 and 2009 was an error. We also note that 
the conversion factor in question was first developed based on sampling conducted between 1989 and 1994. 
(Nova  Scotia  addendum questionnaire response, (E xhibit CAN -313), p.  14). 
872 Canada's  first written submission, para.  861.  
873 Canada's  response to Panel  question No. 238, para.  316.  
874 Canada's  response to Panel  question No. 238, para.  317.  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  conversion factor after 2007.875 We note that the USDOC did not explain why a conversion factor 
the accuracy of which was examined in 2005 would remain suitable for use after 2007, when a new 
log scaling system was adopted by Nova Scotia , and particularly in the POI. In this regard, we 
consider that the mere reference to continued use of that conversion factor by the government of 
Nova Scotia  is not adequate to justify the survey's  use of that conversion factor, if the conversion 
factor otherwise does not remain suitable for use pursuant t o the adoption of a new scaling system. 
As the USDOC did not explain why the conversion factor used in the survey was suitable for use 
despite the adoption of the new scaling system, we consider that the USDOC did not provide a 
reasoned and adequate basis for finding the conversion factor, and hence the survey, to be reliable.  
7.422.   We also note that Canada has pointed to record evidence that indicates that "different 
variables – such as moisture content, tree size, and tree species – can have dramatic effects on how 
much a particular volume of wood fibre weighs".876 Canada contends that these factors have changed 
in Nova Scotia  over time, and hence the conversion factor ought to change as well. In support of 
this contention, Canada points out that Nova Scotia's forest has started to recover from a 
devastating hurricane, undergone new silvicultural treatments, and has undergone other natural 
changes that occur in Nova Scotia  forests over time.877 Canada argues that these changes 
necessitated a recalibration  of the conversion factor. We note that the USDOC did not offer any 
explanation as to why this evidence was not material to the issue of the reliability of the conversion 
factor used in the survey, as we consider an objective and unbiased authority would h ave done.  
7.423.   Canada has also argued that the use of the conversion factor in question made the survey 
unreliable because the survey was based on transactions that took place from April to 
December  2015, to the exclusion of transactions that took place in the  winter, while the conversion 
factor in question was an annual average conversion factor.878 According to Canada, the use of this 
conversion factor made the survey unreliable because logs are heavier in the winter due to ice and 
snow accumulation on logs an d the conversion factor failed to account for this seasonal variation.879 
We note that Canada has shown that the survey participants informed Deloitte that conversion 
factors differed by season, and yet the government of Nova Scotia  instructed Deloitte to a pply the 
annual average conversion factor.880 We note that the USDOC did not explain why the conversion 
factor contained in the survey was reliable, even though survey participants themselves informed 
Deloitte that conversion factors vary by season and the survey itself excluded transactions conducted 
in certain winter months.  
7.424.   Based on the foregoing, we consider that the USDOC did not provide a reasoned and 
adequate explanation as to whether the conversion factor used in the survey was reliable, and 
consequ ently it also failed to explain whether the survey itself was reliable.  
7.5.2.1.5   Errors detected in verification  
7.425.   Canada argues that the verification conducted by the USDOC was not comprehensive of the 
survey responses, and the transactions that the USDOC did revie w contained multiple errors.881 
Canada asserts that the USDOC reviewed only 13 transactions, which constitute only [[***]] and 
found errors in five of the thirteen examined transactions.882 In Canada's  view, the USDOC erred by 
concluding that it found "no evidence of misreporting" despite the errors detected in the reported 
transactions during the verification visit.883 Canada asserts that the errors in the transactions 
 
875 Canada's  response to Panel  question No. 238, para.  322 (referr ing to Nova  Scotia scaling manual, 
(Exhibit CAN -616), p.  35).  
876 Miller Report, (Exhibit CAN -303 (BCI)), p.  34; see also, Canada's  response to Panel  question 
No. 238, para.  321. 
877 Canada's  response to Panel  question No. 238, para.  321 (referring to Asker R eport, 
(Exhibit  CAN-15), pp.  49-50; and Nova  Scotia  questionnaire response, (Exhibit CAN -313), pp.  7-8 and 14).  
878 Canada's  first written submission, para.  859.  
879 Canada's  first written submission, para.  859. 
880 Deloitte Report, (Exhibit CAN -312), p.  4. 
881 Canada's  first written submission, para.  842.  
882 Canada's  opening statement at the first meeting of the Panel (28  February  2019), para.  121. We 
note that Canada also asserts that it found a [[***]] of the examin ed transactions "exhibited cause for 
concern" but does not point to verifiable evidence to support this contention. We therefore proceed on the 
basis that the USDOC found five transactions to contain errors.  
883 Canada's  opening statement at the first meeti ng of the Panel (28  February  2019), para.  122. WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  examined during the US DOC's  verification included [[***884]].885 According to Canada, the USDOC 
improperly assumed that the problems found in the examined transactions are unique and could not 
recur in the remaining population.886 
7.426.   The United States argues that Canada's  concerns th at prices other than that of standing 
timber were included in certain transactions recorded in the survey are unfounded because Deloitte 
sought to confirm that the reported transactions were limited to purchases of stumpage and excluded 
other costs.887 Howe ver, as noted above in section  7.5.2.1.2 , we consider that the survey remained 
problematic despite Deloitte's  verification. In respect of the inclusi on of a [[***]] in certain 
transaction prices, the United States contends that [[***]].888 We consider that the 
United  States'  argument is not a persuasive defence for the presence of a transaction price that 
included a [[***]] in the survey. This is becaus e absence of evidence regarding what the [[***]] 
precisely was not a valid reason to include an inaccurate transaction price in the survey considering 
that it was known that part of that transaction price was a [[***]].  
7.427.   The United States also contends tha t it observed the expected standard of diligence in the 
verification, as evidenced by the fact that it examined six transactions during the verification as 
"surprise transactions" in addition to the seven transactions that were preselected for verification .889 
We consider that the fact that the USDOC conducted a "surprise" verification of certain transactions 
is not a persuasive defence of the USDOC's  continued reliance on the survey despite the detection 
of errors in the examined transactions. We note that record evidence clearly indicates that there 
were errors in not just the preselected transactions, but also the surprise transactions that the 
USDOC examined during the verification visit.890 As the USDOC continued to rely on the survey, 
notwithstanding the  detection of these errors in the transactions included in the survey examined 
during the verification visit, we agree with Canada that the USDOC improperly assumed that the 
errors were unique to the examined transactions and that the remaining transaction s would be 
accurate.  
7.428.   The United States also asserts that suggesting that the USDOC ought to have rejected the 
survey because Nova Scotia  sought to make "minor corrections" to the examined transactions would 
also mean that the USDOC ought to have rejected all questionnaire responses filed by company 
respondents and provincial governments, as all of those respondents also made corrections to their 
submissions.891 We consider that the issue before us is not whether the nature of corrections that 
the other respondents sought to make to their submissions before the USDOC should have led the 
USDOC to reject those submissions , but we have enough information to consider that the errors that 
the USDOC detected in the survey would have led an impartial and ob jective investigating authority 
to not find the survey reliable for establishing benchmark prices.  
7.5.2.1.6   Use of the survey  
7.429.   Canada argues that the USDOC wrongly assumed that the survey was [[***]].892 Canada 
refers to certain documents obtained through [[***]] requests in order to support its contention 
that Nova Scotia  [[***]].893 According to Canada, the USDOC's  mistaken assumption that the survey 
was [[***]].894 The United States, in response, contends that whether the survey was [[***]] is 
immaterial to the USDOC's  conclusions, which relied on the fact that the survey was commissioned 
 
884 [[***]] 
885 Canada's  response to Panel  question No. 33, para.  133; opening statement at the first meeting of 
the Panel (28  February  2019), para.  123.  
886 Canada's  opening statement at the first meeting of the P anel (28  February  2019), para.  124; 
second  written submission, para.  262.  
887 United States'  response to Panel  question No. 33, para.  112.  
888 United States'  response to Panel  question No. 33, para.  113.  
889 United States'  response to Panel  question No. 33, p aras. 110 and 114.   
890 Nova Scotia verification report , (Exhibit CAN -511 (BCI)), pp.  8-9.  
891 United States'  response to Panel  question No. 33, para.  115.  
892 [[***]] 
893 Nova Scotia, freedom of information response, (Exhibit CAN -516 (BCI) ).  
894 Canada's  second written submission, para.  259.  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  for the purpose of setting Crown timber prices.895 The United States points to the "Statement of 
Work provided by Deloitte to Nova Scotia ", which indicated that the [[***]].896  
7.430.   We note that in the final determination, the USDOC noted the following about the 
survey's  purpose:  
The [Government of Nova Scotia ], in the ordinary course of business, relies on periodic 
surveys of private -origin standing timber as the basis for setting Crown -origin stumpage 
prices. The data in the NS Survey collected on behalf of the [Government of 
Nova Scotia ] was for a similar purpose.897 
We consider that the  USDOC's  observation regarding the purpose of the survey does not suggest 
that the survey was [[***]] by the government of Nova Scotia  for setting Crown timber prices. The 
USDOC's  observations appear to be consistent with the description in the statement o f work that the 
United States points to where the survey was stated to have been commissioned for the purpose of 
creating an updated survey of private timber transactions. We therefore reject Canada's  argument 
that the USDOC [[***]].  
7.5.2.2   Conclusion  
7.431.   We conclude that Canada has established a prima facie  case not sufficiently rebutted by the 
United States that the ambiguity in the definition of the term "transaction" in the survey made the 
survey unreliable. Further, we conclude that unlike the USDOC, a n objective and unbiased 
investigating authority would not have relied on the Nova Scotia  survey for determining the 
benchmark price upon finding the kind of errors in the survey that the USDOC did during its 
verification visit. The USDOC also failed to pr ovide a reasoned and adequate explanation as to 
whether the conversion factor used in the survey was reliable and accurate. We therefore uphold 
Canada's  claim that by relying on an unreliable survey, the USDOC failed to satisfy the requirements 
of the chapeau of Article  14 of the SCM Agreement. We exercise judicial economy in respect of 
Canada's claims under Article  19.4 of the SCM  Agreement and Article  VI:3 of the GATT 1994.  
7.6  Canada's  claim concerning the USDOC's  failure to consider the full remuneration pa id 
by producers in Alberta, Ontario, Québec , and New Brunswick  
7.432.   Canada claims that the USDOC erred by comparing the administered price for stumpage in 
various provinces or, in Québec, the transposed price (together "the administered price") to the 
price pai d for privately owned standing timber in Nova Scotia  without adjusting the administered 
price to account for various other charges paid by tenure -holder s to provincial governments. Canada 
contends that by so doing the USDOC failed to take into account the full cost of standing timber and 
conditions of purchase and sale in Alberta, Ontario, Québec , and New Brunswick , as required under 
Article  14(d)  of the SCM  Agreement.898 Instead, in Canada's  view, the USDOC ought to have 
considered the cost paid by recipien ts in the form of various mandatory dues, fees, charges, and 
in-kind costs as remuneration for Crown stumpage.899  
7.433.   The United  States contends that the USDOC need not have provided adjustments for the 
additional expenses that Canada points to as the USDOC ha d found that those costs were not directly 
related to stumpage prices, that they were billed as separate line items, and that no record evidence 
indicated that any such additional items were included within the Nova Scotia  benchmark prices.900 
7.6.1   Legal standar d 
7.434.   The Appellate  Body has observed that the determination of whether the remuneration for 
the good in question is "less than adequate" within the meaning of Article  14(d),  involves the 
selection of a comparator – i.e. a benchmark price – with which to compa re the government price 
 
895 United States'  response to Panel  question No. 32, para.  104.  
896 United States ' response to Panel  question No. 31, para.  98 (quoting Nova Scotia first supplemental 
questionnaire response , (Exhibit USA -32 (BCI) ), p. 8).  
897 Final determination, (Exhibit CAN -10), p.  118.  
898 Canada's  first written submission, paras.  863-865.  
899 Canada' s first written submission, para.  864.  
900 United  States'  second written submission, para.  215.  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  for the good in question. If the result of this comparison is that the government price is less than 
the benchmark price, the difference between the two prices reflects the benefit conferred under 
Article  14(d).901 The panel in US – Countervailing Measures (China)  (Article  21.5 – China)  
understood the term "remuneration", that the Appellate  Body referred to as "government price", as 
follows:   
Depending on the circumstances, the remuneration, i.e. "[t]he act of paying or 
compensating", may encompass something other or more than the price paid for the 
goods (compensation in kind, for example). In most cases however, the price paid by 
the producer /exporter would typically constitute the remuneration for the provision of 
the good in question.902 
7.435.   We agree with this finding of that panel and consider that charges other than the price of 
the good, or mandatory obligations that the receiver of the good i n question must furnish in order 
to receive the good, may also constitute part of the "remuneration" for the good in question that an 
investigating authority must take into account when determining benefit by comparing the 
government price to the benchmark . We consider that the assessment of whether such charges or 
obligations give rise to costs that must be included in the remuneration for the good in question will 
depend on the facts and circumstances of each case.  
7.6.2   Evaluation  
7.436.   We note that the USDOC rejec ted the Canadian interested parties'  request for adjusting 
stumpage prices in Alberta, Ontario, New Brunswick , and Québec  for the following reasons:   
a. the costs identified by the respondents were not incorporated into the prices paid by 
harvesters of private timber in Nova Scotia903;  
b. certain "administrative costs" incurred by tenure -holder s in the other provinces for which 
adjustments were sought were "o verhead expenses", which were not directly related to 
stumpage prices;  
c. the USDOC did not find any evidence that stumpage rates set by provincial governments 
were adjusted to account for revenue from any fees or charges required under long -term 
tenure  agreements904; and  
d. the costs associated with long -term tenure rights were billed on separate invoices or as 
separate line items by provinces, rather than being incorporated into the stumpage 
price.905  
7.437.   We examine these reasons offered by the USDOC for declining  to make the proposed 
adjustments in turn.  
7.6.2.1   Costs not incorporated into the Nova  Scotia  benchmark  
7.438.   As noted above, the USDOC refused to adjust the stumpage price to account for certain 
payments made by tenure -holder s in the other provinces on the basis that  those payments were not 
incorporated into the prices paid by harvesters of private timber in Nova Scotia . Canada contends 
that this reasoning of the USDOC was flawed because the USDOC was obliged to determine the full 
remuneration paid and costs incurred by the respondent companies in exchange for the right to 
harvest Crown -origin timber, including all charges and in -kind payments made for that timber.906 
 
901 Appellate  Body Report, US – Carbon Steel (India) , para.  4.148.  
902 Panel Report, US – Countervailing Measures (China)  (Article  21.5 – China ), para.  7.154. (fn omitted)  
903 The USDOC decided not to adjus t for "post -harvest activities", "in kind costs (e.g., for silviculture, 
road construction, forest management and planning, etc.)", and "cost of long -term tenure obligations 
(e.g.,  annual fees, [Forest Resource Improvement Association of Alberta  (FRIAA) ] dues, holding and protection 
charges,  etc.)" on this basis. (Final determination, (Exhibit CAN -10), pp.  136-138).  
904 The USDOC considered annual fees, FRIAA dues, holding, and protection charges to be examples of 
long-term tenure obligations.  
905 Final determ ination, (Exhibit CAN -10), pp.  137-138.  
906 Canada's  first written submission, para.  869.  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  The United  States contends that the USDOC's  reasoning was proper as it would not be accurate to 
adjust the stumpage price that the respondents were charged when the benchmark reflects a 
market -determined price for the good in question, i.e. what the recipient would have paid under 
market conditions.907 
7.439.   We agree with Canada that the USDOC ought to have adjust ed the stumpage price in the 
provinces at issue to account for various mandatory in -kind costs  and mandatory charges  that 
harvesters were required to incur as a condition to access Crown timber. This is because the USDOC 
was under the obligation to determi ne the adequacy of remuneration for standing timber based on 
the full remuneration paid by the harvesters to the provinces in question.  
7.440.   We also consider that the USDOC's  approach of comparing only the stumpage price 
component of the overall payment made f or timber by tenure -holder s in the other provinces, to the 
stumpage price component of the overall payment made for timber in Nova Scotia  was improper, 
even though the United  States argues that by so doing the USDOC was comparing like -for-like. This 
is bec ause, as noted in the legal standard section above, we consider that an investigating authority 
must take into account the full remuneration paid for the good in question when determining benefit 
by comparing the government price to the benchmark price. Fu rther, the stumpage price may 
represent only a certain percentage of the overall payment made by a purchaser of timber, with the 
remaining percentage of the payment being potentially incurred in the form of other charges or 
in-kind expenses. The percentage  of the overall payment for timber that the stumpage price 
represents in each of the other provinces may not be the same as the percentage of overall payment 
for timber that the stumpage price in Nova Scotia  represents. For example, while one province may 
decide to recover half of the value of timber through stumpage prices and the other half through 
other means such as in -kind obligations, another province may decide to recover the full value 
through stumpage price alone, thus not needing to impose any oth er charges or in -kind payment 
obligations on the purchaser. In the absence of a finding by the USDOC that the stumpage price 
component of the overall payment made for standing timber represented the same percentage of 
the overall payment made for standing timber in all provinces, the USDOC's  reasoning that other 
charges and in -kind payments could be disregarded because it was looking at the stumpage prices 
in all provinces would therefore not ensure a fair comparison. We thus consider that the USDOC 
either should have ascertained that the stumpage prices represented the same percentage of overall 
payment made for standing timber by a purchaser in all provinces, or should have considered all 
kinds of payments made for purchasing timber in all provinces to pro perly determine the adequacy 
of remuneration. Since the USDOC did neither, we find that the USDOC was mistaken in considering 
that it could disregard other payments made by timber purchasers because it was looking at the 
stumpage price alone for Nova Scotia, as well as the other provinces.  
7.441.   We also note that while the USDOC did not consider individually the merits of each cost in 
respect of which an adjustment was sought, it did make certain specific findings about silviculture 
costs in the final determinati on. The USDOC noted that the Government of Nova Scotia  charges 
registered buyers CAD 3.00/m3 to cover the cost of silviculture, or requires them to perform their 
own silviculture activities in lieu of the fee. As these silviculture costs were not included in the 
Nova Scotia  benchmark price, the USDOC declined to make adjustments for silviculture costs for 
respondents in the other provinces.908 Canada argues that the USDOC was mistaken in refusing to 
provide adjustments for silviculture costs incurred by tenure -holder s in the other provinces on the 
ground that the silviculture cost of CAD 3.00 /m3 payable in Nova Scotia  was not included in the 
benchmark, because almost all facilities in Nova Scotia  chose to conduct their own silviculture 
activities at a cost that was "far less than $3m3".909 We note that Canada has demonstrated that 
only one payment of  CAD 9.00 was made as silviculture fee during the POI in Nova Scotia , whereas 
one Nova Scotia  facility (Irving)  incurred only [[***]] as expenses for conducting its own silviculture 
operations.910 As Canada has shown that the silviculture costs in Nova Scotia  were lower than what 
the USDOC estimated th em to be, and the silviculture costs in the other provinces were not 
mentioned by the USDOC in the determination, we find that the USDOC did not provide a reasonable 
and adequate explanation for refusing to make adjustments for silviculture costs on the ba sis that 
 
907 United  States'  first written submission, para.  140.  
908 Final determination, (Exhibit CAN -10), p.  137. 
909 Canada's  first written submission, para.  876. 
910 Canada's  first written submission, paras.  876-877 (referring to Redacted version of Nova  Scotia 
verification report , (Exhibit CAN -318), p.  5; and Irving submission of factual information , 
(Exhibit  CAN-353 (BCI)), pp.  7-8). WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  the Nova Scotia  benchmark did not include silviculture costs either. This is because the silviculture 
costs in the other provinces could have been more than what they were in Nova Scotia , and therefore 
the exclusion of silviculture costs on both s ides of the equation does not necessarily yield a fair 
comparison.  
7.6.2.2   Administrative costs were not directly related to stumpage prices  
7.442.   We note that the USDOC applied the reasoning that certain costs for which adjustments 
were sought were not directly related  to stumpage prices, only to what it considered "administrative 
costs". We consider that because the USDOC applied this reasoning only to "administrative costs", 
this reasoning could not have been the basis for the USDOC's  refusal to adjust the stumpage pr ice 
to account for other costs that Canada points to. Therefore, this reasoning will have no bearing on 
our findings with respect to the USDOC's refusal to make adjustments for other costs.  
7.443.   We note that USDOC does not specify the costs that it classified as "administrative costs".911 
In response to a question from the Panel asking it to clarify which specific costs the USDOC referred 
to as "administrative costs", the United  States pointed to a question directed by the USDOC to 
Alberta, asking how Alberta to ok into account certain factors in adjusting the stumpage price.912 We 
note that "administrative costs" is only one item in the list of factors mentioned in the question, and 
the question does not indicate which particular costs are to be considered "admini strative costs". We 
also note that neither the United  States nor the USDOC have described the scope and coverage of 
the term "administrative costs" in the context of Ontario, Québec , and New Brunswick . We consider 
that in the absence of a clear finding as to which specific costs the USDOC referred to as 
"administrative costs", the USDOC failed to adequately explain how such costs were not directly 
related to stumpage prices. Thus, we conclude that the USDOC did not provide a reasoned and 
adequate explanatio n for refusing to make the requested adjustments.  
7.6.2.3   Absence of evidence that provincial governments considered long -term tenure 
obligations when fixing stumpage prices  
7.444.   The United  States contends that the USDOC properly rejected the proposed adjustments 
because it considered evidence on the record regarding the costs incorporated by provincial 
governments into stumpage rates and found no evidence that the costs in respect of which 
adjustments were being sought were affirmatively considered by provincial gover nments when 
setting stumpage rates.913 Canada contends, in response, that whether the provinces took into 
account other Crown -imposed costs when setting the administered stumpage rate portion of the full 
remuneration, does not change the reality that all of  the charges and costs that the USDOC ignored 
are part of the full price of Crown -origin timber, and therefore this inquiry is irrelevant.914  
7.445.   We agree with Canada and consider that even if there was no evidence before the USDOC 
regarding the manner in which the existence of charges other than the stumpage price and in -kind 
payment obligations arising from various obligations that tenure -holder s were subject to affected 
the amount of stumpage prices fixed by the provincial governments, the USDOC ought no t to have 
rejected the proposed adjustments on that basis. So long as there was evidence that tenure -holder s 
were under an obligation to furnish payments, in cash or in -kind, other than the stumpage price to 
 
911 We also note that in commenting on the Unit ed States'  response to our question referred to above, 
Canada has pointed to the following excerpt from the final determination, that indicates that the USDOC 
adopted an inconsistent approach to the question of whether adjustments ought to be provided for 
administrative costs in context of British  Columbia on the one hand, and Ontario, Québec, Alberta, and 
New Brunswick on the other:   
The Department does not agree with the petitioner that cost adjustments should not be granted  
for indirect costs or for [Gen eral and Administrative] costs reported by the respondents with 
operations in British  Columbia. The respondents must incur these costs in order to access and 
harvest Crown timber. The Department examined these costs at verification and found that the 
repor ted costs were tied to either the respondents'  tenure obligations or to expenses relating to 
accessing, harvesting, or hauling timber to the mills.  
(Canada's  comments on the United  States'  response to Panel  question No. 232, para.  248 (quoting 
Final determ ination, (Exhibit CAN -10), p. 73))  
912 United  States'  response to Panel  question No. 232, para.  290. 
913 United  States'  first written submission, para.  151.  
914 Canada's  response to Panel  question No. 19, para.  92.  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  provincial governments in order to obtain or mai ntain their tenures, such payments are part of the 
remuneration paid to the provincial government.915  
7.446.   For example, Canada has demonstrated that the holders of a T SG have to pay an annual 
royalty pursuant to Québec 's SFDA.916 The obligation to pay an annual royalty is also set out in 
TSG contracts.917 The rate of this royalty is determined by the timber market board, and Canada 
has produced evidence demonstrating that the rate was 18% of the TSG -holder's  prior 
year's  stumpage f ees during the POI.918 Canada has shown that the payment of this charge was 
mandatory.919 The fact that the USDOC did not find evidence that the Government of Québec  took 
this royalty fee into consideration in fixing the amount of the stumpage prices, does n ot mean that 
the annual royalty fees was not a mandatory part of the remuneration that TSG -holders had to pay 
to the Government of Québec .  
7.447.   We therefore consider as flawed the USDOC's  reasoning that the absence of evidence as to 
whether the provincial gove rnments affirmatively took into account revenue from long -term tenure 
obligations in fixing the amount of stumpage prices made the requests for adjustments liable to be 
rejected.  
7.6.2.4   Costs associated with long -term tenure obligations were billed on separate 
invoices  
7.448.   In the final determination, the USDOC ruled against making adjustments for long -term 
tenure obligations on the ground that "[c]osts associated with long -term tenure rights are billed on 
separate invoices or as separate line items by the provinces, rather than incorporated into the 
stumpage price".920 In Canada's  view, there is no basis in the SCM  Agreement to reject part of the 
remuneration on the basis that certain dues were charged via separate invoices or line items.921  
7.449.   We agree with Canada and co nsider that an objective and impartial investigating authority 
will not reject costs incurred by tenure -holder s in the other provinces as being a part of the 
remuneration for standing timber, merely on the basis that those costs were not charged on the 
same invoice or as the same line item as stumpage prices.922  
7.6.2.5   Conclusion  
7.450.   We conclude that the USDOC acted inconsistently with Article  14(d)  of the SCM  Agreement 
by failing to consider the payments in question as part of the remuneration for timber paid by 
tenure-holder s in the other provinces. By not adjusting for any mandatory payments, arising either 
from monetary charges or in -kind obligations, the USDOC underestimated the remuneration that 
tenure -holder s made for standing timber in various provinces, thus i nflating the amount of benefit 
determined to exist or finding benefit where none existed . 
7.451.   We note that Canada has put forth specific arguments and evidence about several individual 
payments made by tenure -holder s in the other provinces, either by way of ma ndatory charges or 
mandatory in -kind obligations, contending that the USDOC ought to have provided adjustments in 
respect of each of those payments. We consider that we need not make findings as regards whether 
 
915 We consider that there could be circumstan ces in which an investigating authority may have reason 
to consider a charge or an in -kind payment not to be a part of remuneration for the good in question even if 
paying that payment is mandatory to get access to the good in question. For example, an inv estigating 
authority may decide to exclude payments associated with certain mandatory obligations from the 
remuneration amount, because the receiver of good derives benefits from making that payment other than 
getting access to the good. However, the USDOC  did not explain why, in this case, mandatory payments 
should not be included in the remuneration amount.   
916 SFDA , (Exhibit CAN -169), Section 95.  
917 TSG 206, (Exhibit CAN -358 (BCI)), [[***]].  
918 Québec initial questionnaire response , (Exhibit CAN -170), p.  QC-S-48.  
919 SFDA , (Exhibit CAN -169), Sections 88 and 109 -110. 
920 Final determination, (Exhibit CAN -10), p.  138.  
921 Canada's  response to Panel  question No. 29, para.  124.  
922 We also note that in the EU – Biodiesel (Indonesia)  case, the panel took th e view that the fact 
that the premium for the product at issue was paid in a different invoice from the price did not mean 
that the premium should not be considered a part of the price paid for the product. (Panel Report, 
EU – Biodiesel  (Indonesia) , para.  7.117).   WT/DS533/ R 
BCI deleted, as indicated [[***]]  
- 139 - 
 
  each of those payments merited a specific adj ustment. We, instead, limit our findings to ruling that 
the USDOC failed to offer a reasonable and adequate explanation for not making the requested 
adjustments, as each of the reasons were invalid. The USDOC should instead have engaged more 
closely with t he evidence before it concerning each individual payment for which an adjustment was 
requested. The USDOC should then have made adjustments for payments the evidence pertaining 
to which indicated that it was mandatory for the tenure -holder s to make those p ayments in order to 
engage in their harvesting operations, or explained why a mandatory payment should not be 
included in the remuneration amount despite its obligatory nature.923 
7.7  Canada's claims concerning the USDOC's use of a Washington logs benchmark  
7.7.1   Introduction  
7.452.   In the underlying investigation, the USDOC sought to use a benchmark that reflected prices 
for comparable goods, and related to the prevailing market conditions in British  Columbia .924 In 
making its benefit determination, the USDOC rejected  an "in -market"  stumpage benchmark 
proposed by the Government of British  Columbia  and the Canadian respondents, which was the 
stumpage price based on auctions conducted by  the BCTS. The USDOC also rej ected, as a possible 
benchmark, prices of standing timber in the Canadian province of Nova Scotia  because it took the 
view that standing timber in British  Columbia  is not comparable to standing timber in Nova Scotia .925 
7.453.   Having rejected these benchmarks, the  USDOC used an out -of-country benchmark, which 
was based on log prices in the United States Pacific North -West (PNW) (Washington logs 
benchmark). In section 7.3.3 of this Report, we reviewed Canada's  claim concerning the 
USDOC's  rejection of the benchmark based on auctions conducted by BCTS. In this part of our 
Report, we review Canada's  claim concerning the USDOC's  use of the Washington log s benchmark . 
7.454.   Canada claims in this regard that the USDOC acted inconsistently with Article 14(d) of the 
SCM Agreement in using the Washington logs benchmark  to ascertain whether stumpage was 
provided to the Canadian respondents in the province of British  Columbia  for less than adequate 
remuneration. The United States asks us to reject Canada's claims.  
7.7.2   Legal standard  
7.455.   Article  14 of the SCM  Agreement, as noted above, states that "any" method used by the 
investigating authority to calculate the benefit to the recipient conferred pursuant to Article  1 of 
this Agreement shall be consistent with the guidelines set out in Articles  14(a) -(d). Article  14(d)  of 
the SCM  Agreement states, inter alia , that the government's provision of goods and services shall 
not be con sidered as conferring a benefit unless the provision is made for less than adequate 
remuneration. The second sentence of Article  14(d), in turn, states that the adequacy of 
remuneration shall be determined "in relation to prevailing market conditions for t he good or service 
in question in the country of provision or purchase (including price, quality, availability, 
marketability, transportation and other conditions of purchase or sale)".  
7.456.   While the second sentence states that the adequacy of remuneration sha ll be determined in 
relation to the prevailing market conditions for the good "in the country of provision", relying on the 
phrase "in relation to", the Appellate  Body has clarified in previous cases that a benchmark may be 
based on out -of-country prices provided certain conditions are met.926 For instance, the 
Appellate  Body has clarified that when an investigating authority uses out -of-country prices, it "is 
under an obligation to ensure that the resulting benchmark relates or refers to, or is conn ected with, 
prevailing market conditions in the country of provision, and must reflect price, quality, availability, 
marketability, transportation and other conditions of purchase or sale, as required by 
Article  14(d)".927 The investigating authority may be  required to make appropriate adjustments to 
 
923 See fn 915 to para. 7.445 . 
924 Final determination, (Exhibit CAN -10), p.  63; United States'  first written submission, paras.  403 
and 413; and Canada's  first written submission, para.  602. 
925 See, e.g. Canada's first written submission, para. 602 (referring to Preliminary determination, 
(Exhibit CAN -8), Issues and Decision Memorandum, p. 46; and Final de termination, (Exhibit CAN -10), Issues 
and Decision Memorandum, p. 63). 
926 Appellate  Body Reports, US – Softwood Lumber IV , para.  89; US – Carbon Steel (India) , para.  4.188.  
927 Appellate  Body Report, US – Softwood Lumber IV , para.  106. WT/DS533/ R 
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  ensure that the benchmark reflects prevailing market conditions in the country of provision.928 In 
particular, the Appellate  Body has noted that the inclusive list of prevailing market conditions 
identified in th e second sentence of Article  14(d)  (i.e. price, quality, availability, marketability, 
transportation, and other conditions of purchase or sale)  describes factors that may affect the 
comparability of the financial contribution at issue with a benchmark.929 If a proposed benchmark 
does not reflect prevailing market conditions in the country of provision, adjustments in the light of 
the factors listed in the second sentence of Article  14(d)  would be necessary to ensure comparability, 
and by extension a meaningf ul benefit comparison.930 
7.457.   In determining whether the investigating authority has complied with these obligations under 
Article  14(d)  of the SCM  Agreement, we must examine whether the conclusions reached by the 
investigating authority are reasoned and adequa te.931 Such an examination, as we have consistently 
noted, must be critical, based on the information contained on the investigating authority's  record 
and the explanations given by that authority.932 We also note that to assess the adequacy of 
remuneration in relation to the prevailing market conditions in the country of provision, as required 
by Article  14(d)  of the SCM  Agreement, it is necessary for an investigating authority to seek, and 
engage with, evidence concerning the prevailing market conditions fo r the good in question.933 
Investigating authorities bear the responsibility of conducting the necessary analysis to determine, 
on the basis of information supplied by petitioners and respondents in a countervailing duty 
investigation, whether proposed benc hmark prices are market determined and are, therefore, 
reflective of prevailing market conditions in the country of provision such that they can be used to 
determine whether remuneration is less than adequate.934 
7.7.3   The USDOC's  use of the Washington Log benchm ark for British  Columbia  
7.458.   In the underlying investigation, the USDOC constructed the Washington log benchmark 
based on a methodology of derived demand. The USDOC's  starting premise was that standing timber 
values are largely derived from the demand for logs  produced from a given tree; the value of a 
standing tree is derived from the demand for logs produced from that tree and the demand for logs 
is in turn derived from the demand for the type of lumber produced from these logs.935 Starting with 
delivered log prices from eastside Washington936, collected by the Washington Department of Natural 
Resources (WDNR), the USDOC deducted harvesting  and other  costs reported by the Canadian 
respondents to derive a stumpage price in British  Columbia .937 The USDOC compared t his derived 
stumpage price  (i.e. the benchmark price)  to the stumpage prices paid by Canadian respondents to 
ascertain the existence, and extent, of the benefit.938 
7.459.   Canada contends that the USDOC's  use of WDNR log prices as a benchmark was inconsistent 
with Article  14(d)  of the SCM  Agreement. Canada submits in this regard that Article  14(d), as 
interpreted by the Appellate  Body, requires the use of a benchmark that relates or refers to, or is 
connected with, prevailing market conditions in the country of pro vision.939 According to Canada, 
the WDNR log prices did not meet this requirement because they represented an out -of-country 
benchmark that did not relate to the prevailing market conditions in British  Columbia .940 
7.460.   Canada provides two underlying bases to support its claim. First, Canada contends that the 
USDOC's  Washington log benchmark was inappropriate for assessing the  adequacy of remuneration 
 
928 Appellate  Body Report, US – Carbon Steel (India) , para.  4.158.  
929 Appellate  Body Report, US – Carbon Steel (India) , para.  4.244.  
930 Appellate  Body Report, US – Carbon Steel (India) , para.  4.244.  
931 Appellate  Body Report, US – Carbon Steel (India) , para.  4.311. 
932 Appellate  Body Report, US – Carbon Steel (India) , para.  4.311.  
933 Appellate  Body Report, US – Carbon Steel (India) , para.  4.306.  
934 Appellate  Body Report, US – Carbon Steel (India) , para.  4.306.  
935 Final determination, (Exhibit CAN -10), pp.  67-68. 
936 According to the United States, the USDOC used log prices from eastside Washington (and not 
coastal Washington), as that area of Washington is contiguous with the British Columbia interior  where the 
mandatory respondents based their operations. (United States'  first written submission, para.  403; see also, 
Canada's  first written submission, para.  604).  
937 Final determination, (Exhibit CAN -10), pp.  67-68; Canada's  first written submission, paras.  603-604; 
and United States' first written submission, para.  408.  
938 Final determination, (Exhibit CAN -10), p.  63. 
939 Canada's  first written submission, para.  44.  
940 Canada's  first written submission, para.  600; second written submission, para.  178. WT/DS533/ R 
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  under Article  14(d).941 In this regard, we note that Canada focuses essentially on why the 
USDOC's  choice of a Washington log benchmark was flawed per se (or did not provide an appropriate 
starting point for a benchmark determinati on).942 Second, Canada contends that in failing to make 
four specific adjustments, the USDOC failed to adjust the WDNR prices to reflect the prevailing 
market conditions in British  Columbia .943 
7.7.3.1   The appropriateness of the Washington log benchmark  
7.461.   Canada contends that the USDOC's  Washington logs benchmark was inappropriate for 
assessing the adequacy of remuneration for the provision of standing timber in British  Columbia  
under Article  14(d)  of the SCM  Agreement.944 Canada asserts that the USDOC's  premise that the 
conditions in Washington State and British  Columbia  were sufficiently comparable, and its conclusion 
that the value of standing timber in British  Columbia  can be reliably derived from Washington State 
log prices was factually and logically fl awed.945 
7.462.   In support of this assertion, Canada states that, contrary to the USDOC's  view, the species 
harvested by the Canadian respondents in the British Columbia interior  differed in significant ways 
from the species mix in eastside Washington.946 In additi on, Canada states that in selecting the 
Washington log benchmark the USDOC relied on a false premise that log prices are constant across 
geographical regions.947 
7.463.   In response, the United States argues that the USDOC focused on the "key aspects" of 
comparabil ity to ensure the prices relate to the prevailing market conditions in British  Columbia . 
According to the United States, and as explained by the USDOC, the WDNR data is well-suited for 
measuring remuneration in British  Columbia  because the forests of eastside Washington are 
contiguous with those of the British Columbia interior , and feature the same species and growing 
conditions.948 The United States argues that Article  14(d) does not  require the USDOC to account 
for every conceivable difference within loca lities of Canada.949 According to the United States, 
Canada's  arguments are completely untethered to the text of the SCM  Agreement and under its 
"implausible position", goods such as logs and stumpage are immune from a subsidy analysis 
because, for all prac tical purposes, it is unknowable whether they are provided for less than adequate 
remuneration.950 
7.464.   In our view Canada's arguments require us to address whether the USDOC's methodology 
to determine the adequacy of remuneration, i.e. the use of an out -of-country benchmark based on 
Washington log prices, was flawed per se . This part of Canada's  claim challenges the methodology 
or benchmark used by the USDOC and, as presented by Canada, is separate from the part of its 
claims concerning the USDOC's  failure t o make necessary adjustments.  
7.465.   In resolving the " per se " issue raised by Canada, we recall that the relevant inquiry under 
Article  14(d)  of the SCM  Agreement is whether the benchmark used by the investigating authority 
to assess whether a good is provided b y the government for less than adequate remuneration, 
relates to prevailing market conditions for the good in the country of provision. In cases where the 
investigating authority uses out -of-country prices to assess the adequacy of remuneration, as 
discuss ed above, it needs to make appropriate adjustments to ensure that the resulting benchmark 
relates to the prevailing market conditions in the country of provision. If the investigating authority 
fails to make the necessary adjustments, that benchmark will n ot relate to the prevailing market 
conditions in the country of provision and would not allow the investigating authority to assess the 
 
941 Canada's  first written submission, para.  607. 
942 In paragraph 630 of its first written submission, for instance, Canada argues that the 
USDOC's  failure to make critical adjustments compounded  the error of the USDOC's  flawed cross -border 
methodology.  
943 Canada's  first written submission, para.  630. 
944 Canada's first written submission, para.  607. 
945 Canada's  first written submission, para.  608. 
946 Canada's  first written submission, para.  612. 
947 Canada's  first written submission, para.  614. 
948 United States'  first written submission, para.  411 (referring to Fin al determination, (Exhibit CAN -10), 
p. 63). 
949 United States'  first written submission, para.  418. 
950 United States'  first written submission, para.  417. WT/DS533/ R 
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  adequacy of the government's  remuneration in a manner consistent with Article  14(d)  (an issue that 
we address when deali ng with Canada's  arguments concerning such type of adjustments).  
7.466.   However, the need to make such type of adjustments obviously arises only because the 
out-of-country prices without such type of adjustments do not relate to prevailing market conditions. 
In such a scenario, one would expect differences in the prices initially selected (and not yet 
adjusted)  and the financial contribution at issue. The more significant the differences, the more 
challenging it may be for an investigating authority to adjust the prices to reflect prevailing market 
conditions. However, what is relevant for the purpose of our determination  here is whether the 
benchmark ultimately used  by the investigating authority in assessing the adequacy of remuneration 
under Article  14(d)  reflec ts the prevailing market conditions in the country of provision, such that 
(as noted in paragraph 7.456  above)  the benchmark is comparable to the fina ncial contribution at 
issue.  
7.467.   We note that in the underlying investigation, the USDOC sought to use a benchmark that 
reflected the prevailing market conditions in British  Columbia  (i.e. a province in the country of 
provision). Considering we must make our d etermination based on a review of the USDOC's  findings, 
we will examine whether the USDOC used a benchmark that reflected the prevailing market 
conditions in British  Columbia . 
7.468.   Based on the legal analysis set out in paragraphs 7.455 -7.457  above, we will address the 
specific submissions by Canada conc erning (a)  the differences in species mix in eastside Washington 
and the British Columbia interior ; and (b)  why in selecting the Washington logs benchmark the 
USDOC relied on a false premise that log prices are constant across geographical regions.  
7.469.   Regarding the differences in species mix in eastside Washington and the British Columbia 
interior , Canada's  argument is that species mix in eastside Washington differs in "significant ways" 
from the British Columbia interior .951 For instance, lodgepole pine  and spruce represent 83% of log 
purchases of the Canadian respondents, whereas these species represent 6% of the logs entering 
sawmills in eastside Washington.952 Canada argues that the difference in proportion is "particularly 
significant" in light of the  impact of the mountain pine beetle (MPB)  and spruce beetle on lodgepole 
pine and spruce populations, which had a disproportionate impact in the British Columbia interior .953 
The United States asserts that the same species exist in substantial quantities in  both 
British  Columbia  and Washington, merely in different proportions.954 In addition, the United States 
notes that because the USDOC used a species -specific benchmark, the relative prevalence of a given 
species does not detract from the suitability of the  benchmark data.955 
7.470.   Canada appears to take the view that differences in species mix in eastside Washington and 
the British Columbia interior  made the WDNR prices an inappropriate starting point in the 
USDOC's  benefit analysis (irrespective of adjustments th e USDOC made to ensure that the 
benchmark reflected the prevailing market conditions in British  Columbia ). We note that the USDOC 
concluded that the WDNR data " properly adjusted for market conditions in British  Columbia " was 
representative of prices for st anding timber in British  Columbia .956 The USDOC did not contend for 
instance that the underlying data, without necessary adjustments, was an appropriate benchmark. 
To the extent Canada contends that the benchmark ultimately used was not properly adjusted to  
reflect the prevailing market conditions in British  Columbia , we discuss Canada's specific arguments 
in this regard below. Thus, we disagree with Canada's argument  that the WDNR data could not be 
used as a benchmark because of differences in species mix b etween eastside Washington and the 
British Columbia interior .957 
 
951 Canada's  first written submission, para.  612. 
952 Canada's  first written submission, para. 612, table 6.  
953 Canada's  first written submission, para.  613. 
954 United States'  first written submission, para.  412. 
955 United States'  first written submission, para.  412. 
956 United States'  first written submission, para.  410. (emphasis added)  
957 We reca ll our findings in paras.  7.46-7.48 above that, as a starting point in its benefit analysis, the 
USDOC was obligated to consider a benchmark from within the BC interior, and could have rejected using that 
benchmark only in very limited circumstances. In the event that the USDOC did have a v alid basis for not using 
prices from within the BC interior as a benchmark (which we have found it did not) for that region, it could 
have used an external benchmark from a region that did not have the same prevailing market conditions as 
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  7.471.   Regarding Canada's  argument that in selecting the Washington logs benchmark the USDOC 
relied on a false premise that log prices are constant across geographical regions, Canada submits 
that th is premise was necessary to allow the USDOC to treat any difference in log prices, and 
consequently the derived standing timber price, as evidence of an alleged subsidy, rather than the 
result of differences in prevailing market conditions.958 Per Canada, t he record was clear that there 
were a number of factual reasons why log prices differ between regions, "including" variability in 
physical characteristics of softwood logs as well as contractual terms of sale and differences in 
prevailing local market cond itions.959 Canada asserts that instead of investigating the causes of price 
differences to control for them in its analysis, the USDOC ignored the data and expert evidence 
provided by the Canadian respondents in this regard.960 In particular, Canada argues t hat the expert 
evidence submitted to the USDOC demonstrates how even logs of the same species grown under 
similar conditions, are unlikely to have the same price because of differences in prevailing market 
conditions.961 
7.472.   The United States contends that nothing in Article  14(d)  required the USDOC to account for 
every conceivable difference within localities of Canada or for the range of minutia that Canada 
identified when it asserted that log prices differ from region to region.962 The United States also 
submits that "tellingly" Canada does not propose a method by which the USDOC could have actually 
undertaken an analysis of the type suggested by Canada.963 
7.473.   We note that when Canada argues that in selecting the Washington log benchmar k the 
USDOC relied on a false premise that log prices are constant across geographical regions, Canada 
focuses on the USDOC's  alleged failure to investigate the causes  of differences in log prices between 
British  Columbia  and eastside Washington in order t o control for them.964 However, we consider that 
while to make a benefit assessment consistent with Article  14(d),  an investigating authority must 
ensure that the benchmark ultimately used to make that assessment relates to the prevailing market 
conditions in the country of provision, nothing in this provision suggests that an investigating 
authority must investigate the causes  of differences in the benchmark and the financial contribution 
at issue. If Article  14(d)  did impose such a requirement an investiga ting authority may well be 
required to undertake a quasi -causation analysis answering  why the benchmark price differs from 
the financial contribution at issue, and show that the only reason it differs is because of a subsidy 
(and not other possible reasons ).965 In particular, we consider that such a requirement would impose 
a significant burden on an investigating authority (which is required to complete its investigation 
within a maximum period of 18 months), and a burden that Canada has not shown is envisa ged 
under Article  14(d)  of the SCM  Agreement. Therefore, we disagree with Canada's  argument that in 
selecting the Washington log benchmark the USDOC relied on a false premise that log prices are 
constant across geographical regions.966 
 
the BC interior, after making necessary adjustments to that benchmark. In that situation, whether that 
external benchmark ultimately used by the USDOC, after making the necessary adjustments, was suitable 
under Article  14(d) would depend on whether that benchmark  reflected  prevailing market conditions in the 
country of provision.  
958 Canada's  first written submission, para.  614. 
959 Canada's  first written submission, para.  621. 
960 Canada's  first written submission, para.  622. 
961 Canada's  first written submission, para.  614. 
962 United States'  first written submission, para.  418. 
963 United States'  first written submission, para.  419. 
964 Canada's  first written submission, para.  622. See also, ibid. para.  620. In making its argument on 
the basis of a hypothetical wherein Canada uses Mont ana log prices to derive the value of standing timber in 
Idaho, Canada submits that without explaining and controlling for the factors that caused average log prices to 
differ between Idaho and Montana in the first instance, the use of average log prices i n Montana to derive the 
value of standing timber in Idaho does not produce an accurate or reliable measurement of any stumpage 
subsidy in Idaho.  
965 Such an analysis would also be somewhat circular considering the purpose of the benefit analysis is 
to establ ish whether a subsidy was provided.  
966 Canada makes several additional arguments without properly citing record evidence or explaining the 
textual basis for the argument. For instance, in paragraph 622 of its first written submission, Canada contends 
that t he "record was equally clear" that "prevailing market conditions were in fact different between the 
B.C. Interior and Eastside Washington". But Canada provides no citation to the evidence on the 
USDOC's  record to support this contention. Instead, it gives one example of how such conditions differed by 
referring to the prevalence of the MPB and spruce beetles in British  Columbia. However, we note that Canada 
has separately challenged the USDOC's  failure to make adjustments to its benchmark for differences in  
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  7.474.   Based on the above, w e disagree with Canada's  argument that the Washington log 
benchmark was per se  inconsistent with Article  14(d)  because of the differences in  market conditions 
between Washington and British  Columbia . We next consider Canada's  submissions concerning the 
USDOC's alleged failure to make specific adjustments to the Washington log benchmark.  
7.7.3.2   The USDOC's  adjustments to derive the Washington log benchmark  
7.475.   Canada argues that the USDOC acted inconsistently with Article  14(d)  by failing to adjust its 
out-of-country W ashington log benchmark967 for the following factors:  
a. accurate conversion factors968; 
b. "quality" of logs consumed by Canadian respondents969; 
c. stand -as-a-whole pricing970; and  
d. higher transportation costs incurred by Canadian respondents.971 
7.476.   Canada contends that i f the USDOC had properly accounted for these adjustments it would 
have found no subsidy.972 
7.477.   The United States argues that the USDOC engaged with the record evidence, took into 
account Canada's  arguments in relation to each adjustment, and explained why it r ejected each 
adjustment. According to the United States, Canada does not demonstrate that the USDOC reached 
a conclusion that an objective and unbiased investigating authority could not have reached on the 
basis of these facts.973 
 
prevailing market conditions on account of the disproportionate impact of the MPB and spruce beetles on 
timber in British  Columbia. While the USDOC's  failure to make such an adjustment may result in inconsistency 
with Article  14(d), Canada does not explai n how it supports its view that the USDOC should have investigated 
the causes  of the price differences between logs from the British Columbia interior  and eastside Washington.  
Further, in paragraph 621 of its first written submission, Canada contends that  the record was clear that 
there were a number of factual reasons why log prices differ between regions, "including" for three reasons 
identified in its submissions. It identifies three of these reasons in bullet points as (a)  "variability in physical 
characteristics of softwood logs, including size, and, perhaps most significantly, log quality and defects"; 
(b) "differences in prevailing local market conditions, including log demand and supply, transportation and 
variation in governmental requirements"; an d (c) "variability in contractual terms of sale, such as volume and 
duration" (emphasis omitted). While the reasons identified by Canada may well be relevant in assessing 
whether the benchmark relates to the prevailing market condition for the good, it is for Canada, as the 
complainant, to advance arguments showing how these factors relate to the prevailing market conditions for 
the good in question and why the USDOC acted inconsistently with Article  14(d)  of the SCM  Agreement in 
failing to adjust the bench mark by taking into account those factors. Canada has not done so. In the absence 
of such arguments from Canada, it would be inappropriate for us to review the underlying exhibits on our own 
to (a)  identify  the "number of factual reasons" why log prices di ffer between the British Columbia interior  and 
Washington; and (b)  determine whether the USDOC acted inconsistently with Article  14(d)  of the 
SCM Agreement in failing to take such reasons into account. In addition, we note that Canada's  submissions in 
this section with respect to the USDOC's  alleged failure to take into account these reasons overlap with its 
arguments concerning the USDOC's  alleged failure to make necessary adjustments to its Washington logs 
benchmark. For instance, Canada makes separate su bmissions concerning the USDOC's  failure to make 
necessary adjustments to its benchmark to account for log grade and condition, which are discussed in 
section  7.7.3.2  below. In the absence of sufficient arguments from Canada, it is unclear how its arguments 
regarding those claims concerning adjustment differ from submissions made by Canada in this section.  
967 Canada's  first written submission, para.  630. 
968 Canada's  first written submission, paras.  632-699; second written submission, paras.  182-198. 
969 Canada's  first written submission, paras.  700-720; second written submission, paras.  199-220. 
970 Canada's  first written submission, paras.  721-731. 
971 Canada's  first written submission, paras.  732-737. 
972 Canada's  first written submission, para.  631. Canada has quantified the difference each factor makes 
to the subsidy margin, with the exception of an adjustment for transportation costs. ( Canada's  first written 
submission, paras.  739-740 and table 21).  
973 United States'  first written submission, para.  424. WT/DS533/ R 
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  7.7.3.2.1   Conversion factors  
7.478.   Log vol ume is measured differently under the scaling systems in British  Columbia  and the 
United States PNW.974 In British  Columbia  logs are measured in cubic metres, and thus would be 
priced per cubic metre . In Washington, however, logs are measured in thousand board feet (MBF) 
and thus would be priced per MBF. To compare a benchmark based on Washington logs that was 
priced per MBF to prices per cubic metres (which is how British  Columbia  respondents reported their 
prices), the USDOC converted the benchmark to price in cubic metre. In making this conversion, the 
USDOC used a single conversion rate of 5.93  m3/MBF, which, as noted below, was based on 
a 1984 United States Forestry Service Study, subsequently updated in 2002 (Spelter Study). The 
Canadian respondents proposed a conver sion based on a BC Dual -Scale Study, but the USDOC 
declined to use it for the reasons discussed below.  
7.479.   Canada challenges under Article  14(d)  of the SCM  Agreement the USDOC's  use of the 
conversion factor provided in the Spelter Study and its reject ion of  the conversion factor s provided 
in the BC  Dual-Scale Study. The United States argues that the USDOC relied on the only viable 
conversion factor on the record, which was the Spelter Study.975 We first set out a brief description 
of why a conversion factor was required in the underlying investigation, and then move on to our 
analysis of the issues.  
7.7.3.2.1.1   Conversion from MBF to cubic met res 
7.480.   In Washington State, logs are measured according to the Scribner Decimal C Rule 
(Scribner  Scale).976 The WDNR data, from which the Washington log benchmark was derived, was a 
price per MBF, based on a measurement of logs according to the Scribner Scale. The Scribner Scale 
estimates the total log volume based on  an estimate of  the amount of one -inch thick boards that 
could be made from  within the scaling cylinder  the log.977 This is demonstrated in Figure 1 below. 
One-inch by twelve -inch board is equal to one board foot.  
Figure 1: Scribner Decimal C Rule  
 
Source: Canada's  first written submission, para.  638, figure 57.  
7.481.   In British  Columbia , logs are measured according to the BC Metric Scale, which measures 
the entire volume of us able wood fibre regardless of the fibre's  potential use (e.g. lumber, 
 
974 Canada's  first written submission, para.  633; United States'  first written submission, para.  428. 
975 United States'  first written submission, para.  430. 
976 Canada's  first written submission, para.  633; United States'  first written submission, para.  427. 
977 Canada's  first written submission, paras.  633, 637, and 639; United States'  first written submission, 
para. 427. The United States explains that the Scr ibner Scale quantifies the amount of dimensional lumber that 
can be produced from a log. See also, Jendro and Hart Report , (Exhibit CAN -20 (BCI)), pp.  5 and 48; and 
Spelter Study, (Exhibit CAN -287), p.  4.  
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  woodchips, or other co -products).978 The volume is calculated by taking the measurements of the 
top (small end)  and butt (large end)  of the log and the length. This is demonstrated in Figure 2 
below.  
Figure 2: British  Columbia  Metric  
 
Source: Jendro and Hart Report , (Exhibit CAN -20 (BCI)), p.  213. 
7.482.   Because the Scribn er Scale measures  volume by estimating  the amount of one -inch thick 
boards that could be milled from the log,  the estimated volumes of recoverable lumber will be  
sensitive to variations in  the physical characteristics  of the log , including diameter, length , shape, 
and defects.979 In addition, these sensitivities mean that the relationship between the two scaling 
systems is not fixed and the ratio of cubic metres (the BC system)  to MBF (Washington State system)  
for any given log will vary depending on those physical characteristics.980 Due to differences in the 
way in which the two scaling systems account for factors such as diameters, length, taper , and 
defects , logs that have similar physical dimensions can have  different  estimates of volumes, and 
thus, different  conversion factor s.981 The difference between the two scaling systems is 
demonstrated in Figure 3 below.  
Figure 3: Difference between the Scribner Scale and the British  Columbia  Metric Scale  
 
Source: Canada's  first written submission, para.  639, figure 58.  
7.483.   Considering the USDOC used a benchmark consisting of log survey prices from the 
United  States PNW reported in USD per MBF, a conversion factor was necessary to compare these 
 
978 Canada's  first written submission, paras.  633 an d 636; United States'  first written submission, 
para. 428. The United States explains that the BC Metric Scale involves a broader measure of wood fibre than 
the Scribner Scale because it includes the entire sound wood volume of the log, regardless of wheth er the 
wood fibre can be made into lumber.  
979 Canada's  first written submission, para.  639. For an explanation of how defects are relevant to 
scaling, see Canada's  first written submission, paras.  643-644; see also, Jendro and Hart Report, 
(Exhibit  CAN-20 (BCI)), appendix A, p.  31, which explains that defects will affect the volume of wood under the 
Scribner Scale. A check defect, the most common defect occurring in beetle -killed timber, will result in volume 
deductions under the Scribner Scale, but thes e defects do not affect the volume of usable fibre under the 
BC Metric Scale.  
980 Canada's  first written submission, para.  640. 
981 Jendro and Hart Report , (Exhibit CAN -20 (BCI)), p.  217; Canada's first written submission, 
paras.  639-644 and 657 -665. 
BUTTTOPLENGTH
RADIUS
S C R I B N E R B C  M E T R I C
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  prices to the amounts paid (per cubic metre ) by the Canadian respondents.982 The USDOC used , as 
noted above,  a single volumetric conversion factor of 5.93  m3/MBF.983 This conversion factor was, 
as also noted above, based on a 1984 study, as updated in 2002 by Henry Spelter and the 
United  States Department of Agriculture Forest Service, i.e. the Spelter Study.984 
7.484.   In the preliminary determination, the USDOC explained tha t it used a conversion factor 
of 5.93, which was the same conversion factor used in the earlier Lumber IV  proceedings, but would 
continue to evaluate the most appropriate conversion factor to be used.985 The Canadian respondents 
requested the USDOC to use t he conversion factors provided in the BC Dual -Scale Study rather than 
the Spelter Study to convert MBF to cubic met res.986  
7.485.   The BC Dual -Scale Study , according to Canada,  developed specific conversion factors 
applicable to the principle species , grades , and conditions of logs  harvested in  the British  Columbia  
interior based on data collected in  2016.987 Unlike the regression analysis used in the Spelter Study, 
which estimat ed a board foot to cubic foot conversion  factor based on the average diameter of logs 
consumed by eastern Washington State sawmills in 1998, the premise of a  contemporaneous  
dual-scale study is to record the volume of the same log  using the BC Metric Scale  (cubic metre s) and 
Scribner Scale (board feet, or MBF)  in order to ascertain accurate conversion factor s for the species, 
grade , and conditions of logs consumed by sawmills in the BC interior during the POI. Through a 
representative sample of the log popu lation, a dual -scale study seeks to develop conversion factors 
applicable to the wider log population.988 
7.486.   According to the authors of the BC Dual -Scale Study, Mr  Jendro and Mr  Hart, in order for the 
study results to be representative of the harvest in the B ritish Columbia interior , the study data 
needed to represent the variability in diameter, length, taper, shape, and defect characteristics of 
live and dead conifer timber of the principal species harvested in the region, including beetle -killed 
timber.989 To achieve this the study team selected sample sites that covered the range of the British 
Columbia interior  forest types, handled the principle species, and accounted for large volumes of the 
British  Columbia  interior harvest. This was checked against British  Columbia  interior Harvest Billing 
System (HBS) data for 2014 and 2015.990 The study then selected random loads at each site through 
computer generated random sampling991; 33 log loads were selected, and all logs in each load were 
sampled.992 The scali ng took place in February to March 2016.993 Separate personnel were used to 
scale logs using the Scribner  Scale and metric system.994 Field personnel submitted data to 
Jendro  and Hart as it was collected to ensure that they obtained a sufficient representati on of the 
British  Columbia  harvest.995 
 
982 United States'  first written submission, para.  427; USDOC memorandum to the WDNR on delivered 
log price information , (Exhibit CAN -284), p.  2. 
983 United States'  first written submission, para.  428; Canada's  first written submission, para.  666. See 
also, USDOC memorandum to the WDNR on delivered log price information , (Exhibit CAN -284), p.  2. The 
USDOC divided the average log price per MBF for each species in the WDNR data set by 5.93 to convert it to a 
price per cubic metres.  
984 United States'  first written submission, para.  428; Spelter Study, (Exhibit CAN -287).  
985 Preliminary determination, (Exhibit CAN -8), p.  53. 
986 Canada's  first written submission , para.  651; Final determination, (Exhibit CAN -10), pp.  58-59. The 
BC Dual -Scale Study was commissioned by the British  Columbia Ministry of Forests, Lands, and Natural 
Resource Operations (MFLNRO). (Jendro and Hart Report, (Exhibit CAN -20 (BCI)), appendix A, p. 3). 
987 Canada's  first written submission, para.  651; Jendro and Hart Report, (Exhibit CAN -20 (BCI)), 
appendix A, table 8.  
988 We note that the representativeness of the BC Dual -Scale Study is disputed among the parties.  
989 Canada's  first written submiss ion, para.  682; Jendro and Hart Report, (Exhibit CAN -20 (BCI)), 
appendix A, p.  8. 
990 Canada's  first written submission, para.  682; Jendro and Hart Report, (Exhibit CAN -20 (BCI)), 
appendix A, pp.  8-9. 
991 Canada's  first written submission, para.  684; Jendro an d Hart Report, (Exhibit CAN -20 (BCI)), 
appendix A, p.  10. 
992 Jendro and Hart Report, (Exhibit CAN -20 (BCI)), appendix A, p.  14. 
993 Jendro and Hart Report, (Exhibit CAN -20 (BCI)), appendix A, p.  14. 
994 Jendro and Hart Report, (Exhibit CAN -20 (BCI)), appendix A , pp. 10-11. 
995 Canada's  first written submission, para.  689; Jendro and Hart Report, (Exhibit CAN -20 (BCI)), 
appendix A, p.  14. WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  7.487.   The USDOC declined to rely on the conversion rates provided in the BC Dual -Scale Study 
because:  
a. there was no evidence that the study used statistically valid sampling methodologies in 
selecting the 13 scaling sites and  therefore the USDOC could not determine whether the 
information provided a representative sample996; 
b. the lack of evidence about a valid sampling methodology was "particularly concerning" 
because the study was prepared for the purpose of litigation and ther efore has diminished 
weight because it is at risk of litigation -inspired fabrication or exaggeration997; and  
c. the BC Dual -Scale Study would not be a more accurate conversion factor because it was 
based only on trees in British  Columbia , whereas the benchmark  is the price of a log in 
Washington State, and the Spelter Study is based on trees in Washington State.998 
Because the USDOC needed to convert a Washington State-priced benchmark, measured 
in board feet, to cubic met res, "[t]he Washington state price in cu bic meters would be 
based upon the cubic meters of the tree in Washington state, not BC" .999 
7.7.3.2.1.2   Evaluation  
7.488.   The issue that we must resolve is whether the USDOC acted inconsistently with 
Article  14(d)  of the SCM  Agreement when it converted the Washington log benchmark, which is 
reported in price  per MBF to price  per cubic met re using a single conversion rate of 5.93 based on 
the Spelter Study. In resolving this issue, as discussed in paragraph 7.457  above, we must examine 
whether the USDOC's conclusion s were reasoned and adequate. Our  examination in this regard must 
be critical, based on the information contained on the USDOC's  record and its explanations. W e note 
in this regard that, as stated above, the USDOC had two sets of information on its record with respect 
to conversion  rates:  first, the Spelter Study; second, the BC  Dual-Scale Study provided by the 
Canadian respondents.  
7.489.   Canada contends that the sing le conversion factor of 5.93 that the USDOC used in the 
underlying investigation, and sourced from the Spelter Study was, in contrast to the BC Dual -Scale 
study, outdated and imprecise.1000 It, per Canada, also failed to reflect the prevailing characteristics 
of logs consumed by mills in the interior of British  Columbia .1001 In support of its view, Canada refers 
to submissions made by the Canadian respondents and the Government of British  Columbia before 
the USDOC, specifically, comments in the Jendro and Hart Report highlighting the demerits of the 
Spelter Study compared to the BC Dual -Scale Study.1002 
7.490.   For instance, as Canada also observes, Jendro and Hart submitted to the USDOC that the 
convers ion factor of 5.93 sourced from the Spelter Study was not based on up -to-date data, did not 
include major species prevalent in British  Columbia  or account for the impact of beetle -killed logs 
(which, as Canada notes, is relevant because conversion rates va ry species -to-species and is also 
different for beetle -killed logs). The United States does not dispute these assertions.1003 However, 
the USDOC stated that it would not address the parties'  specific arguments regarding the relative 
merits of the BC Dual -Scale Study compared to the Spelter Study because of its concerns regarding:  
a. the lack of a valid sampling methodology used to produce the data in the BC Dual -Scale 
Study; and  
 
996 Final determination, (Exhibit CAN -10), p.  60. 
997 Final determination, (Exhibit CAN -10), p.  60. 
998 Final determination, (Exhibit CAN-10), pp.  60-61. 
999 Final determination, (Exhibit CAN -10), p.  60. 
1000 Canada's  first written submission, para.  666. Canada notes that a conversion factor that is "low"  will 
tend to overstate the volume of logs that are actually entering sawmills and theref ore understate the amount 
actually paid on a per unit basis by dividing the same price by a larger volume, thereby artificially inflating any 
alleged benefit. (Canada's  first written submission, paras.  634 and 646).  
1001 Canada's  first written submission, par a. 666. 
1002 Jendro and Hart Report, (Exhibit CAN -20 (BCI)), pp.  239-241; Canada's  first written submission, 
para. 677. 
1003 See, e.g. United States'  response to Panel question No. 109, para.  333; second written submission, 
paras.  228-289.  WT/DS533/ R 
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  b. the use of a conversion factor based on BC trees (as is the case with the BC Dual-Scale 
Study ) in respect of Washington trees that were used in determination of the 
USDOC's  out-of-country Washington log benchmark.1004  
7.491.   We note that the USDOC did not engage with specific arguments raised by the 
Canadian  respondents as to why it would be appropriate to use the conversion factors set out in the 
BC Dual -Scale Study because it rejected this study based on the grounds set out in 
paragraph s 7.490a -7.490b . We thus commence our analysis by examining whether an unbiased and 
objective investigating authority could have rejected the BC D ual-Scale Study on the grounds set 
out in paragraph s 7.490a -7.490b . 
7.492.   Regarding the lack of a valid sampling methodology in the BC Dual -Scale Study, the USDOC 
took the view that because this study was prepared for the purpose of the underlying investigation 
before the USDOC, it was at risk of litigation -inspired fabrication or exaggeration, which diminished 
its weight.1005 However, as the United States notes, the USDOC did not reject the BC Dual -Scale 
Study on this basis alone, noting in this regard that the USDOC only concluded that it could not  
confirm the study's  conversion factors after reviewing the study's  sampling methodology.1006 
7.493.   With regard to the USDOC's  rejection of the BC Dual -Scale Study because it failed to provide 
a statistically valid sampling methodology, the USDOC provided the foll owing reasons in its 
determination:  
While we do not question the qualifications of Mr. Jendro and Mr. Hart, or the scaling 
professionals used by Jendro & Hart LLC, we have serious concerns about the 
methodology used to identify the selected scaling sites. Given the volume of lumber 
products being produced by the BC respondents, it is unclear why only 13 scaling sites 
were selected by Mr. Jendro and Mr. Hart for purposes of the BC Dual Scale Study. 
Further, although these sites were purportedly selected base d upon the historic 
knowledge of the trees that are harvested and scaled at these 13 sites,  there is no 
evidence that either the GBC or Mr. Jendro and Mr. Hart selected these sites using any 
statistically valid sampling methodology. While the data in the B C Dual Scale Study may 
be "valid" in the sense that they are based upon the actual measurement of trees in BC, 
our concern arises when this data is subsequently characterized to be representative of 
all interior BC trees. We find that this concern may be a lleviated if the BC Dual Scale 
Study was conducted using a statistically valid sampling methodology, which could then 
better represent the large area of BC interior trees or possibly all trees in BC. The 
BC Dual Scale Study does not explain how and whether  different types of sampling were 
considered, or even selected:  random, stratified, or composite, etc. The structure of a 
sampling methodology is a key decision point of any sound sampling methodology 
because how a sample is conducted can minimize bias, ma ximize the representativeness 
of the sample result, and inform the statistical relevance to the population. Instead, the 
researchers of the BC Dual Scale Study note that in order to have study results relatable 
to the BC Interior harvest, "the study team d istributed study samples among the forest 
types represented by the BC interior harvest." Therefore, because there is no evidence 
that the study used statistically valid sampling methodologies in selecting these 13 sites, 
the Department cannot determine tha t the information in the study provides a 
representative sample.1007 
7.494.   However, we note, as Canada observes, that Jendro and Hart in their report set out the 
methodology and procedures used in their BC Dual -Scale Study, in which they noted that they 
selected t he scaling sites based on (a)  their coverage of the major British  Columbia  interior forest 
types; and (b)  whether the sites handled the principal species and accounted for the large volume 
of the British  Columbia  interior harvest.1008 In this regard, Jendro and Hart also explained that they 
 
1004 Final determination , (Exhibit CAN -10), p.  61. 
1005 Final determination, (Exhibit CAN -10), p.  60. 
1006 United States'  first written submission, para.  438. We also note in this regard that just because a 
respondent submits evidence created for the purpose of an investigation, does n ot mean that the investigating 
authority is relieved of its duty to review that evidence. (Appellate  Body Report, US – Washing Machines , 
paras.  5.281 -5.283). We agree with the Appellate Body in this regard.  
1007 Final determination, (Exhibit CAN -10), pp.  59-60. (fns omitted)  
1008 Canada's  first written submission, para.  682 (referring to Jendro and Hart Report, 
(Exhibit  CAN-20 (BCI)), appendix A, pp.  8-9). WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  selected the sampling sites by reviewing the BC Interior HBS  scale data for years 2014 and 2015 
with a map of British  Columbia  interior timber types.1009 We consider that presented with 
explanations in the report as to how J endro and Hart had selected the scaling sites, it was incumbent 
on the USDOC, as an unbiased and objective investigating authority, to seek additional clarifications 
it considered necessary regarding the methodology used for selecting the scaling sites. Ye t, as the 
United States does not dispute, the USDOC sought no such clarification from the Canadian 
respondents or British  Columbia . For these reasons, we consider that an objective and unbiased 
investigating authority would not have, as the USDOC did, reje cted the BC Dual -Scale Study without 
seeking additional clarifications on this regard.  
7.495.   Regarding the second reason provided by the USDOC for rejecting the BC Dual -Scale Study, 
i.e. this study set out the conversion factor for BC trees, and thus could not b e used to convert the 
Washington log benchmark, which was based on Washington trees, not British  Columbia  trees, from 
MBF to cubic met res, we note that the Canadian respondents reported their log prices in price  per 
cubic met re. The benchmark based on Wash ington logs was in price  per MBF. To compare benchmark 
prices with prices reported by the Canadian respondents the USDOC would have had to either 
(a) convert the benchmark prices, reported in price  per MBF, to price  per cubic met re or (b) convert 
the log p rices of the Canadian respondents, reported in price  per cubic met re, to price  per MBF. We 
note Canada's  submission, which the United States does not dispute, that the results obtained 
through either of these two methods would be mathematically equivalent.1010 In the underlying 
investigation, as we noted above, the USDOC converted the benchmark prices reported in price  
per MBF to price  per cubic met re. 
7.496.   In converting the benchmark price, the USDOC stated that the "Washington state price in 
cubic meters would be based upon the cubic meters of the tree in Washington state, not 
[British  Columbia ]" and therefore it would not be more accurate to use a conversion factor derived 
from trees in British  Columbia  when it had a conversion factor based on Washington trees on the 
record (i.e. the Spelter Study).1011 We note, however, that while the USDOC stated that it would not 
be more accurate to use a conversion factor derived from trees in British  Columbia  (on which the 
BC Dual-Scale Study was based) when converting benchmark prices based on Washington trees, the 
United States clarifies that the USDOC never asserted that the BC Dual -Scale Study measured the 
"wrong logs" (because they were based on BC logs, not Washington logs) nor that this study was 
unreliable becaus e it measured the "wrong logs".1012 We consider the United States' clarification in 
this regard to be consistent with its submission that the USDOC concluded based on the record 
evidence that logs in British  Columbia  and Washington were not incomparable and that the similarity 
of trees in the interior of British  Columbia  and Washington reinforced the appropriateness of the 
conversion factor in the Spelter Study (which was based on Washington logs).1013 Indeed, we do not 
consider that an unbiased and objective i nvestigating authority would have, on one hand, considered 
the use of a conversion factor based on Washington logs to be appropriate because of similarities of 
trees in the interior of British  Columbia  and Washington, and on the other hand, considered the 
BC Dual-Scale Study to be unreliable because it was based on logs in British  Columbia  and not 
Washington (which the USDOC considered to be comparable). Instead, we agree with Canada that 
there is an inherent tension between these two positions.1014 Thus, to the extent the USDOC rejected 
the BC Dual -Scale Study because it was based on logs in British  Columbia , not Washington, we do 
not consider this to be a proper basis to reject this study.  
7.497.   Based on the above, we do not consider that the USDOC had a proper ba sis to reject the 
BC Dual-Scale Study on the grounds set out in paragraph s 7.490a -7.490b . In this regard, and as 
we noted above, the Canadian respondents made specific arguments before the USDOC as to why 
it should use the conversion factors set out in the BC Dual -Scale Study rather than the Spelter Study. 
The USDOC declined to do so on the g rounds set out in paragraph s 7.490a -7.490b . Considering the 
USDOC did not have proper basis to reject the BC Dual -Scale Study on these grounds, we are of the 
view that the USDOC failed to provide a reasoned and adequate explanation for not using the 
 
1009 Jendro and Hart Report, (Exhibit CAN -20 (BCI)), appendix A, pp.  8-9. 
1010 Canada's first written submission, fn 1140; comments on the United States' response to Panel 
question No. 285(a), para. 12. 
1011 United States'  response to Panel question No. 254, para.  352 (referring to Final determination, 
(Exhibit CAN -10), pp.  60-61). 
1012 United States' comments on Canada's response to Panel question No.  285(b), para. 20. 
1013 United States' response to Panel question No. 285(a), paras.  15-16; comments on 
Canada's  response to Panel question No. 285(b), para. 25. 
1014 Canada's comments on the Uni ted States' response to Panel question No.  285(a), para. 9. WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  conversion factors set out in this study while ad justing the Washington log benchmark to reflect the 
prevailing market conditions in British  Columbia . 
7.498.   Therefore, we consider that the USDOC acted inconsistently with Article 14(d) of the 
SCM Agreement because it failed to provide a reasoned and adequate ex planation for not adjusting 
the Washington log benchmark on account of the relevant conversion factors to reflect the prevailing 
market conditions in British  Columbia . 
7.499.   Based on the above, we conclude that the USDOC acted inconsistently with Article 14(d) of 
the SCM Agreement in failing to adjust, without providing a reasoned and adequate explanation, the 
Washington log benchmark, to reflect the prevailing market conditio ns in British  Columbia . 
7.7.3.2.2   Adjustments for quality of logs  
7.500.   Canada argues that the USDOC acted inconsistently with the obligation in Article  14(d)  to 
ensure the benchmark reflects prevailing market conditions in the country of provision when it failed 
to accou nt for the portion of the Canadian respondents'  "log diet" that would have been lower valued 
in Washington. These lower -valued logs are:  
a. utility -grade logs; and  
b. beetle -killed logs.1015 
7.7.3.2.2.1   Adjustments for log grade  
7.501.   Log grading systems are used to classify logs a ccording to their quality . However, the grading 
systems used in Washington and British  Columbia  differ.1016 For instance, the WDNR data  utilized by 
the USDOC  to determine the benchmark reflected prices of two sawlog grades (Camprun and 
Chip-N-Saw) and one no n-sawlog grade, i.e. utility grade.1017 But in British  Columbia , unlike 
Washington, logs are classified in the following grades:  (a) premium, (b)  sawlog, (c)  lumber reject, 
and (d)  undersized log.1018 In the underlying investigation, the USDOC found that the W DNR data 
contained prices for various grades within each species category, which did not correspond to the 
grades contained in the British  Columbia  stumpage data provided by the Canadian respondents.1019 
7.502.   In order to estimate how much of the harvest in the British  Columbia  stumpage data would 
have qualified as sawlogs and utility under the grading system in Washington (note that the 
British  Columbia  stumpage data was reported per the British  Columbia  gradin g system), the 
Canadian respondents and Government of British  Columbia  provided the BC Dual -Scale Study. In 
particular, the Canadian respondents and Government of British  Columbia  argued that the USDOC 
should account for the differences in the grading syst ems by applying ratios calculated in the 
BC Dual-Scale Study to account for the percentage of sawlog and utility -grade logs in the harvest of 
the respondent companies.1020 However, the USDOC rejected the BC Dual -Scale Study for the 
reasons set out in paragra phs 7.490a -7.490b  above. Having rejected t his study, the USDOC declined 
to make an adjustment to the WDNR data to account for the volume of logs consumed by the 
Canadian respondents that would have been graded as utility.1021 The USDOC concluded that due to 
the inability to match by grade the WDNR d ata and data provided by Canadian respondents it was 
relying on the overall unit price listed for each species, which it found to be reflective of prices of all 
grades of logs contained in the WDNR survey (i.e. utility and sawlogs).1022 Thus, the USDOC 
compa red the benchmark based on Washington log prices to the reported prices of the Canadian 
respondents, at a species -specific level, not a grade -specific level.1023 
 
1015 Canada's  first written submission, para.  702. 
1016 Canada's  first written submission, para.  701; United States'  response to Panel question No. 101, 
para. 307; and Preliminary determination, (Exhibi t CAN -8), p.  53. 
1017 United States'  first written submission, para.  443. 
1018 Jendro and Hart Report, (Exhibit CAN -20 (BCI)), appendix A, p.  19, and attachment A, pp.  175-179.  
1019 United States'  response to Panel question No. 101, para.  307. 
1020 Final determinatio n, (Exhibit CAN -10), p.  75. 
1021 Preliminary determination, (Exhibit CAN -8), p.  53; Final determination, (Exhibit CAN -10), p.  64. 
1022 United States'  response to Panel question No. 101, para.  307. 
1023 United States'  response to Panel question No. 101, para.  308. WT/DS533/ R 
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  7.503.   Canada contends that the USDOC was under an obligation pursuant to Article  14(d)  to utilize 
a benchmark that reflected the prevailing market conditions, including the quality of the good in the 
country of provision.1024 Therefore, the USDOC was required to adjust its benchmark based on 
WDNR  data to account for the portion of the harvest reported by the  Canadian respondents that 
would be graded as utility under the Scribner Scale.1025 Canada notes in this regard that the 
United  States agrees that the prices of utility -grade logs reported in WDNR were significantly lower 
than prices of other grades.1026 Canad a states that because the quality of a log affects its price, 
differences between grading systems complicate any price comparison.1027 
7.504.   In response to the United States'  reliance on the USDOC statement that there was no reliable 
basis on the record to make su ch an adjustment to the benchmark based on grades, Canada notes 
that Canadian respondents and the Government of British  Columbia  provided the USDOC with the 
BC Dual -Scale Study that set out a ratio of each of the Canadian respondents'  harvest that would 
be graded as utility in Washington.1028 However, noting that the USDOC rejected the BC Dual -Scale 
Study, Canada asserts that the USDOC's  justification for rejecting this study was unfounded and 
invalid.1029 In addition, Canada s ubmits that even if the USDOC was not prepared to accept the 
sawlog -to-utility ratio provided in the BC  Dual-Scale Study, considering the Canadian 
respondents'  log harvest included utility -grade logs, it was incumbent on the USDOC to seek 
alternative metho ds to determine what quantity or ratio of utility -grade prices it should include in 
its benchmark.1030 Instead, Canada notes the USDOC chose not to make any adjustment to properly 
account for utility log prices in its benchmark, thereby artificially inflatin g its benchmark price.1031 
7.505.   The United States does not dispute that the prices for utility -grade logs in the WDNR data 
are significantly lower than other grades.1032 The United States also acknowledges that some logs 
consumed by the Canadian respondents would have been graded as "utility" in Washington.1033 
However, the United States contends that the USDOC acted consistently with Article  14(d)  of the 
SCM Agreement beca use (a)  the species -specific benchmark determined based on WDNR data 
included utility -grade price quotes1034; and (b)  there was no reliable evidence on the record that 
would warrant an adjustment for utility -grade logs that Canadian respondents requested.1035 The 
United States acknowledges that the Canadian respondents submitted the BC  Dual-Scale Study to 
the USDOC as a basis for making such adjustments. But the United States notes that the USDOC 
rejected that study, thereby leaving no reliable evidence on the record that could be used to make 
the requested adjustments.  
7.506.   We note that the United States agrees that:   
a. British  Columbia  and Washington have different grading systems for logs;  
b. prices for utility -grade logs in the WDNR data were significantly lower than WDNR prices 
for other  sawlog  grades1036; and  
c. some logs consumed by the Canadian respondents would have been graded utility under 
Washington grade rules.1037  
7.507.   Based on the above, the issue we must resolve is whether the USDOC acted inconsistently 
with Article  14(d) of the SCM  Agreement in using a species -specific benchmark, which, per Canada, 
 
1024 Canada's  first written submission, para.  700. 
1025 Canada's  first written submission, para.  706. 
1026 Canada's  second written submission, para.  202; United States'  response to Panel question No.  101, 
para. 311. 
1027 Canada's  first written submission, para.  701. 
1028 Canada's  opening statement at the first meeting of the Panel (27 February 2019), para.  44. 
1029 Canada's  first written submission, para.  708. 
1030 Canada's  first written submission, para.  709. 
1031 Canada's  first written submission, para.  710. 
1032 Canada's  first writ ten submission, para.  705; United States'  response to Panel question No. 101, 
para. 311. 
1033 United States'  response to Panel question No. 101, para.  309. 
1034 United States'  second written submission, para.  295. 
1035 United States'  opening statement at the first meeting of the Panel (27 February 2019), para.  21. 
1036 United States'  response to Panel question No. 101, para.  311. 
1037 United States'  response to Panel question No. 101, para.  309. WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  was not sufficiently adjusted to reflect the prevailing market conditions in British  Columbia , 
specifically, the utility grades consumed in the British  Columbia  harvest.  
7.508.   Article 14(d)  of the SCM  Agreement provides that when determining whether government 
provision of goods is made for less than adequate remuneration (thereby conferring a benefit), the 
adequacy shall be determined in relation to prevailing market conditions f or the good in question in 
the country of provision (including price and quality). Therefore, the second sentence of 
Article  14(d)  clarifies that the benchmark used for ascertaining whether there is a benefit  conferred 
through government provision of goods  must be determined in relation to the prevailing market 
conditions in the country of provision, here, Canada. The investigating authority, as noted in 
paragraph 7.456  above, may be required to make appropriate adjustments to the benchmark to 
ensure it reflects prevailing market conditions, and such adjustments must be made in light of the 
factors set out in Article  14(d). However, Article  14(d)  does no t prescribe how such adjustments 
must be made, and investigating authorities have the discretion to choose a methodology, which is 
consistent with the SCM  Agreement.  
7.509.   We note in this regard that in adjusting a benchmark to reflect prevailing market conditio ns 
in the country of provision in light of the factors listed in Article  14(d)  would require an investigating  
authority to make necessary adjustments for differences in quality and price. The parties agree that 
the grading systems in Washington and British  Columbia  are different, that utility -grade  logs 
command significantly lower prices than other grades, and some portion of the harvest consumed 
by the Canadian respondents included utility -grade logs. We consider that an out -of-country 
benchmark, he re, a benchmark based on Washington log prices, must adequately reflect the grades 
and associated prices in British  Columbia  in order to be consistent with Article  14(d).  
7.510.   The United States does not disagree that, as a legal matter, the benchmark needs to b e 
adjusted to reflect grades sold in the country of provision. However, the United States justifies the 
choice of the species -specific benchmark based on WDNR data that the USDOC selected on the 
ground that this data "was the most appropriate benchmark whe n selecting among the options on 
the record".1038 
7.511.   The question thus is whether the USDOC adequately adjusted the out -of-country data to 
reflect the grades and associated prices in British  Columbia . In resolving this question, as noted in 
paragraph 7.457  above, we must critically examine the USDOC's  determination based on the 
information on the USDOC's  record as well as the explanations that it provided an d assess whether 
the conclusions reached are reasoned and adequate.  
7.512.   We note that the parties do not disagree as such that the WDNR data used as the basis of 
the benchmark included some utility -grade prices. However, Canada contends that the WDNR prices 
reflected utility -log prices in nothing but a de minimis  fashion, noting in this regard that of the 
four species that made up 99% of the harvest consumed by the Canadian respondents, only two of 
the twelve months contained a single utility -log price quote.1039 Canada asserts therefore that the 
species -specific "all grades" benchmark based on WDNR data was manifestly higher than it would 
have been had the prices reflected appropriate proportions of utility -grade logs consistent with the 
prevailing market conditio ns in British  Columbia .1040 The United States submits that the USDOC was 
unable to account for the volume of utility -grade logs because the WDNR data it used did not include 
volumetric information.1041 Thus, per the United States there was no reliable basis on  the record to 
weight -average the WDNR data to correspond to the grades of the respondents'  log inputs.1042 
Instead, because the WDNR data included monthly unit prices of sawlogs and utility -grade logs but 
no volume, the USDOC calculated annual prices by sim ple-averaging the monthly unit prices of all 
grades.1043 In this regard, the United States notes that the prices in WDNR data was based on a 
survey that "included a limited number" of utility -grade log quotes.1044 
 
1038 United States'  response to Panel question No. 258, para.  362. 
1039 Canada's  second written submission, para.  207. 
1040 Canada's  second written submission, para.  207. 
1041 United States'  response to Panel question No. 261, para.  366. 
1042 United States'  response to Pa nel question No. 261, para.  370. 
1043 United States'  response to Panel question No. 261, para.  369. 
1044 United States'  response to Panel question No. 261, para.  369. WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  7.513.   In these panel proceedings, Canada presented d ata based on information before the USDOC, 
stating that the benchmark prices were manifestly higher than what they would have been if the 
prices appropriately reflected proportions of the British  Columbia  interior logs that were of lower 
quality.1045 The United States does not disagree with this statement of Canada. Indeed, the 
United  States acknowledges that the benchmark price was based on a low number of utility -grade 
quotes. But it attributes this to the "limitations of the record data", not to th e USDOC's decision to 
exclude utility -grade prices from the benchmark.1046 
7.514.   To the extent the United States justifies the USDOC's  decision to not make an adjustment 
for utility -grades based on the "limitations of the record data", we disagree with the United  States. 
Canada contends that the BC Dual -Scale Study provided the USDOC the appropriate basis to make 
such adjustments. Because the USDOC rejected the BC Dual -Scale Study on the grounds set out in 
paragraph s 7.490a -7.490b  above, it did not assess whether, as a substantive matter, the 
BC Dual-Scale Study could be used to make this adjustment. In paragraph 7.497  above, we 
concluded that the USDOC did not have a proper basis to reject the B C Dual -Scale Study on these 
grounds. Thus, we disagree with the USDOC's reasons for concluding that the record evidence did 
not allow it to adjust for utility -grades. Instead, we consider that the USDOC was required to engage 
with the BC Dual -Scale Study t o assess whether it provided an adequate basis to make such 
adjustments.  
7.515.   In any case, we consider that having selected out -of-country prices for the purpose of 
determining a benchmark, it was incumbent on the USDOC to ensure that it acted consistently wit h 
Article  14(d)  of the SCM  Agreement by adjusting the benchmark to reflect prevailing market 
conditions in the country of provision. The USDOC's  obligation to act consistently with 
Article  14(d)  of the SCM  Agreement is not diminished because the data sourc e that it selects (here 
WDNR data)  has limitations (in the form of information necessary to make volumetric adjustments 
for utility grades)  that make such adjustments difficult. In particular, while the USDOC was free to 
select a methodology that allowed i t to make such type of adjustments, and the SCM  Agreement is 
not prescriptive in this regard, the failure to make such type of adjustments in this particular case 
is not consistent with Article  14(d)  of the SCM  Agreement, which requires that the adequacy o f 
remuneration be determined in relation to prevailing market conditions for the good in the country 
of provision.  
7.7.3.2.2.2   Adjustments for beetle -killed timber  
7.516.   In the underlying investigation, the Canadian respondents and the Government of 
British  Columbia  request ed the USDOC to adjust a benchmark based on Washington log prices 
(which was based on WDNR data)  to account for the prevailing market conditions in British  Columbia , 
specifically, the portion of beetle -killed timber that is prevalent in British  Columbia .1047 To make this 
adjustment, they asked the USDOC to use the prices for beetle -killed logs in Washington obtained 
by their experts Jendro and Hart.1048 Jendro and Hart got these prices through a survey of sawmills 
in PNW.1049 In their report, Jendro and Hart atta ched prices lists from sawmills, and records of 
conversations where sawmills provided them with prices.1050 
7.517.   However, the USDOC declined to make this adjustment because:  
a. First, per the USDOC the Canadian respondents  did not provide evidence that beetle -killed 
log prices were not already included in the WDNR data.1051  
 
1045 Canada's  opening statement at the first meeting of the Panel (27 February 2019), paras.  40-42; 
comments on United States'  responses to Panel question No. 258, para. 316, and No.  261, para.  318.  
1046 United States'  responses to Panel question No. 102, para.  313, and No. 258, para.  362. 
1047 Final determination, ( Exhibit CAN -10), p.  75. See a lso, British  Columbia case brief, 
(Exhibit  CAN-295), p. V-73; Canfor case brief, (Exhibit CAN -137 (BCI)), p.  29; and West Fraser case brief, 
(Exhibit CAN -139 (BCI)), p.  4.  
1048 Final determination, ( Exhibit CAN -10), p.  76. 
1049 Final determination, (Exhibit CAN -10), p.  76; Canada's  first written submission, para.  718.  
1050 Canada's  first written submission, para.  718. 
1051 Final determination, (Exhibit CAN -10), p.  76. WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  b. Second, according to the USDOC the prices reported in the Jendro and Hart Report were 
obtained for the purpose of the investigation and therefore not rel iable.1052  
7.518.   Canada contends that the USDOC's  decision to not adjust its out -of-country benchmark 
based on WDNR data to include prices for beetle -killed logs was inconsistent with Article  14(d)  of 
the SCM  Agreement. In particular, Canada argues that Article  14(d) of the SCM  Agreement required 
the USDOC to adjust this out -of-country benchmark to account for the difference in the prevailing 
market conditions in British  Columbia  and Washington because of the disproportionate impact of 
beetle infestations on logs in British  Columbia  as opposed to Washington. In this regard, Canada 
states that the evidence before the USDOC demonstrated that beetle infestations negatively 
impacted the British Columbia interior  more severely than eastside Washington; beetle -killed 
lodgepole pine and spruce represented a significantly larger proportion of the Canadian 
respondents'  harvest than that of eastside Washington mills; and beetle -killed logs are less valuable 
than green logs harvested from live trees.1053 
7.519.   In response to the Unite d States'  reliance on the USDOC's  statement that there were no 
reliable prices on the record for beetle -killed timber, Canada explains that the price quotes for 
beetle -killed logs provided in the Jendro and Hart Report were provided in response to actual s ales 
inquiries.1054 Having rejected the evidence supplied by the Canadian respondents (i.e. the prices 
presented in the Jendro and Hart Report)  on which to base the requested adjustments, Canada 
argues that the USDOC had an obligation to seek out information  required to make accurate 
calculations of any alleged benefit.1055 Canada asserts that it was incumbent on the USDOC to solicit 
relevant facts, including alternative methods to calculate prices for beetle -killed timber to include in 
the benchmark.1056 
7.520.   The Uni ted States contends that the USDOC had proper basis to reject the request of 
Canadian respondents and the Government of British  Columbia  to adjust the benchmark to account 
for prices of beetle -killed timber. Regarding the USDOC's  conclusion that the Canadi an respondents 
did not provide evidence that beetle -killed timber was not already included in WDNR data, the 
United  States asserts that Canada's  contention that the WDNR data does not include beetle -killed 
prices is not just speculative, but also contrary to record evidence, considering (a)  the beetle 
infestation affected two species lodgepole pine and spruce, and there is evidence that beetle 
infestation exists among these species in Washington (just as they exist in British  Columbia ), 
although the species  themselves are less prevalent in Washington; and (b)  Jendro and Hart 
themselves provided price quotes for beetle -killed timber from several mills in the United States.1057 
The United States submits that because the Canadian respondents were the proponents o f a 
"counterintuitive proposition" that the WDNR data contained no prices for beetle -killed lodgepole 
pine or spruce (which are the two species affected by beetle infestation)  they had the burden of 
providing supporting evidence for that proposition.1058 With respect to the USDOC's  conclusion that 
the prices reported by Jendro and Hart were unreliable, the United States submits that the record 
evidence supported the USDOC's  conclusion in this regard.1059 
7.521.   In light of the above, the issue that we must resolve is whether the USDOC acted 
inconsistently with its obligation under Article  14(d)  to ensure that the benchmark reflects prevailing 
market conditions by appropriately adjusting it to include beetle -killed timber prices. In this regard, 
we must examine whether the USDOC provided a reasoned and adequate basis in its determination 
for its refusal to make such an adjustment to its benchmark. We recall, as mentioned in 
paragraph  7.456  above, that the second sentence of Article  14(d)  sets out a list of factors, which 
includes the quality of the good in question, that may affect the comparability of the financial 
contribution at issue with the benchmark. If a propo sed benchmark does not reflect prevailing 
market conditions, adjustments in the light of these listed factors would be necessary to ensure 
comparability, and by extension a meaningful benefit comparison.  
 
1052 Final determination, (Exhibit CAN -10), p.  76. 
1053 Canada's  first written submission, para.  711; opening statement at the first meeting of the Panel 
(27 February 2019), para.  48. 
1054 Canada's  first written submission, para.  718. 
1055 Canada's  first written submission, para.  720. 
1056 Canada's  first written submission, para.  710. 
1057 United States'  response to Panel  question No. 105, para.  321. 
1058 United States'  response to Panel question No. 105, para.  322. 
1059 United States'  response to Panel question No. 104, paras.  318-320. WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  7.522.   We note the difference between the USDOC's  benchmark  based on Washington logs and the 
financial contribution at issue based on prices of logs in British  Columbia , resulting from what Canada 
considers the disproportionate impact of beetle -killed logs in British  Columbia  (as opposed to 
Washington), pertains t o a difference in quality between the good used for the benchmark 
determination and that concerning the financial contribution at issue. In accordance with 
Article  14(d), such difference in quality would affect the relevant prevailing market conditions, an d 
would therefore necessitate an adjustment to ensure that the proposed Washington benchmark 
reflects the prevailing market conditions in British  Columbia , specifically, the disproportionate 
presence of beetle -killed logs in British  Columbia . 
7.523.   In the underlying investigation, the USDOC denied the Canadian respondents'  request to 
adjust the benchmark to account for the impact of beetle -killed disease on logs in British  Columbia  
on the ground that these respondents did not provid e evidence that beetle -killed logs were not 
already included in the WDNR data, that formed the basis of the out -of-country benchmark. Canada 
asserts in this regard that the USDOC assumed that its benchmark included prices for beetle -killed 
logs instead of investigating whether it did, such as through an enquiry to WDNR.1060 In addition, 
Canada contends, relying on evidence on the USDOC's  record, that the WDNR data could not have 
included any non -de minimis  volume of beetle -killed logs.1061 The United States, as noted above, 
submits  that the Canadian respondents had the burden of showing that the WDNR data did not 
include prices of beetle -killed timber and that the USDOC's  findings were consistent with the record 
evidence. The United States also submits that because the WDNR data is species -specific (setting 
out prices separately for lodgepole pine, spruce and other species), the WDNR data would capture 
log quality issues that were unique to a given species.1062 
7.524.   We note that Canada presents evi dence that was before the USDOC showing that the 
petitioner (domestic industry)  agreed that beetle -killed timber had lower value and price than timber 
that was not affected.1063 Neither the USDOC in the underlying investigation, nor the United States 
dispute d this view.1064 Canada also notes that lodgepole pine, spruce, and white fir/hemlock sell for 
similar average prices in the U nited States PNW and alludes to record evidence before the USDOC 
showing that lodgepole pine, spruce, and white fir/hemlock species in the WDNR data tracked close 
to one another.1065 Considering only lodgepole pine and spruce were affected by the beetle outbreak 
and not white fir/hemlock, Canada reasons that if the WDNR data had included  any non -de-minimis  
volume of beetle -killed log pri ces, the average prices for lodgepole pine and spruce would have been 
significantly lower than the average price for white firm/hemlock .1066 
7.525.   In our view, having selected the WDNR data as the basis for its benchmark, it was incumbent 
on the USDOC to ensure it  reflected the prevailing market conditions in British  Columbia , specifically 
the existence of beetle -killed logs. Even if, as the United States contends, MPB and spruce beetle 
infestations were existent in Washington, like in British  Columbia , it is not c lear from the 
USDOC's  determination whether the USDOC verified that its data source, i.e. the WDNR data 
adequately reflected market conditions existent in British  Columbia  on account of beetle infestation. 
In particular, we note that the Canadian intereste d parties made submissions before the USDOC  
contending that the WDNR data provided by the petitioners, and ultimately used by the USDOC, 
could not reflect  beetle -killed log prices.1067 Therefore, it was incumbent on the USDOC (not the 
Canadian respondents)  to do the necessary investigation to ensure that its benchmark reflected the 
prevailing market conditions in British  Columbia . We recall in this regard that the obligation under 
Article 14 to calculate the amount of subsidy in terms of benefit to the recipient encompasses a 
requirement to conduct a sufficiently diligent investigation into, and solicitation of relevant facts, 
while basing its determination on positive evidence.1068 Howeve r, nothing in the 
USDOC's  determination suggests that the USDOC did indeed conduct such an investigation. In this 
regard, we consider that even assuming the USDOC was justified in rejecting the price quotes for 
 
1060 Canada's  opening statement at the first meeting of the Panel (27 February 2019), paras.  49 and 54.  
1061 Canada's  second written submission, para.  217. 
1062 United States'  first written submission, para.  454. 
1063 Canada's  response to Panel question No. 105, para.  300. 
1064 However, the parties disagree on whether beetle -killed logs are of higher quality and  price than 
utility -grade logs.  
1065 Canada's  second written submission, para.  217.  
1066 Canada's  second written submission, para.  217. 
1067 See, e.g. Canada's response to Panel question No. 105, para. 300 (referring to Jendro and 
Hart Report, (Exhibit CAN -20 (BCI)), pp.  37-48). 
1068 Appellate  Body Report, US – Carbon Steel (India) , para.  4.190.  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  beetle -killed timber from Washington provided  by Jendro and Hart, that did not remove the 
obligation on the USDOC as an investigating authority to use a benchmark that was adequately 
adjusted to reflect the prevailing market conditions in British  Columbia . 
7.526.   Therefore, based on above, we find that the USDOC acted inconsistently with Article  14(d)  of 
the SCM  Agreement in failing to adjust its benchmark to account for the impact of beetle -killed 
timber in British  Columbia . 
7.7.3.2.3   Stand -as-a-whole pricing  
7.527.   In British  Columbia , a given "stand" in a forest may conta in multiple species of trees. Canada 
notes that such stands are identified by a unique timbermark, which identifies the specific cutting 
authority or geographic location where the timber is harvested.1069 However, Canada submits that 
British  Columbia  sets th e price for the "stand" as a whole (hence the term stand -as-a-whole pricing), 
and not for each species within that stand.  
7.528.   In the underlying investigation, the USDOC used species -specific benchmarks and compared 
them to respondents'  purchases of Crown -origin standing timber aggregated by timbermark and 
species .1070 In order to make this comparison at the species level, the USDOC requested the 
Government of British  Columbia  to report average stumpage charges on a species -specific basis as 
part of its questionna ire response.1071 However , these charges were a statistical construct. To obtain 
these amounts, the Government of British  Columbia  added, for each species separately, the values 
for that species on every invoice. The Government of British  Columbia  then weigh t-averaged the 
stumpage charge by stand proportionate to the volume of each species in each stand, to report the 
constructed species -stumpage charge in the response.1072 
7.529.   The USDOC disagreed with the Canadian respondents  and the Government of 
British  Columbia 's argument that it must consider stand -as-a-whole pricing as a prevailing market 
condition.1073 The Canadian respondents proposed two methods for the USDOC to account for 
stand -as-a-whole pricing. First, compare a single weighted average all -species benchma rk price to 
a single weighted average all -species stumpage price.1074 Second, (and alternatively), the Canadian 
respondents  argued that if using a species -specific benchmark, the USDOC must include any 
negative comparison results for each species -specific li ne item.1075 
7.530.   The USDOC declined to use either of these two methods. Instead, the USDOC determined 
the annual average price for Crown timber purchased by the investigated producers, classifying 
purchases based on timbermark and species. The USDOC compared the se annual average 
timbermark/species -specific prices for each investigated producer in British  Columbia  to the 
corresponding annual average species -specific benchmark prices from eastside Washington. Where 
the annual average timbermark/species -specific stu mpage price in British  Columbia  was more than 
the annual average benchmark price for that species in Washington State, the USDOC set the benefit 
conferred to zero. The USDOC removed any timbermark/species aggregations where the stumpage 
purchase volume or value was negative.1076 The USDOC then added together all 
 
1069 Canada's  first written submission, fn 1220.  
1070 Final determination, (Exhibit CAN -10), p.  66. 
1071 Canada's  first written submission, para.  723; British  Columbia case brie f, (Exhibit CAN -295), p.  V-74 
and fn 181.  
1072 British  Columbia case brief , (Exhibit CAN -295), p.  V-74 and fn 181. Canada notes in this regard that 
British  Columbia issues invoices that reflect the single stumpage rate for the stand, which applies to all spec ies. 
The species -specific rates are identical in the invoice. Canada explains, by pointing to the evidence before the 
USDOC, that while the invoices included line items for each species with both volume and value figures, 
British  Columbia explained to the USDOC that there were no unique, species -specific prices reported at the 
stand level for any sale in British  Columbia. (Canada's comments on the United States' responses to panel 
question Nos.  271 and 273(a), para. 331; United States' response to Panel que stion No. 273(a), para.  397).  
1073 Final determination, (Exhibit CAN -10), p.  68. 
1074 Canada's  first written submission, para.  727; Final determination, (Exhibit CAN -10), p.  67. 
1075 Canada's  first written submission, para.  727; Final determination, (Exhibit CAN -10), p. 67. 
1076 USDOC  calculation memo, Tolko, (Exhibit CAN -381 (BCI)), p.  7; USDOC  calculation memo, 
West Fraser, (Exhibit CAN -382 (BCI)), p.  4; and USDOC  calculation memo, Canfor, (Exhibit CAN -380 (BCI)), 
p. 4. WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  timbermark/species -specific benefits for each investigated producer to calculate the overall 
benefit.1077 The parties refer to this as the transaction -specific approach for assessing benefit.  
7.531.   Canada argues that stand -as-a-whole pricing is a condition of sale of the British  Columbia  
stumpage system within the meaning of Article  14(d)  that the USDOC was required to take into 
account.1078 By failing to account for this condition, Canada argues that the USDOC calculated an 
inflated countervailing duty rate.1079 
7.532.   The United States contends that the USDOC disagreed with the Canadian respondents that 
stand -as-a-whole pricing was a prevailing market condition because selling timber by the stand may 
in itself be inconsistent with market principles.1080 In particular, the United States submits that if the 
USDOC were to accept the Government of British  Columbia 's pricing unit as a prevailing market 
condition, it would ignore the very differences that the USD OC was seeking to measure.1081 In 
addition, according to the United States, nothing in the SCM Agreement (or other 
covered  Agreements)  precludes the transaction -specific analysis that the USDOC undertook in the 
underlying investigation.1082 
7.533.   We note that the pa rties' arguments regarding this aspect of Canada's  claim raise a two -part 
issue:  First, whether "stand -as-a-whole pricing" was a prevailing market condition within the 
meaning of Article  14(d). Second, whether the USDOC acted inconsistently with Article  14(d) by 
conducting a transaction -specific analysis for assessing benefit where it set to zero the negative 
transaction results based on a comparison of the benchmark with the reported cost.  
7.534.   In addressing these issues, and specifically the first part, we rec all that Article  14(d)  of the 
SCM Agreement provides that when determining whether a government provision of goods is made 
for less than adequate remuneration (thereby conferring a benefit), the adequacy shall be 
determined in relation to the prevailing ma rket conditions for the good in question in the country of 
provision. The inclusive list of the prevailing market conditions identified in the second sentence of 
Article  14(d)  – price, quality, availability, marketability, transportation, and other conditi ons of 
purchase or sale – describe factors that may affect the comparability of the financial contribution at 
issue with a benchmark. The  assessment of "prevailing market conditions", within the meaning of 
Article  14(d)  of the SCM  Agreement, necessarily in volves an analysis of the market generally, rather 
than isolated transactions in that market.1083 The investigating authority can draw only through such 
an analysis conclusions regarding the conditions that are "prevailing" in the market of the country 
of provision.1084 "[O]ther conditions of purchase or sale"  is a factor included in the illustrative list of 
prevailing market conditions in Article  14(d).  
7.535.   In the underlying investigation, while the Canadian respondents contended that 
"stand -as-a-whole" pricing i s part of the prevailing market condition in British  Columbia , the USDOC 
disagreed with that view. The USDOC provided the following reason for its disagreement:  
Although the [Canadian respondents] argue the [USDOC] must consider pricing on a 
"stand as a wh ole" basis as a prevailing market condition, we disagree. Under our 
tier-three benchmark methodology we find that a main condition for determining 
stumpage is the demand of the logs from that tree. As such, the [USDOC] would not 
accurately assess the adequ acy of remuneration for stumpage from a weighted -average 
combined species benchmark, considering how its value is evaluated according to 
market principles. Moreover, not calculating a weighted average combined species 
benchmark is consistent with our pract ice. In utilizing a timbermark -based approach 
and further disaggregating by species, the [USDOC] is conducting the calculation on the 
basis that is as close to a transaction -specific analysis as possible; a transaction -specific 
analysis is the [USDOC's] lo ng-standing preference. And by not offsetting its 
 
1077 USDOC  calculation memo, Tolko, (Exhibit CAN -381 (BCI)), pp.  5-7; USDOC  calculation memo, 
West Fraser , (Exhibit CAN -382 (BCI)), p.  4; and USDOC  calculation memo, Canfor, (Exhibit CAN -380 (BCI)), 
p. 3.  
1078 Canada's  first written submission, para.  722. 
1079 Canada's  first written submission, para.  722. 
1080 United States'  first written submission, para.  461. 
1081 United States'  first written submission, para.  461. 
1082 United States'  first written submission, para.  459.  
1083 Appellate  Body Report, US – Carbon Steel (India) , para.  4.245.  
1084 Appellate  Body Report, US – Carbon Steel (India) , para.  4.245.  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  comparisons for negative benefits, the [USDOC] is acting consistently with the fact that 
a benefit is either conferred or not conferred, and a positive benefit from certain 
transactions cannot be masked or otherwise offset by "negative benefits" from other 
transactions. Because a benefit is either conferred or not conferred, the manner in which 
the GBC prices its stumpage is irrelevant to our analysis. If a government chooses to 
set a price for a whole stand , rather than differentiating by species within a particular 
stand, that does not change the amount of the benefit conferred for purposes of our 
analysis.1085 
7.536.   We note from this explanation that in disagreeing with the Canadian 
respondents'  submission that the USDOC  treat stand -as-a-whole pricing as a prevailing market 
condition, the USDOC concluded that it could not accurately assess the adequacy of remuneration 
for stumpage from a weighted -average combined species benchmark, considering how its value is 
evaluated according to market principles. Relying on this explanation of the USDOC, the United 
States submits that the USDOC disagreed with the Canadian respondents that stand -as-a-whole 
pricing was a prevailing market condition because selling timber by the s tand may itself be 
inconsistent with market principles.1086 The United States explains in this regard that the 
USDOC's  approach to measuring the adequacy of remuneration hinged upon a recognition that the 
species of a tree is an integral part of the value of  the tree.1087 Noting that the price of timber varies 
significantly by species, the United States asserts that under the guise of accounting for 
stand -as-a-whole pricing as a prevailing market condition, Canada is requiring the USDOC to 
overlook this key pro duct characteristic.1088 
7.537.   In addition to contending that the United States'  submission that stand -as-a-whole pricing 
was not a prevailing market condition because selling timber by the stand may in itself be 
inconsistent with market principles is ex post rationalization, Canada contends that the United  States 
is incorrect in contending that stands of timber in British  Columbia  are sold without any consideration 
of the value of species in them.1089 Canada explains that British  Columbia 's MPS expressly takes into 
account the volume and relative value of each species in the stand at issue when it sets stumpage 
rates on non -auctioned stands.1090 To support its explanations , Canada refers to submissions that 
the Government of British  Columbia  presented before the USDOC showing how the stumpage rate 
for a stand purchased by the Canadian respondents Canfor, West Fraser, and Tolko was 
determined.1091 Canada relies on them to contend that British  Columbia  took into account the volume 
and relative va lue of each species in the stand at issue while setting the stumpage rates.1092 
7.538.   Regarding the first part of the issue, we note the USDOC's conclusion that it could not 
accurately assess the adequacy of remuneration for stumpage from a weighted -average combin ed 
species benchmark, considering how its value is evaluated according to market principles. The 
United  States, as noted above, explains that this means that the USDOC disagreed with the Canadian 
respondents that stand -as-a-whole pricing was a prevailing m arket condition because selling timber 
by the stand may itself be inconsistent with market principles.  
7.539.   However, in our view an unbiased and objective investigating authority would not have 
concluded that stand -as-a-whole pricing was not a prevailing market  condition because selling 
timber by the stand may itself be inconsistent with market principles without examining evidence 
on how British  Columbia  took into account the volume and relative value of each species in the stand 
at issue while setting the stum page rates. This evidence was directly relevant to the question on 
whether stand -as-a-whole pricing is consistent with market principles, and thus the USDOC would 
have been expected to explain in its determination why, notwithstanding such evidence, it was  of 
the view that stand -as-a-whole pricing was inconsistent with market principles. The 
USDOC's  determination, however, provides no such explanation.  
7.540.   Therefore, without such an explanation in the USDOC's  determination, we are of the view 
that the USDOC did  not have proper basis to conclude that stand -as-a-whole pricing was inconsistent 
 
1085 Final determination, (Exhibit CAN -10), p.  68. (fns omitted)  
1086 United States'  first written submission, para.  461. 
1087 United States'  first written submission, para.  461. 
1088 United States'  first written submission, para.  462. 
1089 Canada's  response to Panel question No. 107, para.  302. 
1090 Canada's  response to Panel question No. 107, para.  303. 
1091 Canada's  response to Panel question No. 107, para.  304. 
1092 Canada's  response to Panel question No. 107, para.  303. WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  with market principles. Because the USDOC disagreed with the Canadian respondents that 
stand -as-a-whole pricing was not a prevailing market condition based on this conclusion , it follows 
that the USDOC did not have proper basis to reject the Canadian respondents'  submission that 
stand -as-a-whole pricing was a prevailing market condition.  
7.541.   With respect to the second aspect of the issue, i.e. whether the USDOC act ed inconsistentl y 
with Article  14(d)  by conducting a transaction -specific analysis for assessing benefit where it set to 
zero negative transaction results based on a comparison of the benchmark with reported cost, we 
note that the USDOC used this methodology based on its view that stand -as-a-whole pricing was 
not a prevailing market condition. In particular, based on its view that stand -as-a-whole pricing was 
not a prevailing market condition, the USDOC declined to use the two methodologies for benefit 
assessment that the Canadian respondents proposed, which were  (a) to compare a single -weighted 
average benchmark with the stumpage rate reported by the Canadian respondents (which was 
determined on a stand -as-a-whole basis);  or (b)  use a transaction -specific analysis wherein the 
USDOC compared benchmark price of each species with the species -specific price reported by the 
Canadian respondents, but  did no t aggregate all comparison results, positive as well as negative .  
7.542.   Considering we are of the view that the USDOC did not have  proper basis to reach its view 
that stand -as-a-whole pricing was not a prevailing market condition, we conclude that the USDOC 
did not have proper basis to reject the two methodologies proposed by the Canadian respondents 
(which were rejected based on thi s erroneous view).1093 
7.543.   Based on the above, we conclude that the USDOC did not have proper basis to conclude that 
stand -as-a-whole pricing was not a prevailing market condition in British  Columbia , and thus had no 
basis to not take into account this condition  when adjusting its benchmark to reflect the prevailing 
market conditions in British  Columbia . Therefore, we consider that the USDOC failed to provide a 
reasoned and adequate explanation of why it could not account for stand -as-a-whole pricing as a 
prevail ing market condition, as required by Article  14(d)  of the SCM  Agreement.  
7.7.3.2.4   Transportation costs  
7.544.   The parties do not disagree that in comparing its benchmark based on log prices in eastside  
Washington to the stumpage prices reported by Canadian respondents, the USDOC did not take into 
account the higher transportation costs paid by the Canadian respond ents to bring their finished 
lumber products to major lumber -consuming markets relative to producers in eastside Washington. 
However, the parties disagree on whether Article  14(d)  of the SCM  Agreement required the USDOC 
to take such higher transportation c osts into account and adjust for such costs . 
7.545.   Canada acknowledges that Article  14(d)  refers to determination of the adequacy of 
remuneration in relation to the prevailing market conditions for the "good", and that the "good" 
provided by the government in th is case was "standing timber" and not lumber.1094 However, Canada 
contends that the higher cost of transporting lumber from the British Columbia interior  to major 
lumber -consuming markets compared to the relatively lower costs incurred by lumber producers in  
eastside Washington reduces the residual value of standing timber in British  Columbia  relative to 
eastside  Washington.1095 In particular, Canada submits that the need to make this type of 
adjustment arises from the USDOC's  choice to use a derived demand met hodology wherein it derived 
the demand for standing timber from the value of downstream products.1096 In support of its view, 
Canada refers to submissions made by the Government of British  Columbia  before the USDOC, 
including the statement by Jendro and Hart that average freight costs for BC lumber tend to be 
higher than average freight costs for lumber p roduced in the United States PNW, and that the freight 
cost differential lowers the value of British  Columbia  logs in relation to US logs.1097 
 
1093 In addition, we hav e also concluded in paragraph 7.585  below that a transaction -specific analysis 
wherein the USDOC compared the benchmark price of each species with the  species -specific price reported by 
the Canadian respondents but did no t aggregate all comparison results, positive as well as negative , is not 
consistent with Article  14(d) of the SCM Agreement.  
1094 Canada's  response to Panel question No. 108, para.  306. 
1095 Canada's  response to Panel question No. 108, para.  306. 
1096 Canada's  response to Panel question No. 108, para.  309. 
1097 Canada's  first written submission, para.  733 (referring to Jendro and Hart Report , 
(Exhibit  CAN-20 (BCI)), section V.3.2, p.  33). WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  7.546.   The United States notes that Article  14(d)  provides that the adequacy of remuneration will 
be determined in relatio n to prevailing marketing conditions for the good in the country of provision. 
The United States argues that this shows that Article  14(d)  unambiguously refers to the 
government -provided input, which in this case is standing timber and not lumber.1098 The 
United States submits that Canada does not present any basis to adjust transportation costs for a 
downstream good (i.e. lumber),  which is different from the government -provided input (i.e. standing 
timber).1099 According to the United States, the relevant tran sportation cost is that of moving a 
timber input to the respondent's  sawmill, not the respondent's  cost for shipping lumber to a 
purchaser in the United States.1100 
7.547.   The issue before us is whether the USDOC acted inconsistently with Article  14(d)  of the 
SCM Agreement in not taking into account the higher transportation costs paid by the Canadian 
respondents to bring their lumber products to major lumber -consuming markets relative to 
producers in eastside Washington.  
7.548.   We note that Article  14(d)  provides that inv estigating authorities shall determine the 
adequacy of remuneration in relation to the prevailing market conditions for the good in the country 
of provision. The good in question is standing timber, as the parties agree.1101 To be consumed, 
standing timber m ust move from the stand to the roadside and the roadside to the mill in the form 
of harvested logs resulting in transportation costs. In other words, the good in question, i.e. standing 
timber, simply cannot be accessed or used by a sawmill without transpo rtation of harvested logs 
from a timber stand to the sawmill. We also note that the parties agree that transportation costs for 
logs were adjusted by the USDOC.1102 Instead, the question here is whether the USDOC should have 
provided an adjustment for the di fference in costs for transporting lumber, a product further 
downstream, from sawmills to major lumber -consuming markets incurred by producers in 
British  Columbia  compared to the relatively lower transportation costs incurred by lumber producers 
in eastern  Washington. In our view, costs incurred by that sawmill subsequently, such as the cost 
for transporting finished lumber products to the lumber market, are not a part of the inquiry that an 
investigating authority is required to undertake under Article 14( d) of the SCM Agreement. 
Therefore, we do not consider that Canada has shown why the USDOC acted inconsistently with 
Article 14(d) in failing to make adjustments for higher transportation expenses incurred in bringing 
lumber to market in British  Columbia  compared to the corresponding costs in Washington.  
7.549.   While it may well be undisputed that, as Canada submits, the value of logs and stumpage is 
affected by the cost to transport lumber to the market, this does not necessarily mean that the 
USDOC was required  pursuant to Article  14(d)  to make an adjustment for such a cost. Indeed, it is 
entirely possible that costs to transport not just lumber but also downstream products made from 
lumber may ultimately affect the price of stumpage. However, as discussed above , Article  14(d) 
specifically refers to prevailing market conditions of the "good" (and not the downstream products)  
and therefore does not require investigating authorities to take into account costs associated with 
transporting downstream products such as  lumber to market.  
7.550.   Finally, considering such type of transportation expenses are not uniform but would vary 
depending on how far a particular lumber producer is from one or more of the major 
lumber -consuming markets, it is doubtful that an investigating au thority could make its benefit 
determination with any degree of precision if it were required to make adjustments for such type of 
costs to the benchmark.  
7.551.   Based on the above, we consider that Canada has failed to establish that the USDOC acted 
inconsistent ly with Article  14(d)  of the SCM  Agreement by not taking into account the higher 
 
1098 United States'  first written submission, para.  467. 
1099 United States'  first written submission, para.  467. 
1100 United States'  first written submission, para.  469. 
1101 Canada, as noted above, does not dispute that the relevant "good" here is standing timber and not 
downstream products. (Canada's  response to Panel question No. 108, para.  306).  
1102 In the underlying investigation, the USDOC used a derived demand methodology  wherein it derived 
prices of standing timber from Washington log prices, to determine the adequacy of remuneration with respect 
to standing timber (i.e. the good). The United States submits (and Canada does not dispute)  that the USDOC 
accounted for the co st of transporting a harvested log from the stand to the roadside and the roadside to 
the mill. (United States'  first written submission, para.  469).  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  transportation cost to bring their lumber products to major lumber -consuming markets than 
producers in eastside Washington.  
7.7.4   Conclusion  
7.552.   Based on the above, we find as follows:  
a. Canada has not established that the Washington log benchmark was per se  inconsistent 
with Article  14(d)  because of the differences in  market conditions between Washington 
and British  Columbia . 
b. Canada has not established that the USDOC acted inconsistently with Article  14(d)  by 
failing to make an adjustment for the higher cost incurred by the BC respondents for 
transporting lumber to major lumber markets.  
c. The USDOC acted inconsistently with Article  14(d)  of the SCM  Agreement by failing to 
make adjustments fo r the following factors to ensure that the Washington log benchmark 
was comparable with the financial contribution at issue:  
i. conversion factors;  
ii. portion of utility -grade logs in the harvest of Canadian respondents that would have 
been graded as utility;  and 
iii. beetle -killed timber prices in the Washington log benchmark . 
7.553.   The USDOC did not have proper basis to conclude that stand -as-a-whole pricing was not a 
prevailing market condition in British  Columbia , and thus had no basis to not take into account this 
condition when adjusting its benchmark to reflect the prevailing market conditions in 
British  Columbia . 
7.8  Whether the USDOC improperly set certain results of comparisons between the prices 
of the examined  transactions and the corresponding benchmark prices to zero in 
determining the adequacy of remuneration  
7.554.   Canada claims that the USDOC acted inconsistently with Articles  1.1(b), 14(d), 19.3, 
and 19.4 of the SCM  Agreement and Article  VI:3 of the GATT 1994 in  calculating the amount of 
benefit conferred on investigated producers in New Brunswick  and British  Columbia  by setting -to-
zero all negative results obtained on comparing an examined transaction with the corresponding 
benchmark price.1103 Canada contends tha t this method of benefit calculation led to results that were 
not related to the prevailing market conditions for the good in question and to imposition of 
countervailing duties in inappropriate amounts. The United  States asks the Panel to reject 
Canada's  claims arguing that nothing in the SCM  Agreement or the GATT 1994 prevented the USDOC 
from applying the methodology that it had used to calculate the amount of benefit conferred on 
investigated producers in New Brunswick  and British  Columbia .1104  
7.8.1   Factual as pects  
7.555.   In calculating the benefit conferred by New Brunswick 's provision of standing timber to 
Irving, i.e. the investigated producer in New Brunswick , the USDOC compared each of 
Irving's  individual purchases of Crown -origin timber to Irving's  monthly avera ge private stumpage 
purchase prices in Nova Scotia . For purchases where the transaction -specific Crown stumpage price 
in New Brunswick  was higher than the corresponding monthly average private market price in 
Nova Scotia , the USDOC set the benefit amount t o zero. The USDOC then summed the remaining 
transaction -specific benefits to calculate the total benefit.1105 
 
1103 Canada's  first written submission, paras.  919-920.  
1104 United  States'  first written submission, para.  473. 
1105 Irving final calculation, (Exhibit CAN -264 (BCI)), pp.  4-6. WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  7.556.   In the case of British  Columbia , the USDOC determined the annual average price for Crown 
timber purchased by investigated producers, classifying pur chases based on timbermark1106 and 
species. The USDOC compared these annual average timbermark/species -specific prices for each 
investigated producer in British  Columbia  to the corresponding annual average species -specific 
benchmark prices from Washington St ate interior. Where the annual average 
timbermark/species -specific stumpage price in British  Columbia  was more than the annual average 
benchmark price for that species in Washington State, the USDOC set the benefit conferred to zero. 
The USDOC then added t ogether all timbermark/species -specific benefits for each investigated 
producer to calculate the overall benefit.1107  
7.8.2   Evaluation  
7.557.   Canada claims that the benefit calculation methodology that the USDOC applied in relation 
to the government provision of timber in New Brunswick  and British  Columbia  was inconsistent with 
Articles  1.1(b), 14(d), 19.3, and 19.4 of the SCM  Agreement, and Article  VI:3 of the GATT 1994, 
because this methodology made the benefit calculation less accurate and less related to prevailing 
market conditions.1108  
7.558.   Canada argues that Article  14(d)  of the SCM  Agreement requires an investigating authority 
to ensure that its method for calculating the benefit conferred relates to the prevailing market 
conditions in the country of provision .1109 Canada  contends that the USDOC's  benefit calculation 
methodologies in respect of New Brunswick  and British  Columbia  did not satisfy this requirement. 
The United  States argues that the SCM  Agreement does not require an investigating authority to 
"provide a credit" for instances in which other financial contributions do not confer a benefit.1110 
Relying on the findings of the panel in US – Anti-Dumping and Countervailing Duties (China) , the 
United  States asserts that Article  14(d)  of the SCM  Agreement contains no reference to any notion 
of offsetting "negative benefits"  or of averaging comparison results across the POI.1111  
7.8.2.1   Legal basis for Canada's  claims  
7.559.   Canada claims that by setting certain comparison results to zero, the USDOC acted 
inconsistently with Articles  1.1(b), 14(d), 19 .3, and 19.4 of the SCM  Agreement and Article  VI:3 of 
the GATT 1994.1112 In response to a questio n from the Panel regarding whether Canada's  claims 
under other provisions of the SCM  Agreement and the GATT 1994 were consequential to 
Canada's  claims under Article  14(d)  of the SCM  Agreement, Canada explained that it has made the 
following three independe nt claims regarding the USDOC's  decision to set certain comparison results 
to zero:   
a. the USDOC failed to assess the adequacy of remuneration in relation to prevailing market 
conditions as required under Article  14(d)  of the SCM  Agreement;  
b. the USDOC impose d countervailing duties in excess of the amount of subsidy found to 
exist inconsistently with Article  19.4 of the SCM  Agreement and Article  VI:3 of the 
GATT  1994; and  
c. the USDOC acted inconsistently with Article  19.3 of the SCM  Agreement as it imposed 
countervailing duties in amounts that are not "appropriate".  
 
1106 A timbermark is used to identify the specific cutting authority or geographic area where the timber 
is harvested. (Canada's  first written submission, fn 1577).  
1107 USDOC  calculation memo, Tol ko, (Exhibit CAN -381 (BCI)), pp.  5-7; USDOC  calculation memo, 
West Fraser, (Exhibit CAN -382 (BCI)), p.  4; and USDOC  calculation memo, Canfor, (Exhibit CAN -380 (BCI)), 
pp. 3-4.  
1108 Canada's  first written submission, paras.  919-920.  
1109 Canada's  first written submission, para.  924 (referring to Appellate  Body Report, US – Softwood 
Lumber IV , para.  96).  
1110 United  States'  first written submission, para.  473.  
1111 United  States'  first written submission, para.  480 (referring to Panel Report, US – Anti-Dumping and 
Countervailing Duties (China) , para.  11.47).  
1112 Canada's  first written submission, para.  920.  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  Canada also specified that its claim under Article  1.1(b)  of the SCM  Agreement is consequential to 
these claims.1113 
7.560.   We note that even though Canada asserts that it has made independent claims under 
provisions other than Article  14(d)  of the SCM  Agreement, its substantive arguments explaining how 
the USDOC erred by setting certain comparison results to zero overwhelmingl y rely on language 
used in Article  14(d)  of the SCM  Agreement. Canada's  arguments are principally based on its view 
that the benefit calculation method used by the USDOC yielded a result that was not related to the 
prevailing  market conditions  in the Canad ian provinces in question. We also note that, while Canada 
has identified language in Article  14(d)  of the SCM  Agreement in light of which, in Canada's  view, 
an investigating authority may be required to aggregate all comparison results , positive as well a s 
negative,  in certain circumstances, it has not identified any basis in the text of other provisions from 
which the existence of such an obligation could independently be inferred. We therefore consider 
that Canada's  claim that the setting of certain comp arison results to zero by the USDOC violated 
Articles  19.3 and 19.4 of the SCM  Agreement because it resulted in imposition of countervailing 
duties in amounts that were not "appropriate" and were "in excess of the amount of subsidy found 
to exist" respecti vely, depends on the existence of an obligation under Article  14(d)  that the USDOC 
violated in this case. We consider that if an obligation due to which the USDOC was required to 
aggregate all comparison results, positive and negative, does not exist in Ar ticle 14(d)  itself, the 
USDOC cannot be found to have violated Articles  19.3 or 19.4 for that reason. In this regard, we 
agree with the United  States'  argument that reading an obligation concerning an aspect of benefit 
calculation methodology into Articles  19.3 or 19.4 if that obligation does not exist in Article  14 itself, 
would be tantamount to overriding a provision that bears specifically upon benefit calculation 
(i.e. Article  14), with provisions that do not explicitly bear upon benefit calculation (i. e. Articles  19.3 
and 19.4).1114 Thus, an obligation concerning a benefit calculation methodology that is not present 
in Article  14(d)  of the SCM  Agreement cannot be read into Article  19.3 or Article  19.4 of the 
SCM Agreement, as doing so would run contrary t o the principle that a general provision cannot 
override a specific provision.   
7.561.   We therefore consider Canada's  claim under Article  14(d)  of the SCM  Agreement to be its 
principal claim in respect of the USDOC's  decision to set certain comparison results to zero, and 
deem Canada's  claims under other provisions of the SCM  Agreement and the GATT 1994 to be 
dependent on the outcome of Canada's  principal claim. We thus begin our analysis by examining 
whether Canada has established that Article  14(d)  required the USDOC to aggregate all comparison 
results , positive as well as negative.   
7.562.   We note that the text of Article  14(d)  of the SCM  Agreement does not explicitly require an 
investigating authority to follow any particular method for determining the adequacy of 
remuneration. The chapeau  of Article  14 explicitly characterizes the rules set forth in the 
four subparagraphs of Article  14 as "guidelines". In this respect, we note that past panels and the 
Appellate  Body have consistently found that these "guidelines" esta blish the basic framework for the 
calculation of benefit, but also leave a considerable amount of leeway to investigating authorities as 
to precisely how those calculations are to be undertaken in any given case, depending on the specific 
facts under consi deration.1115 We agree and consider that nothing in Article  14(d)  of the 
SCM Agreement sets out a general rule requiring investigating authorities to aggregate all 
transaction -to-benchmark comparison results , positive as well as negative  (aggregate all compa rison 
results). This interpretation of Article  14(d)  of the SCM  Agreement is the same as that adopted by 
the panel in US – Anti-Dumping and Countervailing Duties (China) , which was a case where the 
question whether Article  14(d)  of the SCM  Agreement requir es aggregation of all comparison results 
was examined. We note that the panel in that case found that within the basic "guideline" that "[t]he 
adequacy of remuneration shall be determined in relation to prevailing market conditions", an 
investigating autho rity can exercise the methodological flexibility accorded to it under Article  14 so 
as to appropriately take into account the specific facts of the investigation.1116 The panel further 
noted that the term "prevailing market conditions for the good in questio n" means that the 
benchmark selected by the investigating authority must correspond to a factual situation found to 
 
1113 Canada's  response to Panel  question No. 116, paras.  317-320; second written submission, 
para. 283.  
1114 United  States'  second written submission, para.  330.  
1115 Panel Report, US – Anti-Dumping and Countervailing Duties (China) , para.  11.55; Appellate  Body 
Reports, US – Softwood Lumber IV , paras.  91-92; Japan – DRAMs (Korea) , para.  191.  
1116 Panel Report, US – Anti-Dumping and Countervailing Duties (China) , para.  11.56.   WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  exist in respect of the government -provided good – a requirement that circumscribes the 
methodological flexibility afforded to investigating  authorities.1117 Although the panel in that case 
did not find Article  14(d)  to set out a general obligation requiring investigating authorities to 
aggregate all comparison results, the panel also foresaw the possibility that in certain factual 
circumstances , an investigating authority might be required to undertake such aggregation. The 
panel found:  
We consider that there could be certain situations in which some sort of grouping or 
averaging of transactions might be necessary in order to arrive at a determi nation of 
the amount of the benefit. Examples might include where a given set of transactions 
was made pursuant to a contract, or possibly where the actual prices paid to the 
government fluctuated slightly around the market benchmark(s)  over the entire per iod 
of investigation.1118  
7.563.   We agree with this finding of the panel in US – Anti-Dumping and Countervailing 
Duties  (China) . We consider that the question before us is whether, despite there being no general 
rule requiring aggregation of comparison results, anything in the fact pattern of the case before the 
USDOC suggested that the USDOC ought to have aggregated all comparison results in this particular 
case. We note in this regard that Canada has only sought to establish violations of the 
SCM Agree ment and the GATT 1994 by the USDOC "on these specific facts".1119 
7.8.2.2   Whether the USDOC's  determination was consistent with Article  14(d)  of the 
SCM Agreement  
7.564.   Considering that there is no general requirement in Article  14(d)  of the SCM  Agreement for 
investigati ng authorities to aggregate all comparison results, but that doing so may be necessary 
for the investigating authority in certain circumstances for fulfilling the requirements of Article  14(d), 
we proceed to examine whether Canada has shown that the facts of this particular case were such 
that the USDOC ought to have aggregated all comparison results. We note that Canada has advanced 
claims concerning this aspect of the USDOC's  benefit calculation methodology as applied to 
two provinces – New Brunswick  and British  Columbia . We will analyse arguments put forth by 
Canada in the context of New Brunswick  first, and then consider the case of British  Columbia . 
However, before examining Canada's  arguments concerning the two provinces individually, we 
analyse certai n issues pertinent to our assessment of Canada's  claims in respect of both provinces.  
7.8.2.2.1   Issues common to Canada's  claims concerning New Brunswick  as well as 
British  Columbia   
7.565.   In this section, we examine the parties'  submissions on two issues that cut across  
Canada's  claims in respect of both New Brunswick  and British  Columbia . First, we examine whether 
Canada has shown that the obligation under Article  14(d)  of the SCM  Agreement for an investigating 
authority to determine the adequacy of remuneration in rela tion to prevailing market conditions for 
the good in question applies not just to the selection of a benchmark, but also to all other aspects 
of the authority's  benefit calculation methodology. Second, we examine whether the USDOC, in this 
case, conducted the subsidy investigati on on a transaction -specific basis, or a programme -wide 
basis. We also explain in our analysis below how these issues are pertinent to Canada's  claims.  
 
1117 Panel Report, US – Anti-Dumping and Countervailing Duties (China) , para.  11.56.  
1118 Panel Report, US – Anti-Dumping and Countervailing Duties (China) , para.  11.66.  
1119 Canada's  second written submission, paras.  283 and 293. The United  States points to certain 
statements made by Canada in its submissions that, in the United  States'  view, reveal that Canada has 
adopted two contradictory positions. (United States' second w ritten submission, paras.  305-307 (quoting 
Canada's  opening statement at the first meeting with the Panel (28  February  2019), para.  90; and first written 
submission, para. 940)). The United  States highlights that on the one hand, Canada has asserted that i t is not 
"arguing that subsidies may be offset by transactions that are not subsidized" but has on the other hand 
effectively argued that the USDOC was required to provide offsets for negative comparison results in the 
benefit calculation by asserting that  "[o]nly by aggregating the results of its comparisons, without first zeroing 
negative comparison results" could the USDOC have reached an accurate benefit determination. We consider 
Canada's  position to be that, while aggregation of all comparison results  is not required under the 
SCM Agreement as a general rule in all circumstances, such aggregation was required in context of the specific 
facts at hand, in order to make a benefit determination consistent with the SCM  Agreement.  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  7.8.2.2.1.1   Whether the obligation to assess adequacy of remuneration "in relation to 
prevai ling market conditions" applies to all aspects of the benefit calculation method  
7.566.   Responding to Canada's  reliance on the term "prevailing market conditions" in support of its 
claim, the United  States argues that the issue of whether an investigating authori ty is required to 
"provide offsets" for instances where no benefit was conferred is "totally unrelated to prevailing 
market conditions", as that step takes place after the prevailing market conditions have been taken 
into account in the selection and match ing of transactions and benchmarks, and after "transactions 
and benchmarks have been compared".1120 In other words, the United  States contends that the 
concept of "prevailing market conditions" is not relevant for the process of determining the adequacy 
of remuneration after a benchmark has been selected and comparisons have been made. In its 
subsequent submissions, however, the United  States stated that it "does not disagree" with 
Canada's  argument that "all steps of the benefit calculation that an investiga ting authority uses" 
must conform to the requirements of Article  14(d)  of the SCM  Agreement.1121 In this regard, Canada 
has contended that the benchmark selected, as well as the method for comparison of the benchmark 
to the examined transactions, have to rel ate to prevailing market conditions.1122 We recall that 
Canada claims that the USDOC failed to determine the adequacy of remuneration in relation to 
prevailing market conditions  by setting -to-zero negative comparison results between an examined 
transaction a nd the benchmark price, i.e. an aspect of benefit calculation methodology other than 
selection of the benchmark price. We must therefore determine if Canada has shown a basis in the 
text of the SCM  Agreement in support of its view that as a matter of law, the requirement to 
determine the adequacy  of remuneration  in relation to prevailing market conditions applies not only 
to the selection of  a benchmark, but to all aspects of an investigating authority's  methodology.  
7.567.   We note that Canada relies on the phras e "any such method" in the chapeau  of Article  14 of 
the SCM  Agreement in support of its view that the requirement to determine the adequacy of 
remuneration in relation to prevailing market conditions applies to all aspects of the investigating 
authority's  benefit calculation methodology. The chapeau  of Article  14(d), in relevant part, provides:  
For the purpose of Part V, any method used by the investigating authority to calculate 
the benefit to the recipient conferred pursuant to paragraph 1 of Article  1 shall be 
provided for in the national legislation or implementing regulations of the Member 
concerned and its application to each particular case shall be transparent and 
adequately explained. Furthermore, any such method shall be consistent with the 
followi ng guidelines[.]  
Canada argues that "any such method" in the second sentence of the chapeau  refers to the method 
used by the investigating authority to calculate the benefit to the recipient pursuant to paragraph 1 
of Article  1 of the SCM  Agreement. Canada  further argues that the method uses to calculate benefit 
conferred in the form of government provision of goods must be consistent with the guidelines set 
out in Article  14(d)  of the SCM  Agreement, which oblige an investigating authority to assess the 
adequacy of remuneration in relation to the prevailing market conditions for the good in question. 
As neither the text of the chapeau  of Article  14 nor of Article  14(d)  restrict the meaning of "method 
used" to the selection of a benchmark, all aspects of the methodology applied by an investigating 
authority must relate to the prevailing market conditions for the good in question.1123 We agree with 
Canada's  reading of Article  14 of the SCM  Agreement, and, as noted above, the United  States does 
not disagree. We consider that Canada has properly established that the reference to "any method 
used" in the chapeau  of Article  14, read with t he guidelines in Article  14(d)  of the SCM  Agreement 
require that all aspects of the methodology applied by an investigating authority in determining the 
adequacy of remuneration must relate to the prevailing market conditions for the good in question.  
7.568.   We n ote that this reading of Article  14 of the SCM  Agreement is in keeping with the 
Appellate  Body's  finding in Japan – DRAMs (Korea) , that the chapeau  of Article  14 requires that any 
method used by an investigating authority shall be consistent with the guide lines contained in 
paragraphs (a) -(d) of Article  14.1124 As Canada points out and we agree, the Appellate  Body in that 
 
1120 United  States'  second wr itten submission, paras.  317 and 328.  
1121 United  States'  comments on Canada's  response to Panel question No.  266, para.  252; 
Canada's  response to Panel question No.  266, paras.  392-393.  
1122 Canada's  first written submission, para.  924.  
1123 Canada's  response to Panel question No.  266, paras.  391-393.  
1124 Appellate  Body Report, Japan – DRAMs (Korea) , para.  190.  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  case also clarified that the determination of a benchmark is a "component[] or element[] of the 
method[] used" by an investigating authorit y to calculate the amount of benefit conferred, and that 
the determination of benchmark "in isolation" cannot be understood as being "the complete 'method 
used'  in calculating the amount of subsidy".1125 We therefore consider that all aspects of an 
investiga ting authority's  benefit determination methodology must conform to the guideline in 
Article  14(d)  of the SCM  Agreement that the adequacy of remuneration must be assessed in relation 
to the prevailing market conditions for the good in question. In our view,  any aspect of the benefit 
determination methodology that detracts the investigating authority from this guideline in a given 
set of facts can potentially give rise to a violation of Article  14(d)  of the SCM  Agreement.  
7.8.2.2.1.2   Whether the USDOC conducted the subs idy investigation on a 
transaction -specific basis or a programme -wide basis  
7.569.   We note that refuting Canada's  claim, the United  States also argues that the SCM  Agreement 
permits investigating authorities to analyse the existence of a subsidy on a transaction -by-
transaction basis, as Article  1.1(a)  of the SCM  Agreement provides that a subsidy shall be deemed 
to exist if there is a financial contribution and a benefit is thereby conferred, using the terms 
"subsidy ", "financial contribution ", and "benefit " in the  singular form.1126 According to the 
United  States, each time British  Columbia  and New Brunswick  provided standing timber to one of 
the respondents for less than adequate remuneration, a benefit was conferred and a subsidy was 
deemed to exist.1127 The United  States contends that as the SCM  Agreement does not require an 
investigating authority to diminish the amount of benefit conferred by one subsidy if other financial 
contributions do not confer a benefit, those instances where Canadian provinces provided timb er for 
adequate remuneration were irrelevant.1128 Thus, in the United  States'  view, the USDOC was not 
obligated to provide a credit for instances where the Canadian provinces did not provide a subsidy 
in an examined transaction.1129  
7.570.   Responding to this argumen t from the United  States, Canada argues that the USDOC did not 
actually analyse each transaction as a separate financial contribution and a separate subsidy, but 
rather conducted its investigation on a programme -wide basis and calculated subsidy rates for 
programmes as a whole.1130 Canada points to the following elements of the USDOC's  investigation 
and the determination as the basis for its argument that the USDOC examined the existence of 
subsidy on a programme -wide basis : (a) the initiation checklist, whic h stated that "[f]or each 
program, Petitioner alleged the elements of a subsidy" and described the programmes at issue as 
"Government of British  Columbia  Provision of Stumpage for [Less than Adequate Remuneration]" 
and "Government of New Brunswick  Provisio n of Stumpage for [Less than Adequate 
Remuneration]"1131; (b) the USDOC's  findings in the preliminary and the final determinations that 
"the provincial stumpage programs constitute a financial contribution in the form of a good, and that 
 
1125 Canada's  response to Panel question No.  266, para.  393 (referring to Appellate  Body Report, 
Japan  – DRAMs (Korea) , para.  195). We note that in support of its view that an investigating 
authority's  method for comparing the benchmark to the examined transaction must relate to the prevailing 
market conditions, Canada also cites to the obse rvation of the Appellate  Body in US – Softwood Lumber IV  that 
Article  14(d)  of the SCM  Agreement "requires that the method selected  for calculating the benefit must relate 
or refer to, or be connected with, the prevailing market conditions in the country o f provision". 
(Canada's  first written submission, para.  924 (referring to Appellate  Body Report, US – Softwood Lumber IV , 
para. 96 (emphasis added by Canada))). We note that while the Appellate  Body did refer to "the method 
selected for calculating benefit " in the quote cited to by Canada, the Appellate  Body was not explicitly 
examining the issue of whether the term "prevailing market conditions" pertains only to the selection of the 
benchmark or applies also to the benefit calculation method as a whole. Ra ther, when making that observation, 
the Appellate  Body was examining the question of whether the benchmark has to be a private price in the 
country of provision of the good in question in all circumstances.  
1126 United  States'  first written submission, para.  491; second written submission, para.  323. 
1127 United  States'  opening statement at the first meeting of the Panel (28  February  2019), para.  16.  
1128 United  States'  opening statement at the first meeting of the Panel (28  February  2019), para.  16. 
1129 United  State s' first written submission, para.  491.  
1130 Canada's  response to Panel question No.  265, para.  384. Canada also argues that the 
United  States'  argument that each transaction could constitute a separate subsidy would require an 
investigating authority to sel ect a benchmark that corresponds to the particular transaction being examined, 
which the USDOC did not do. (Canada's  second written submission, para.  292). We note that Canada's  claims 
being examined in this section do not concern whether the USDOC's  selection of a benchmark was consistent 
with the requirements of Article  14(d)  of the SCM  Agreement. Therefore, we will not examine the merits of this 
particular argument offered by Canada.  
1131 USDOC initiation checklist , (Exhibit CAN -384), pp.  8 and 19.  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  the provinces are pr oviding the good, i.e., standing timber, to lumber producers"1132; (c) the 
USDOC's  findings with respect to specificity that "the stumpage programs at issue are specific within 
the meaning of section 771(5A)(D)(iii)(I)  of the Act"1133; (d) the USDOC's  selection of a single 
benchmark for each of the investigated programmes; (e)  USDOC's  calculation of a single "net 
subsidy rate" for each programme, using as the numerator the respondents'  softwood sawmill 
purchases of Crown timber during the POI and as the denominator the respondents'  total softwood 
lumber and softwood co -product sales; and (f)  the fact that USDOC's  analysis concerning whether 
the subsidy amount was de minimis  was conducted on a programme -wide basis.1134  
7.571.   The United  States c ontends that the USDOC established the existence of both 
transaction -specific benefits, as well as the total benefit of the stumpage programmes, for each 
examined producer.1135 The United  States, pointing to the record, explains that the USDOC summed 
the tra nsaction -specific benefits to calculate the total benefit for the programme with respect to each 
respondent.1136 We consider that, even though the USDOC may have calculated the benefit amount 
on a transaction -specific as well as a programme -wide basis, the e lements of the 
USDOC's  determination that Canada has pointed to clearly suggest that the USDOC was examining 
the existence of a countervailable subsidy on a programme -wide basis and not on a 
transaction -specific basis. In particular, the fact that the USDO C calculated the subsidy rate for each 
programme using as the numerator respondents'  total softwood sawmill purchases of Crown -origin 
standing timber during the POI, and not only the sawmill purchases made via transactions that 
yielded a positive result wh en compared to the benchmark price, shows that the USDOC was making 
a subsidy determination in respect of the programme as a whole. We therefore reject the 
United  States'  argument that the USDOC was not required to aggregate all comparison results 
because each transaction was an independent financial contribution, and hence potentially an 
independent countervailable subsidy. We consider that the USDOC did not in fact treat individual 
transactions as freestanding countervailable subsidies in this case, as th e underlying determinations 
indicate that the USDOC was examining the existence of a countervailable subsidy over the POI on 
a programme -wide basis.  
7.8.2.2.2   Whether the USDOC violated Article  14(d)  by setting certain comparison results 
to zero in its benefit deter mination for New Brunswick 's provision of stumpage  
7.572.   Canada notes that the USDOC compared individual purchases  of Crown -origin standing 
timber in New Brunswick  to a monthly average of certain private transactions in Nova Scotia  to 
calculate the benefit. Acco rding to Canada, the outcome of a comparison of a particular individual 
transaction to a benchmark comprising an average of multiple transactions would capture the 
difference in the "wide range of price, quality, harvesting, geographic and other market con ditions" 
that pertained to Nova Scotia  transactions from which the benchmark was derived on the one hand, 
and those pertaining to the time and place of the particular transaction under consideration on the 
other.1137 In Canada's  view, such a methodology woul d yield an accurate and reasonable benefit 
calculation only if all individual comparison results are aggregated, because such aggregation 
carefully matches average transaction conditions to average benchmark conditions.1138 Canada 
asserts that the USDOC erre d by setting -to-zero any comparison results where the transaction price 
was below the benchmark price, as this compromised the averaging effect of the aggregation of 
individual results, thereby making the benefit assessment less related to the prevailing m arket 
conditions.1139 The United  States contends that Canada has failed to establish that anything about 
the factual situation in New Brunswick  supports the conclusion that the USDOC ought to have 
"provided offsets" for individual financial contributions tha t did not confer a benefit when it 
aggregated benefit amounts for individual financial contributions that did confer a benefit.1140  
7.573.   Having found that as a matter of law, Article  14 of the SCM  Agreement requires the method 
applied by an investigating authori ty to determine the adequacy of remuneration in relation to the 
 
1132 Preliminary determination, (Exhibit CAN -8), p. 25; Final determination, (Exhibit CAN -10), p.  38. 
1133 Preliminary determination, (Exhibit CAN -8), pp.  25-26.  
1134 Preliminary determination, (Exhibit CAN -8), p.  51; Canada's  response to Panel question No.  265, 
paras.  385-388; and second written submission, fn 479.  
1135 United  States'  response to Panel question No.  265, para.  375.  
1136 United  States' response to Panel question No.  265, paras.  376-379.  
1137 Canada's  first written submission, para.  929; second written submission , paras.  288-289.  
1138 Canada's  first written submission, para.  930; second written submission, para.  290.  
1139 Canada's  first written submission, para.  931.  
1140 United  States'  comments on Canada's  response to Panel question No.  268, para.  257.  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  prevailing market conditions for the good in question, we proceed to examine whether Canada has 
established that in the case at hand, the USDOC failed to satisfy this obligation by setting -to-zero 
the negative comparison results between examined transactions and the benchmark price. We agree 
with Canada that in the facts of this particular case, the USDOC's  setting -to-zero of comparison 
results where the transaction price was lower than the ben chmark price (negative comparison 
results)  was inconsistent with Article  14(d)  of the SCM  Agreement. This is because, as Canada 
explained, by setting -to-zero negative comparison results, the USDOC calculated a benefit amount 
that included price differences  that arise solely due to the asymmetry between average geographic 
conditions of various private transactions based on which the benchmark price was calculated on 
the one hand, and the specific geographic conditions relating to the individual transactions that were 
priced less than the benchmark price on the other. In other words, this method would capture as 
benefit any difference between the examined transaction price and the average benchmark price, 
including those differences attributable to variation i n prevailing market conditions.  The USDOC 
ought to have adopted a methodology that addressed this asymmetry, which is inherent to 
comparisons of individual transactions to average benchmark, due to the practical reality that timber 
prices vary significantl y depending on factors such as whether timber is located on a steep slope or 
a flat stretch of land, or the distance of a timber stand from the sawmill to which logs have to be 
transported. An aggregation of all comparison results without zeroing would hav e achieved a result 
that reflects average market conditions on either side of the comparison, and hence resolved the 
asymmetry that arises due to the comparison of an individual transaction to a benchmark derived 
by averaging several transactions.  
7.574.   We note  that the requirement in Article  14(d)  that the adequacy of remuneration be 
determined in relation to the prevailing market conditions " for the good or service in question " also 
supports Canada's  contention that by setting negative comparison results to ze ro, the USDOC in 
effect compared dissimilar things – i.e. a benchmark comprising private transactions taking place in 
a variety of geographic conditions and individual government transactions taking place in specific 
geographical conditions. By focusing on  "the good … in question", i.e. the government -provided 
good, Article  14(d)  instructs an investigating authority to be mindful not only of the prevailing 
market conditions under which private transactions from which the benchmark is derived take place, 
but also of the conditions under which the government -provided good was supplied to the 
investigated producer when determining the adequacy of remuneration. The following finding of the 
panel in US – Anti-Dumping and Countervailing Duties (China) , in which th e panel notes that the 
facts concerning the situation in which the government provides the good in question are also 
material to the process of benefit determination, supports this understanding:   
[W]e consider that the basic requirement of Article  14(d), as expressed by the phrase 
"prevailing market conditions for the good … in question … (including price, quality, 
availability, marketability, transportation and other conditions of purchase or sale )", is 
that the benchmark used must correspond to the particular good at issue, as it is 
actually sold, at the time of the transaction being analyzed (i.e., it must reflect the 
factual situation found to exist in respect of the government -provided good).1141 
7.575.   We therefore find that by setting the negative comparison results to zero in light of the 
specific facts of this case, the USDOC failed to assess the adequacy of remuneration in relation to 
the prevailing market conditions of the Crown timber provided to the investigated producer by 
New Brunswick .  
7.8.2.2.3   Whether the USDOC violated Article  14(d)  by setting certain comparison results 
to zero in its benefit determination for British  Columbia 's provision of stumpage  
7.576.   We now consider Canada's  claim that the USDOC erre d by setting -to-zero comparison results 
when the timbermark/species -specific transaction prices of Crown timber in British  Columbia  were 
higher than the benchmark price (negative comparison results). Canada claims that by 
setting -to-zero such comparison results, the USDOC acted inconsistently with the obligation in 
Article  14(d)  of the SCM  Agreement to determine the adequacy of remuneration in relation to the 
prevailing market conditions for the good in question for the following two reas ons:  
a. while the annual average benchmark used by the USDOC reflected a range of local supply 
and demand conditions spanning Washington interior, the respondent 
 
1141 Panel Report,  US – Anti-Dumping and Countervailing Duties (China) , para.  11.56.  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  companies'  purchases of species from specific timbermarks reflected only the local supply 
and de mand conditions, and transportation distances1142; and  
b. additionally, the USDOC's  deconstruction of the stand -as-a-whole price in British  Columbia  
into artificial species -specific prices followed by setting -to-zero of negative comparison 
results caused the U SDOC to arrive at inflated benefit determinations.1143 
7.577.   We note that the parties'  arguments regarding the first reason based on which Canada claims 
that the USDOC acted inconsistently with Article  14(d)  of the SCM  Agreement by setting negative 
comparison resu lts to zero when calculating the benefit conferred, are conceptually the same as 
those made in context of the claim concerning New Brunswick . Therefore, for reasons explained in 
section 7.8.2.2.2  above, we find that the USDOC erred by setting negative comparison results to 
zero in its benefit determination for provision of stumpage by British  Columbia . By so doing, the 
USDOC's  benefit determination capt ured the difference between the prevailing market conditions 
related to the specific place and time of a particular examined transaction on the one hand, and the 
average of a variety of the prevailing market conditions related to the multiple transactions from 
which the average benchmark price was derived on the other. Hence, the USDOC acted 
inconsistently with Article  14(d)  of the SCM  Agreement by failing to determine the adequacy of 
remuneration in relation to the prevailing market conditions for stumpage  provided to the 
investigated producers by British  Columbia .  
7.578.   We will now separately analyse the merits of the additional reason offered by Canada as a 
basis of its claim in respect of British  Columbia . We recall that Canada claims that the USDOC, by 
setting negative comparison results to zero when determining the benefit conferred by 
British  Columbia , failed to determine the benefit amount "based on how, in practice, the specific 
good in question is sold".1144 Canada asserts that stumpage is sold in British  Columbia  by the stand, 
and not by species, whereas the USDOC artificially constructed species -specific annual average 
transaction prices for any given timbermark.1145 Therefore, while the benchmark price reflected the 
annual average price for only one specie s, the purchase price for a stand reflected the average value 
of all of the species in that stand.1146 Canada contends that because the USDOC set -to-zero 
comparison results where the artificial species -specific transaction price exceeded the benchmark 
price,  the USDOC's  benefit calculation methodology failed to relate to the prevailing market condition 
that British  Columbia  prices and sells stumpage on the basis of the stand, and thus produced an 
inaccurate measure of the existence and the amount of any benef it conferred.1147 
7.579.   The United  States refutes Canada's  contention that the USDOC artificially constructed 
species -specific transaction prices and that British  Columbia  sold stumpage on a stand -as-a-whole 
basis.1148 Rather, the United  States contends that stumpag e invoices issued by British  Columbia  are 
issued o n a timbermark -specific basis with separate transaction lines for each species and grade 
combination.1149 Further, the United  States asserts that under the derived demand methodology it 
 
1142 Canada's  first written submission, para.  939. We note in this regard that the transactions that the 
USDOC examined were annual average prices for the provision of stumpage in a particular  timbermark, i.e. a 
stumpage stand in a particular geographic area. On the other hand, the USDOC's  benchmark price was an 
annual average of log prices from all over Washington interior. (Preliminary determination, (Exhibit CAN -8), 
pp. 52-53).  
1143 Canada's  first written submission, paras.  940-942.  
1144 Canada's  response to Panel question No.  267, para.  395 (quoting Panel Report, US – Anti-Dumping 
and Countervailing Duties (China) , para.  11.53).  
1145 We note in this regard that while British  Columbia sold stumpage  on a stand -as-a-whole basis, the 
USDOC constructed species -specific stumpage rates for each species in the stand, by notionally assuming the 
common stumpage rate for the whole stand to be the species -specific stumpage rate for each individual 
species in t hat stand. As an example, Canada points to a particular stumpage stand purchased by Canfor for 
which the stumpage rate was [[***]]. Canada shows that the USDOC notionally assumed the stumpage rate 
for each species to have been [[***]], and then compared the annual average stumpage price for each species 
calculated on this basis to an annual average species -specific benchmark price fr om Washington interior. 
(Canada's  opening statement at the first meeting of the Panel (28  February  2019), para.  86 (referring to 
Canada  presentation at first meeting ( 28 February 2019 ), (Exhibit CAN -528 (BCI)), p.  56)). See also,  
below,  para. 7.580 .  
1146 Canada's  first written submission, para.  938.  
1147 Canada's opening statement at the first meeting of the Panel (28  February 2019), paras.  87-88.  
1148 United States'  response to Panel question No.  273, para.  397.  
1149 United  States'  response to Panel question No.  273, para.  399.  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  employed to determine a benchmark, the species of a tree is integral to the value of that tree.1150 
The United  States posits that British  Columbia  itself uses the derived demand analysis in the 
MPS equation used to determine the selling price of a stand.1151 
7.580.   We first note that elsewhere in our Report, we have reached the view that the USDOC did 
not provide a proper basis to not consider stand -as-a-whole pricing as a prevailing market condition 
in British  Columbia .1152 While the United  States contends that stumpage invoices issued by 
British  Columbia  contain separate line items for each individual species in a stand, we agree with 
Canada that this does no t mean that the invoices contain prices determined on a species -specific 
basis.1153 Canada has established that the stumpage rate for each individual line item in the invoices 
referred to by the United  States is the same for all species in a stand.1154 In our view, it is abundantly 
clear that the formal reproduction of the same stumpage rate in different line items for different 
species was not a sign that British  Columbia  sold Crown timber at species -specific prices. Rather, it 
indicates that British  Columbia  applied the same stumpage rate to the whole stand. As we noted 
earlier in our report, British  Columbia  had explained to the USDOC that while the invoices included 
line items for each species with both volume and value figures, there were no unique, species -specific 
prices reported at the stand level for any sale in British  Columbia .1155 We also note that , even though 
the MPS equation does take into consideration the values and amounts of different species in each 
stand when fixing the price for that stand, British Columbia  eventually sells the stand at a single 
stumpage rate. Thus, we reject the United  States'  argument that the USDOC properly considered 
that British  Columbia  sells stumpage at species -specific prices. We consider that the USDOC 
notionally assum ed that British  Columbia  sold timber of different species in a stand at 
species -specific prices.1156 
7.581.   We also note the United  States'  argument that a species -specific benchmark would measure 
the adequacy of remuneration accurately, while a weighted -average co mbined species benchmark 
would not.1157 In this respect, we consider that Canada has not challenged in this claim the 
appropriateness of a species -specific benchmark. Rather, Canada contends that when comparing the 
benchmark that the USDOC chose to use to (notionally -assumed)  species -specific stumpage 
transaction prices in British  Columbia , the USDOC should not have set negative comparison results 
to zero. By so doing, Canada claims, the USDOC  failed to assess the adequacy of remuneration in 
relation to the  prevailing market conditions for Crown stumpage provided by British  Columbia . This 
is the question we next examine.  
7.582.   Canada asserts, and we agree, that the benchmark price reflected an average price for a 
single species, but the purchase price reflected a n average price for several species.1158 We also 
agree with Canada that British  Columbia 's application of the same average stumpage rate to each 
species in the stand meant that the higher -valued species were under -priced, because the average 
government price  also reflects the inclusion of lower -valued timber in the stand. Likewise, the 
 
1150 United  States'  response to Panel question No.  273, para.  399.  
1151 United  States'  response to Panel question No.  273, para.  400.  
1152 See, above,  para. 7.540 .  
1153 Canada's  comments on the United  States'  response to Pane l question No. 273, para.  328.  
1154 Canada's  comments on the United  States'  response to Panel question No. 273, paras.  328 and 330 
(referring to British  Columbia  initial questionnaire response , (Exhibit CAN -18 (BCI)), pp.  BC-I-175 
and BC-I-186; and Exhibit B C-S-124 of British  Columbia initial questionnaire response, (Exhibit USA -84), p.  4). 
1155 Canada's comments on the United States' responses to panel question Nos. 271 and 273(a), 
para. 331; United States' response to Panel question No. 273(a), para. 397. See  also, fn 1072 to para. 7.528 .  
1156 We also consider that the following observations of the panel in para. 11.63 of the Panel Report in 
US – Anti-Dumping and Countervailing Duties (China) , made in context of the panel's rejection of 
China's  proposed need for aggregation of all input prices approach, support our view:  
We note first that China does not conte nd that all of the different types of rubber were sold for a 
single, undifferentiated price. Nor does the record evidence indicate that this was the case. To 
the contrary, the record evidence shows that each type of rubber was sold as a specific, separate 
product with its own pricing, and that the tire producers maintained their purchase records 
separately for each type.  
We note that the panel in that case reached its conclusion on this issue based on its observation that China had 
not contended that "diffe rent types of rubber were sold for a single, undifferentiated price". This suggests that 
had the types of rubber in question been sold for a single, undifferentiated price, as was the case with standing 
timber of different species in a particular timbermar k in British  Columbia, the panel may have reached a 
different conclusion.  
1157 United  States'  response to Panel question No.  273, para.  399. 
1158 Canada's  opening statement at the first meeting of the Panel ( 28 February  2019), para.  86. WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  lower -valued species would be comparatively overpriced, because the higher -valued species in the 
stand would drive the average stumpage price within the stand higher.1159 This im plies that the 
USDOC, when examining any given stumpage sale transaction, was likely to find a benefit from the 
sale of the higher -valued species within the examined stand, while it was likely to find that the 
lower -valued species were priced higher than the benchmark price. Pursuant to the methodology it 
followed, the USDOC would add to the total benefit amount the result obtained on comparing the 
notionally -assumed species -specific transaction price of the higher -valued species in the examined 
stand to t he corresponding benchmark if the benchmark price was higher. However, the USDOC 
would set to zero the result obtained on comparing the notionally -assumed species -specific 
transaction price of the lower -valued species in that stand to the corresponding ben chmark, if a 
negative comparison result was obtained. As Canada rightly argues, the benefit amount calculated 
on this basis will not reflect whether the stand -as-a-whole was purchased for less than adequate 
remuneration.1160 On the other hand, if the USDOC w ere to aggregate all comparison results instead 
of setting some of them to zero, its benefit determination would properly account for both the 
lower -valued and higher -valued species that were purchased for the same stumpage price as part 
of the same transa ction.  
7.583.   We therefore conclude that the USDOC acted inconsistently with Article  14(d)  of the 
SCM Agreement. We find that in context of the factual background of this dispute, by setting 
negative comparison results to zero, the USDOC failed to assess the ade quacy of remuneration in 
relation to the prevailing market condition of stumpage sold by British  Columbia  on a 
stand -as-a-whole basis.1161 
7.8.3   Conclusion  
7.584.   We reaffirm the finding of the panel in US – Anti-Dumping  and Countervailing Duties (China)  
that there is no  general obligation in Article  14(d)  of the SCM  Agreement for an investigating 
authority to aggregate all comparison results , positive as well as  negative , but that doing so may be 
necessary in specific circumstances to satisfy the requirements of Article  14(d)  of the 
SCM Agreement. We find that by setting the negative comparison results to zero, the USDOC failed 
to assess the adequacy of remuneration in relation to the prevailing market conditions of the Crown 
timber provided to the investigated producer b y New Brunswick . This is because by so doing, the 
USDOC calculated a benefit amount that included price differences that arose solely due to the 
asymmetry between average geographic conditions of various private transactions based on which 
the benchmark pr ice was calculated on the one hand, and the specific geographic conditions relating 
to the individual transactions that were priced less than the benchmark price on the other.  
7.585.   For the same reason, the USDOC also acted inconsistently with Article  14(d)  of the 
SCM Agreement by setting -to-zero comparison results where the timber mark/species -specific 
transaction prices were found to be more than the corresponding benchmark price in its benefit 
determination for provision of stumpage by British  Columbia . Furthe r, as explained above, by 
setting -to-zero such comparison results, the USDOC also violated Article  14(d)  of the 
SCM Agreement because by so doing it failed to make a benefit assessment in relation to a particular 
prevailing market condition in British  Columbia, i.e. sale of stumpage by British  Columbia  on a 
stand -as-a-whole basis.  
 
1159 Canada's  second written  submission, para.  296. 
1160 Canada's  second written submission, para.  297. We note that Canada has supported its arguments 
with an example from record evidence where the USDOC found benefit to exist, even though the respondent 
company had paid a total amount  for the stand that was more than what the total value of the stand would 
come out to be if the USDOC's  species -specific benchmark price was used to calculate the value of the stand. 
However, because the USDOC calculated the benefit based on notionally -assumed species -specific prices in the 
stand in question and set negative comparison results to zero, the USDOC found a benefit to exist. 
(Canada's  opening statement at the first meeting of the Panel ( 28 February  2019), para.  86 (referring to 
Attachment IV to  USDOC calculation memo, Canfor, (Exhibit CAN -383 (BCI)) ); second written submission, 
para. 298 (referring to Canada presentation at first meeting (28  February  2019), (Exhibit CAN -528 (BCI)), 
pp. 49-56)). 
1161 In resolving Canada's  claim, we take no view as t o whether the USDOC's  use of notionally -assumed 
species -specific transaction prices for stumpage provided by British  Columbia was in itself problematic. We 
note that Canada has not challenged as part of its claims that manner in which the USDOC identified or 
grouped transactions under consideration. Rather, Canada's  claim and our findings pursuant to that claim are 
limited to whether or not the USDOC should have set negative comparison results between prices of the 
examined transactions and corresponding be nchmark prices to zero.  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  7.586.   Having found that by setting -to-zero negative comparison results in the context of this 
particular case, the USDOC acted inconsistently with Article  14(d)  of the SCM  Agreement, w e 
consider that we need not make findings concerning Canada's  claims under other provisions of the 
SCM Agreement and the GATT 1994. We therefore exercise judicial economy in respect of 
Canada's  claims under Articles 1.1(b), 19.3, and 19.4 of the SCM Agreem ent and Article VI:3 of the 
GATT 1994.  
7.9  Canada's claims concerning the  export -permitting process for British  Columbia  logs 
7.587.   In the underlying investigation, the USDOC investigated certain restrictions on the export of 
logs from British  Columbia . In particula r, the Governments of British  Columbia  and Canada prohibit 
the export of logs from British  Columbia  without an export permit. The BC Forest Act and 
Canada's  Federal Notice to Exporters  No. 102 provide for an export -permitting process that 
authorizes the export of logs in accordance with specified criteria.1162 We refer to this process as the 
LEP process. The USDOC found that the LEP process  in British  Columbia  result s in a policy where the 
Governments of Canada and British  Columbia  provide a financial contribution under 
Article  1.1(a)(1)(iv)  of the SCM  Agreement by entrusting or directing private log suppl iers to provide 
logs to consumers in British  Columbia .1163  
7.588.   Canada makes the following two claims with respect to the USDOC's  finding:   
a. First, Canada claims that the USDOC acted inconsistently with Article  1.1(a)(1)(iv)  of the 
SCM Agreement, because it impro perly determined that , through  the LEP  process in 
British  Columbia ,the Governments of British  Columbia  and Canada allegedly entrusted or 
directed private logs suppliers to provide logs to consumers in British  Columbia .  
b. Second, Canada claims that the USDOC  acted inconsistently with Articles  11.2 and 11.3 
of the SCM  Agreement, by improperly initiating a countervailing investigation regarding 
the LEP process.1164 
7.9.1   Provisions at issue  
7.589.   Article  1.1(a)(1)  of the SCM  Agreement reads, in relevant part, as follows:  
For the purpose of this  Agreement, a subsidy shall be deemed to exist if:  
(a)(1)   there is a financial contribution by a government or any public body within 
the territory of a Member (referred to in this  Agreement as "government"), i.e. where:  
…  
(iii) a gov ernment provides goods or services other than general infrastructure, or 
purchases goods;  
(iv) a government makes payments to a funding mechanism, or entrusts or directs a 
private body to carry out one or more of the type of functions illustrated in (i)  to 
(iii) above which would normally be vested in the government and the practice, in no 
real sense, differs from practices normally followed by governments[.]  
7.590.   Articles  11.2 and 11.3 of the SCM  Agreement read, in relevant part, as follows : 
11.2 An application under paragraph 1 shall include sufficient evidence of the existence 
of (a) a subsidy and, if possible, its amount[.] … Simple assertion, unsubstantiated by 
relevant evidence, cannot be considered sufficient to meet the requirements o f this 
paragraph. The application shall contain such information as is reasonably available to 
the applicant on the following:  
 
1162 Final determination, (Exhibit CAN -10), pp.  149-150. 
1163 Final determination, (Exhibit CAN -10), pp.  152 and 155.  
1164 Canada's  panel request, p.  2; response to Panel question No. 118, para.  332. WT/DS533/ R 
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  … 
(iii) evidence with regard to the existence, amount and nature of the subsidy in 
question;  
… 
11.3 The authorities shall review the accuracy and adequacy of the evidence provided 
in the application to determine whether the evidence is sufficient to justify the initiation 
of an investigation.  
7.9.2   Whether the LEP process constitutes a financial contribution within the meaning of 
Article  1.1(a)(1)(iv)  
7.591.   Pursuant to Article  1.1(a)(1)(iii)  of the SCM  Agreement, a government or public body 
provides a financial contribution when it provides goods or services other than general infrastructure. 
Pursuant to Article  1.1(a)(1)(iv)  of the SCM  Agreemen t, a government or public body provides a 
financial contribution when it "entrusts or directs" a private body to carry out certain functions listed 
in Articles  1.1(a)(1)(i)  to (iii), including entrusting or directing such a body to provide goods (as 
covere d under Article  1.1(a)(1)(iii)  of the SCM  Agreement).  
7.592.   In the underlying investigation, as noted in paragraph  7.587  above, the USDOC found that 
the Go vernments of Canada and British  Columbia  entrusted or directed private log suppliers (i.e. a 
private body)  to provide logs (i.e. goods)  to producers in British  Columbia . We first set out the 
USDOC's  findings and the record evidence on which those findings were based. Then we turn to our 
evaluation of the claims put forth by Canada.  
7.9.2.1   The USDOC's  finding of entrustment and direction  
7.593.   In the underlying investigation, the USDOC concluded that through certain restrictions 
imposed on the export of logs, the Governm ents of British  Columbia  and Canada entrusted or 
directed private log suppliers to provide logs to Canadian producers. The USDOC noted in this regard 
that logs harvested in British  Columbia  are either subject to provincial jurisdiction, under 
British  Colum bia's Forest Act, or federal jurisdiction, under Canada's  Federal Notice to Exporters 
No. 102.1165 Both laws require that logs be used or provided to timber processing facilities in 
British  Columbia  unless an exception applies.1166 
7.594.   Under the British  Columbia  Forest Act, timber harvested in British  Columbia  may only be 
used in British  Columbia  or manufactured within British  Columbia  into a wood product, unless one 
of the following three possible exceptions applies:   
a. logs are surplus to the requirements of timber processing facilities in British  Columbia  
(surplus criterion);  
b. timber processing facilities cannot economically use them ( economic criterion); or  
c. logs would otherwise be wasted (utilization criterion).1167  
7.595.   The USDOC noted that the surplus criterion was used most frequently during the POI.1168 
The USDOC observed that to qualify for the surplus criterion:   
 
1165 United  States'  first written submissio n, para.  534. 
1166 United  States'  first written submission, para.  534. The BC Forest Act and Canada's  Federal Notice to 
Exporters No. 102 provide for an almost identical process for log exports. (Final determination, 
(Exhibit  CAN-10), pp.  149-151; Forest Act,  (Exhibit CAN -39); and Federal Notice to Exporters No. 102, 
(Exhibit  CAN-69)). 
1167 Final determination, (Exhibit CAN -10), p.  150. 
1168 In the final determination, the USDOC indicated that "all but two of the approved applications for 
export were made under the surplus test". (Final determination, (Exhibit CAN -10), p.  150).  WT/DS533/ R 
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  a. The applicant must adve rtise its logs to mill operators in British  Columbia , who have an 
opportunity to place a written offer on the logs advertised in the bi -weekly advertising 
list.1169  
b. If no offer is received from mill operators for the advertised logs, then such logs are 
considered surplus, and automatically authorized for export.1170  
c. If, however, mill operators submit an offer:  
i. The offer is evaluated by an advisory panel  to determine whether it represents a fair 
market value.1171  
ii. The advisory panel then provides a recommendation to the responsible federal or 
provincial minister on whether the logs should be authorized for export.  
iii. If the offer is considered unfair, i.e. below the market price, the logs will be authorized 
for export.  
iv. If the offer is deemed to be fair, i.e. at or above the market price, the application for 
an export exemption will be rejected.1172  
7.596.   The USDOC also noted that the export of logs under provincial jurisdiction is subject to a 
fee, which "can be significant, and can substantia lly increase the final price a potential customer 
would have to pay for the logs".1173 In addition, the export of logs, including logs harvested under 
the provincial and federal jurisdiction s in British  Columbia , without a permit is subject to penalties 
under the Export and Import Permits Act (EIPA)  of Canada.1174 
7.597.   The USDOC found that the requirements of the BC Forest Act and Canada's  Federal Notice 
to Exporters No. 102 combined with a lengthy process for obtaining an authorization for exports, 
the surplus test , fees charged by British  Columbia  upon exports, and legal penalties for exporting 
logs without a permit, compel harvesters to provide logs to consumers within the province and divert 
to domestic consumers logs that could otherwise be exported.1175 The USDOC  considered that "[t]he 
lengthy and burdensome export prohibition exemption process discourages log suppliers from 
considering the opportunities that may exist in the export market by significantly encumbering their 
ability to export, especially where ther e may be uncertainty about whether their logs will be found 
to be surplus to the requirements of mills in BC. Moreover, this process restricts the ability of log 
suppliers to enter into long -term supply contracts with foreign purchasers" .1176 The USDOC also 
stated that "timber harvesters in British  Columbia  must ensure that demand for logs in 
British  Columbia  is met before seeking a purchaser overseas and, therefore, they are forced to 
receive a lower price for their timber in British  Columbia  than they would  if they were able to export 
free of the … export restrictions" .1177 
7.9.2.2   Evaluation  
7.598.   In the underlying investigation, the USDOC determined, based on the record evidence set 
out in paragraphs 7.593 -7.597  above, that the Governments of British  Columbia  and Canada 
provided a financial contribution to mill operators by entrusting or directing private log suppliers to 
provide logs to mill operator s (i.e. provide goods), stating in this regard as follows:  
[The] legal requirement[] that logs remain in British  Columbia  combined with the 
process for obtaining an exception from those requirements to export, result in a policy 
 
1169 Preliminary determination, (Exhibit CAN -8), p.  59; Final determination, (Exhibit CAN -10), p.  150. 
1170 Final determination, (Exhibit CAN -10), p.  150; Canada's  first written submission, paras.  203 
and 963. 
1171 Final determination, (Exhibit CAN -10), p p. 150-151.  
1172 Canada's  first written submission, para.  129. 
1173 Final determination, (Exhibit CAN -10), p.  142. 
1174 Final determination, (Exhibit CAN -10), p.  151. 
1175 Final determination, (Exhibit CAN -10), p.  155. 
1176 Final determination, (Exhibit CAN -10), p.  154. 
1177 Final determination, (Exhibit CAN -10), pp.  154-155. WT/DS533/ R 
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  where the GOC and GBC have entrusted or directed timber harvesters to provide logs 
to producers in British  Columbia . Specifically, with respect to the GBC, we continue to 
find that the legal requirements, combined with both the lengthy process for obtaining 
an exception, and the fee s charged by the GBC upon export, result in a policy where 
the GBC has entrusted or directed private log suppliers to provide logs to mill operators 
within the meaning of section 771(5)(B)(iii)  of the Act. With respect to the GOC, we 
continue to find that the GOC has also entrusted and directed private log suppliers to 
provide logs to mill operators, within the meaning of 771(5)(B)(iii)  of the Act, insofar 
as the surplus test and the legal penalties for exporting logs without an export permit 
compel such su ppliers to divert to mill operators some volume of logs that could 
otherwise be exported.  
7.599.   The question that we must resolve is  whether an unbiased and objective investigating 
authority could have found, based on the record evidence set out above, that the Governments of 
Canada and British  Columbia  entrusted or directed private log suppliers in British  Columbia  to 
provide log s to Canadian producers. In making this determination, we are not permitted to conduct 
a de novo  review of the facts of the case or sub stitute our judgement for that of the investigating 
authority, here, the USDOC.1178 Instead, we must examine whether, in the light of the evidence on 
the USDOC's  record, its conclusions were reasoned and adequate.1179 Our examination in this regard 
would be ba sed on the definition of subsidy set out in Article  1.1 of the SCM  Agreement, specifically 
the rules regarding entrustment and direction, as well as government provision of goods set out in 
Articles  1.1(a)(1)(iv)  and 1.1(a)(1)(iii)  of the SCM  Agreement res pectively.  
7.600.   With respect to the definition of subsidy set out in Article  1.1 of the SCM  Agreement, we 
recall that in past cases the term "entrust" has been understood to cover situations where a 
government "gives responsibility to" a private body, and the t erm "direct" has been understood to 
cover situations where a government "exercises its authority over" a private body to carry out one 
of the types of functions listed in paragraphs (i)  through (iii)  of Article  1.1(a)(1).1180 Thus, a finding 
of entrustment o r direction requires that the government give responsibility to a private body, or 
exercise its authority over a private body, in order to effectuate a financial contribution covered by 
Article s 1.1(a)(1)(i) -(iii).1181 Government measures that confer a benef it but are not financial 
contributions covered by Articles  1.1(a) (1)(i)-(iv) are not subsidies under Article  1.1 of the 
SCM Agreement. Therefore, entrustment or direction cannot be found to exist based on the economic 
effects of a government measure, inclu ding a government measure that is in the form of an export 
restraint.1182 This means that when examining whether a government entrusts or directs a private 
body, we need to examine the government's  actions, and not a private party's  reactions to a 
government  measure, which would essentially be the effect of a government measure rather than 
necessarily a case of entrustment or direction.  
7.601.   We note that in past cases WTO panels have examined whether restraints on export of a 
good could lead to direction or entrus tment to provide such a good. In US – Countervailing Measures 
(China)  the underlying government measure at issue was the limitations imposed on the ability of 
the domestic suppliers to export certain products. The panel in that case was of the view that in 
limiting the ability of domestic suppliers to export certain products , the government did not entrust 
or direct those suppliers to provide those goods to Chinese producers. In particular, the panel took 
the view that the government in question (a)  did not direct  the suppliers to provide those goods 
because it d id not give t hem responsibility to do anything (through such a limitation); and (b)  did 
not exercise its authority  over them to provide those goods to the Chinese producers.1183 Instead, 
the government exercised its authority over those producers only in relation to expo rts of those 
products (as opposed to providing those products to Chinese producers).1184 
7.602.   In US – Export Restraints  the panel found that the export restraints at issue did not meet 
the criteria set out in Article  1.1(a)(1)(iv)  of the SCM  Agreement.1185 The export restraints at issue 
 
1178 Appellate  Body Report, US – Anti-Dumping and Countervailing  Duties (China) , para.  379. 
1179 Appellate  Body Report, US – Softwood Lumber VI (Article  21.5 – Canada) , para.  93. 
1180 Appellate  Body Report, US – Countervailing Duty Investigation on DRAMs , paras.  110-111 and 113; 
Panel Report, US – Countervailing Measures (China) , para.  7.399.  
1181 Appellate  Body Report, US – Countervailing Duty Investigation on DRAMs , para.  113. 
1182 Panel Report, US – Countervailing Measures (China) , para.  7.401.  
1183 Panel Report, US – Countervailing Measures (China) , paras.  7.400 -7.401.  
1184 Panel Report, US – Countervailing Measures (China) , para. 7.401.  
1185 Panel Report, US – Export Restraints , paras.  8.29-8.44. WT/DS533/ R 
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  were a border measure that took the form of a government law or regulation that expressly limited 
the quantity of exports, or placed explicit conditions on the circumstances under which exports are 
permitted , or took the for m of a government -imposed fee or tax on exports of the product calculated  
to limit the quantity of exports . We note that this panel's  determination was in part based on its 
view that entrustment and direction occur where there is an explicit and affirmativ e delegation or 
command, which was a view not shared by the Appellate  Body in US – Countervailing Duty 
Investigation on DRAMs (which considered instead, as noted above, that entrustment or direction 
occurs where a government gives responsibility to, or exe rcises authority over, a private body to 
effectuate a financial contribution).1186 
7.603.   However, the Appellate  Body agreed with this panel's  view that Article  1.1(a) (1)(iv) does 
not cover situations in which the government intervenes in the market in some way (in cluding 
through export restraints), which may or may not have a particular result simply based on the given 
factual circumstances and the reaction of actors in the market.1187 It also agreed with this panel that 
entrustment or direction cannot be inadvertent  or a mere by -product of government regulation.1188 
Instead, the Appellate  Body was of the view that there must be a demonstrable link between the 
government and the conduct of the private body.1189 We share this understanding of past panels 
and the Appellate  Body.1190 
7.604.   Having reviewed the USDOC's  findings based on the record evidence, in light of this 
understanding of the disciplines set out in Article  1.1(a)(1)(iv)  of the SCM  Agreement, we do not 
consider that an unbiased and objective investigating authority co uld have found, consistent with 
Article  1.1(a)(1)(iv)  of the SCM  Agreement, that the Governments of British  Columbia  and Canada 
gave responsibility to, or exercised their authority over, private log suppliers to provide logs to mill 
operators. In particula r, consistent with the view, set out in paragrap hs 7.600 -7.603  above, 
Article  1.1(a)(1)(iv)  of the SCM  Agreement covers situations where the go vernment must give 
responsibility to, or exercise authority over, a private body to provide goods  (i.e. effectuate a 
financial contribution under Article  1.1(a)(1)(iii)  of the SCM  Agreement), we do not consider that 
the USDOC had proper basis to conclude t hat the Governments of British  Columbia  and Canada 
entrusted or directed private log suppliers to provide logs to mill operators.  
7.605.   In reaching this conclusion, we note that the underlying policy that in the USDOC's  view 
resulted in a direction or entrustmen t to provide goods comprises restrictions imposed by the 
Governments of British  Columbia  and Canada on export of logs. In particular, export of logs is 
permitted only if certain specific criteria set out in paragraph s 7.594 -7.595  above are met. In 
addition, as noted in paragraph 7.596  above, the Government of British  Columbia  charges a fee on 
such exports, and legal penalties are imposed if logs are exported without a permit. Further, the 
USDOC a lso noted the "potentially lengthy nature" of the export permission process. The USDOC 
concluded that official government action compels suppliers of British  Columbia  logs to supply to 
British  Columbia  consumers, including mill operators. The United  States submits that in reaching 
these conclusions as part of its entrustment or direction analysis, the USDOC did not adopt an 
effects -based approach. Instead, per the United  States, the USDOC explicitly ide ntified the link 
between the government action and the specific conduct of private bodies (in terms of providing 
goods),  by noting that timber harvesters and processers in British  Columbia  are limited by the 
provincial and federal restrictions on whom they  can sell their logs to.1191 The United States also 
rejects Canada's  assertion that the LEP process did not , in practice, impact the ability of the log 
sellers to export. In this regard, the United  States notes the USDOC's  statement that information on 
the r ecord indicated that a blocking system operated in British  Columbia , which created an 
environment in which log sellers were forced into informal  agreements that lowered export volumes 
and domestic prices.1192 In addition, noting that in US – Countervailing D uty Investigation on DRAMS 
the Appellate  Body had considered that in most cases one would expect entrustment or direction of 
a private body to involve some form of threat or inducement, which, in turn, could serve as evidence 
 
1186 Appellate  Body Report, US – Countervailing Duty Investigation on DRAMs , paras.  109-111 and 113.  
1187 Appellate  Body Report, US – Countervailing Duty Investigation on DRAMs , para.  114; Pan el Reports, 
US – Export Restraints , para.  8.31; US – Countervailing Measures (China) , para.  7.397.  
1188 Appellate  Body Report, US – Countervailing Duty Investigation on DRAMs , para.  114. 
1189 Appellate  Body Report, US – Countervailing Duty Investigation on DRAMs , para.  112. 
1190 We, like the Appellate  Body, disagree with the panel in US – Export Restraints  that entrustment and 
direction occur  only when there is an explicit and affirmative delegation or command from the government to a 
private body.  
1191 See, e.g. United  States'  second written submission, para.  342. 
1192 United  States'  first written submission, para.  593. WT/DS533/ R 
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  of entrustment or direction, t he United  States submits that legal penalty for exporting logs without 
authorization is such a type of threat or inducement.1193 We are not persuaded by these submissions 
by the United  States.  
7.606.   In this regard, we agree with Canada that there is no evidence th at the Governments of 
British  Columbia  and Canada require log suppliers to provide their logs to anyone, or direct them to 
sell those logs at any particular price. We acknowledge, of course, that restrictions on exports of 
logs could affect private -party b ehaviour of log suppliers. But entrustment or direction cannot be a 
mere by -product of government regulation. Indeed, government regulations of different types could 
affect private -party behaviour. However, just because a governmental regulation has such a n effect 
does not mean that the government gives responsibility to, or the government exercises  authority 
over, a private body to provide goods. In particular, we do not consider that a government entrusts 
or directs a private party to provide goods, or pr ovide them at a particular price, just because that 
private party's  behaviour, in terms of sale and pricing of its goods, is affected by the regulatory 
framework in which it operates. Therefore, the USDOC's  considerations that the LEP process 
"discourages log suppliers from considering the opportunities that may exist in the export market", 
"restricts the ability of log suppliers to enter into long -term supply contracts with foreign purchasers" 
and leads to a lower price of timber in British  Columbia , perta in in our view to the effects of the 
export regulation for logs and do not indicate the existence of entrustment and direction.  
7.607.   In this regard, we disagree with the United  States'  view that a penalty for exporting logs 
without a permit is a "form of threat  or inducement" by the government to ensure that private log 
suppliers comply with the law requiring that they supply logs to consumers in British  Columbia , 
unless granted an exemption and export authorization.1194 We note that if a government enacts a 
regulation, it may also enact measures to enforce it, including through penalties. That may be a 
threat or inducement to comply with the relevant regulation. However, it does not follow that it is a 
threat or inducement to effectuate a financial contribution in  the form of provision of goods, which 
is what is required under Article  1.1(a)(1)(iv)  of the SCM  Agreement. With regard to the 
United  States'  reliance on the USDOC's  statement regarding a "blocking system" that "creates an 
environment in which log sellers  are forced into informal  Agreements that lower export volumes and 
domestic prices" (which Canada denies1195), we do not consider that such an arrangement (if 
any) suggests that it is the government that entrusted or directed the log suppliers to provide goo ds. 
In addition, while we note that when mill operators make an offer to purchase advertised logs, the 
offer is reviewed by the relevant advisory committee  to determine whether such offer represents a 
fair market value (with the authorization to export den ied if it is), we also note Canada's  explanation 
that there is no requirement on the log seller to accept those offers.1196 Instead, it could choose to 
sell to someone else, use the logs themselves or (if in the southern interior of British  Columbia ) hold 
off harvesting them in the first place.1197 Therefore, we do not consider that the USDOC had proper 
basis to conclude that the Governments of British  Columbia  and Canada gave responsibility to, or 
exercised their authority over, private log suppliers to provid e logs to mill operators.  
7.608.   Based on the above, we conclude that the USDOC acted inconsistently with 
Article  1.1(a)(1)  (iv) of the SCM  Agreement in determining that the Governments of Canada and 
British  Columbia  directed or entrusted log sellers to provide g oods to Canadian producers.  
7.9.3   Whether the USDOC acted inconsistently with Articles  11.2 and 11.3 in initiating an 
investigation regarding the LEP process  
7.609.   Canada claims that the United  States acted inconsistently with Articles  11.2 and 11.3 of the 
SCM Agreeme nt by improperly initiating an investigation regarding the LEP process without sufficient 
evidence on the existence of a subsidy. Canada submits that the investigation was initiated based 
on the petitioner's  allegations regarding the existence of a financi al contribution in the form of 
provision of goods, and these allegations were predicated solely on the existence of the LEP process 
and its alleged price suppressing impact on logs in British  Columbia .1198 Relying essentially on the 
same type of legal argume nts that it does while making its claim under Article  1.1(a)(1)(iv)  of the 
 
1193 United  States'  second written s ubmission, para.  346. 
1194 United  States'  second written submission, para.  346. 
1195 Canada's  second written submission, para.  325. 
1196 Canada's  response to Panel question No. 123, para.  341. 
1197 Canada's  first written submission, para.  129. 
1198 Canada's  first written  submission, para.  971. WT/DS533/ R 
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  SCM Agreement, Canada argues that there was no evidence of a financial contribution or of 
entrustment or direction that could have been provided in the application that would meet t he 
"sufficient evidence" standard in Articles  11.2 and 11.3.1199 Canada's  submission is based on its view 
that export restraints of the type at issue in the underlying investigation cannot, as a matter of law, 
be a financial contribution under Article  1.1.(a )(1)(iv)  of the SCM  Agreement. In response to our 
questions, Canada clarified that if we agree with its main argument that the LEP  process cannot 
constitute a financial contribution under Article  1.1(a)(1)(iv)  as a matter of law, then 
Canada's  claims under  Articles  11.2 and 11.3 are consequential.1200  
7.610.   The United  States asserts that the obligations under Articles  11.2 and 11.3 of the 
SCM Agreement are distinct from the obligations under Article  1.1(a)(1)  of this  Agreement. 
Therefore, just because an investiga ting authority acts inconsistently with Article  1.1(a)(1)  of the 
SCM Agreement does not mean that this investigating authority also acts inconsistently with 
Articles  11.2 and 11.3 of the SCM  Agreement.1201 The United  States argues that 
Canada's  Articles  11.2 and 11.3 claims fail for the same reasons that its claim under 
Article  1.1(a)(1)(iv)  fails.1202  
7.611.   We note that Canada's  claims under Articles  11.2 and 11.3 of the SCM  Agreement are 
premised on its view that export restraints of the type at issue here cannot be a subsidy under 
Article  1.1 of the SCM  Agreement because there is no direction or entrustment from the government 
to provide goods. We have upheld Canada's  claim under Article  1.1(a) (1)(iv) of the SCM  Agreement 
challenging the USDOC's  determinati on that the Governments of Canada and British  Columbia  
directed or entrusted log sellers to provide goods to Canadian producers. Having made this finding, 
we do not consider that additional findings under Articles  11.2 and 11.3 of the SCM  Agreement are 
necessary to resolve this dispute. Therefore, we exercise judicial economy on Canada's  claims under 
Articles  11.2 and 11.3 of the SCM  Agreement.1203 
7.612.   Based on the above, we exercise judicial economy on Canada's  claims under Articles  11.2 
and 11.3 of the SCM Agreement.  
7.9.4   Conclusion  
7.613.   In light of the foregoing, we find that the USDOC's  determination that Canada and 
British  Columbia  entrusted or directed private log suppliers to provide logs to consumers in 
British  Columbia  is inconsistent with Article  1.1(a)(1) (iv) of the SCM  Agreement. We exercise 
judicial economy on Canada's  claims under Articles  11.2 and 11.3 of the SCM  Agreement.  
7.10  Canada's  claims concerning certain reimbursements made to harvesters by Québec  
and New Brunswick  for silviculture and forest manag ement activities  
7.614.   Canada claims that the USDOC erred by finding certain reimbursements that Québec  and 
New Brunswick  made to harvesters to be financial contributions in the form of grants.1204 Canada 
further claims that the USDOC improperly found the reimburs ements to confer a benefit on the 
relevant harvesters in the total amount of the reimbursement received.1205 The United  States asserts 
that the USDOC's  finding that the reimbursements in question were financial contributions in the 
form of grants under Artic le 1.1(a)(1)(i)  of the SCM  Agreement was supported by record evidence 
and was reasonably and adequately explained.1206 The United  States also contends that Canada 
wrongly claims that the reimbursements did not confer a benefit on the recipients.1207  
 
1199 Canada's  first written submission, paras.  969-973. 
1200 Canada's  response to Panel question No. 128, para.  363. 
1201 United  States'  second written submission, para.  400. 
1202 United  States'  first written submission, paras.  608 and 611.  
1203 WTO panels are not required to address each and every claim. Instead, they are only required to 
address those claims that are necessary to resolve a dispute. (Appellate  Body Report s, Argentina – Import 
Measures , para.  5.190).  
1204 Canada's  first written submission, para.  974.  
1205 Canada's  first written submission, para.  974.  
1206 United  States'  first written submission, para.  613.  
1207 United  States'  first written submission, paras.  650-651.  WT/DS533/ R 
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  7.10.1   Factual a spects  
7.615.   In the underlying investigation, the USDOC examined the Partial Cut Investment programme 
(PCIP)  in Québec , whereby Québec  provides reimbursements for partial cutting activities that certain 
harvest areas are subject to. Pursuant to the partial cutti ng requirements, harvesters are allocated 
the right to harvest timber from certain designated harvest areas upon the condition that they must 
remove less than 50% of the volume of a harvest stand, in order to encourage natural regeneration 
of forest areas without the need to replant. The partial cuts method, which is more expensive than 
the clear -cutting method, increases harvesting costs. Under the PCIP, harvesters are reimbursed for 
up to 90% of their increased costs attributable to partial cutting requir ements. The USDOC found 
that the reimbursement received by Resolute under the PCIP was a financial contribution in the form 
of a grant, which confers a benefit in the amount of reimbursement received by Resolute.1208  
7.616.   The USDOC also observed that J.D. Irving , Ltd. ( JDIL)  has been a long -term leaseholder of 
provincial lands in New Brunswick  from which it sources part of its input supply. Under the Crown 
Lands and Forests Act (CLFA), JDIL has to  perform basic silviculture and forest management 
obligations. New Brunswick  provides reimbursements for silviculture and licence management 
expenses to JDIL. The USDOC found that these reimbursement payments constitute financial 
contributions in the form of a grant, which conferred a benefit in the amount of reimbursement 
received by JDIL.1209  
7.617.   Canada challenges the USDOC's  conclusion that the reimbursement payments for silviculture 
and forest management to JDIL and Resolute were grants, since these payments  were made to 
reimburse JDIL and Resolute for services provided to New Brunswick  and Québec  respectively. 
Canada also argues that even if the reimbursements were found to constitute a grant, the 
reimbursements did not confer a benefit on either Resolute or  JDIL.1210 
7.10.2   Legal standard  
7.618.   Article  1.1 of the SCM  Agreement stipulates that a subsidy shall be deemed to exist if there 
is a financial contribution by a government whereby a benefit is conferred on the recipient of the 
financial contribution. Article  1.1(a)(1 )(i) provides that a financial contribution could be made in the 
form of a direct transfer of funds and includes grants as an example of a direct transfer of funds. 
The Appellate  Body has found that a grant normally exists when money or money's  worth is gi ven 
to a recipient without an obligation or expectation that anything will be provided to the grantor in 
return.1211 We agree with this finding of the Appellate  Body. We further note that the United  States 
and Canada both agree that a grant exists for purpos es of Article  1.1(a)(1)(i)  when the government 
confers something on a recipient without getting anything in return.1212  
7.10.3   Evaluation  
7.619.   Canada's  primary contention is that the reimbursements in question do not constitute 
financial contributions at all, while Can ada contends in the alternative that the reimbursements did 
not confer a benefit.1213 Accordingly, we first examine the parties'  arguments concerning whether 
the USDOC properly found the reimbursements to be financial contributions in the form of grants, 
before examining the parties'  arguments concerning whether the reimbursements in question 
conferred a benefit on the recipients. We will examine Canada's  claims concerning reimbursements 
provided by New Brunswick  and Québec  separately, considering that the re levant facts are different 
for the two provinces.  
 
1208 Final determination, (Exhibit CAN -10), pp.  188-189. 
1209 Final determination, (Exhibit CAN -10), p.  186. 
1210 Canada's  first written submission, para.  975. 
1211 Appellate  Body Report, US – Large Civil Aircraft (2nd complaint),  paras.  616-617.  
1212 United  States'  first written submission, para.  619; Canada's  first written submission, para.  978.  
1213 Canada's  first written submission, para.  975.  WT/DS533/ R 
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  7.10.3.1   Whether the USDOC properly found silviculture reimbursements to be grants  
7.10.3.1.1   New Brunswick  
7.620.   Canada contends that the USDOC improperly characterized the silviculture  and forest 
management  reimbursements that New Brunswick  made to JDIL as grants.1214 According to Canada, 
the silviculture  and forest management  obligations performed by JDIL and the reimbursement 
payments from New Brunswick  constituted a reciprocal exchange of rights and obligat ions, and the 
reimbursement was therefore not a grant.1215  
7.621.   The United  States argues that Canada's  claim in respect of silviculture reimbursements 
provided to JDIL by New Brunswick  lacks merit because the USDOC properly found that JDIL was 
legally obligated to pay all expenses for silviculture and forest management.1216 In support of this 
argument, the United  States points to provisions of New Brunswick 's CLFA and JDIL's  Forest 
Management  Agreement (FMA)  with New Brunswick  wherein the relevant silviculture and forest 
management obligations are set out.1217 We reject this argument of the United  States. We note that 
even though the CLFA and the FMA contain provisions that oblige JDIL to undertake certain 
silviculture and forest management obligations, the same legal instruments also provide that 
New Brunswick  shall reimburse JDIL for the performance of such obligations.1218 We consider that 
the fact that the relevant obligations as well as the reimbursement for the performance of those 
obligations are foreseen in the same legal instruments undermines the USDOC's  characterization of 
the reimbursement as a grant. This is because the obligations and the reimbursement are both part s 
of the set of terms based on which New Brunswick  provided Crown timber to JDIL. We agree with 
Canada's  argument that the USDOC's  approach  of characterizing reimbursement by a government 
to an entity for performance of certain obligations as a grant will effectively mean that the 
government cannot delegate any responsibility to that entity without any compensation provided in 
exchange for th at delegation being considered a subsidy.1219  
7.622.   The United  States also argues that the reimbursements in question constituted a transaction 
that was separate and distinct from the stumpage transaction.1220 The United  States contends that 
the obligation to under take silviculture was imposed on JDIL as part of the stumpage transaction, 
whereas the reimbursements were provided through a different transaction. According to the 
United  States, the distinct nature of the two transactions shows that there was no exchang e of rights 
and obligations in respect of the reimbursement provided by New Brunswick  to JDIL.1221 We reject 
this argument of the United  States. As noted above, both the legislation and the FMA , which impose 
on JDIL the obligation to perform silviculture  and forest management  as a condition to access timber, 
also impose the obligation on New Brunswick  to reimburse JDIL for the performance of those 
obligations. We consider this to indicate that, notwithstanding the temporal separation between the 
imposition of  the relevant silviculture and forest management  obligations and the application for and 
receipt of the reimbursement by JDIL, the two were reciprocal considerations made in the same 
transaction.1222 We note that even though the reciprocal obligations agreed  to between JDIL and 
 
1214 Canada's  first written submission, para.  990.  
1215 Canada's  first written submission, para.  990.  
1216 United  States'  first written submission, para.  624.  
1217 United  States'  first written submission, paras.  621-623.  
1218 New Brunswick CFLA , (Exhibit CAN -242), Section 38(2) (that stipulates, in relevant part, that 
New Brunswick shall reimburse "the licensee for such expenses of forest management as are approved in and 
carried out  in accordance with the operating plan" and "for other expenses of forest management in 
accordance with the regulations"); JDIL Forest Management Agreement , (Exhibit CAN -250 (BCI)), p.  26 (that 
stipulates, in relevant part, that "[t]he Minister shall reimb urse the Company for basic silvicultural treatments 
at rates authorized by the Minister" .) 
1219 Canada's  second written submission, para.  341.  
1220 United  States'  first written submission, para.  638.  
1221 United  States'  first written submission, para.  638.  
1222 We note that Canada also challenges the correctness of the USDOC's  reasoning that "it is JDIL, and 
not the [Government of New  Brunswick], that has the mandate and ultimate responsibility to carry out basic 
silviculture and license management activities". (Final determination, (Exhibit CAN -10), pp.  185-186).  
According to Canada, as the owner of the Crown forests, New  Brunswick is responsible for managing and 
caring for Crown forests. (Canada's  first wri tten submission, para.  992). We consider that by making access to 
stumpage legally conditional upon performance of silviculture, New  Brunswick had shifted the responsibility for 
performing silviculture to licence holders (albeit with the reciprocal conside ration in form of reimbursements). 
The USDOC could, however, not have found that the reimbursements in question constituted a grant based on 
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  New Brunswick  were implemented at different points of time, they were agreed to at the same time, 
and as part of the same transaction.  
7.623.   The United  States also argues that the USDOC properly characterized the silviculture 
reimbursements  provided by New Brunswick  to JDIL as a grant because the reimbursements were 
provided for obligations "which JDIL would undertake even in the absence of the 
reimbursements".1223 In respect of this argument of the United  States, we agree with Canada that 
the USDOC did not adequately explain its assertion that JDIL would have undertaken the silviculture 
and forest management activities for which it was reimbursed by New Brunswick , even in the 
absence of reimbursements.1224 Canada argues that the USDOC did not ex plain why JDIL would 
perform silviculture and forest management activities in the absence of reimbursements, considering 
that productivity improvements that arise due to JDIL's  performance of silviculture  and forest 
management  "[do] not necessarily mean th at JDIL will be allocated the resulting timber, and even 
if it does, it would still have to pay Crown stumpage for it".1225 We note in this regard that JDIL's  FMA 
with New Brunswick  indicates that JDIL could be allocated additional timber generated due to 
silviculture activities.1226 We consider that having an additional supply of timber, even upon payment 
of stumpage charges, could be commercially beneficial for a company. Thus, JDIL could potentially 
benefit from productivity increases resulting from its silv iculture  and forest management  activities 
in the form of having access to increased supply of timber, and hence has an incentive to carry out 
silviculture even without reimbursements from New Brunswick . While the USDOC did refer to one of 
the provisions in  JDIL's  FMA that indicate that JDIL could be allocated rights to any additional timber 
that is produced due to silviculture1227, we consider that the USDOC's  assertion was nevertheless 
inadequately reasoned. This is because the USDOC did not engage with the possibility that the costs 
that JDIL would incur in performing silviculture and forest management  activities without any 
reimbursement from New Brunswick  may exceed any commercial advantage in the form of increased 
supply that may result from silviculture  and forest management , due to which it may not be 
commercially logical for JDIL to undertake silviculture  and forest management  without 
reimbursement.  
7.624.   We consider that the USDOC did not reasonably and adequately explain why the 
reimbursements  in question constituted grants, when the legal instruments that set out 
JDIL's  silviculture and forest management obligations and the corresponding reimbursements 
payable to JDIL  indicated that the conveyances of funds from New Brunswick  to JDIL in the fo rm of 
reimbursements involved a reciprocal obligation on part of JDIL to assume the responsibility for 
performing silviculture and forest management  in Crown forests.1228 While the USDOC asserted that 
 
this reasoning alone, because the legal obligation that fell on JDIL to undertake silviculture was conditional 
upon the receipt of reimbursement from New  Brunswick.  
1223 United  States'  first written submission, para.  626 (quoting Final determination, (Exhibit CAN -10), 
p. 185).  
1224 Canada's  first written submission, para.  995; response to Panel  question No. 132, para.  382.  
1225 Canada's  response to Panel  question No. 132, para.  383. In this regard, Canada also argues that it 
is commercially illogical that JDIL should incur silviculture expenses for harvest area covered under licence 
No. 7 on its own when other purchasers also purchased Crown timber from that harvest area. 
(Canada's  first written submission, para.  996). This argument assumes that the other purchasers of 
Crown  timber from that harvest area only pay the stumpage rates and do not share forest management 
expenses wi th JDIL. This assumption is at odds with certain terms of JDIL's  FMA with New  Brunswick which 
stipulate that sub -licencees will pay JDIL a "reasonable and fair share of the costs and charges" incurred by 
JDIL in forest management. (JDIL  Forest Management  Agreement, (Exhibit CAN -250 (BCI)), p.  17). Thus, we 
reject this argument put forth by Canada.   
1226 JDIL Forest Management  Agreement, (Exhibit CAN -250 (BCI)), Sections 13.4 -13.5. 
1227 Final determination, (Exhibit CAN -10), fn 1117.  
1228 Appellate  Body Report, US – Large Civil Aircraft (2nd complaint) , para.  617. We note that in support 
of its claim that the USDOC wrongly considered the reimbursement provided to JDIL by New  Brunswick as a 
grant, Canada also argues that the fact that JDIL charged a "harmonized sales tax" to New  Brunswick for forest 
management and basic silviculture activities shows that the reimbursement was not a grant, as this tax is 
applicable only to purchase of goods and services, and not grants, in Canada. (Canada's  first written 
submission, par as. 1002-1005; opening statement at the first meeting of the Panel ( 27 February 2019 ), 
para. 102). We reject this argument on the ground that the levy of a certain tax on a transaction between the 
government and a private entity is not necessarily determin ative of the proper characterization of that 
transaction under Article  1 of the SCM  Agreement. This is because how a transaction is characterized under 
domestic law is not determinative of its characterization under WTO law. (Appellate  Body Reports, Canada  – 
Renewable Energy / Canada – feed-in Tariff Program , para.  5.127). Thus, the fact that levy of a certain tax 
would make a certain transfer of funds from the government to a company a purchase of a good or service 
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  JDIL would have performed silviculture and forest managem ent activities even in the absence of 
reimbursements, it did not adequately explain this assertion. Thus, we conclude that USDOC did not 
reasonably and adequately explain its finding that the reimbursements provided by New Brunswick  
to JDIL were grants.1229  
7.10.3.1.2   Québec  
7.625.   Canada claims that the USDOC improperly found that the reimbursement payments made 
by Québec  to Resolute under the PCIP  constituted a financial contribution in the form of a grant.1230 
Canada contends that by treating the PCIP payments as grants, the  USDOC failed to take into 
account the exchange of rights and obligations and consideration reflected in the transactions.1231 
In Canada's  view, a challenged measure can constitute a "grant" when there is an " absence  of an 
exchange of rights and obligations and consideration within the transaction".1232 According to 
Canada, the PCIP payments reimburse the harvesters for increased costs associated with mandatory 
partial cutting activities that the harvesters are obliged to undertake in certain harvest areas.1233 
Canada asserts that PCIP payments are made as  consideration for mandatory partial cutting 
activities, and can hence not be regarded as a "grant".1234  
7.626.   The United  States contends that the USDOC properly found the PCIP payments to be a 
financial contribution because Resolute was legally responsible for p erforming partial cutting 
activities, and thus the payment was made without an obligation or expectation that anything would 
be provided to Québec  in return.1235 We reject this argument by the United  States. We agree with 
Canada that the PCIP reimbursement a re part of the bundle of rights and obligations that are 
exchanged when Resolute harvests non -auction Crown timber.1236 In other words, we consider that 
Canada has demonstrated that Resolute's  obligation to perform partial cuts and Québec 's obligation 
to pro vide reimbursements for partial cuts, constitute a reciprocal exchange of rights and obligations 
that are stipulated simultaneously, through the same legal instrument. We note that Canada has 
established through record evidence that Resolute's  obligation t o perform partial cuts on certain 
blocks flows from Resolute's  Harvest  Agreements with Québec  that, inter alia , incorporate the 
silviculture obligations on each harvest block specified in Québec 's Annual Operating Plan.1237 We 
 
instead of a grant under Canadian law, do es not necessarily mean that the same would be the case under 
WTO law as well.  
1229 We note that Canada has also argued that the silviculture and forest management reimbursements 
made to JDIL by New  Brunswick were a purchase of services, and not grants, due to which the reimbursements 
were not financial contributions covered under Article  1 of the SCM  Agreement. (Canada's  first written 
submission, paras.  974 and 980). We consider that because we have found that the USDOC did not reasonably 
and adequately expl ain its finding that the reimbursements in question were grants, we need not rule on 
whether the reimbursements should properly have been characterized as a purchase of services. Also, we note 
that we are not precluding the USDOC from finding in a WTO -consistent manner that the reimbursements were 
grants but are upholding Canada's  claims only because the USDOC's  findings were not adequately reasoned or 
were not supported by record evidence. For example, we may potentially have reached a different conclusion  
had the USDOC reasonably and adequately explained its view that JDIL would have undertaken silviculture and 
forest management activities even in the absence of reimbursements.   
1230 Canada's  first written submission, para.  981.  
1231 Canada's  first written subm ission, para.  984.  
1232 Canada's  first written submission, para.  984 (referring to Appellate Body Reports, Canada – 
Renewable Energy / Canada – Feed-in Tariff Program , para. 5.131 (emphasis original)).  
1233 Canada's  first written submission, para.  983.  
1234 Canada's  first written submission, para.  987.  
1235 United  States'  first written submission, paras.  632 and 634; second written submission, para.  417.  
1236 Canada's  response to Panel question No. 283, para.  8.  
1237 Canada's  response to Panel  question No. 282, paras.  1 and 3 (referring to Harvest  Agreement, 
(Exhibit CAN -623 (BCI)), pp.  8.9-8.11 and 11 -14). We note that the United  States'  asserts that the SFDA  is the 
overarching law that governs a timber supply holde rs' access to and right to harvest Crown timber in Québec. 
The United  States points to Section 38 of the SFDA, which provides that Québec "may, by regulation, prescribe 
sustainable forest development standards for anyone carrying on a forest development ac tivity in a forest in 
the domain of the State" and to Section 89 of regulation respecting standards of forest management for forests 
in the domain of the State which prohibit "any cutting without regeneration and soil protection". According to 
the United  States, these provisions of Québec law require harvesters to use more costly partial cutting 
techniques in certain harvest areas and makes them responsible for harvesting costs. 
(United  States'  comments on Canada's response to Panel  question No. 282, para. 3; first written submission, 
paras.  628-629; and second written submission, para.  416 (referring to SFDA , (Exhibit CAN -169); and Québec 
questionnaire response , (Exhibit USA -75))). We consider that while the SFDA may be the overarching, general 
legislation pursuant to which several aspects of the sale and purchase of, and access to, Crown timber are 
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  further note that the Treasury Board Note that established the PCIP sets out Québec 's obligation to 
provide reimbursements for performance of partial cuts by a harvester as well as  the 
harvester's  obligation to abide by the terms of the Harvest  Agreement, from which the requirement 
to perform partial cuts arises.1238 Specifically, Section 8.3 of the Treasury Board Note describes the 
"Obligations of the Minister" as "[paying] the agent  an amount that takes into account the 
execution  control of silvicultural treatment carried out and the analysis of the activity report 
submitted to the regional branch concerned", and Section 9.1 obliges the agent to "comply with 
the … harvest  Agreement".1239 We also note that the Treasury Board Note predates 
Resolute's  Harvest  Agreements. While the PCIP was established by the Treasury Board Note on 
26 March 2013, Resolute's  Harvest  Agreement that Canada has identified from the record is dated 
to 2014.1240 We also note that Canada has pointed to record evidence that states that pursuant to 
the coming into force of Québec 's SFDA on 1  April 2013, all forest tenures that existed under the 
preceding legislation were cancelled and a new system for sale and pricing o f standing timber was 
introduced.1241 We consider that these facts pre -empt the possibility that Resolute's  partial cutting 
obligations were already in existence before the PCIP was established. Therefore, we agree with 
Canada that Resolute's  agreement to ha rvest blocks subject to the partial cutting requirement, will 
be informed by the knowledge that Québec  will reimburse it for the additional expenses that this 
requirement entails.1242 Therefore, because Resolute's  obligation to abide by its Harvest  Agreement s 
and Québec 's obligation to reimburse Resolute for abiding by the partial cutting requirements 
foreseen in the Harvest  Agreement are both stipulated in the Treasury Board Note, and because the 
Treasury Board Note predates Resolute's  Harvest  Agreements, an  objective and impartial 
investigating authority would not have found that PCIP payments were separate from the mandatory 
partial cutting obligation.  
7.627.   Refuting Canada's  argument that Resolute performed partial cutting activities in exchange 
for PCIP payment s from Québec , the United  States also contends that provision of stumpage by 
Québec  and the provision of PCIP payments to Resolute constituted two distinct transactions.1243 
The United  States asserts that in the first transaction, Resolute purchased standing  timber from 
Québec  and was legally required to perform partial cutting as a condition to access and harvest 
Crown timber, while in the second transaction, Québec  provided Resolute the opportunity to apply 
for PCIP payments. On this basis, the United  State s argues that there was no exchange of rights 
and obligations in respect of PCIP payments provided by Québec  to Resolute.1244 The United  States 
supports its argument that the provision of PCIP payments and the imposition of the partial cutting 
requirement as  a condition to harvest stumpage were two distinct transactions, by pointing to the 
fact that harvesters must apply to Québec 's Ministry of Forests for receiving reimbursements.1245 
We reject these arguments of the United  States. As noted above, the Treasury  Board Note that 
established the PCIP also obliged Resolute to abide by its Harvest  Agreement, which required 
Resolute to perform partial cutting. In our view, this indicates that, notwithstanding the temporal 
separation between the imposition of the relev ant silviculture obligations and the application for and 
receipt of PCIP payments by Resolute, the two were reciprocal considerations foreseen in the 
Treasury Board Note establishing the PCIP.  We also consider that the fact that Resolute must apply 
to Québec's Ministry of Forests for receiving the reimbursement does not alter that reciprocal 
character of performance of partial cutting obligation and the provision of reimbursements therefor. 
As Canada has explained, the submission of such an application is a  part of the mechanism through 
which Québec  verifies Resolute's  compliance with the partial cutting obligation before providing the 
 
regulated, the Harvest  Agreements are the specific legal instrument through which a particular harvester is tied 
to the partial cutting obligation wi th respect to a particular block. This understanding is confirmed by 
Section  103 of the SFDA, which provides that "[t]he harvest  Agreement specifies the forest operations zones 
where the timber is to be harvested and sets out the conditions for harvesting and for the other forest 
development activities related to this responsibility".  
1238 Treasury Board Note , (Exhibit CAN -208).  
1239 Treasury Board Note , (Exhibit CAN -208), Sections  8.3 and 9.1. We note that Section 5 of the 
Treasury Board Note provides that eligi ble "agents" include "beneficiaries of timber supply guarantees".  
1240 Canada's  response to Panel question No. 283, fn 21; Harvest  Agreement, (Exhibit CAN -623 (BCI)), 
p. 8.2. 
1241 Québec initial questionnaire response , (Exhibit CAN -170), pp.  QC-S-1-QC-S-2. We n ote that this 
questionnaire response indicates that the SFDA was adopted in 2010, and went into force on 1  April 2013.  
1242 Canada's  response to Panel  question No. 283, para.  8.  
1243 United  States'  first written submission, para.  645.  
1244 United  States'  first wr itten submission, para.  646.  
1245 United  States'  first written submission, para.  646. WT/DS533/ R 
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  reimbursement.1246 We consider that the mechanism through which Québec  ensures the fulfilment 
of the partial cutting obligatio ns by the recipient of the PCIP payments does not imply that the PCIP 
payment is a transaction distinct from the imposition of the partial cutting obligation as a condition 
to harvest stumpage, such that the PCIP payments become a grant.  
7.628.   We therefore cons ider that the USDOC improperly found that the PCIP payments made by 
Québec  to Resolute were a grant.1247  
7.10.3.2   USDOC's  benefit determination  
7.629.   In the final determination, after characterizing the relevant reimbursements provided by 
Québec  and New Brunswick  as grant s, the USDOC proceeded to find the total amount of 
reimbursements to be the amount of benefit conferred on the recipients.1248 As we have found that 
the USDOC did not provide a reasoned and adequate explanation for its finding that the silviculture 
and fores t management reimbursements made by New Brunswick  to JDIL, and the PCIP payments 
made by Québec  to Resolute, were grants, we conclude that the USDOC's  benefit finding was 
consequentially flawed. This is because the USDOC's  benefit finding was premised on its view that 
the reimbursements in question constituted grants. We concur with the finding of t he panel in EC and 
certain member States – Large Civil Aircraft  that the amount of financial contribution and the amount 
of the benefit are the same in cases where a government provides a grant to a recipient.1249 We, 
however, consider that the USDOC could n ot have found the entire amounts of the relevant 
reimbursements to represent the amount of benefit conferred in the absence of a reasonably and 
adequately explained finding that the reimbursements were grants in the first place.  
7.10.3.3   Conclusion  
7.630.   Based on the fo regoing, we find that the USDOC did not provide a reasoned and adequate 
explanation for characterizing the reimbursements provided by New Brunswick  to JDIL, and by 
Québec  to Resolute, as financial contributions in the form of grants under Article  1.1(a)(1) (i) of the 
SCM Agreement. We also find that, consequently, the USDOC's  benefit findings in respect of the 
reimbursements provided by New Brunswick  to JDIL, and Québec  to Resolute, were also tainted and 
hence inconsistent with Article  1.1(b)  of the SCM  Agreement.1250 
7.11  Canada's claims concerning provincial electricity programmes  
7.631.   The USDOC investigated whether provincial electricity programmes in British  Columbia , 
Québec , and New Brunswick  conferred a benefit on West Fraser, Tolko, Resolute, and Irving. In 
British  Columbia , the USDOC found that BC Hydro provided a financial contribution in the form of a 
purchase of goods, i.e. electricity, to West Fraser and Tolko that conferred a benefit, because the 
purchase was made for more than adequate remuneration.1251 Similarly, in Québec , the USDOC 
 
1246 Canada's  response to Panel  question No. 283, para.  9. We also note that Section 9.2 of the Treasury 
Board Note that established the PCIP requires the recipient of PCIP pa yments to submit an "activity report".  
1247 We note that Canada has also argued that PCIP payments made by Québec to Resolute were a 
purchase of services, and not grants, due to which the reimbursements were not financial contributions 
covered under Article  1 of the SCM  Agreement. (Canada's  first written submission, paras.  974 and 980). We 
consider that because we have found that the USDOC improperly found that the reimbursements in question 
were grants, we need not rule on whether the reimbursements should pr operly have been characterized as a 
purchase of services.  
1248 Final determination, (Exhibit CAN -10), pp.  186 and 189.  
1249 Panel Report, EC and certain member States – Large Civil Aircraft , fn 5724.  
1250 We note that in response to a Panel question, Canada stat ed that it is making a consequential claim 
of violation of Articles  19.3 and 19.4 of the SCM  Agreement. (Canada's  response to Panel  question No.  134, 
para. 385). We note, however, that Canada did not refer to Articles  19.3 and 19.4 of the SCM  Agreement in 
the context of its claims concerning silviculture reimbursements in its first written submission. We therefore 
consider that we cannot make findings under those provisions of the SCM  Agreement, in light of paragraph 3.1 
of the working procedures which prov ides that "[b]efore the first substantive meeting of the Panel with the 
parties, each party shall submit a written submission in which it presents the facts of the case and its 
arguments". This approach is consistent with the Appellate  Body's  finding in EC – Fasteners (China)  "that 
assertions made … only in response to questioning by the Panel, [cannot] comply with either Rule 4 of the 
Panel's  Working Procedures, or the requirements of due process of law". (Appellate  Body Report, EC – 
Fasteners (China) , para. 574). We note that rule 4 of the Working Procedures of the panel in that case is 
equivalent to paragraph 3.1 of the Panel's  Working Procedures in this case.   
1251 Final determination, (Exhibit CAN -10), p.  166. WT/DS533/ R 
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  found that Hydro -Québec purchased electricity from Resolute for more than adequate remuneration, 
and thus provided a financial contribution to Resolute in the form of a purchase of goods that 
conferred a benefit.1252 In New Brunswick , the USDOC found that New Brunswick  Power Corporation 
(NB Power ) provided a financial contribution that conferred a benefit to Irving in the form of revenue 
foregone under the L IREPP because it reduced Irving's  electricity bills.1253 
7.632.   Canada claims that the United  States acted inconsistently with Articles  1.1(b) and 14(d) of 
the SCM  Agreement because the USDOC incorrectly determined that provincial electricity 
programmes conferred a b enefit.1254 Specifically, Canada submits that the USDOC incorrectly found 
that: 
a. BC Hydro purchased electricity from West Fraser and Tolko for more than adequate 
remuneration;  
b. Hydro -Québec purchased electricity from Resolute for more than adequate remuneratio n; 
and 
c. the LIREPP constituted revenue foregone by New Brunswick  in favour of Irving.  
7.633.   Canada also challenges the USDOC's  finding that these purchase s of electricity (in the case 
of New Brunswick , revenue foregone) were attributed to the product under investigation, 
i.e. softwood lumber.  
7.11.1   British  Columbia  provincial electricity programme  
7.11.1.1   Introduction  
7.634.   We will first consider  Canada's  claim that the USDOC incorrectly determined that the 
purchase of electricity by BC Hydro from West Fraser and Tolko was made  for more than adequate 
remuneration and, therefore, was inconsistent with Articles  1.1(b) and 14(d) of the SCM  Agreement. 
Canada's  main argument concerns the USDOC's  approach to conduct its benefit analysis on the basis 
of a single market for electricity in British  Columbia . Canada argues that the USDOC erred by finding 
that the relevant market was a single market for electricity generated from all sources in 
British  Columbia .1255 For Canada, the relevant market for assessing the adequacy of remuneration 
was the wholesale market for biomass electricity produced and sold in British  Columbia .1256 Canada 
argues that the USDOC conflated distinct markets:  the wholesale market where BC Hydro purchases 
and generates electricity from a variety of sources at a variety o f prices; and the retail market, 
where BC Hydro sells electricity to consumers at tariff rates that reflect the blend of generation 
sources and their costs.1257 After failing to identify the relevant market, Canada argues that the 
USDOC selected a benchmark that did not reflect "prevailing market conditions" when it compared 
BC Hydro's  retail electricity rates with the rates at which BC Hydro purchased electricity.1258 
7.635.   The United  States submits that the USDOC defined the relevant market in the investigation 
as the market where BC Hydro both bought electricity from Tolko and West Fraser and sold electricity 
to Tolko and West Fraser.1259 The United  States contends that BC Hydro's  retail electricity tariff is 
the best benchmark for determining the benefit to the reci pient, considering that BC Hydro both 
purchased electricity from, and sold electricity to, West Fraser and Tolko.1260 
7.636.   We begin our assessment of Canada's  allegations by setting out the relevant legal standard 
applicable to benefit determinations under Articl es 1.1(b) and 14(d). We then consider it useful to 
 
1252 Final determination, (Exhibit CAN -10), pp.  162-167 and 170 -173. 
1253 Final determination, (Exhibit CAN -10), p.  213. 
1254 Canada's panel request, p.  3. 
1255 Canada's  first written submission, para.  1049.  
1256 Canada's  first written submission, para.  1054.  
1257 Canada's  opening statement at the first meeting of the Panel (27 February 2019), para.  133; 
first written submission, para.  1048.  
1258 Canada's  first written submission, paras.  1055-1062.  
1259 United  States' first written submission, para.  681. 
1260 United  States' first written submission, paras.  683-684. WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  set out, in some detail, the regulatory regime in British  Columbia  in which BC Hydro operated and 
the relevant purchases of electricity were made.  
7.11.1.2   Legal standard  
7.637.   We recall that Article  1.1(b) of the SCM  Agreement provides that "a subsidy shall be deemed 
to exist if … a benefit is thereby conferred." A financial contribution will confer a benefit upon a 
recipient within the meaning of Article  1.1(b) when it provides an advantage to the recipient. 
The Appella te Body has indicated that "the marketplace provides an appropriate basis for 
comparison" in determining whether a benefit has been conferred.1261 A financial contribution will 
only confer a benefit, "if it is provided on terms that are more advantageous tha n those that would 
have been available to the recipient on the market" .1262 Article  14 set s outs the guidelines for 
calculating a benefit to the recipient pursuant to Article  1.1(b).  
7.638.   According to Article  14(d), the purchase of goods will not confer a benefi t unless it is made 
"for more than adequate remuneration".  The adequacy of remuneration must be determined in 
relation to "prevailing market conditions" for the good in question, including "price, quality, 
availability, marketability, transportation and ot her conditions of sale." Article  14(d) of the 
SCM Agreement necessarily involves an analysis of the market generally in order to draw a 
conclusion concerning the conditions that are "prevailing" in that market.1263 At the same time, 
Article  14(d) does not prescribe any specific methodology to calculate the benefit to the recipient 
conferred by a government's  purchase of goods. The chapeau  of Article  14 provides an investigating 
authority with some latitude as to the  methodology it chooses to calculate the amount of benefit, as 
long as such methodology is "transparent and adequately explained" and is consistent with the 
general guidelines provided in Article  14(d).1264 
7.11.1.3   The British  Columbia  Energy Plan  
7.639.   In 2007, the Government of British  Columbia  issued a new policy plan called "The BC Energy 
Plan: A Vision for Clean Energy Leadership" (BC Energy Plan). The BC Energy Plan sets out numerous 
"policy actions".1265 Relevant to the current dispute, the BC Energy  Plan contains policy actions to 
ensure that (a) clean or renewable electricity1266 generation continues to account for at least 90% 
of total generation1267; (b) British  Columbia  is to achieve energy self -sufficiency by 20161268; 
and (c) greenhouse gas emissions  from new and existing generation projects will be reduced to 
zero.1269 Certain policy actions contained in the BC Energy Plan were subsequently enacted in the 
Clean Energy Act  in 2010.1270 
 
1261 Appellate  Body Report, Canada – Aircraft , para.  157. The parties agree that the marketplace 
provides the appropriate basis for comparison. Canada argues that, " [t]he actual comparison required in a 
specific benefit analysis is to be conducted by comparing the terms of a government's  'financial contribution' to 
terms available in the relevant market for a comparable transaction" . (Canada's  first written submission, 
para. 1019). The Unite d States argues that this comparison is accomplished by considering the "market [as] 
the appropriate benchmark in determining benefit within the meaning of Article  1.1(b)". (United  States' 
first written submission, para.  670 (referring to Appellate  Body Re port, EC and certain member States – 
Large  Civil Aircraft , para.  976)).  
1262 Panel Report, Canada – Aircraft , para.  9.112. See also, Appellate  Body Report, Canada – Aircraft , 
para. 157. 
1263 Appellate  Body Report, US – Carbon Steel (India) , para.  4.306.  
1264 Appell ate Body Report, Japan – DRAMs (Korea) , paras.  190-191. 
1265 BC Energy Plan, (Exhibit CAN -402), pp.  3-4.  
1266 The BC Energy Plan states that clean or renewable resources include sources of energy that are 
constantly renewed by natural processes, such as water p ower, solar energy, wind energy, tidal energy, 
geothermal energy, wood residue energy, and energy from organic municipal waste. (BC Energy Plan, 
(Exhibit  CAN-402), p.  13). 
1267 BC Energy Plan, (Exhibit CAN -402), pp.  3 and 39, policy action No.  21. 
1268 BC Energy  Plan, (Exhibit CAN -402), pp.  3 and 39, policy action No.  10.  
1269 BC Energy Plan, (Exhibit CAN -402), pp.  3 and 39, policy action Nos.  18 and 19.  
1270 Clean Energy Act, (Exhibit CAN -403), pp.  4-5. The Clean Energy Act  states that 
British  Columbia's  energy objec tives comprise, among  other things, to achieve electricity self -sufficiency, to 
generate at least 93% of electricity in British  Columbia from clean or renewable resources, to reduce 
British  Columbia greenhouse gas emissions by 2020 and for each subsequent calendar year to at least 
33% less than the level of those emission in 2007, and to reduce waste by encouraging the use of waste heat, 
biogas, and biomass.  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  7.640.   BC Hydro is a provincial Crown corporation with a mandate to generate,  manufacture, 
conserve, supply, acquire, and dispose of power in British  Columbia .1271 It generates electricity 
through its own facilities and purchases energy through electricity purchase  agreements (EPAs).1272 
The BC  Energy Plan includes specific policy acti ons concerning BC Hydro's  acquisition of electricity 
through EPAs, including the promotion of new sources of energy.1273 The BC Energy Plan states:  
Through the BC Energy Plan, BC Hydro will issue a call for proposals for electricity from 
sawmill residues, lo gging debris and beetle -killed timber to help mitigate impact from 
the provincial mountain pine beetle infestation.1274 
BC Hydro issued Bioenergy Call Phases I and II in 2008 and 2010 respectively.1275 Bioenergy Call 
Phases I and II were "competitive calls", a imed at yielding a pre -established target of electricity 
generation with certain eligibility criteria.1276 
7.641.   Separate to the Bioenergy Call Phases, the BC Energy Plan established a Standing Offer 
programme to encourage production of clean electricity by small producers.1277 Under this 
programme, BC  Hydro purchased directly from eligible suppliers at a set price.1278 The Standing 
Offer programme is not limited to biomass energy producers. BC Hydro also enters into bilateral 
negotiations to procure energy.1279  
7.642.   In the retail market, the rates that BC Hydro charges for the provision of electricity are 
subject to approval by the British  Columbia  Utilities Commission and determined by relevant 
provisions of the Utilities Commission Act , Clean Energy Act , and regulat ions.1280 When BC Hydro 
sells electricity to customers, it does not distinguish between energy supply sources or ownership, 
i.e. whether electricity was generated using biomass or hydro (for example), or whether it was 
purchased by BC  Hydro or generated by B C Hydro's  own facilities.1281 
7.11.1.4   The USDOC's  determination regarding the benefit conferred on West Fraser and 
Tolko  
7.643.   The USDOC found that BC Hydro had EPAs with 105 independent power producers, including 
West Fraser and Tolko.1282 West Fraser reported two EPAs to the USDOC for its sawmills at Chetwynd 
and Fraser Lake.1283 Tolko similarly reported two EPAs to the USDOC.1284 First, a bilateral EPA with 
respect to Tolko's  Armstrong facility, negotiated following Tolko's  unsuccessful parti cipation in 
 
1271 British  Columbia initial questionnaire response , (Exhibit CAN -395), p.  BC-II-30; Hydro and Power 
Authority Act, (Exhibit CAN -397), p.  5.  
1272 British  Columbia initial questionnaire response , (Exhibit CAN -395), p.  BC-II-33. 
1273 The relevant policy actions include taking advantage of the large volume of beetle -killed timber in 
British  Columbia followi ng the "unprecedented mountain pine beetle infestation". (BC Energy Plan, 
(Exhibit  CAN-402), pp.  17-18). 
1274 BC Energy Plan, (Exhibit CAN -402), pp.  17-18 and 39, policy action No.  31. The Panel notes that 
this is one of 55 policy actions under the BC Energy Plan.  
1275 BCUC application for BioPhase  1, (Exhibit CAN -404 (BCI)); Report on the RFP process,  
(Exhibit  CAN-405).  
1276 British  Columbia initial questionnaire response , (Exhibit CAN -395), p.  BC-II-34. Prices in EPAs 
resulting from the Bioenergy Call Phases were  determined by the successful proponent's bid into the call 
process. ( British  Columbia initial questionnaire response , (Exhibit CAN -395), p.  BC-II-43). 
1277 BC Energy Plan, (Exhibit CAN -402), pp.  10 and 39, policy action No.  11. 
1278 British  Columbia initial que stionnaire response , (Exhibit CAN -395), pp.  BC-II-40 and 
BC-II-45-BC-II-46. Eligible projects must be less than 10  MW in size and be clean electricity or high efficiency 
electricity cogeneration. The price offered in the standing offer contract would be ba sed on the prices paid in 
the most recent BC Hydro energy call.  (BC Energy Plan, (Exhibit CAN -402), p.  10). See also, Standing Offer 
programme rules, (Exhibit CAN -407).  
1279 British  Columbia initial questionnaire response , (Exhibit CAN -395), p.  BC-II-35. For example, 
BC Hydro uses bilateral negotiations to renew pre -existing EPAs.  
1280 British  Columbia initial questionnaire response , (Exhibit CAN -395), pp.  BC-II-47 and BC -II-50-52; 
Utilities Commission Act, (Exhibit CAN -398); and Clean Energy Act, (Exhibit CAN -403), pp.  9-10. 
1281 British  Columbia initial questionnaire response , (Exhibit CAN -395), pp.  BC-II-47 and BC -II-49. 
1282 Preliminary determination, (Exhibit CAN -8), p.  84. 
1283 Preliminary determination, (Exhibit CAN -8), p.  84. BC Hydro and West Fraser negotiated the se EPAs 
as part of Bioenergy Call Phase II. ( British  Columbia initial questionnaire response , (Exhibit CAN -395),  
BC Hydro Narrative , p. BC-II-37). See also, Fraser Lake EPA, (Exhibit CAN -411 (BCI)); and Chetwynd EPA, 
(Exhibit CAN -412 (BCI)).  
1284 Preliminary determination, (Exhibit CAN -8), p.  84.  WT/DS533/ R 
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  Bioenergy Call Phase I.1285 Second, an EPA as a result of the Standing Offer programme between 
BC Hydro and Tolko's  Kelowna sawmill and cogeneration facility.1286 
7.644.   To determine the benefit conferred on West Fraser and Tolko, the USDOC selected a 
comparator by which it could compare whether the remuneration that BC Hydro paid West  Fraser 
and Tolko for electricity pursuant to their respective EPAs was adequate. The USDOC selected the 
price at which BC Hydro sold electricity to West Fraser and Tolko.1287 As a result of this comparison, 
the USDOC determined that BC Hydro's  purchases of electricity were made for more than adequate 
remuneration and therefore, conferred a benefit.1288 The USDOC's  rationale was that the best 
measure of the benefit to the recipien t is the difference between the price at which a government 
provided the good and the price at which the government purchased that same good.1289 The USDOC 
explained that it considers a benefit to be conferred in relation to the purchase of a good when a 
firm receives more revenues than it otherwise would earn in the absence of the government 
programme.1290 
7.645.   Before the USDOC, West Fraser and the Government of British  Columbia  argued that the 
EPAs were the result of a competitive bidding process and, in that sens e, market based. In these 
circumstances, West Fraser and the Government of British  Columbia  argued the prices were 
adequate and no benchmark analysis is required.1291 The USDOC found that the prices paid under 
EPAs could not be considered market based becaus e they resulted from the Government of 
British  Columbia 's policy framework, i.e. the BC Energy Plan, which limited the sources from which 
BC Hydro could source electricity, namely from within the province and from renewable sources.1292 
In addition, the USDO C found that the adequacy of remuneration does not exist in a vacuum and to 
determine whether remuneration is "adequate", a comparison source is needed. Accordingly, the 
USDOC determined that it was necessary to select a benchmark to calculate the benefit.1293 
7.646.   The USDOC rejected the argument of Tolko, West Fraser, and the Government of 
British  Columbia  to use successful bid prices under the Bioenergy Call Phase I as a benchmark, on 
the basis that the benchmark used to measure the benefit from an investigated programme should 
not be taken from that same programme.1294 To do so would not capture the difference between the 
price at which the government sold electricity and purchased electricity. In response to the argument 
that the EPAs reflect the market -based pri ces for the specific electricity product (i.e. biomass 
electricity), and that there are different types of electricity, the USDOC found that while electricity 
can be generated using various sources (including hydro, coal, gas, oil, solar, nuclear, biomass) , 
there was no information on the record to demonstrate that the method used to generate electricity 
changes the "physical characteristics of electricity or the fungibility of electricity".1295 In support of 
this assertion, the USDOC observed that BC  Hydro d oes not track the sources of electricity that it 
sells to its customers.1296 
7.11.1.5   Whether the USDOC improperly determined that BC Hydro's  purchases of 
electricity were made for more than adequate remuneration  
7.11.1.5.1   The benchmark selected by the USDOC  
7.647.   Canada argues that  in assessing whether a government has purchased electricity for more 
than adequate remuneration, the Appellate  Body has indicated that the first analytical step is to 
 
1285 Preliminary determination, (Exhibit CAN -8), p.  84; British  Columbia initial questionnaire response , 
(Exhibit CAN -395), pp.  BC-II-40-BC II-41. See also, Armstrong EPA, (Exhibit CAN -414 (BCI)).  
1286 Prelimin ary determination, (Exhibit CAN -8), p.  84; British  Columbia initial questionnaire response , 
(Exhibit CAN -395), p.  BC-II-40. See also, Kelowna Standing Offer programme EPA, (Exhibit CAN -416 (BCI)).  
1287 Final determination, (Exhibit CAN -10), p.  166. 
1288 Final d etermination, (Exhibit CAN -10), p.  166. 
1289 Final determination, (Exhibit CAN -10), p.  166. 
1290 Final determination, (Exhibit CAN -10), p.  165. 
1291 Final determination, (Exhibit CAN -10), p.  163. 
1292 Final determination, (Exhibit CAN -10), p.  164. 
1293 Final determination, (Exhibit CAN -10), pp.  164-165. 
1294 Final determination, (Exhibit CAN -10), p.  167. 
1295 Final determination, (Exhibit CAN -10), p.  167. 
1296 Final determination, (Exhibit CAN -10), p.  167. WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  define the relevant market from which to select an appropriate benchmark.1297 Canada's  claim of 
inconsistency with Articles  1.1(b) and 14(b) is based on the USDOC's  use of a benchmark from the 
allegedly incorrect market.1298 According to Canada, the USDOC erred by finding that the relevant 
market was a single market for all electricity in British  Columbia .1299  
7.648.   The United  States argues that the USDOC defined the relevant marketplace correctly as the 
market where BC  Hydro both bought electricity from Tolko and West Fraser and sold electricity to 
Tolko and West Fraser.1300 In order to determine whether BC Hydro's  purchase of biomass electricity 
conferred a benefit, the USDOC therefore compared BC Hydro's  purchase price of biomass electricity 
from Tolko and West Fraser to tariff rates charged by BC Hydro to the same companies for electricity 
gener ated from all sources.1301 The United  States argues that the USDOC rejected the contention 
that the relevant market should be limited to the supply side of the market where BC Hydro bought 
electricity from Tolko and West Fraser, as these were the transaction s for which the USDOC had to 
decide whether a benefit had been conferred.1302 In our view, this approach by the USDOC was 
fundamentally flawed.  
7.649.   In considering the benchmark the USDOC selected, we note that the relevant financial 
contribution is the purchase by BC Hydro of electricity generated by Tolko and West Fraser from 
biomass.1303 In purchasing electricity, BC  Hydro was bound by the requirements of the BC Energy 
Plan, which required it to purchase electricity generated from biomass.1304 In the context of that 
regulatory regime, electricity generated by Tolko and West Fraser was not substitutable – from 
BC Hydro's  perspective – with electricity generated from other sources.1305 As a result, the fact that 
BC Hydro did not track the source of electricity that it s ells to its customers1306, or the fact that there 
was no information on the record to demonstrate that the method used to generate electricity 
changes the physical characteristics or the fungibility of electricity1307, is not determinative. The 
regulatory regi me imposed by the BC Energy Plan shaped the prevailing market conditions1308 
governing the sale and purchase of electricity at the wholesale level. The fact that a regulatory 
 
1297 Canada's  first written submission, para.  1021 (referring to A ppellate  Body Reports, Canada – 
Renewable Energy / Canada – Feed-in Tariff Program , para. 5.169).  
1298 Canada's  first written submission, paras.  1022 and 1048 -1054; second written submission, 
para. 348. 
1299 Canada's  first written submission, para.  1049.  
1300 United  States' first written submission, paras.  680-681. 
1301 United  States' first written submission, para.  684; response to Panel question No.  278, 
paras.  420-421. 
1302 United  States' first written submission, para. 681. 
1303 Furthermore, we find that the purchases of electricity produced from biomass energy sources were 
made  pursuant to four specific EPAs between BC Hydro , and Tolko and West Fraser. (Preliminary 
determination, (Exhibit  CAN-8), pp.  84-85). The EPAs  were concluded pursuant to three different procurement 
mechanisms,  the Bioenergy Call Phase II, Standing Offer programme, and bilateral negotiations. (See , above, 
paras.  7.640 -7.641 ). There is nothing on the record to suggest that the regulatory regime existent in 
British  Columbia, in a broad sens e, was the subsidy programme under investigation.  
1304 We recall policy action No. 31 of the BC Energy Plan, which states that BC Hydro "will issue a call for 
proposals for electricity from sawmill residues, logging debris and beetle -killed timber". (BC Ener gy Plan, 
(Exhibit CAN -402), policy action No.  31). We also note that the BC Energy Plan provides that clean or 
renewable electricity generation continues to account for at least 90% of total generation in British  Columbia. 
(BC Energy Plan, (Exhibit CAN -402), pp.  3 and 39, policy action No.  21; see , above , paras.  7.639 -7.642 ). We 
consider that BC Hydro's acquisition of biomass energy in the four EPAs at issue was made pursuant to these 
policy directives.  
1305 Nor was it substitutable from the perspective of West Fraser and Tolko. The EPAs at issue were for 
the sale of electricity generated from biomass, not the sale of electricity indeterminate of the source. The 
United  States argues that Tolko and West Fraser  considered electricity they sold to BC Hydro to be "completely 
substitutable" with electricity provided by BC Hydro's  own facilities. (United  States' first written submission, 
para. 683. See also, second written submission, para.  432). In support of this assertion, the United  States 
references statements which, in our opinion, demonstrate that electricity, when sold in the retail market , is 
fungible. (United  States' first written submission, fn 1261).  
1306 United  States' first written submission, para.  683. 
1307 The parties agree that electricity is physically identical regardless of how it is 
generated.  (Canada's  response to Panel question No.  281, para.  430; United  States' response to Panel 
question No.  281, para.  425).  
1308 We note that the illustrative list of p revailing market conditions set forth in Article  14(d) includes 
"marketability". In our view, the regulatory requirement for a certain amount of electricity generated from 
biomass concerns the "marketability" of electricity.  WT/DS533/ R 
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  regime shapes the wholesale electricity market in British  Columbia  is not, in and o f itself, a cause of 
subsidization.1309 
7.650.   Accordingly, the benchmark selected by the USDOC should have reflected these prevailing 
market conditions for electricity at the wholesale level. By selecting a benchmark that reflected 
prevailing market conditions for  the sale of electricity at the retail level, where the prevailing market 
conditions were not shaped by the same regulatory regime, the USDOC acted inconsistently with 
Articles  1.1(b) and 14(d) of the SCM  Agreement.1310 
7.11.1.5.2   Whether the USDOC improperly rejected the benchmarks submitted by the 
interested parties  
7.651.   Having found that the USDOC failed to select a benchmark that related to the prevailing 
market conditions of BC Hydro's  purchase of electricity from West Fraser and Tolko, we turn now to 
consider Canada's  arguments that the USDOC improperly rejected the alternative benchmarks 
submitted by the interested parties during the investigation.  
7.652.   Canada argues that Article 14(d) permits the assessment of adequacy of remuneration for 
the purchase of a good in the abse nce of a benchmark price.1311 According to Canada, three of the 
four EPAs in question had market -determined prices such that they did not need a benchmark.1312 
Canada also argues that Bioenergy Call Phase I could have served as an appropriate benchmark for 
all EPAs under investigation.1313 Canada asserts that the USDOC improperly rejected 
BC Hydro's  Bioenergy Call Phase I as a market -based price discovery mechanism.1314 Canada 
submits that the evidence before the USDOC confirmed that the Bioenergy Call Phase I prices were 
market based. In particular, the expert report of Dr Rosenzweig showed that the Bioenergy Call 
Phase I followed "the 'open', 'transparent' and 'best of fer' characteristics of a competitive 
process" .1315 In support of its assertion that the EPAs were "competitively priced", Canada also refers 
to the British  Columbia  Utilities Commission's  acceptance of the EPAs resulting from the Bioenergy 
Call Phase I.1316 
7.653.   The United  States argues that Canada's  position whereby an investigating authority assesses 
the adequacy of remuneration by comparing the remuneration against itself is untenable.1317 The 
United  States argues, as did the USDOC, that it would be incongruent to  select as a benchmark price 
the same programme price for electricity that is under investigation for providing a benefit.1318 
 
1309 The regulatory regime per se  is only disciplined under the SCM  Agreement to the extent that it falls 
within the scope of that  Agreement, in the sense that it provides for financial contributions that confer benefit. 
Furthermore, we note that the USDOC itself recognised that the existe nce of regulation in a market does not 
necessarily preclude prices in that market from being used as a benchmark:   
Although we acknowledge that the electricity tariffs that are charged by both  [sic] BC Hydro are 
regulated and approved by the [Government of  British  Columbia] through the [British  Columbia 
Utilities Commission], we disagree that this precludes their use in determining the benefit to the 
recipients.  
(Final determination, (Exhibit CAN -10), p.  166) 
The USDOC did not determine that the regulatory regime resulting from the BC Energy Plan would 
distort the market, in the sense of preventing the establishment of market -determined prices of wholesale 
electricity.  
1310 Under the SCM  Agreement, government regulation should not be equated with subsidization,  unless 
it takes the form of a financial contribution that confers a benefit. Our finding is broadly consistent with 
reasoning advanced by the Appellate Body in Canada – Renewable Energy / Feed -in Tariff Program , in 
particular para.  5.176, and the Appellat e Body's finding that "the government's  definition of the energy 
supply -mix for electricity generation does not in and of itself  constitute a subsidy" . (Appellate Body Report, 
Canada – Renewable Energy / Feed -in Tariff Program , para. 5.190 ). (emphasis adde d) 
1311 Canada's  first written submission, para.  1029.  
1312 Canada's  first written submission, para.  1060. Canada does not argue that the EPA between 
BC Hydro and Tolko's  Kelowna facility, as a result of the Standing Offer programme, has market -determined 
prices  such that it did not need a benchmark.  
1313 Canada's  first written submission, para.  1059; second written submission, para.  377. 
1314 Canada's  first written submission, para.  1057.  
1315 Canada's  first written submission, para.  1059 (referring to Rosenzweig Report, ( Exhibit  CAN-417), 
p. 23). 
1316 Canada's  first written submission, para.  1059.  
1317 United  States' first written submission, para.  684. See also, second written submission, para.  438. 
1318 United  States' first written submission, para.  678 (referring to Final determination, 
(Exhibit  CAN-10), p.  167); comments on Canada's  response to Panel question No.  275, para. 275. WT/DS533/ R 
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  According to the United  States, the USDOC's  reasoning that a comparison source is needed to 
determine whether remuneration is adequ ate, accords with the Appellate  Body's  understanding " that 
the word 'benefit', as used in Article  1.1(b), implies some kind of comparison" .1319 
7.654.   The United  States also observes that, in rejecting these alternative benchmarks, the USDOC 
stated that the EPA pro cess cannot be considered market based, because "this policy framework 
limits the sources from which BC Hydro can source electricity".1320 The USDOC found that BC Hydro 
is required to purchase electricity "from only sources within the province, and increasin gly from 
renewable sources of power".1321 
7.655.   We find that Canada has not put forward adequate legal arguments and evidence1322 to make 
a prima facie  case that the USDOC improperly rejected the alternative benchmarks.1323 Canada has 
not provided a sufficient explanation of how the USDOC's  rejection of the alternative benchmarks 
was improper in light of the policy framework that limits the purchase of bio mass energy to sources 
within the province of British  Columbia . In particular, we consider that Canada has not provided a 
sufficient explanation of how the geographical limitation on market participants results in alternative 
benchmark  prices  that do not deviate from being a market -determined price.1324 Some form of 
government regulation may, in particular circumstances, distort pricing. Thus, although geographic 
limitations on market participants (imposed by regulation) may not necessarily distort pricing in  all 
cases, there could be factual situations in which such limitations do operate to cause price distortion. 
Accordingly, the onus is on Canada, as the complainant, to establish prima facie  that the 
USDOC's  determination in this regard is flawed. The  Panel asked the parties to explain whether and 
how the statement of the USDOC, that BC  Hydro is required to purchase electricity from only sources 
within the province, is relevant for the Panel's  analysis of Canada's  claim under Articles  1.1(b) and 
14(d) of th e SCM  Agreement.1325 Canada contends the policy framework that the Government of 
British  Columbia  imposed on BC  Hydro's  purchase of electricity is "precisely the type of government 
decision concerning supply mix that the Appellate  Body has expressly found cannot be used as a 
basis to reject an appropriate benchmark from within a properly identified ma rket".1326 Canada 
submits no other legal argument in support of its position. In particular, Canada does not address 
the geographic limitation alluded to by the USDOC.  
7.656.   In relation to the benchmark based on winning bids in Bioenergy Call Phase I, Canada argue s 
that the expert report of Dr Rosenzweig confirms that Bioenergy Call Phase I prices were market 
based.1327 We note that Dr Rosenzweig's  Report acknowledges that the Government of 
British  Columbia  specified several criteria that BC Hydro must use for its lo ng-term resource 
planning, including that BC Hydro must be capable of meeting its electricity supply obligations solely 
from electricity -generation facilities within British  Columbia .1328 In addition, Dr Rosenzweig's  Report 
provides that, "[u]nder [ British  Columbia ] guidelines, the geography of the market is 
[British  Columbia ] and the product(s) are long -term non -interruptible resources that are carbon 
neutral and provided by independent power producers" .1329 Notwithstanding these references, we 
 
1319 United  States' first written submission, para.  684 (referring to Appel late Body Report, Canada – 
Aircraft , para.  157). See also, second written submission, para.  441. 
1320 Final determination, (Exhibit CAN -10), p.  164; United  States' first written submission, para.  676. 
1321 Final determination, (Exhibit CAN -10), p.  164. 
1322 Appella te Body Report, Chile – Price Band System (Article  21.5 – Argentina) , para.  134. 
1323 A prima facie  case is one which, in the absence of effective refutation by the defending party, 
requires a panel, as a matter of law, to rule in favour of the complaining pa rty. (Appellate  Body Report, EC – 
Hormones , para.  104).  
1324 While proper benchmarks would normally emanate from the market for the good in question, it is 
only to the extent that these benchmark prices are market determined that they would have the requisite  
connection with prevailing market conditions in the country of provision, and thereby satisfy Article  14(d). 
(See, for example, Appellate  Body Report, US – Carbon Steel (India) , para.  4.151).  
1325 Panel  question No.  276.  
1326 Canada's  response to Panel question No.  276, para.  422 (referring to Appellate  Body Reports, 
Canada  – Renewable Energy / Canada – Feed-in Tariff Program , paras.  5.173 and 5.175 -5.178) . See also, 
response to Panel question No.  139, para.  398. Canada also ar gues that no law or regulation requires  BC Hydro 
to purchase electricity from only sources within the province. ( Canada's  response to Panel question No.  276, 
para. 421). In response, the United  States reiterates the USDOC's  finding that it was the policy f ramework, 
rather than a law or regulation, that limited BC Hydro's  purchase of electricity to in -province suppliers. 
(United  States' comments on Canada's  response to Panel question No.  276, paras.  278-279).  
1327 Canada's  first written submission, para.  1059.  
1328 Rosenzweig Report , (Exhibit CAN -417), p.  6. 
1329 Rosenzweig Report , (Exhibit CAN -417), p.  15. WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  do not consider  that Dr Rosenzweig's  Report addresses how the limitation of the "geography of the 
market" to British  Columbia  affects prices in that market, if at all. In any event, Canada may not 
simply allege facts, as contained in Dr Rosenzweig's  Report, and expect th e Panel "to divine from it 
a claim of WTO inconsistency".1330 
7.657.   In relation to the three EPAs that Canada alleges the USDOC should have examined to assess 
if they were market based and consistent with prevailing market conditions, Canada argues that 
Tolko's  Armstrong EPA was based on Bioenergy Call Phase I pricing and the British  Columbia  Utilities 
Commission accepted it as a cost -effective agreement.1331 With respect to West  Fraser's  EPAs, 
Canada submits that Bioenergy Call Phase II produced market -determined pr ices.1332 We do not 
consider this evidence submitted by Canada to be adequate to substantiate its claim that the 
USDOC's  rejection of the alternative benchmarks was improper. We consider that, on its face, the 
operation of a policy framework that limits BC H ydro's  purchases of biomass electricity to sources 
within the province, requires additional explanation to what Canada has provided as to how prices 
emanating from that market are, notwithstanding the policy, market -determined such that the 
USDOC's  rejecti on of those prices was improper.  
7.658.   In reaching this conclusion, we do not consider that Canada has the burden of proof to 
demonstrate that the alternative benchmarks , which it alleges the USDOC improperly rejected , are 
WTO-consistent. Rather, we find that Ca nada, as the complainant, has the burden to make a 
prima  facie case that the USDOC's  rejection of the alternative benchmarks was improper. This 
necessarily involves the submission of adequate legal argument s and evidence in support of its 
claim.1333 In light  of the evidence and submissions before us, we find that Canada has not made a 
prima facie  case that the USDOC improperly rejected the benchmarks submitted by the interested 
parties. We therefore reject this claim.  
7.11.1.5.3   The USDOC's  determination of benefit in r espect of Tolko's  turn-down 
payments  
7.659.   The EPA between BC Hydro and Tolko required Tolko's  Armstrong facility to keep an agreed 
amount of capacity available to BC Hydro and prohibited it from selling electricity to a third party, 
even when BC Hydro declined to purchase electricity it would otherwise be required to purchase 
under the  Agreement.1334 If BC Hydro were to turn down energy, the EPA required it to make 
turn-down payments.1335 During the POI, BC Hydro made two such turn -down payments to Tolko.1336 
The USDO C included the full amount of turn -down payments to Tolko Armstrong in its benefit 
calculation.1337 In the final determination, the USDOC explained that "these payments are used to 
compensate Tolko for its investment in fixed generation assets that relate to  its sales of electricity 
to BC Hydro" .1338 
7.660.   Canada argues that the USDOC failed to identify an appropriate benchmark for 
Tolko's  turn-down payments by treating them as a "grant" and adding the full amount of the 
turn-down payments to the benefit calculations .1339 According to Canada, turn -down payments are 
contractual provisions between BC Hydro and Tolko.1340 Canada explains that the turn -down 
payments compensated Tolko for reserving and making available its full generation capacity 
 
1330 Appellate  Body Report, US – Gambling , para.  140. 
1331 Canada's  first written submission, para.  1060.  
1332 Canada's  first written submission, para.  1061.  
1333 As not every  claim of WTO -inconsistency will consist of the same elements, "the nature and scope of 
evidence required to establish a prima facie  case 'will necessarily vary from measure to measure, provision to 
provision, and case to case'". (Appellate  Body Report, US – Gambling , fn 151 (quoting Appellate  Body Report, 
Japan – Apples , para.  159, in turn quoting Appellate  Body Report, US – Wool Shirts and Blouses , DSR 1997:I, 
p. 335)).  
1334 Armstrong EPA, ( Exhibit CAN -414 (BCI)), sections 7.3 and 7.10; Tolko questionnaire r esponse , 
(Exhibit CAN -67 (BCI) ), pp.  TOLKO -CVD-143-TOLKO -CVD-144. See also, Canada's  first written submission, 
paras.  1046 and  1063; and second written submission, para.  380. 
1335 [[***]] (Armstrong EPA, (Exhibit  CAN-414 (BCI)), p.  18). 
1336 Canada's  first written submission, para.  1063.  
1337 Tolko calculation memorandum , (Exhibit CAN -420 (BCI)), tab "Electricity for MTAR".  
1338 Final determination, (Exhibit CAN -10), p.  159. 
1339 Canada's  first written submission, paras.  1063-1065.  
1340 Canada's  second w ritten submission, para.  380. WT/DS533/ R 
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  exclusively to BC  Hydro, as electricity not used by BC Hydro could not be stored and subsequently 
sold to another party.1341 
7.661.   The United  States submits that Tolko itself, in response to the USDOC's  questionnaire, 
described turn -down payments as a compensation for its "investment in fixed generation assets that 
relate to its sales of electricity to BC Hydro".1342 The United  States argues that the USDOC correctly 
determined that turn -down payments to Tolko were grants, because BC Hydro did not receive 
anything in return for providing a direct transfer of funds to Tolko.1343 
7.662.   It is undisputed that in the case of a grant "the conveyance of funds will not involve a 
reciprocal obligation on the part of the recipient".1344 The issue before us, therefore, is whether the 
USDOC erred in finding that the turn -down payments BC Hydro made to Tolko did not involve a 
reciprocal obligation and as a result, if the USDOC failed to asses s whether a benefit was conferred 
consistent with Article  1.1(b). We consider that the record evidence clearly indicates that the 
turn-down payments were part of the contractual obligation between BC Hydro and Tolko for the 
purchase of electricity, with re ciprocal obligations clearly imposed on Tolko.1345 We disagree with the 
arguments of the United  States that BC  Hydro did not receive anything in return for its payments, 
since these payments were made according to the provision of the EPA that guarantees the  supply 
of electricity exclusively to BC  Hydro and compensates Tolko's  costs to generate electricity if 
BC Hydro turns down the electricity.1346 
7.663.   Nor are we persuaded by the United  States' argument that Tolko's  description of the 
turn-down payments as compens ation for Tolko's  investment in fixed generation assets is, in some 
way, determinative of the payments being a grant.1347 Elsewhere in Tolko's  questionnaire response 
(the document on which the United  States and the USDOC rely), Tolko explains that:  
[T]he Arm strong contract has a provision for BC Hydro to turn down the electricity 
generation at the Armstrong facility. BC Hydro then pays a fee, essentially a charge for 
having made our generation capacity available to BC Hydro,[45] for the firm energy that 
is not delivered.1348 
45 It is common for both wholesale energy purchase contracts and electricity tariffs for large 
industrial customers to include a capacity component and an energy component. The capacity 
charge would reflect the peak demand the buyer requires , to compensate the Seller for having to 
have the capacity available to serve the Buyer, and the energy charge will reflect actual energy 
flows.  
We consider this evidence does not support the United  States' assertion that the payments were 
grants. To the c ontrary, Tolko specifically refers to the provision in the contract for the purchase of 
electricity , which allows BC Hydro to turn down electricity. An unbiased and objective investigating 
authority would have taken these contractual obligations into accou nt when assessing whether a 
benefit was conferred pursuant to Article  1.1(b).  
7.664.   In light of the above, we find that the USDOC failed to assess whether a benefit was 
conferred consistent with Article  1.1(b). We also find that the USDOC acted inconsistently wi th the 
 
1341 Canada's  first written submission, para.  1064; second written submission, para.  380. 
1342 United  States' response to Panel question No.  141, para.  425 (quoting Final determination, 
(Exhibit  CAN-10), p.  159, and referring to Tolko questionnaire response , (Exhibit CAN -67 (BCI))). See also, 
second written submission, para.  685. 
1343 United  States' f irst written submission, paras.  684-685; response to Panel question No.  279, 
paras.  422-423. 
1344 Appellate  Body Report, US – Large Civil Aircraft (2nd complaint) , para.  617. See also, 
Canada's  second written submission, paras.  378-380; United  States' first w ritten submission, para.  685; and 
United States'  response to Panel question No.  141, para.  425. 
1345 Armstrong EPA, ( Exhibit CAN -414 (BCI)), sections 7.3 and 7.10; Tolko questionnaire response , 
(Exhibit CAN -67 (BCI) ), pp.  TOLKO -CVD-143-TOLKO -CVD-144. 
1346 Armstrong EPA, ( Exhibit CAN -414 (BCI)), sections 7.3 and 7.10.  
1347 United  States' first written submission, para.  685; responses to Panel question No.  141, para.  425, 
and No.  279, paras.  422-423. 
1348 Tolko questionnaire response , (Exhibit CAN -67 (BCI)), p.  TOLKO-CVD-153. WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  first sentence of Article  14(d) in that, after improperly treating the turn -down payments as grants, 
it failed to assess whether the purchase of goods was made for more than adequate remuneration.  
7.11.1.6   Conclusion  
7.665.   In light of the above, we find that the U SDOC selected a benchmark that did not relate to 
the prevailing market conditions within the market where BC  Hydro purchased electricity, and 
accordingly, acted inconsistently with Articles  1.1(b) and 14(d) of the SCM  Agreement. We find that 
Canada has fai led to make a prima facie  case that the USDOC improperly rejected alternative 
benchmarks in order to assess whether a benefit was conferred.  
7.666.   As for the turn -down payments BC Hydro made to Tolko, we find that the USDOC failed to 
assess whether a benefit was  conferred consistent with Article  1.1(b). We also find that the USDOC 
acted inconsistently with the first sentence of Article  14(d) in that it failed to assess whether the 
purchase of goods was made for more than adequate remuneration.  
7.11.2   Québec  provincial e lectricity programme  
7.11.2.1   Introduction  
7.667.   We now turn to Canada's  claim that the USDOC incorrectly determined that the purchase of 
electricity by Hydro -Québec from Resolute was made for more than adequate remuneration and, 
therefore, was inconsistent with Articles  1.1(b) and 14(d) of the SCM  Agreement. Canada contends 
the USDOC wrongly conflated the market for renewable biomass electricity with the market for all 
sources of electricity, by taking a benchmark from the market in which Hydro -Québec generates 
electrici ty from all sources and sells it to all consumers.  
7.668.   The United  States argues that the USDOC found that Hydro -Québec was selling electricity 
to and purchasing it from Resolute, therefore the benefit to the recipient is the difference between 
the price at whi ch Hydro -Québec sold electricity and the price at which the government purchased 
it back.1349  
7.669.   We begin by considering the regulatory regime in Québec  in which Hydro -Québec operated 
and the relevant purchases of electricity were made.  
7.11.2.2   The Québec  Energy Strat egy 
7.670.   In 2006, the Government of Québec  issued the "Québec Energy Strategy 2006 -2015" 
(Québec  Energy Strategy) with the objectives of making energy supply more secure, promoting 
sustainable development, and increasing energy efficiency.1350 Electricity in Québec  is predominantly 
sourced from hydroelectricity.1351 One of the "priority actions" of the Québec  Energy Strategy 
relevant to the current dispute is to facilitate the decentralized production of electricity by 
encouraging "small -scale electricity production to trigger the development of new energy 
technologies, including those using biomass" .1352 The st rategy provides that "[s]mall quantities of 
forest residues and biogas produced by small landfill sites or farms are ideal sources of energy for 
this type of decentralized production".1353 
7.671.   Hydro -Québec is a public utility, owned by the Government of Québec .1354 Hydro -Québec 
has separate divisions responsible for the generation of electricity (Hydro -Québec Production), and 
supply of electricity to customers within Québec  (Hydro -Québec Distribution).1355 When 
 
1349 United  States' first written submission, para.  693. 
1350 Québec Energy Strategy 2006 -2015, (Exhibit CAN -429), p.  4. 
1351 Québec Energy Strategy 2006 -2015, (Exhibit CAN -429), p.  10. 
1352 Québec Energy Strategy 2006 -2015, (Exhibit CAN -429), p.  72. 
1353 Québec Energy Strategy 2006 -2015, (Exhibit CAN -429), p.  72. 
1354 Hydro -Québec Act, (Exhibit CAN -423); Canada's  first written submission, para.  1067.  
1355 Québec questionnaire response, (Exhibit CAN -424 (BCI)), p.  QC-BIO-1. WT/DS533/ R 
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  Hydro -Québec Distribution requires electricity beyon d the guaranteed volume supplied by 
Hydro -Québec Production, it must be acquired through supply contracts.1356 
7.672.   The Power Purchase programme was one mechanism used to acquire additional electricity 
volume.1357 Hydro -Québec issued the Power Purchase programme guided by the policy actions set 
out in the Québec  Energy Strategy and associated regulations.1358 The Power Purchase programme 
was designed to purchase 300  MW of electricity from cogeneration plants using forest biomass.1359 
The formula for the price that wou ld be paid by Hydro -Québec Distribution to purchase power under 
the Power Purchase programme was set out in the standard contract provided with the programme 
description.1360 As long as the eligibility criteria1361 were met, bids submitted in the Power Purchas e 
programme were accepted on a first come, first served basis, until the total quantity of electricity to 
be purchased pursuant to the programme was reached.1362 
7.673.   The Régie is the economic regulatory tribunal for the energy sector of Québec .1363 It is a 
quasi -judicial body established by the Act Respecting the Régie de l 'énergie and is responsible for, 
inter alia , setting distribution rates and conditions of service for Hydro -Québec Distribution, 
approving the supply plan and features of supply contracts1364 entered into by Hydro -Québec 
Distribution, including approving the process for purchasing programmes for electricity from 
renewable sources (including biomass).1365 
7.11.2.3   The USDOC's  determination regarding the benefit conferred on Resolute  
7.674.   The USDOC found that amon g the power purchase  agreements (PPAs) concluded by 
Hydro -Québec pursuant to the Power Purchase programme, were two PPAs with Resolute with 
respect to its forest biomass power plants at Gatineau newsprint and Dolbeau specialty paper 
mills.1366 
7.675.   The USDOC foun d that Resolute's  pulp and paper mills purchased electricity from 
Hydro -Québec at the "Industrial L rate", the tariff in effect during the POI, and sold electricity to 
Hydro -Québec at an administratively -set price.1367 The USDOC selected the Industrial L rat e as a 
benchmark to measure the adequacy of remuneration for Hydro -Québec's  purchases of electricity 
from Resolute. The benefit to Resolute is the difference between those two prices.1368 The USDOC 
found that Hydro -Québec's  purchase of electricity from Resol ute conferred a benefit, which was 
measured by the difference between the benchmark, the Industrial L rate that Resolute paid for 
electricity, and the administratively -set prices at which Resolute sold electricity.1369 
7.676.   During the investigation, the Governmen t of Québec  argued that the Industrial L rate cannot 
be used as a benchmark because it does not differentiate by the type of power sold and cannot be 
 
1356 Québec questionnaire response,  (Exhibit  CAN-424 (BCI) ), p. QC-BIO-55; Canada's  first written 
submission, para.  1069.  
1357 Québec questionnaire response, (Exhibit CAN -424 (BCI)), p.  QC-BIO-55. 
1358 Order in Council D -1086-2011, (Exhibit CAN -431); Canada's  first written submission, para.  1071.  
1359 Québec  questionnaire response, (Exhibit CAN -424 (BCI)), p.  QC-BIO-55. Eligible fuels for the 
programme were residual forest biomass comprised of bark, sawdust, shavings, trim ends, wood chips, scrap 
wood, compressed wood products, primary, secondary and de -inking sludge, pulp, and paper cooking liquors, 
as well as wood products generated in the course of silvicultural treatments or forestry operations.  
1360 Québec questionnaire response, (Exhibit CAN -424 (BCI)), p.  QC-BIO-14. Applicants knew when they 
submitted a bi d for the programme how Hydro -Québec Distribution would calculate the price to be paid for 
electricity purchased pursuant to the programme.  
1361 The eligibility criteria included that electricity must originate from generating facilities located in 
Québec. (Québec questionnaire response, (Exhibit CAN -424 (BCI)), p.  QC-BIO-64).  
1362 Québec questionnaire response, (Exhibit CAN -424 (BCI)), p.  QC-BIO-63. 
1363 Québec questionnaire response, (Exhibit CAN -424 (BCI)), p.  QC-BIO-44. 
1364 The Régie does not approve individual supply contracts, but rather approves the model contracts 
that serve as the basis for individual contracts. (Québec questionnaire response, (Exhibit CAN -424 (BCI)), 
pp. QC-BIO-7-QC-BIO-8). 
1365 Québec questionnaire response, (Exhi bit CAN -424 (BCI)), pp.  QC-BIO-47-QC-BIO-48; 
Act respecting the Régie de l'énergie , (Exhibit CAN -428).  
1366 Preliminary determination, (Exhibit CAN -8), p.  85. 
1367 Final determination, (Exhibit CAN -10), p.  171. 
1368 Final determination, (Exhibit CAN -10), p.  171. 
1369 Final determination, (Exhibit CAN -10), pp.  171-172. WT/DS533/ R 
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  used for a renewable -energy -only programme.1370 It noted that the Industrial L rate is effectively 
the price for hydropower, given that hydropower accounts for more than 98% of Hydro -Québec 
power supply. The Government of Québec  and Resolute argued that the USDOC should use prices 
provided in the repor t, "The Competitive Cost of Biomass Generated Electricity" prepared by the 
Merrimack Energy Group (Merrimack Study) to determine a benchmark for Hydro -Québec's  purchase 
of electricity.1371 The Government of Québec  also argued that the Merrimack Study can be used as 
a "tier -two" benchmark, since it provides a world -market price using a biomass price from Ontario 
and the United  States, as well as a "tier -three" benchmark, because it was used to establish terms 
and conditions for the Power Purchase programme.1372 
7.677.   The USDOC stated that Hydro -Québec does not differentiate between the sources of 
electricity provided to its customers, which is confirmed by Hydro -Québec's  tariff schedules.1373 The 
USDOC rejected the arguments that "tier -two" or "tier -three" benchmarks sho uld be used, given 
that the USDOC examined the benefit conferred to Resolute based on the benefit -to-the-recipient 
standard, instead of the three -tiered framework.1374 
7.11.2.4   Whether the USDOC improperly determined that Hydro -Québec's  purchases of 
electricity were made for more than adequate remuneration  
7.11.2.4.1   The benchmark selected by the USDOC  
7.678.   Canada contends the USDOC wrongly conflated the market for renewable biomass electricity 
with the market for all sources of electricity, by taking a benchmark from the market in w hich 
Hydro -Québec generates electricity from all sources and sells it to all consumers. Canada submits 
that the USDOC failed to take into account the relevant supply -side factors, including the fact that 
biomass electricity and other generation technologie s are not substitutable on the supply side of the 
market.1375 Canada argues that the USDOC erred in using the Industrial L rate as a benchmark to 
assess the adequacy of remuneration, since it was selected within an inappropriate market.1376  
7.679.   The United  States argues that the USDOC found that Hydro -Québec was selling electricity 
to, and purchasing it from Resolute, therefore the benefit to the recipient is the difference between 
the price at which Hydro -Québec sold electricity and the price at which the governme nt purchased 
it back.1377 The United  States submits that the USDOC considered both demand -side and supply -side 
factors. On the demand side, the United States argues the evidence showed that Hydro -Québec 
considered electricity it purchased from Resolute subst itutable with electricity it supplied, regardless 
of the source from which it was generated.1378 On the supply side, the United  States argues that 
evidence showed Resolute considered electricity that it sold to Hydro -Québec substitutable with 
electricity sup plied by Hydro -Québec.1379 For the United  States, electricity tariffs that Hydro -Québec 
charged to Resolute best reflected the benefit -to-the-recipient standard endorsed by the chapeau  of 
Article  14 of the SCM  Agreement, since Hydro -Québec was both providing  electricity to and 
purchasing it from Resolute.1380 
7.680.   We consider that the situation before us is analogous to BC Hydro's  purchases of electricity 
from West Fraser and Tolko; the legal arguments of the parties are similar in relation to the two 
subsidy progra mmes, so we find it appropriate to adopt the same analytical approach.1381 We must 
examine whether a benefit has been conferred as a result of the purchases by Hydro -Québec of 
electricity generated by Resolute from biomass. There is nothing on the record to indicate that the 
regulatory regime existent in Québec  was the subsidy programme under investigation. In purchasing 
electricity, Hydro -Québec, was bound by the requirements of the Québec  Energy Plan, which 
 
1370 Final determination, (Exhibit CAN -10), p.  170. 
1371 Final determination, (Exhibit CAN -10), p.  170; Cost of biomass -generated electricity, 
(Exhibit  CAN-432).  
1372 Final determination, (Exhibit CAN -10), pp.  170-171. 
1373 Final determination, (Exhibit CAN -10), p.  172. 
1374 Final determination, (Exhibit CAN -10), pp.  172-173. 
1375 Canada's  first written submission, paras.  1081-1086.  
1376 Canada's  first written submission, paras.  1087-1092.  
1377 United  States' first written submission, para.  693. 
1378 United  States' first written submission, para.  694. 
1379 United  States' first written submission, para.  695. 
1380 United  States' first written submission, para.  695. 
1381 See, above, paras.  7.647 -7.650 . WT/DS533/ R 
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  required it to purchase electricity generated from  biomass.1382 In the context of that regulatory 
regime, electricity generated by Resolute was not substitutable with electricity generated from other 
sources.1383 The regulatory regime imposed by the Québec  Energy Plan shaped the prevailing market 
conditions1384 governing the sale and purchase of electricity at the wholesale level. The fact that a 
regulatory regime shapes the wholesale electricity market in Québec  is not, in and of itself, a cause 
of subsidization.1385 Accordingly, the benchmark selected by the USD OC should have reflected these 
prevailing market conditions for electricity at the wholesale level. By selecting a benchmark that 
reflected prevailing market conditions for the sale of electricity at the retail level, where the 
prevailing market conditions  were not shaped by the same regulatory regime, the USDOC acted 
inconsistently with Articles  1.1(b) and 14(d) of the SCM  Agreement.  
7.11.2.4.2   Whether the USDOC improperly rejected the benchmark submitted by the 
interested parties  
7.681.   Canada submits that the USDOC improp erly rejected the data in the Merrimack Study as a 
proper benchmark. The Merrimack Study was based on biomass and renewable electricity costs in 
Ontario, the United  States, and Québec .1386 Canada argues that if the Panel agrees with the 
United  States' argume nt that there is a single wholesale market for all renewable electricity in 
Québec , the USDOC was required to select a benchmark from within the wholesale market for 
renewable electricity, rather than relying on the retail rate.1387 According to Canada, the 
USDOC's  failure to rely on the Merrimack Study violates Articles  1.1(b) and 14(d) as it was the only 
benchmark that provided a fair assessment of the adequacy of remuneration determined in relation 
to the prevailing market conditions for biomass electricit y.1388 
7.682.   The United  States argues that the Merrimack Study fails to recognize that Hydro -Québec is 
acting on both sides of the relevant market for the benefit comparison (i.e. buying and selling 
electricity) .1389 According to the United  States, the Merrimack Study relied on cost data limited to 
electricity generated by biomass energy technology and did not measure the rate for electricity 
generated from other sources when the evidence demonstrated that Hydro -Québe c did not 
differentiate between generation sources of electricity.1390 
7.683.   We recall our finding, above, that the benchmark selected by the USDOC should have 
reflected the prevailing market conditions at the wholesale level, as shaped by the Québec  Energy 
Plan.1391 The USDOC rejected the Merrimack Study because it found that, "the [Government of 
Québec ] failed to provide any evidence that the prevailing market conditions for the provision of 
 
1382 We recall tha t one of the priority actions of the Québec Energy Strategy is to facilitate the 
decentralized production of electricity by encouraging "small scale electricity production to trigger the 
development of new energy technologies, including those using biomass ". (Québec Energy 
Strategy  2006-2015, (Exhibit CAN -429), p. 72; see , above, paras.  7.670 -7.673 ). 
1383 We are not persuaded by the arguments of the United  States that  the evidence showed Resolute 
considered electricity that it sold to Hydro -Québec substitutable with electricity supplied by Hydro -Québec . 
(United  States' first written submission, para.  695; see also, second written submission, para.  433). 
We consider that the evidence demonstrates that electricity was substitutable in the retail market, i.e. in 
relation to Resolute's  consumption  of electr icity.  
1384 We note that the illustrative list of prevailing market conditions set forth in Article  14(d) includes 
"marketability". In our view, the regulatory requirement for a certain amount of electricity generated from 
biomass concerns the "marketability " of electricity.  
1385 The regulatory regime per se  is only disciplined under the SCM  Agreement to the extent that it falls 
within the scope of that  Agreement, in the sense that the regime provides for the provision of financial 
contributions that confer benefit. Furthermore, we note that the USDOC itself recognised that the existence of 
regulation in a market does not preclude prices in that market from being used a benchmark:   
Although we acknowledge that the electricity tariffs that are charged by both BC Hydro are 
regulated and approved by the GBC throu gh the [British  Columbia Utilities Commission], we 
disagree that this precludes their use in determining the benefit to the recipients.  
(Final determination, (Exhibit CAN -10), p.  166) 
The USDOC did not determine that the regulatory regime resulting from th e Québec Energy Plan would 
distort the market, in the sense of preventing the establishment of market -determined prices of wholesale 
electricity.  
1386 Canada's  first written submission, paras.  1093-1095.  
1387 Canada's  second written submission, para.  368. 
1388 Canada's first written submission, para.  1095.  
1389 United  States' first written submission, para.  696. 
1390 United  States' first written submission, para.  696. 
1391 See, above, paras.  7.678 -7.680 . WT/DS533/ R 
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  electricity by Hydro -Québec is differentiated based upon the manner in whi ch the electricity is 
generated" .1392 In support of this assertion, the USDOC stated that when electricity rates are set, 
there is no distinction between sources of electricity generated.1393 While this may be true, the 
USDOC's  determination does not consider the prevailing market conditions of the purchase of energy 
at the wholesale level, where a differentiation is made based upon the manner in which electricity is 
generated.  
7.684.   Therefore, we find that the USDOC improperly rejected the Merrimack Study and as suc h, 
assessed the adequacy of remuneration inconsistently with Articles  1.1(b) and 14(d).  
7.11.2.5   Conclusion  
7.685.   In light of the above, the Panel finds that the USDOC acted inconsistently with Articles  1.1(b) 
and 14(d) of the SCM  Agreement in selecting a benchmark that did not relate to the prevailing 
market conditions within the market where Hydro -Québec purchased biomass electricity. In addition, 
we find that the USDOC improperly rejected the Merrimack Study and as such, assessed the 
adequacy of remuneration inconsiste ntly with Articles  1.1(b) and 14(d).  
7.11.3   New Brunswick  provincial electricity programme  
7.11.3.1   Introduction  
7.686.   The final provincial electricity programme at issue is the LIREPP in New Brunswick . Canada 
claims that the USDOC erroneously found that the LIREPP constitutes a financial contribution to 
Irving through NB Power in the form of revenue foregone, rather than the provision of a good.1394 
Canada argues that the measure at issue should be characterized as a purchase of goods under 
Article  1.1(a) (1)(iii).1395 According to Canada, the USDOC's  incorrect characterization of the financial 
contribution meant that it failed to assess the alleged benefit in accordance with Articles  1.1(b) 
and 14(d) of the SCM  Agreement.1396 
7.687.   The United  States argues that the credit issued pursuant to  the LIREPP decreases the 
amount of NB Power's  revenue (a state -owned corporation) and was properly considered to 
constitute a financial contribution in the form of revenue foregone.1397 Because the USDOC properly 
considered the LIREPP was a financial contri bution in the form of revenue foregone, the United  States 
argues the USDOC appropriately decided not to analyse the benefit as if the financial contribution 
was a purchase of goods under Article  1.1(a) (1)(iii).1398 
7.688.   We first set out the legal standard and rel evant factual background to the LIREPP before 
considering the arguments of the parties.  
7.11.3.2   Legal standard  
7.689.   We begin by recalling the text of Article  1.1 of the SCM  Agreement that provides, in relevant 
part, as follows:  
1.1 For the purpose of this  Agreement, a subsidy shall be deemed to exist if:  
(a)(1) there is a financial contribution by a government or any public body within the 
territory of a Member (referred to in this  Agreement as "government"), i.e. where:  
… 
 
1392 Final determination, (Exhibit CAN -10), p.  172. 
1393 Final determination, (Exhibit CAN -10), p.  172. 
1394 Canada's  first written submission, para.  1109.  
1395 Canada's  first written submission, para.  1110.  
1396 Canada's  first written submission, para.  1096.  
1397 United  States' first written submission, para.  707. 
1398 United  States' first written submission, para.  709. See also, second written submission, para.  444. WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  (ii) government revenue that is otherwise due i s foregone or not collected (e.g. fiscal 
incentives such as tax credits);  
(iii) a government provides goods or services other than general infrastructure, or 
purchases goods[.]  
7.690.   Article  1.1(a)(1) is concerned with the different forms that a "financial contribution" may 
take. Under Article  1.1(a)(1)(ii), a financial contribution may take a form of foregoing government 
revenue that is otherwise due or not collected. The Appellate  Body has stated that a situation where 
a government foregoes or d oes not collect its revenue that is "otherwise due" implies that less 
revenue has been raised by the government than would have been raised in a different situation.1399 
In other words, a government "gives up or relinquishes its entitlement to collect revenu e that is 
owed or payable in other circumstances".1400 In determining if revenue "otherwise due" has been 
foregone, a comparison must be made between the revenue actually raised and the revenue that 
would have been raised "otherwise". The basis of such  a comparison is normally the tax or fiscal 
rules in the jurisdiction at issue.1401  
7.691.   The purchase of goods under Article  1.1(a) (1)(iii) occurs "when a 'government' or 'public 
body' obtains possession (including in the form of an entitlement) over a good by making a payment 
of some kind (monetary or otherwise)" .1402 As we have discussed, above, a benefit will be conferred 
if the purchase is made for more than adequate remuneration.  
7.692.   Article  1.1(a)(1) is not explicit as to the relationship between the subparagra phs; the 
structure of the provision does not exclude that there may be circumstances where a transaction 
may be covered by more than one subparagraph.1403 
7.11.3.3   The Large Industrial Renewable Energy Purchase programme  
7.693.   In 2012, the Government of New Brunswick  estab lished the LIREPP with two goals : (a) to 
use more electricity generated from renewable sources, in accordance with the New Brunswick  
Action Plan; and (b) to bring large industrial enterprises' net electricity costs in line with the average 
cost of electric ity in other provinces.1404 The Government of New Brunswick  states that the purpose 
of the LIREPP "is to bring electricity costs for qualifying export -oriented companies in New Brunswick  
in line with the average cost of electricity in provinces where those c ompanies' competitors are 
located" .1405 
7.694.   NB Power, a state -owned company, is the sole supplier of electricity to consumers in 
New Brunswick .1406 Together with the New Brunswick  Department of Energy and Resource 
Development (DERD), NB  Power administers the LIREP P.1407 To qualify for the LIREPP, a company 
must produce "eligible electricity", meaning electricity generated within New Brunswick  at an 
approved facility using biomass, or its chemical by -products.1408 In order to be an "eligible facility" 
 
1399 Appellate  Body Report, US – FSC, para.  90. We consider this comports with the definition proffered 
by the United  States based on the Oxford English Dictionary, " [r]ead together, the words 'revenue foregone' 
thus mean the difference between the income that a government could have collected and the income that it 
did collect" . (United States' first written submission, para.  700).  
1400 Appellate  Body Report s, Brazil – Taxation , para.  5.220.  
1401 Appellate  Body Report, US – FSC, para. 90; Panel Report, US – Large Civil Aircraft (2nd complaint) , 
para. 7.120.  
1402 Appellate  Body Reports, Canada – Renewable Energy / Canada – Feed-in Tariff Program , 
para. 5.123 (referring to Panel Reports, Canada – Renewable Energy / Canada – Feed-in Tariff Program , 
para. 7.231).  
1403 Panel Report, Japan – DRAMS (Korea) , para.  7.439; Appellate  Body Reports, US – Large Civil 
Aircraft (2nd complaint) , para.  613 and fn 1287; Canada – Renewable Energy / Canada – Feed-in Tariff 
Program , para.  5.120.  
1404 Final determination, (Exhibit CAN -10), p.  212. See also, Canada's  first written submission, 
para. 1099; and LIREPP, (Exhibit CAN -440 (BCI)), p.  3. 
1405 New Brunswick LIREPP, (Exhibit CAN -452), p.  2. 
1406 Electricity Act, (Exhibit CAN -438), Sections 72, 73, and 82.  
1407 Appendix to New  Brunswick questionnaire response , (Exhibit CAN -450 (BCI)), p.  2. 
1408 LIREPP Regulation, (Exhibit CAN -439), Section 2; Appendix to New  Brunswick questionnaire 
response , (Exhibit CAN -450 (BCI)), p.  9. WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  for the LIREPP, a company must, inter alia , consume not less than 50 GWh of electricity per year, 
and purchase all, or a portion of, its firm electricity requirements from NB Power.1409  
7.695.   Under the LIREPP, NB Power must purchase eligible electricity1410 from a large industrial 
enterprise such that the cost of electricity for all eligible facilities owned by the enterprise is reduced 
by the Target Reduction Percent.1411 If NB Power procures an amount of electricity in excess of the 
amount required to meet renewable energy targets, N B Power will credit the excess amount towards 
any shortfalls incurred from the electricity goals of previous compliance years.1412 
7.696.   NB Power concluded a LIREPP  Agreement1413 with Irving through a group of four Irving 
affiliates (the Irving Group):  
a. Irving Paper (a manufacturer of printing and writing paper);  
b. Irving Pulp & Paper (a manufacturer of pulp and producer of biomass fuelled renewable 
electricity);  
c. St George Power  LP (a hydroelectric generating station); and  
d. J.D. Irving, a diversified company, including L ake Utopia (a manufacturer of cardboard 
packaging components) and a separate forest products division that produces softwood 
lumber subject to the USDOC's  investigation.1414 
All four companies are co -parties to the LIREPP  Agreement.1415 
7.697.   NB Power purchases renewable energy from Irving Pulp & Paper and St George Power. 
Rather than paying directly for that electricity, NB Power issues a credit for the amount it owes. That 
credit is applied to the monthly electricity bill issued to Irving Paper. Irvin g Paper then assigns a 
share of the amount of credit to J.D. Irving's  Lake Utopia Division in proportion to Lake 
Utopia's  electricity consumption (Net LIREPP credit).1416 
7.11.3.4   The USDOC's  determination with respect to the benefit conferred on Irving  
7.698.   The USDOC found that the LIREPP was properly analysed as revenue foregone, rather than 
a possible purchase of electricity for more than adequacy remuneration.1417 According to the USDOC, 
the LIREPP credit transferred from Irving Paper to J.D. Irving conferred a benefit on the Irving 
 
1409 LIREPP Regulation, (Exhibit CAN -439), Section 2; Appendix to New  Brunswick questionnaire 
response , (Exhibit CAN -450 (BCI)), p.  10. In order to be an "eligible facility" and be eligible for the LIREPP, it 
must also be the case that 50% or more of the prima ry products produced by the facility are exported to 
another province or territory of Canada or elsewhere.  (LIREPP Regulation, (Exhibit CAN -439), Section 2).  
1410 NB Power purchases eligible electricity under the LIREPP at the legislated rate of CAD  95 per MW h. 
(LIREPP Regulation, (Exhibit CAN -439), Section 5). NB Power ceases to purchase eligible electricity at the 
CAD 95 per MWh  LIREPP price when the target reduction amount is reached. ( Canada's  response to Panel 
question No.  143, para.  408).  
1411 LIREPP Regula tion, (Exhibit CAN -439), Section 4. The Target Reduction Percent is defined in LIREPP 
Regulation, (Exhibit CAN -439), Section 7 and is based on the amount of electricity that the eligible facilities 
were contracted to obtain from NB Power immediately before  the participation in the LIREPP.  (LIREPP 
Regulation, (Exhibit CAN -439), Section 4).  
1412 LIREPP Regulation, (Exhibit CAN -439), Section 12. Put simply, when the enterprise's  electricity costs 
reach the average electricity cost of a Canadian producer in the sa me industry sector, NB  Power ceases 
purchasing electricity at the CAD 95 per MWh  LIREPP price. ( Canada's  first written submission, para.  1102 and 
fn 1869; response to Panel question No.  143, para.  408).  
1413 LIREPP  Agreement, (Exhibit CAN -448 (BCI)).  
1414 Append ix to LIREPP questionnaire response , (Exhibit CAN -451 (BCI)), pp.  LIREPP -2-LIREPP -3. 
1415 Irving Paper, Irving Pulp & Paper, and J.D. Irving's  Lake Utopia Division together meet the energy 
consumption requirements of the LIREPP, while Irving Pulp & Paper and St George Power together meet the 
renewable energy generation requirements. (Canada's  first written submission, para.  1106).  
1416 Appendix to LIREPP questionnaire response , (Exhibit CAN -451 (BCI)), p.  LIREPP -3. 
1417 Final determination, (Exhibit CAN -10), p.  211. WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  Group.1418 The USDOC determined that the amount of the credit was the countervailable benefit.1419 
The USDOC explained the programme as follows:  
The NB Power officials stated that "the purpose of LIREPP is that 'you want to buy 
enough to get them to the target discount,'" adding that "we want to buy a certain of 
[electricity ], then we resell at firm rates, then the difference is the NET LIREPP 
Adjustment." In other words, the NET LIREPP adjustment is the difference between the 
amount of re newable electricity that NB Power will purchase from the LIREPP participant 
(here, the participating Irving companies), and the amount of electricity that NB Power 
will sell to the LIREPP participant (again, the participating Irving companies).1420 
7.699.   The USDOC  described the programme as "multifaced"1421 and acknowledged that it "does 
encompass in part, the purchase of a good or service".1422 However, the USDOC concluded that "the 
credits reduce the participating Irving Companies' monthly electricity bills, and it i s the amount of 
the monthly credits that we have determined is the countervailable benefit" .1423 According to the 
USDOC, even though the Irving Group sold electricity to NB Power at CAD 95 per MWh , the rate was 
immaterial to the calculation of the Net LIREPP  adjustment.1424 The USDOC explained this was 
because the volume of electricity sold is derived using the Target Discount (the total electricity bills 
for the participating Irving companies multiplied by the Target Reduction Percent) and the fixed rate 
of CAD 95 per MWh,  and the programme guarantees that the Target Discount is reached each month 
by adjusting the volume of electricity NB Power purchases from the Irving Group.  
7.11.3.5   Whether the USDOC improperly found that New Brunswick  provided a financial 
contributi on to Irving in the form of revenue foregone that conferred a benefit  
7.700.   Canada contends that although the LIREPP was similar to the calls for power in 
British  Columbia  and Québec , where the USDOC characterized the financial contribution at issue as 
the purch ase of goods for more than adequate remuneration, the USDOC erroneously characterized 
the LIREPP as revenue foregone.1425 Canada argues the USDOC failed to take into account the 
exchange of rights and obligations under the LIREPP.1426 According to Canada, the Net LIREPP credit 
represents money that NB Power owes to the Irving Group for renewable electricity purchased under 
LIREPP, rather than money that NB  Power is entitled to receive.1427 As a result of an allegedly 
incorrect finding of financial contribution, t he USDOC failed to properly assess the alleged benefit to 
the Irving Group in accordance with Article  14(d). Canada argues that since the USDOC relied on its 
revenue foregone finding, it measured benefit by the full amount of the Net  LIREPP credit, rather 
than examining the adequacy of remuneration for purchased electricity.1428 
7.701.   The United  States argues that the amount of credit was determined in advance and was 
separate and apart from any purchases of renewable energy from the LIREPP participants.1429 The 
United States submits that NB Power first determines the amount of credit it wants to give to the 
programme participants and then "works backwards to build up that credit through a series of 
renewable energy power purchases and sales and additional credits".1430 The United  States argues 
that since the credit is not tied to the amount of electricity purchased, the USDOC correctly concluded 
that the credit reduced the Irving Group's  electricity bills so this amount confers a benefit.1431 The 
United  States argues that the USDOC correctly decided not to analyse benefit as if the contribution 
 
1418 Final determination, (Exhibit CAN -10), p.  211. 
1419 Final determination, (Exhibit CAN -10), p.  213. 
1420 Final determination, (Exhibit CAN -10), p.  212. (fn omitted)  
1421 Final determination, (Exhibit CAN -10), p.  212. 
1422 Final determination, (Exhibit CAN -10), p.  213. 
1423 Final determination, (Exhibit CAN -10), p.  213. 
1424 Final determination, (Exhibit CAN -10), p.  213. 
1425 Canada's  first written submission, para.  1096; second written submission, para.  384. 
1426 Canada's  first written submission, paras.  1109-1110; second written submission, para.  388.  
1427 Canada's  first written submission, para.  1111; opening statement at the first meeting of the Panel 
(27 February 2019), para.  147. See also, second written submis sion, para.  385 where it argues that, 
"[c]ontrary to Commerce and the U.S. assertion, at no point do the Irving entities receive money for free, nor 
does NB Power forego any money it is entitled to receive" . 
1428 Canada's  first written submission, paras.  1114-1116.  
1429 United  States' first written submission, paras.  707-708; second written submission, para.  446. 
1430 United  States' first written submission, para.  708; second written submission, para.  446. 
1431 United  States' first written submission, para.  708; second  written submission, para.  446. WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  constituted a purchase of goods.1432 The benefit for revenue foregone, according to the 
United  States, is the amount of revenue that is foregone or not c ollected.1433 In other words, the 
revenue foregone by New Brunswick  as a result of this credit is the money that the Irving Group did 
not spend on the electricity bill received from NB Power.1434 According to the United  States, even if 
the Panel were to find that the LIREPP involved the purchase of a good, such a finding would not 
exclude the possibility that the LIREPP also constitutes a financial contribution in the form of revenue 
foregone as d efined under Article  1.1(a)(1)(ii).1435 
7.702.   We recall that Article  1.1(a)(1) does not preclude circumstances where a transaction may 
be characterized under more than one subparagraph of that provision.1436 However, the issue before 
us is not whether the LIREPP mig ht also be characterized as a purchase of goods under 
Article  1.1(a)( 1)(iii). The issue before us is whether the USDOC erred in characterizing the LIREPP 
as revenue foregone, rather than the purchase of goods. The United  States argues that the amount 
of the Net LIREPP credit was separate and apart from any purchases of renewable energy from the 
LIREPP participants1437, and that the USDOC was therefore correct in treating the amounts as 
revenue foregone.  
7.703.   NB Power generates revenue by selling electricity to cus tomers in New Brunswick , including 
the Irving Group.  Therefore, any amount that is due to NB Power is, ultimately, in exchange for the 
provision of electricity to consumers in New Brunswick . Under the LIREPP, NB Power pays for the 
renewable electricity it purchases pursuant to the programme from the eligible companies in the 
Irving Group by issuing a credit on Irving Paper's  electricity bills. We consider that the LIREPP credit 
is a payment mechanism under the LIREPP  Agreement between NB Power and the Irvin g Group, and 
represents an amount that NB Power owes to the Irving Group in return for the purchase of 
renewable electricity.1438 Although the credit amount ultimately reduces the Irving Group's  electricity 
bills, it does not constitute an amount that would be otherwise due to NB Power. This is not an 
amount that would otherwise have accrued to NB Power, since NB Power would, in any event, have 
had to pay that amount to Irving Paper in return for the renewable electricity that it purchased from 
eligible compa nies in the Irving Group.  The USDOC acknowledged that, "the program does 
encompass, in part, the purchase of a good or service".1439 However, it is the revenue generated 
from these "purchases" of electricity that is used as a credit on Irving Paper's  bill ag ainst the 
Irving  Group's  overall electricity charges.1440 As such, we consider that the USDOC's  finding that the 
LIREPP credits are revenue foregone and therefore the amount of the countervailable  benefit is not 
one that an unbiased and objective investigati ng authority could have reached.  
7.704.   We also do not agree with the argument of the United  States that the amount of electricity 
NB Power purchased from the Irving Group was "immaterial" to the credit that appeared on the 
companies' electricity bills.1441 The Un ited States argues that NB Power predetermines the credit to 
be given to participants in the LIREPP and then "works backwards" to build up to that credit.1442 
According to the United  States, the amount of electricity that NB Power purchases from the Irving 
Group is immaterial to the Net LIREPP adjustment credit that appears on Irving  Paper's  electricity 
 
1432 United  States' first written submission, para.  707; second written submission, paras.  443-446. 
1433 United  States' first written submission, para.  709 (referring to Panel Report, US – Washing 
Machines , para.  7.303).  
1434 United  States' first written submission, para.  709; second written submission, para.  444 (referring 
to Panel Report, US – Washing Machines , para.  7.303).  
1435 United  States' second written submission, para.  445.  
1436 See, above, paras.  7.689 -7.692 . 
1437 United  States' first written submission, paras.  707-708. 
1438 We consider that a purchase of a good under Article  1.1(a)(1)(iii) can be effected in exchange for 
consideration that is of value to both parties to the transaction. (Appellate  Body Report, US – Large Civil 
Aircraft (2nd complaint) , paras.  618-619).  
1439 Final determination, (Exhibit CAN -10), p.  213. Elsewhere in the determination, the USDOC appears 
to acknowledge that the credit is the payment mechanism for the purchase of electricity. The USDOC stat es, 
"[i]nstead of paying the full amount owed for 'purchased' renewable energy to IPP and SGP directly, NB Power 
applies the 'NET LIREPP' credits to the monthly electricity bill issued to IPL, a cross -owned paper producer" . 
(Ibid. p.  214). Based on the USD OC's own reasoning, the credit was issued in lieu  of payment.  
1440 Appendix to New  Brunswick questionnaire response , (Exhibit CAN -450 (BCI)), p.  1. 
1441 United  States' comments on Canada's  response to Panel question No.  280, para.  287.  
1442 United  States' first wr itten submission, para.  707; comments on Canada's  response to Panel 
question No.  280, paras.  286-288. WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  bills.1443 We understand that the credit is determined in connection with the Target Reduction 
Percent, which is the percentage by which qualifying companies in  New Brunswick  would have to 
reduce their electricity costs to be in line with the average cost of electricity in provinces where those 
companies' competitors are located. While the Target Reduction Percent may be set in accordance 
with the LIREPP policy o bjectives, it does not follow that the amount of electricity purchased is 
immaterial  to the credit for the purposes of characterizing the financial contribution pursuant to 
Article  1.1(a)(1). To the contrary, it is a precondition to the Irving Group receiv ing the credit that 
NB Power purchases the requisite amount of electricity. Both the design and operation of the LIREPP 
are relevant considerations in determining its proper characterization for the purpose of 
Article  1.1(a)(1).1444 We consider that by focus ing on the design of the programme, i.e. that the 
credit was, according to the United  States, predetermined in order to meet certain policy objectives, 
the USDOC failed to give relevant consideration to the operation of the programme. Specifically, the 
USDOC failed to consider that the requisite amount of electricity must, as a matter of fact, be 
purchased by NB Power before a credit is issued to the Irving  Group.  We find that this is not a 
conclusion that an unbiased and objective investigating authority c ould have reached.  
7.11.3.6   Conclusion  
7.705.   In light of the above, we find that the USDOC erred by characterizing the LIREPP as a 
financial contribution to Irving through NB Power in the form of revenue foregone, rather than a 
purchase of goods consistent with Article  1.1(a)(1)(iii). Because the USDOC erred in its 
characterization of the financial contribution at issue, we also find that it failed to properly assess 
the alleged benefit to the Irving Group in accordance with Article  1.1(b) and the first sentence of 
Article 14(d) of the SCM  Agreement.  
7.11.4   Whether the USDOC failed to ascertain the precise amount of subsidies allegedly 
conferred by provincial programmes  
7.706.   Canada claims that the United  States acted inconsistently with Articles  10, 19.1, 19.3, 
and 19.4 of the SCM  Agreement and Article  VI:3 of the GATT 1994 as the USDOC improperly 
attributed to the production of softwood lumber products certain alleged subsidies that were 
bestowed on the production of non -investigated products, and therefore failed to properly ascertai n 
the precise amount of subsidies attributable to the product under investigation.1445 Canada asks the 
Panel to find that the USDOC improperly countervailed an alleged benefit that was tied to a product 
other than the product under investigation.1446 
7.707.   We have u pheld Canada's  claims under Articles  1.1(b) and  14(d) of the SCM  Agreement 
challenging the USDOC's  determination that provincial electricity programmes in British  Columbia , 
Québec , and New Brunswick  conferred a benefit on West Fraser, Tolko, Resolute, and Irving. Having 
made these findings, we do not consider it necessary to make additional findings that the USDOC 
improperly countervailed a benefit that was tied to a product other than softwood lumber.  
7.708.   Therefore, we exercise judicial economy on Canada's  claims under Articles  10, 19.1, 19.3, 
and 19.4 of the SCM  Agreement and Article  VI:3 of the GATT 1994.1447 
7.12  Canada's claims concerning the s pecificity of the  accelerated capital cost 
allowance  (ACCA)  for Class 29 assets  
7.709.   In the final determination of the underlying investigation, the USDOC concluded that the 
ACCA  for Class 29 assets (Class 29 programme)  was de jure  specific, because, as a matter of law, 
eligibility for the programme was expressly limited to certain enterpr ises or industries.1448 In this 
 
1443 United  States' first written submission, para.  708; comments on Canada's  response to Panel 
question No.  280, para.  287. 
1444 Appellate  Body Reports, Canada  – Renewable Energy / Canada – Feed-in Tariff Program , 
para. 5.120.  
1445 Canada's panel request, pp.  2-3; first written submission, paras.  1119-1149; and second written 
submission, paras.  389-394. 
1446 Canada's second written submission, para. 394. 
1447 The DSU does not require a panel to examine all legal claims made by the complaining party. 
Rather, a panel is only required to make findings on those claims necessary to resolve the particular matter. 
(Appellate  Body Report, US – Wool Shirts and Blouses , p. 18). 
1448 Final determination, (Exhibit CAN -10), p.  200. WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  regard, the USDOC noted that Class 29 assets refer to machinery and equipment used in 
manufacturing and processing of goods. Pursuant to Canada's  Income Tax Act and Income Tax 
Regulations, Class 29 assets acquired after 18  March 2007 and before 2016 can be fully depreciated 
at an accelerated rate over three years, and the amount of depreciation can be claimed as a 
deduction to reduce the taxpayer's  taxable income.1449 
7.710.   The Income Tax Regulations exclude certain activities from the  definition of "manufacturing 
or processing", e.g. farming, fishing, logging, some mining activities, and construction. The 
machinery and equipment used for the excluded activities cannot claim a tax deduction under the 
Class 29 programme. In the absence o f the Class 29 programme, "the manufacturing and processing 
assets acquired would otherwise have been included in Class 43, which is subject to normal, 
i.e., nonaccelerated, depreciation" .1450  
7.711.   Canada claims that the USDOC's  finding of de jure  specificity wi th regard to the Class 29 
programme is inconsistent with Articles  2.1(a)  and 2.1(b)  of the SCM  Agreement.  
7.12.1   Provisions at issue  
7.712.   Articles  2.1(a)  and 2.1(b)  of the SCM  Agreement read as follows:  
In order to determine whether a subsidy, as defined in paragraph  1 of Article  1, is 
specific to an enterprise or industry or group of enterprises or industries (referred to in 
this Agreement as "certain enterprises")  within the jurisdiction of the granting 
authority, the following principles shall apply:  
(a) Where the g ranting authority, or the legislation pursuant to which the granting 
authority operates, explicitly limits access to a subsidy to certain enterprises, such 
subsidy shall be specific.  
(b) Where the granting authority, or the legislation pursuant to which th e granting 
authority operates, establishes objective criteria or conditions[2] governing the eligibility 
for, and the amount of, a subsidy, specificity shall not exist, provided that the eligibility 
is automatic and that such criteria and conditions are st rictly adhered to.  The criteria or 
conditions must be clearly spelled out in law, regulation, or other official document, so 
as to be capable of verification.  
2 Objective criteria or conditions, as used herein, mean criteria or conditions which are neutral , 
which do not favour certain enterprises over others, and which are economic in nature and 
horizontal in application, such as number of employees or size of enterprise.  
7.12.2   Evaluation  
7.713.   Article  2.1 of the SCM  Agreement sets out principles for determining whethe r a subsidy is 
specific to "an enterprise or industry or group of enterprises or industries", referred to in the 
SCM Agreement as "certain enterprises". The disciplines for de jure  specificity are provided in 
Articles  2.1(a)  and 2.1(b). The inquiry under A rticle 2.1(a)  focuses on whether the granting 
authority or its legislation "explicitly limits access" to a subsidy to "certain enterprises". 
Article  2.1(b)  establishes circumstances in which a subsidy shall be deemed non -specific. It provides 
that the spec ificity shall not exist if the legislation at issue sets out "objective criteria or conditions 
governing the eligibility for, and the amount of, a subsidy".  
7.714.   In the final determination, the USDOC considered that the Income Tax Regulations explicitly 
exclude  certain activities from its definition of manufacturing and processing. The enterprises and 
industries engaged exclusively in the excluded activities are not eligible for Class 29 programme. 
Therefore, access to the subsidy is expressly limited to non -excluded enterprises and industries.1451 
The USDOC also noted that the eligibility criteria for Class 29 do not satisfy the statutory requirement 
for "objective criteria", because they favour certain enterprises or industries over others. In other 
words, Income  Tax Regulations favour "enterprises or industries that are engaged in qualifying 
 
1449 Preliminary determination, (Exhibit CAN -8), p.  72; Final determination, (Exhibit CAN -10), p.  197. 
1450 Preliminary determination, (Exhibit CAN -8), p.  72; GOC-CRA-ACCA -4, (Exhibit USA -16), p.  21. 
1451 Final determination, (Exhibit CAN -10), p.  198. WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  manufacturing and processing activities, over enterprises or industries that are not".1452 In response 
to an interested party's  argument that the excluded activities are eligible for comparable tax benefits 
available under other provisions of Canadian tax law, the USDOC stated that the existence of these 
other tax provisions are not subject to this investigation and are not material to the examination of 
the Class  29 programme.1453 Based on these considerations, the USDOC determined that the 
Class 29 programme is de jure  specific, because, as a matter of law, eligibility for the programme is 
expre ssly limited to certain enterprises or industries.1454 
7.715.   Canada challenges the USDOC's  de jure  specificity finding on the following grounds:   
a. The USDOC acted inconsistently with Article  2.1(a), by failing to demonstrate that the 
Canadian legislation at issue " explicitly limits access" to the Class 29 programme to 
"certain enterprises".  
b. Considering the Class 29 programme is non -specific under Article  2.1(a), it was 
unnecessary to determine the existence of "objective criteria and conditions" under 
Article  2.1(b) . Nonetheless, the Class 29 programme is non -specific within the meaning of 
Article  2.1(b).  
c. The USDOC acted inconsistently with Articles  2.1(a)  and 2.1(b), by failing to consider the 
specificity of the Class 29 programme within the broader context of Canad ian tax 
legislation.  
We address each of the alleged inconsistencies below.  
7.12.2.1   Whether the USDOC acted inconsistently with Article  2.1(a)  by failing to 
demonstrate that the Canadian legislation at issue "explicitly limits access" to the 
Class  29 programme to "certain enterprises"  
7.716.   Canada contends that access to the Class 29 programme is not limited based on industry or 
enterprise.1455 Canada makes three arguments to support its view.  
a. First, Canada argues that the USDOC failed to demonstrate that acce ss to the Class 29 
programme is limited to "certain" enterprises or industries, given that no industries or 
enterprises are enumerated or particularized in the relevant provisions of Canada's  Income 
Tax Act and Income Tax Regulations.1456 In Article  2.1(a), the word "to" prior to "certain 
enterprises" shows that the explicit limitation must identify certain enterprises or 
industries.1457 
b. Second, Canada asserts that a limitation on access to a small number of excluded activities 
does not "explicitly" limit the C lass 29 programme to certain enterprises or industries.1458 
c. Third, Canada submits that the only limitation is based on the activities that equipment is 
used for, but this does not satisfy the requirements of Article  2.1(a), because de jure  
specificity exists  only where the granting authority or its legislation explicitly limits access 
to the subsidy to certain enterprises or industries.1459 Canada argues that the 
activity -based exclusion does not lead to an exclusion of particular industries and that the 
Class 29 programme is broadly used across a wide range of industries. Specifically, 
companies engaged in excluded activities often have assets that are used for eligible 
 
1452 Final determination, (Exhibit CAN -10), pp.  197-199. 
1453 Final determination, (Exhibit CAN -10), p.  198. 
1454 Final determination, (Exhibit CAN -10), pp.  196-197. 
1455 Canada's  first written submission, para.  1165;  opening statement at the first meeting of the Panel 
(27 February 2019), para.  158. 
1456 Canada's  first written submission, para.  1163.  
1457 Canada's  opening statement at the first meeting of the Panel (27 February 2019), para.  160; 
response to Panel question No. 147, para.  418. 
1458 Canada's  first written submission, para.  1164.  
1459 Canada's  opening statement at the first meeting of the Panel (27 February 2019), para.  158. WT/DS533/ R 
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  manufacturing activities, and thus are subject to the Class  29 programme for such 
assets.1460 
7.717.   The United  States replies that the USDOC determined that the Class 29 programme was 
de jure specific because this programme was explicitly limited to machinery and equipment used in 
manufacturing and processing operations, excluding multiple industries or enterprises from its 
application.1461 The United  States argues that Article  2.1(a)  does not require "explicit" identification 
of "certain enterprises" that have access to a subsidy, rather, the relevant enterprises must be 
"known and particularized", but not  necessarily "explicitly identified".1462 The United  States points 
out that the term "explicitly" modifies the verb "limit", meaning that the inquiry under 
Article  2.1(a)  is whether the granting authority or its legislation "explicitly limits the access" to a 
subsidy to certain enterprises, not whether it "identifies" certain enterprises.1463 The United  States 
submits that the evidence on the record demonstrated that "access to the subsidy is expressly limited 
to non -excluded enterprises and industries".1464 
7.718.   The United  States further submits that the term "certain enterprises" refers, inter alia , to a 
"group of enterprises or industries" and the term "group" means "a number of people or things that 
are located close together or are considered or classed together".1465 In this regard, the 
United  States argues that if a measure limits the eligibility for a subsidy based on the type of 
activities conducted by the recipients, those recipients are "considered or classed together", and the 
recipients will be "known and par ticularized".1466 Finally, the United  States contends that 
Canada's  argument that the record evidence shows that a wide range of industries actually used 
Class 29 blurs the distinction between de jure  and de facto  specificity. The United  States asserts 
that the USDOC was not required to examine the number of enterprises that are used for a subsidy 
as part of its de jure  specificity analysis.1467  
7.719.   We note that Article  2.1(a)  provides that a subsidy shall be specific, where "the granting 
authority, or the legisla tion pursuant to which the granting authority operates, explicitly limits access 
to a subsidy to certain enterprises" . The phrase "the granting authority, or the legislation pursuant 
to which the granting authority operates" situates the analysis for asses sing any limitations on access 
"in the particular legal instrument or government conduct effecting such limitations".1468 Thus, the 
focus of the analysis under Article  2.1(a)  is on whether, as a matter of law, access to the subsidy is 
limited to certain ente rprises, not on whether they in fact receive it.1469 
7.720.   In the present case, we need to assess whether the USDOC properly considered that 
Canada's  Income Tax Act and the Income Tax Regulations explicitly limit the availability of the 
subsidy to certain enterpri ses or industries. In doing so, we note that the term "explicitly" suggests 
that the limitation on the access to the subsidy to certain enterprises must be "express, 
unambiguous, or clear" from the content of the relevant instrument.1470 The phrase "certain 
enterprises" refers to "a single enterprise or industry or a class of enterprises or industries that are 
known and particularized", but not necessarily "explicitly identified".1471 
7.721.   The Income Tax Act and the Income Tax Regulations provide that Class 29 assets, 
i.e. machinery and equipment used in manufacturing and processing of goods, can be depreciated 
at an accelerated rate over three years. However, the Income Tax Regulations provide that 
machinery and equipment used for certain activities are not eligible to be d epreciated using the 
 
1460 Canada's  first written submission, paras.  1165-1168; response to Panel question No. 149, 
para. 426. 
1461 United  States'  first written submission, paras.  738, 747, and 753.  
1462 United  States'  first written submission, paras.  738 and 751; second written submission, para.  458. 
1463 United  States'  first written s ubmission, para.  750; second written submission, para.  458. 
1464 United  States'  first written submission, para.  747. 
1465 United  States'  second written submission, para.  458 (referring to Definition of "group" from Oxford 
English Dictionary Online,  (Exhibit USA -78)). 
1466 United  States'  second written submission, para.  458. 
1467 United  States'  first written submission, para.  755; second written submission, para.  463. 
1468 Appellate  Body Report, US – Anti-Dumping and Countervailing Duties (China) , para.  368. 
1469 Appellate  Body Report, US – Anti-Dumping and Countervailing Duties (China) , para.  368. 
1470 Appellate  Body Report, US – Anti-Dumping and Countervailing Duties (China) , para.  372. 
1471 Appellate  Body Report, US – Anti-Dumping and Countervailing Duties (China) , para. 373. WT/DS533/ R 
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  Class 29 programme. In particular, the Income Tax Regulations stipulate that Class  29 
"manufacturing or processing" does not include:  
(a) [F]arming or fishing; (b)  logging; (c)  construction; (d)  operating an oil or gas well 
or extracti ng petroleum or natural gas from a natural accumulation thereof; 
(e) extracting minerals from a mineral resource; (f)  processing of (i)  ore, other than 
iron ore or tar sands ore, from a mineral resource to any stage that is not beyond the 
prime metal stage  or its equivalent, (ii)  iron ore from a mineral resource to any stage 
that is not beyond the pellet stage or its equivalent, or (iii)  tar sands ore from a mineral 
resource to any stage that is not beyond the crude oil stage or its equivalent; 
(g) producin g industrial minerals ; (h)  producing or processing electrical energy or 
steam, for sale; (i)  processing a natural gas as part of the business of selling or 
distributing gas in the course of operating a public utility; (j)  processing heavy crude oil 
recover ed from a natural reservoir in Canada to a stage that is not beyond the crude oil 
stage or its equivalent; or (k)  Canadian field processing.1472 
7.722.   Thus, the Income Tax Regulations, on their face, limit access to the Class  29 programme by 
excluding certain acti vities from the definition of "manufacturing and processing". In particular, 
machinery and equipment that are primarily used in farming, fishing, logging, construction, and 
some mining activities cannot be depreciated at the accelerated rate. For Canada, t he activity -based 
exclusion does not lead to an exclusion of particular enterprises or industries. We consider, however, 
that a limitation on access to a subsidy may be established "in many different ways"1473, including, 
for example, "by virtue of the type of activities conducted by the recipients" .1474 The Income Tax 
Regulations limit access to the Class 29 programme based on the type of activities conducted by the 
eligible enterprises. Furthermore, as argued by the United  States, the activities excluded from  the 
Class 29 programme can be associated with the respective industries. The enterprises or industries 
exclusively involved in the listed activities are not eligible for the Class 29 programme. The 
enterprises or industries partially involved in the exclu ded activities have a limited access to the 
Class 29 programme, to the extent that a tax deduction is claimed for the eligible activities. Thus, 
we consider that an investigating authority may properly view the activity -based limitation of access 
to the Cl ass 29 programme as a limitation on access to certain enterprises or industries.  
7.723.   In addition, the term "certain enterprises" in Article  2.1 refers inter alia  to "a group of 
enterprises or industries". The Appellate  Body clarified that the term "group" mean s "[a] number of 
people or things regarded as forming a unity or whole on the grounds of some mutual or common 
relation or purpose, or classed together because of a degree of similarity".1475 The phrase "a group 
of enterprises or industries" can be understoo d as "a class of enterprises or industries that are known 
and particularized".1476 Thus, we agree with the United  States that the Income Tax Regulations limit 
access to the Class  29 programme to "a group of enterprises or industries", i.e. companies that are  
not excluded from the definition of "manufacturing and processing" by virtue of the type of their 
activities.  
7.724.   Further, we consider that an unbiased and objective authority could consider, as the USDOC 
did, based on the text of the Income Tax Regulations, that access to the Class 29 programme is 
limited. Article  2.1 does not specify "any numerical threshold pointing to a minimum or maximum 
number of things" required in order to qualify as a "group of certain enterprises or industries" or 
"certain enterprise s".1477 The phrase "certain enterprises" rather means that the relevant enterprises 
must be "known and particularized", but not necessarily "explicitly identified".1478 We thus reject 
Canada's  argument that the limitation on access is not "explicit" because th e exclusion is limited to 
a small number of activities.1479 
 
1472 Final determination, (Exhibit CAN -10), p.  197; United  States'  first written submission, para.  747. 
1473 Appellate  Body Report, US – Anti-Dumping and Countervailing Duties (China) , para.  413. 
1474 Appellate  Body Report, US – Washing Machines , para. 5.223. 
1475 Appellate  Body Report, US – Anti-Dumping and Countervailing Duties (China) , para.  373. 
1476 Appellate  Body Report, US – Anti-Dumping and Countervailing Duties (China) , para.  373. 
1477 Appellate  Body Report, US – Carbon Steel (India) , para.  4.365.  
1478 Appel late Body Report, US – Anti-Dumping and Countervailing Duties (China) , para.  373. 
1479 We note that a similar approach was taken by the panel in US – Washing Machines , where Korea 
argued, in the context of regional specificity under Article  2.2, that the subs idy was available to 98% of the 
land mass, and that the exclusion of a small area from otherwise generally available tax credits did not 
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  7.725.   Canada also argues that companies involved in the excluded activities can anyway claim tax 
deductions under the Class 29 programme for machinery and equipment used for excluded activities. 
Canada su bmits that companies that are associated with each of the excluded activities have claimed 
deductions under Class 29, i.e. companies in the farming, fishing, logging, construction, and mining 
industries each claimed Class 29  deductions  during the POI with respect to their assets not used in 
these activities.1480 We recall that the subsidy is deemed specific under Article  2.1(a), when a source 
of any limitation on access to the subsidy is "the particular legal instrument or government conduct 
effecting such li mitation".1481 Article  2.1(a)  thus focuses "not on whether a subsidy has been granted 
to certain enterprises, but on whether access  to that subsidy has been explicitly limited"1482 in the 
legislation pursuant to which the granting authority operates, or by the  granting authority itself. 
Thus, the fact that in practice the enterprises involved in the excluded activities used the Class  29 
programme for the eligible machinery and equipment is not a relevant consideration for the analysis 
of de jure  specificity und er Article  2.1(a).  
7.726.   Based on the above, we consider that the USDOC reasonably found that access to the 
Class 29 programme was explicitly limited to "certain enterprises" within the meaning of 
Article  2.1(a)  of the SCM  Agreement.  
7.12.2.2   Whether the Class 29 program me is non -specific within the meaning of 
Article  2.1(b)  
7.727.   Canada submits that because the Class 29 programme is not specific under Article  2.1(a), 
the USDOC did not need to examine specificity based on the existence of "objective criteria or 
conditions" unde r Article  2.1(b). Nonetheless, for Canada, the criteria governing eligibility for the 
Class 29 programme are "objective", and do not favour certain enterprises over others.1483 The 
United  States responds that the eligibility criteria for the Class  29 program me are not based on 
"objective criteria or conditions", because the Income Tax Regulations explicitly exclude assets that 
are used for certain activities by certain enterprises or industries and favours enterprises or 
industries that are not engaged in tho se activities.1484 
7.728.   Article  2.1(b)  establishes that specificity "shall not exist" if the granting authority, or the 
legislation pursuant to which the granting authority operates, establishes "objective criteria or 
conditions governing the eligibility for, and  the amount of", the subsidy, provided that eligibility is 
"automatic and that such criteria or conditions are strictly adhered to". Such conditions and criteria 
"must be clearly spelled out in law, regulation, or other official document so as to be capabl e of 
verification".1485 Footnote 2 to Article  2.1(b)  defines "objective criteria or conditions" as criteria or 
conditions that are "neutral", "do not favour certain enterprises over others", and "are economic in 
nature and horizontal in application, such as number of employees or size of enterprise".  
7.729.   During the underlying investigation, a Canadian interested party argued that the Class 29 
programme is not de jure  specific, because it has "objective criteria or conditions governing the 
eligibility for, and the amount of" the tax reduction that are based on "neutral criteria not favoring 
one enterprise over another". The USDOC considered that the eligibility criteria for Class 29 are not 
"objective", because they "favour one enterprise or in dustry over another". Specifically, the USDOC 
stated that the Income Tax Regulations favour "enterprises or industries that are engaged in 
qualifying manufacturing and processing activities, over enterprises or industries that are not".1486 
7.730.   Considering that the Income Tax Regulations explicitly exclude d enterprises involved in 
certain activities from the Class 29 programme, we are of the view that the USDOC properly 
determined that the Income Tax Regulations favour certain enterprises over ot hers, and thus the 
eligibility criteria are not objective. Therefore, we reject Canada's  allegation that the criteria 
 
establish regional specificity under Article  2.2. That panel considered that the phrase "geographical region" is 
not qu alified in any way, which suggests that "the designation of any geographical region – no matter how 
small or how large – would suffice to trigger the application of Article  2.2". (Panel Report, US – Washing 
Machines , para.  7.282).  See also, Appellate  Body Report, US – Washing Machines , paras.  5.236 -5.239.  
1480 Canada's  first written submission, para.  1168.  
1481 Appellate  Body Report, US – Large Civil Aircraft (2nd complaint) , para.  748. 
1482 Appellate  Body Report, US – Anti-Dumping and Countervailing Duties (China) , para.  368. 
1483 Canada's  first written submission, para.  1169.  
1484 United  States'  first written submission, paras.  738, 748, and 757.  
1485 Appellate  Body Report, US – Countervailing Measures (China) , para.  4.119.  
1486 Final determination, (Exhibit CAN -10), p . 199. WT/DS533/ R 
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  governing eligibility for the Class 29 programme do not favour certain enterprises over others and 
are "objective" within the meaning of A rticle 2.1(b).  
7.12.2.3   Whether the USDOC acted inconsistently with Articles  2.1(a)  and 2.1(b), by 
failing to consider the specificity of the Class 29 programme within the broader context 
of Canadian tax legislation  
7.731.   During the investigation, a Canadian interested p arty argued that the activities excluded 
from Class 29 are eligible for other tax deductions and credits under the Income Tax Act. For 
example, "individuals engaged in farming or fishing are exempt for tax on the first $1 million in 
capital gains from the disposition of their farming or fishing property, while the oil and gas and 
mining industries can deduct exploration and development expenses (the latter at 30% per year on 
a declining balance basis)" .1487 The USDOC rejected this argument, by noting that the  existence of 
these other tax provisions is not subject to its analysis in the underlying investigation.  
7.732.   Canada repeats that same argument before us and asserts that the USDOC failed to consider 
the Class 29 programme in the context of other provisions of  the Income Tax Act, given that excluded 
activities are eligible for other tax deductions and credits under the Income Tax Act.1488 
Canada  argues that the USDOC's  approach contradicts the United  States'  position in US – Large Civil 
Aircraft (2nd complaint) , where the United  States argued that the allocation of patent rights under 
NASA/USDOD  Agreements should be analysed in the context of the overall patent regime in the 
United  States.1489 The United  States submits that while the broader legal framework of a sub sidy 
may be relevant for a de jure  specificity analysis, the other tax deductions and credits are different 
from the Class 29 programme. The United  States argues that Canada did not identify any other tax 
provision to demonstrate that the excluded industri es and enterprises were able to receive the same 
subsidy under other provisions of the Income Tax Act and the Income Tax Regulations.1490 
7.733.   We agree with the parties that the consideration of the broader legislative framework under 
a specificity analysis may b e relevant in certain circumstances. For instance, as indicated by Canada, 
in US – Large Civil Aircraft  (2nd complaint) , both the panel and the Appellate  Body considered that 
the allocation of patent rights under NASA/USDOD R&D contracts has to be examined  in the broader 
context for the allocation of patent rights to contractors under all R&D contracts with other 
government departments and agencies. This is because "the allocation of patent rights or waivers 
under the NASA/USDOD contracts and  Agreements ope rates within the legislative and regulatory 
framework that applies to R&D activities performed by all enterprises for US Government 
departments and agencies" . The Appellate  Body upheld the panel's  finding that the allocation of 
patent rights under the NASA /USDOD contracts is not specific. The Appellate  Body explained that 
both under the general regulations and under a NASA waiver, ownership rights over the invention 
will belong solely to the contractor, although the mechanism for the initial allocation of p atent rights 
is formally different.1491 Put differently, the result of NASA's  patent regulation is the same as under 
the general regulation, even though the formal procedure is different.  
7.734.   At the same time, the Appellate  Body cautioned that the examination of  specificity under 
Article  2.1 should not include subsidies that are different from those challenged by the complaining 
Member. In particular, per the Appellate  Body, a subsidy, access to which is limited to "certain 
enterprises", does not become non -specific merely because there are other subsidies that are 
provided to other enterprises pursuant to the same legislation.1492 In the present case, Canada 
argues that the USDOC should have examined other tax deductions and credits under the Income 
Tax Act applica ble to the activities excluded from the Class  29 programme. As indicated above, 
during the investigation, a Canadian interested party referred to certain tax exemptions for 
individuals engaged in farming and fishing, as well as deductions for the oil and g as and mining 
industries. Even if these tax exemptions benefit the excluded activities, Canada does not explain 
how these tax benefits relate to the type of subsidy at issue, i.e. the Class 29 programme, or how 
these tax benefits lead to the same result as  the Class  29 programme. The subsidy at issue, 
 
1487 Public version of joint case brief , (Exhibit CAN -311), p.  II-11. (fn omitted)  
1488 Canada's  first written submission, para.  1161.  
1489 Canada's  first written submission, paras.  1170-1174 (referring to Appellate  Body Report, US – Large 
Civil Aircraft (2nd complaint) , paras.  787-789).  
1490 United  States'  first written submission, para.  760. 
1491 Appellate  Body Report, US – Large Civil Aircraft (2nd complaint) , para.  780. 
1492 Appellate  Body Repo rt, US – Large Civil Aircraft  (2nd complaint) , para.  751.  WT/DS533/ R 
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  investigated by the USDOC, is the ACCA  for Class 29 assets. The evidence before the USDOC showed 
that the enterprises and industries that are not eligible for the Class 29 programme, are subject to 
a standard rate of depreciation under Class 43.1493 Based on the above, we consider that Canada 
has not demonstrated that the examination of other tax benefits was warranted in this case, or how 
the assessment of the Class  29 programme in the context of other tax benef its would lead to the 
finding of non -specificity.  
7.12.2.4   Conclusion  
7.735.   In light of the above, we find that the USDOC provided a reasoned and adequate explanation 
for its conclusion that the Class 29 programme was de jure  specific within the meaning of 
Articles  2.1(a ) and 2.1(b).  
7.13  Canada's claims concerning the Maritimes Stumpage Benchmark  
7.13.1   Introduction  
7.736.   Canada's  claim with respect to the "Maritimes Stumpage Benchmark" concerns the 
USDOC's  benefit determination, specifically, its determination on whether the Canadian pro vinces of 
Alberta, Ontario, or Québec  provide standing timber to Canadian producers and exporters at less 
than adequate remuneration (thereby conferring a benefit under Article  1.1(b)  of the 
SCM Agreement and within the meaning of Article  14(d)  of this  Agreement). Canada submits that 
the USDO C maintains the Maritimes Stumpage Benchmark as an unwritten measure and considers 
this benchmark to be a measure of present and continued application , or, in the alternative an 
ongoing conduct .1494 In particular, Canada contends that in determining whether these provinces 
provide standing timber at less than adequate remuneration, the USDOC compares stumpage prices 
to private prices in the Maritime Provinces1495 of Canada (i.e.  the benchmark)  and treats the 
stumpage prices from these provinces as "in -market" p rices (i.e.  a tier -one price under the 
United  States'  domestic law).1496 
7.737.   Canada argues that i n softwood lumber proceedings between 2004 -2006, the USDOC relied 
on a benchmark based on private prices in Nova Scotia  and New Brunswick  whereas in the more 
recent softwood lumber investigation (in 2017)  and the uncoated groundwood paper investigation 
(in 2018)  the USDOC used a benchmark based on private prices in Nova Scotia  alone.1497 Canada 
explains that the USDOC's  use of any of the benchmarks containing private pr ices from one or both 
of these provinces would constitute an application of the Maritimes Stumpage Benchmark measure 
as described by Canada.1498 
7.738.   The evidence Canada relied on to establish that this benchmark is a measure of present and 
continued application,  or ongoing conduct, comprises extracts from the USDOC's  determinations in 
its countervailing duty investigations  on softwood lumber as well as uncoated groundwood paper  and 
includes determinations from 2004 to 2018 (though no determinations were made 
between 2006-2017).  
7.739.   Canada asserts that this measure is inconsistent with Articles  1.1(b)  and 14(d)  of the 
SCM Agreement because the USDOC assesses the adequacy of remuneration in a manner 
inconsistent with "the prevailing conditions for standing timber in the  relevant regional market within 
the country of provision".1499 
7.740.   The United  States argues that the Maritimes Stumpage Benchmark is not a measure 
susceptible to dispute settlement in the WTO, and even if Canada could demonstrate that the 
 
1493 Preliminary determination, (Exhibit CAN -8), p.  72; GOC-CRA-ACCA -4, (Exhibit USA -16), p.  21. 
1494 Canada's  first written submission, paras.  1175-1208.  
1495 The "Maritime Provinces" refers to the Canadia n provinces of Nova  Scotia and New  Brunswick. 
Newfoundland and Labrador, and Prince Edward Island are also in this region, but do not produce substantial 
quantities of lumber and as a result are not included in the benchmark. (Canada's  first written submis sion, 
para. 1175 and fn 1973).  
1496 Canada's  first written submission, para.  1175.  
1497 Canada's  opening statement at the first meeting of the Panel (28  February  2019), para.  33. 
1498 Canada's  opening statement at the first meeting of the Panel (28  February  2019), para. 33. 
1499 Canada's  first written submission, para.  1178.  WT/DS533/ R 
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  Maritimes Stumpage Benchmark could be challenged as a measure of present and continu ed 
application or ongoing conduct, Canada has not demonstrated that it would necessarily violate 
Articles  1.1(b)  or 14(d)  of the SCM  Agreement.1500 
7.13.2   Legal standard  
7.13.2.1   Measures  
7.741.   Measures can be challenged in WTO dispute settlement proceedings on an "as applied" or  
an "as such" basis. A claim that a measure is inconsistent "as such" challenges a measure as a rule 
or norm that has general and prospective application, whereas a claim that a measure is inconsistent 
"as applied" challenges a specific application of the measure.1501 The Appellate  Body has explained 
that the implications of "as such" challenges are more far -reaching than "as applied" claims because 
a complaining party is seeking to prevent Members from ex ante  engaging in certain conduct.1502 
The presumption t hat WTO Members act in "good faith" in the implementation of their 
WTO commitments is particularly apt in the context of measures challenged "as such".1503  
7.742.   However, the Appellate  Body has clarified that "as applied" and "as such" do not exhaustively 
define the types of measures that can be challenged in WTO proceedings.1504 The Appellate  Body 
has explained that, "[i]n principle, any act or omission attributable to a WTO Member can be a 
measure of that Member for purposes of dispute settlement proceedings"1505, and that "[t]he scope 
of measures that can be challenged in WTO dispute settlement is therefore broad".1506 
7.13.2.2   Unwritten measures  
7.743.   The Appellate  Body has cautioned that "[p]articular rigour is required on the part of a panel 
to support a conclusion as to the exis tence of a 'rule or norm'  that is not expressed in the form of a 
written document".1507 Notwithstanding that this observation was made in reference to a rule or 
norm of general and prospective application, we consider that similar rigour ought to be applied in 
relation to measures characterized as present and continued application, or ongoin g conduct. This 
is not to say that we must review Canada's  claim through the prism of a rule or norm of general and 
prospective application. In Argentina – Import Measures , the Appellate  Body explained:  
When tasked with assessing a challenge against an unw ritten measure, a panel is also 
not always required to apply rigid legal standards or criteria that are based on the "as 
such" or the "as applied" nature of the challenge. Rather, the specific measure 
challenged and how it is described or characterized by a complainant will determine the 
kind of evidence a complainant is required to submit and the elements that it must 
prove in order to establish the existence of the measure challenged. A complainant 
seeking to prove the existence of an unwritten measure wi ll invariably be required to 
prove the attribution of that measure to a Member and its precise content. Depending 
on the specific measure challenged and how it is described or characterized by a 
complainant, however, other elements may need to be proven.1508  
7.744.   Accordingly, in assessing Canada's  claim, we consider it necessary to examine whether 
Canada has established that the measure is attributable to the United  States, the precise content of 
the measure, and other elements as set out by Canada in its submiss ion. 
 
1500 United  States'  first written submission, para.  762. 
1501 See, for example, Appellate  Body Report, EU – Biodiesel (Argentina) , para.  6.154.  
1502 Appellate  Body Report, US – Oil Country Tubular Goods Sun set Reviews , para.  172. 
1503 Appellate  Body Report, US – Oil Country Tubular Goods Sunset Reviews , para.  173. 
1504 See, for example, Appellate  Body Reports, US – Continued Zeroing , para.  179; EU – Biodiesel 
(Argentina) , fn 429.  
1505 Appellate  Body Report, US – Corrosion -Resistant Steel Sunset Review , para.  81. See also, 
Appellate  Body Reports, US – Softwood Lumber IV (Article  21.5 – Canada) , para.  67; and US – Anti-Dumping 
Methodologies (China) , para.  5.122.  
1506 Appellate  Body Report, EC and certain Member States – Large Civil Aircraft , para.  794. See also, 
Appellate  Body Reports, Guatemala – Cement I , fn 47; Argentina – Import Measures , paras.  5.106 and 5.109; 
and US – Anti-Dumping Methodologies (China) , para.  5.122.  
1507 Appellate  Body R eport, US – Zeroing (EC) , paras.  196 and 198. (emphasis original)  
1508 Appellate  Body Reports, Argentina – Import Measures , para.  5.110.  WT/DS533/ R 
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  7.13.2.3   Measures as present and continued application, or ongoing conduct  
7.745.   The Appellate  Body has explained that "the constituent elements that must be substantiated 
with evidence and arguments in order to prove the existence of a measure challenged will be 
informed by how such measure is described or characterized by the complainant ".1509 Canada has, 
as noted above, described the measure at issue as having present and continued application, or in 
the alternative, ongoing conduct.  
7.13.3   Whether Canada has established t he existence of the Maritimes Stumpage 
Benchmark  
7.13.3.1   Introduction  
7.746.   At the outset, we note that the United  States does not dispute that a measure characterized 
as having present and continued application is susceptible to dispute settlement in the WTO. Instead, 
the United  States argues that Canada has not demonstrated that the Maritimes Stumpage 
Benchmark exists as a measure of present and continued application.1510 In contrast, the 
United  States argues that measures of ongoing conduct are not susceptible to challe nge in the 
WTO dispute settlement system.1511 
7.747.   In examining whether Canada has established that the Maritimes Stumpage Benchmark has 
present and continued application, we must consider whether Canada has established the following 
constituent elements for a measure of present and continued application:  
a. the measure is attributable to the United  States;  
b. the measure has precise content; and  
c. the measure has present and continued application, which is to say, it currently applies 
and will continue to be applied in  the future.1512 
7.748.   In examining whether Canada has established that the Maritimes Stumpage Benchmark is 
an ongoing conduct, we must consider whether Canada has established the following constituent 
elements of ongoing conduct:  
a. the attribution of the measure to  the United  States;  
b. the precise content of the measure;  
c. the repeated application of the conduct; and  
d. the likelihood that such conduct will continue.  
7.749.   We begin by examining whether Canada has established the existence of the Maritimes 
Stumpage Benchmark as a  measure of present and continued application.  
7.13.3.2   The existence of the Maritimes Stumpage Benchmark as a measure of present 
and continued application  
7.750.   Canada challenges the Maritimes Stumpage Benchmark as "a measure" of present and 
continued application.1513 Therefore, in addition to attribution and precise content of such a measure, 
Canada will have to establish that this measure is currently applied and will continue to be applied 
in the future.  
 
1509 Appellate  Body Reports, Argentina – Import Measures , para.  5.108. (emphasis added)  
1510 United  States'  first written submission, para.  765. 
1511 United  States'  first written submission, para. 778. 
1512 Canada's  first written submission, paras.  1184-1185 (quoting  Appellate  Body Reports, Argentina – 
Import Measures , para.  5.146).  
1513 Canada's  first wri tten submission, p.  475. WT/DS533/ R 
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  7.751.   With respect to attribution, we note that the parties do not disp ute that the USDOC made 
the determinations to which Canada refers in its first written submission.1514 However, the 
United  States argues that the measure cannot be attributed to the United  States because the 
measure does not exist.1515 We consider that the USD OC is a body of the United  States'  government, 
and its actions are therefore attributable to the United  States. Thus, to the extent that those actions 
give rise to the measure challenged by Canada, that measure would be attributable to the 
United  States.  
7.752.   With respect to precise content, our  review of the content of the measure will be based on 
the complainant's  description of the measure.1516 The measure at issue here is what Canada 
describes as the Maritimes Stumpage Benchmark. Canada presents the precise co ntent of the 
measure as follows:  
The precise content is that, since 2004, when presented with the factual circumstances 
of assessing the adequacy of remuneration of Crown -origin standing timber prices in 
Alberta, Ontario, or Québec, [USDOC] has applied a b enchmark based on private prices 
in the Maritime Provinces and treated it as an in -market benchmark. The 
[USDOC]  repeatedly employs the same three steps to get to this result. In particular, 
the [USDOC]:  
1. refers to its regulations and its benchmark hiera rchy; 
2. applies its regulations to find that private prices from the Maritimes are 
"tier-one", "in -country" benchmark; and,  
3. finds that, irrespective of the evidence presented, its benchmark in the 
Maritime Provinces is comparable to Alberta, Ontario, o r Québec.1517 
7.753.   The term "Maritimes Stumpage Benchmark", as used by Canada, includes a benchmark 
based on both Nova Scotia  and New Brunswick .1518 To establish the precise content of the measure, 
Canada submitted evidence comprising extracts from the USDOC 's determinations in which Canada 
asserts this measure was applied. This evidence shows, as noted in paragraph s 7.737 -7.738  above, 
that in earlier softwood lumber proceedings, i.e. proceedings between 200 4-2006, the USDOC relied 
on a benchmark based on private prices in Nova Scotia  and New Brunswick  whereas in the more 
recent softwood lumber investigation (in 2017)  and the uncoated groundwood paper investigation 
(in 2018),  the USDOC used a benchmark based on private prices in Nova Scotia  alone.1519 Canada 
explains, as also noted above, that any of the benchmarks containing private prices from one or 
both of these provinces would constitute an application of the Maritimes Stumpage Benchmark 
measure.1520 Therefore, Canada uses the term Maritimes Stumpage Benchmark to refer to 
two different type of b enchmarks, one based on Nova Scotia  and New Brunswick  (which was applied 
between 2004 -2006)  and the other based on Nova Scotia  alone (which was applied 
between  2017-2018).  
7.754.   Canada submits that the Maritimes Stumpage Benchmark exists as " a [m]easure " of pres ent 
and continued application.1521 The phrase "a measure" shows that Canada is challenging a single 
measure.1522 We consider that to establish the precise content of the Maritimes Stumpage 
 
1514 Canada's  first written submission, para.  1189; United  States'  first written submission, para.  766. 
1515 United  States'  first written submission, para.  766; second written submission, para.  466. 
1516 In Argentina – Import Measures for instance, the complainants challenged the existence of a single 
(unwritten)  measure consisting of a combination of one or more of five trade -related requirements or TRRs. 
Therefore, the Appellate  Body stated in that case tha t as part of its examination of the precise content of this 
single measure, the panel was also required to evaluate whether the individual TRRs applied and operated as 
part of a single measure. ( Appellate  Body Reports, Argentina – Import Measures , para.  5.124).  
1517 Canada's  response to Panel question No. 150, para.  428. See also, first written submission, 
paras.  1190-1194.  
1518 Canada's  opening statement at the first meeting of the Panel (28  February  2019), para.  33. 
1519 Canada's  opening statement at the first mee ting of the Panel (28  February  2019), para.  33. 
1520 Canada's  opening statement at the first meeting of the Panel (28  February  2019), para.  33. 
1521 Canada's  first written submission, p.  475. (emphasis added)  
1522 This is consistent with Canada's  description of the  measure. In addition to contending that the 
Maritimes Stumpage Benchmark is a measure of present and continued application, Canada also notes that "it" 
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  Benchmark as a single measure, Canada needs to show that the two benchmarks operate as part of 
a single measure. To demonstrate that the two benchmarks operate as part of a single measure, 
the complainant may have to show that the benchmarks are applied an d operate together, or 
collectively advance some underlying policy. In our view, simply asserting that two types of 
benchmarks comprise "a [single] measure", without showing for instance how they apply or operate 
together, or collectively advance some unde rlying policy, would not be sufficient to establish that 
they form part of a single measure. We consider that the Appellate  Body's  findings in Argentina – 
Import Measures offer some useful guidance in this regard.  
7.755.   In Argentina – Import Measures the complai nants challenged the existence of a single 
(unwritten)  measure consisting of a combination of one or more of five trade -related requirements 
or TRRs. In that dispute, the Appellate  Body stated that, as part of its examination of the precise 
content of this  single measure, the panel was also required to evaluate whether the individual TRRs 
applied and operated as part of a single measure.1523 The Appellate  Body concluded that the panel 
had done so. In reaching this conclusion, the Appellate  Body noted that the  panel analy sed how the 
individual TRRs operated together to further an underlying policy of managed trade, and that the 
content of the single measure consisted of the combined operation of the individual TRRs as one of 
the tools that Argentina used to imp lement this policy, noting that the combined operation of the 
individual TRRs was a defining element of the content of the TRRs measure (as a single measure) .1524 
7.756.   We consider that the Appellate  Body's  finding in this regard supports the view that when a 
comp lainant challenges different instruments (or as here, different benchmarks used to determine 
the existence of subsidy), the complainant would have to demonstrate that such different 
instruments operate as part of a single measure.1525 This demonstration coul d be made by showing 
that the instruments apply and operate together, or collectively advance some underlying policy. 
Neither the complainant, nor a panel could simply assume that different instruments form part of a 
single measure. Otherwise, the requirem ent to examine whether a complainant has established the 
precise content of a measure may well be superfluous.  
7.757.   To be sure, this does not mean that a single measure could not be applied in varying facts 
and circumstances. There may well be variations in the  underlying facts and circumstances in which 
a measure is applied. However, those variations in the underlying facts and circumstances must not 
detract from the fact that the substance of the actions or omissions at issue remain the same across 
those diffe rent facts and circumstances, such that its precise content is discernible.1526 
 
has been applied in every instance and that "it" is being currently applied and will continue to be app lied in the 
future. (Canada's  first written submission, para.  1187).  
1523 Appellate  Body Reports, Argentina – Import Measures , para.  5.124.  
1524 Appellate  Body Reports, Argentina – Import Measures , paras.  5.126, 5.130, and 5.133.  
1525 See also, Panel Report, Russia – Railway Equipment , para.  7.946. The panel stated that a 
complainant may have to demonstrate how the different components of a measure operate together as part of 
a single measure and how such a single measure exists as distinct from its components.  
1526 Take the panel and Appellate  Body Report in US – Supercalendered Paper as an example. In US – 
Supercalendered  Paper , the unwritten measure challenged by the complainant was what it described as "Other 
Forms of Assistance – AFA measure", which comprised  (a) the USDOC asking the respondents in the 
underlying countervailing duty investigations whether they received "other forms of assistance"; and (b)  where 
the USDOC discovered information that it deemed should have been provided in response to the above 
quest ion, applying adverse facts available with respect to that respondent to determine that the discovered 
information amounted to countervailable subsidies. (Panel Report, US – Supercalendered Paper , para.  7.308).  
To establish the precise content of the Other Forms of Assistance – AFA measure, the complainant relied on 
extracts from various investigations conducted by the USDOC. The respondent contended that the complainant 
had not established the precise content of  this measure because, among others, the evidence submitted by the 
complainant showed that there were variations in the USDOC's  questions regarding "other forms of assistance" 
as well as its determinations when the USDOC discovered information. ( Panel Repo rt, US – Supercalendered 
Paper , para.  7.315).  However, the panel took the view that the variations pointed out by the respondent in the 
wording of the USDOC's  questions as well as its determinations did not detract from the fact that the substance 
of the q uestions and the USDOC's  conduct remained the same. ( Panel Report, US – Supercalendered Paper , 
para. 7.316).  The Appellate  Body (i.e. the majority of the three Appellate  Body Members)  upheld the finding of 
the panel. In this regard, the majority, like the panel, held that although the various determinations of the 
USDOC relied upon by the complainant to establish precise content concerned different facts, such differences 
or variations did not detract from the fact that the substance of the USDOC's  conduct remained the same. 
(Appellate  Body Report, US – Supercalendered Paper , para.  5.23).  The findings of the panel and the 
Appellate  Body show that it may be possible to establish the precise content of a single measure across varying 
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  7.758.   In this particular case, Canada has neither advanced any argument nor presented any 
evidence showing that the different benchmarks utilized by the USDOC1527 operate as a single 
measure. Canada has not shown for example that these two benchmarks operate and apply together, 
or collectively advance an underlying policy of the USDOC to use the Maritimes Stumpage 
Benchmark when it assesses the adequacy of remuneration of Crown -origin sta nding timber prices 
in Alberta, Ontario, or Québec . In addition, while in describing the content of the measure, Canada 
contends that irrespective of the evidence presented, the USDOC finds that a benchmark in the 
Maritime Provinces is comparable to Albert a, Ontario, or Québec , the evidence Canada relied upon 
undermines its description of the measure.  
7.759.   Instead, the USDOC's  determinations that Canada relies upon as evidence to establish the 
existence of the Maritimes Stumpage Benchmark show that the USDOC sel ected its benchmark 
following the three -tier hierarchy set out in Section 351.511(a)(2)  of the USDOC's  CVD Regulations. 
Tier-one of this three -tier hierarchy refers to a benchmark based on "market -determined prices from 
actual transactions of the good with in the country under investigation ". In these determinations, the 
USDOC based its benchmark on stumpage prices for private -origin standing timber from 
New Brunswick  and Nova Scotia  or Nova Scotia  alone because, according to the USDOC, they were 
market -determined prices resulting from actual transactions in the "country in question", 
i.e. Canada.1528 Nothing in the determinations shows that the USDOC would treat only transactions 
in the Maritime Provinces as those from the "country in question", or that it wou ld not select a 
benchmark outside the Maritime Provinces irrespective of the evidence presented to it. On the 
contrary, the USDOC's  determinations, and specifically its preliminary determination on softwood 
lumber products in 2017, show that the USDOC used  a benchmark based on Nova Scotia  after 
considering the evidence on the record of that investigation.  
7.760.   For example, in examining in this determination whether it could use prices for private 
stumpage in Nova Scotia  as a benchmark, the USDOC examined whether  prices in Nova Scotia  were 
distorted, based on the information presented by the Government of Nova Scotia  in that 
investigation. It noted that (a)  the Government of Nova Scotia  had provided data indicating that 
private -origin standing timber accounted for the majority of the softwood harvest volume and that 
Crown -origin standing timber accounted for less than a quarter of the softwood harvest volume; and 
(b) based on information supplied by the Government of Nova Scotia , which aligned with its  
conclusions of non -distortion in Nova Scotia  in earlier determinations, the USDOC was preliminarily 
determining that the sale of Crown -origin standing timber did not distort prices for private -origin 
standing timber in Nova Scotia  (and thus using these pr ices as a tier -one benchmark in that 
investigation). We consider this shows that the USDOC's  decision to use prices in Nova Scotia  was 
driven by the underlying facts and circumstances, including the evidence presented by the interested 
parties in the inves tigation, rather than some sort of policy to use prices from one of the Maritime 
Provinces. In addition, the analysis contained in the USDOC's  determination in this regard does not 
suggest, as Canada contends, that irrespective of the evidence the USDOC co ncludes that a 
benchmark in the Maritime Provinces is comparable to Alberta, Ontario, or Québec . Instead, it 
suggests that the USDOC reached its conclusions after examining the evidence presented by the 
Government of Nova Scotia  in this investigation. Ther efore, we find that the evidence that Canada 
relied upon does not support its description of the content of this measure, and also does not support 
its view that irrespective of the evidence the USDOC concludes in its determinations that a 
benchmark in the  Maritime Provinces is comparable to Alberta, Ontario, or Québec . 
7.761.   In addition, we find that Canada has failed to show that this alleged "measure" has present 
and continued application. We note that in Argentina – Import Measures , the Appellate  Body stated 
that the measure in that dispute had present and continued application "in the sense that it currently 
applies and it will continue to be applied in the future until the underlying policy ceases to apply" .1529 
In characterizing the Maritimes Stumpage Benchma rk as a measure of present and continued 
application, Canada relies on this statement of the Appellate  Body and contends as follows:   
 
facts and circumstances as  long as those variations do not detract from the substance of the actions or 
omissions at issue.  
1527 The USDOC, as noted above, used a benchmark based on Nova  Scotia and New  Brunswick in 
softwood lumber investigations between 2004 -2006, and  a benchmark base d on Nova  Scotia alone, in the 
softwood lumber investigation in 2017 and the uncoated groundwood paper investigation in 2018.  
1528 Canada's  first written submission, para.  1192 and table 30.  
1529 Appellate  Body Report s, Argentina – Import Measures , para.  5.146.  WT/DS533/ R 
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  a. The measure currently applies  because the USDOC used a Nova Scotia  benchmark in the 
underlying investigation i.e. the soft wood lumber investigation in 2017.1530 
b. The measure will continue to be applied in the future  because:  
i. First, the measure has had repeated and uninterrupted application over an extended 
period of time, which, Canada argues, demonstrates that the USDOC will co ntinue to 
act in the same way and apply the measure when faced with the relevant factual 
circumstances.1531 Canada contends that the USDOC has not deviated from applying 
this measure since 2004 and has made its determinations in a consistent manner.1532 
ii. Second , the USDOC's  uninterrupted application of the measure has continued despite 
differences in the facts in the underlying proceedings.1533 Canada supports this view 
noting that the USDOC applied the Maritimes Stumpage Benchmark in an investigation 
on uncoated groundwood paper from Canada, i.e. on a product other than softwood 
lumber.1534  
iii. Third, the USDOC's  consistent reference to precedents from previous determinations 
where the Maritimes Stumpage Benchmark was applied shows that this measure is 
likely to continue in future. In this regard, Canada refers to the panel's  finding in US – 
Supercalendered Paper  that consistent references to precedents when a measure is 
applied constitute evidence that it was likely that the measure would continue.1535 
7.762.   The evidence presented by Canada to support its arguments again comprise extracts from 
the USDOC' s determinations, which, according to Canada, demonstrate that the Maritimes 
Stumpage Benchmark currently applies and will continue to apply in the future.1536 In order to 
ascertain whether the measure currently applies or will continue to apply in the futur e, we address 
the following questions:  What measure currently applies? What measure will continue to apply in 
the future? For Canada, it is the Maritimes Stumpage Benchmark that currently applies and will 
continue to apply in the future.  
7.763.   However, we consid er that the evidence presented by Canada does not show that a 
Maritimes Stumpage Benchmark (assuming the precise content of such a benchmark is established)  
is being currently applied or will continue to be applied in the future. Let us consider the extrac ts 
from the USDOC's  determinations from 2004 -2006 and again from 2017 -2018 relied on by Canada.  
7.764.   With respect to the period 2004 -2006, Canada relies on extracts from the first and 
second  administrative reviews on softwood lumber products from Canada (both p reliminary and 
final determinations)  as well as the third review (preliminary determination).1537 In these 
determinations, the USDOC consistently stated that following the hierarchy set out in 
Section  351.511(a)(2)  of the USDOC's  CVD Regulations it must firs t determine whether there are 
"actual market -determined prices for timber sales in Canada " that can be used to measure whether 
the provincial stumpage programmes provide timber for less than adequate remuneration. It 
determined that the "Maritimes'  private prices" were "market -determined prices in Canada " and 
therefore usable under the first tier of the USDOC's  three -tier hierarchy to assess the adequacy of 
remuneration.1538 Consider for instance the USDOC's  preliminary determination concer ning the 
third administrative review on softwood lumber products issued on 12  July 2006, where  the USDOC 
stated that consistent with its approach in the first and second administrative reviews it was using 
"Maritimes'  private prices" to measure the adequac y of remuneration of the stumpage programmes 
administered by Alberta, Saskatchewan, Manitoba, Ontario, and Québec .1539 It stated that it was 
doing so because it had preliminarily determined that the Maritimes'  private prices were 
 
1530 Canada's  first written submission, para.  1195.  
1531 Canada's  first written submission, para.  1196.  
1532 Canada's  first written submission, para.  1196.  
1533 Canada's  first written submission, paras.  1196-1197.  
1534 Canada's  first written submission, para.  1197.  
1535 Canada's  first written submission, para.  1199 (referring to Panel Report, US – Supercalendered 
Paper , para.  7.328).  
1536 See e.g. Canada's  first written submission, para.  1199.  
1537 Canada's  first written submission, paras.  1192 and 1199 and tables 30 and 31.  
1538 See, e.g. Canada's first written submission, para.  1192 and table 30. (emphasis added)  
1539 Canada's  first written submission, para s. 1192 and 1199 and tables 30 and 31.  WT/DS533/ R 
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  "market -determined prices in Canada " and were "therefore, usable under the first tier of [the 
USDOC's] adequate remuneration hierarchy".1540 These "Maritime private prices" were 
"market -determined stumpage prices from Nova Scotia  and New Brunswick ".  
7.765.   With respect to the period 2017 -2018, Canada relies on the preliminary and final 
determination of the countervailing duty investigation on softwood lumber products from Canada 
(in 2017)  as well as the preliminary and final determination of the countervailing duty investigation 
on uncoated g roundwood paper from Canada (in 2018). In these determinations, the USDOC again 
referred to its three -tier hierarchy for assessing adequacy of remuneration and noted for example 
that the preferred benchmark was the market prices from actual transactions wi thin the "country" 
under investigation. But unlike the determinations between 2004 -2006, where it concluded 
Maritimes'  private prices  were market -determined prices in Canada and therefore usable under its 
tier-one benchmark, the USDOC concludes in these in vestigations that prices for private -origin 
standing timber in Nova Scotia  were prices in the country subject to investigation, i.e. Canada and 
therefore usable under its tier -one benchmark.1541 
7.766.   The comparison of the determinations in 2004 -2006 with the dete rminations in 2017 -2018 
shows the following:  
a. In the determinations between 2004 -2006 as well as 2017 -2018, the USDOC examined 
whether there were market -determined prices "in Canada" (consistent with tier -one of its 
three -tier hierarchy that refers to a benchmark based on "market -determined prices from 
actual transactions of the good within the country under investigation").  
i. in the determinations discussed above in 2004 -2006 it found that "market -determined 
prices in Canada" were prices for private -origin  standing timber from the "Maritimes"; 
and 
ii. in the determinations discussed above in 2017 -2018 it found that "market -determined 
prices in Canada" were prices for private -origin standing timber from Nova Scotia . 
7.767.   We consider that Canada has not shown through this evidence that the USDOC decided to 
use a Maritimes Stumpage Benchmark in 2017 -2018. For instance, Canada does not show that in 
the determinations in 2017 -2018 the USDOC decided to use the prices in Nova Scotia  in pursuance 
of a policy to use a price f rom the Maritime Provinces. Instead, this evidence shows that the 
USDOC's  decision to use a price from Nova Scotia  was driven by (a)  the requirement under its 
domestic regulations to use as a tier -one benchmark "market -determined prices from actual 
transac tions of the good within the country under investigation", which, according to the USDOC, 
prices in Nova Scotia  were; and (b)  the underlying facts and circumstances of the case. For instance, 
as noted in paragraph 7.760 above, in the USDOC's  preliminary determination on softwood lumber 
in 2017, the USDOC examined the evidence presented by the Government of Nova Scotia , and only 
after concluding that thi s evidence showed that there was no distortion in stumpage prices in 
Nova Scotia  did it use the prices in this province as a benchmark. If the USDOC was not open to 
considering a benchmark outside Nova Scotia , or outside a Maritime Province, because for ex ample 
it felt compelled by a policy or practice to use a benchmark from the Maritime Province, such an 
analysis may well have been unnecessary.  
7.768.   Based on the above, we consider that Canada has not shown that the USDOC's  decision to 
use the prices in Nova Scotia in the softwood lumber investigation in 2017 or the uncoated 
groundwood paper investigation in 2018, was part of a policy to use prices from the Maritime 
Provinces. Instead, we consider that the evidence shows that the USDOC's  decision to use a price 
from Nova Scotia  was driven by (a)  the requirement under its domestic regulations to use as a 
tier-one benchmark "market -determined prices from actual transactions of the good within the 
country under investigation"; and (b)  the underlying facts and circum stances of the case in question.  
 
1540 Canada's  first written submission, para s. 1192 and 1199 and tables 30 and 31; Third administrative 
review on softwood lumber products, (Exhibit CAN -206), p.  33946. (emphasis added)  
1541 Canada's  first written submission, paras.  1192 and 1199 and tables 30 an d 31. WT/DS533/ R 
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  7.769.   We conclude that the USDOC's  use of a price from Nova Scotia  in the softwood lumber 
investigation in 2017 or the uncoated groundwood paper investigation in 2018 does not show that 
a Maritimes Stumpage Benchmark is a measure  that is being currently applied.  
7.770.   Regarding Canada's  submission that the Maritimes Stumpage Benchmark is likely to be 
continued in the future, Canada relies on three sets of arguments:   
a. the Maritimes Stumpage Benchmark is a measure that has had repeated an d uninterrupted 
application over an extended period of time;  
b. the uninterrupted application of the measure has continued despite differences in the facts 
in the underlying proceedings; or  
c. the USDOC's  consistent reference to precedents from previous determin ations where the 
Maritimes Stumpage Benchmark was applied shows that this measure is likely to continue 
in future.  
7.771.   For the same reasons that we provided above when concluding that Canada has not 
established that the Maritimes Stumpage Benchmark is a measur e that is being currently applied , 
we also conclude that Canada has not established that  (a) the Maritimes Stumpage Benchmark is a 
measure that  has had repeated and uninterrupted application over an extended period of time; and 
(b) the uninterrupted applic ation of the measure has continued despite differences in the facts in 
the underlying proceedings. In addition, we disagree with Canada's  argument that the 
USDOC's  consistent reference to precedents from previous determinations where the Maritimes 
Stumpage  Benchmark was applied shows that this measure is likely to continue in future. For 
instance, in support of its view that the USDOC consistently refers to precedents from previous 
determinations, Canada notes that the USDOC referred to its earlier determin ation in Lumber IV in 
the preliminary and final determination of the countervailing duty investigation on softwood lumber 
products from Canada in 2017.1542 However, the evidence presented by Canada shows that the 
USDOC relied on earlier determinations in Lum ber IV to reinforce the conclusions reached in these 
determinations.  
7.772.   In the preliminary determination for example, as noted in paragraph 7.760  above, the 
USDOC examined whether prices for private -origin standing timber in Nova Scotia  were distorted by 
reviewing the information presented by the Government of Nova Scotia  in this investigation. Having 
reviewed this information, the USDOC concluded that based on this information and the fact that 
this information aligned with the USDOC's  conclusions in its earl ier determination in Lumber IV, it 
was preliminarily determining that the sale of Crown -origin standing timber in Nova Scotia  did not 
have a distortive impact of on the province's  stumpage prices. This shows that the USDOC was 
making its determinations based on the underlying facts and circumstances of the investigation, 
rather than following its precedents as part of some polic y to use prices from the Maritime Provinces. 
In any event, this finding does not show that the USDOC was relying on past determinations as a 
precedent that required it to use a Maritimes Stumpage Benchmark.  
7.773.   Therefore, based on the above, we conclude that Canada has not established that the 
Maritimes Stumpage Benchmark has present and continued application. In support of our finding, 
we note that in Argentina – Import Measures , a dispute where the measure was also characterized 
as having present and continued application, the Appellate  Body found that the panel correctly 
concluded that the measure had "present and continued application, in the sense that it currently 
applies and it will continue to be applied i n the future until the underlying policy ceases to apply ".1543 
Canada has not pointed to any evidence that demonstrates the application, or existence, of an 
underlying policy of the USDOC in relation to the alleged measure. In addition, we consider that 
Canada has not established the existence of a policy to apply the Maritimes Stumpage Benchmark 
through the extracts from the USDOC's  determinations that it relies upon as evidence.  
7.774.   Based on the above, we find that Canada has not established that the Maritimes Stumpage 
Benchmark is a measure of present and continued application.  
 
1542 Canada's  first written submission, para.  1199 and table 31.  
1543 Appellate  Body Reports, Argentina – Import Measures , para.  5.146. (emphasis added)  WT/DS533/ R 
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  7.13.3.3   The existence of the Maritimes Stumpage Benchmark as a measure of ongoing 
conduct  
7.775.   As we have rejected Canada 's claim that the Maritimes Stumpage Benchmark is a measure 
of present and con tinued application, we turn now to Canada's  alternative claim, that the Maritimes 
Stumpage Benchmark can be characterized as ongoing conduct. The constituent elements, as noted 
above, are:  
a. the attribution of the  measure  to the United  States;  
b. the precise co ntent of the measure;  
c. the repeated application of the conduct; and  
d. the likelihood that such conduct will continue.1544 
7.776.   We have already discussed the issues concerning attribution and precise content of the 
measure above. Regarding the repeated application of  the conduct and the likelihood that such 
conduct would continue, Canada states as follows1545: 
a. With respect to the repeated application of the conduct, the repeated application of the 
Maritimes Stumpage Benchmark took place nine times in the following proce edings:  
i. first, in three administrative reviews under the countervailing duty order in the 
Lumber  IV investigation (i.e. the administrative reviews that took place in 2004 -2006);  
ii. second, the softwood lumber investigation in 2017; and  
iii. third, the uncoated gro undwood paper investigation in 2018.  
b. With respect to the likelihood that such conduct would continue, Canada states, relying 
again on evidence in the form of extract from the USDOC's  determination, as follows:  
i. first, the measure has had repeated and uninte rrupted application where the relevant 
factual circumstances arise, in different proceedings and over an extended period of 
time;  
ii. second, the USDOC consistently interpreted its relevant statutory and regulatory 
provisions as directing it to apply the measu re; and  
iii. third, the USDOC refers to precedents from previous determinations where it had 
applied the Maritimes Stumpage Benchmark.  
7.777.   We consider that Canada has not established either the repeated application of the conduct, 
or the likelihood that such conduc t would continue. We note that Canada's  argument concerning the 
repeated application of the USDOC's  conduct presupposes that the USDOC engaged in the same 
conduct across the determinations relied upon by Canada as evidence, which were made 
between  2004-2018. We recall that the conduct Canada alluded to is that when assessing the 
adequacy of remuneration of Crown -origin standing timber prices in Alberta, Ontario, or Québec , the 
USDOC applied a benchmark based on private prices in the Maritime Provinces and t reated it as an 
in-market benchmark. However, as noted in paragraph 7.768  above, the USDOC's  reliance on a 
benchmark based on prices in Nova Scotia  in 2017 and 2018 does not demonstrate that the USDOC 
was relying on a benchmark based on prices in the Maritime Provinces, which undermines 
Canada's  submission of repeated application of a Maritimes Stumpage Benchmark.  
7.778.   Regarding the likelihood of continuatio n of the conduct, we consider that Canada essentially 
relies on the same type of arguments as it does when contending that Maritimes Stumpage 
Benchmark is a measure of continued application. In paragraph 7.771  above, we concluded that 
 
1544 Canada's  first written submission, para.  1201.  
1545 Canada's  first written submission, paras.  1203-1205.  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  Canada has not established that (a) the Maritimes Stumpage Benchmark is a measure that  has had 
repeated and uninterrupted application over an extended period of time; (b) the uninterrupted 
application of the measure has continued despite differences in the facts underlying a proceeding; 
or (c)  the USDOC's  consistent reference to precedents from previous determinations where the 
Maritimes Stumpage Benchmark was applied shows that this measure is likely to continue in future. 
Therefore, for the same reasons, we conclude that Canada has also not established the likelihood of 
continuation of the  conduct, i.e. likelihood of continued application of the Maritimes Stumpage 
Benchmark.  
7.779.   Based on the above, we find that Canada has not established the existence of the Maritimes 
Stumpage Benchmark as ongoing conduct.1546 
7.13.4   Conclusion  
7.780.   In light of the foregoing , we find that Canada has failed to demonstrate that the Maritimes 
Stumpage Benchmark exists, either as a measure of present and continued application or ongoing 
conduct. We find that the evidence relied upon by Canada does not support its description of t he 
content of this measure, and also does not support its view that irrespective of the evidence the 
USDOC concludes in its determinations that a benchmark in the Maritime Provinces is comparable 
to Alberta, Ontario, or Québec . In addition, we consider tha t the evidence presented by Canada does 
not show that a Maritimes Stumpage Benchmark is being currently applied or will continue to be 
applied in the future.  
7.781.   In relation to Canada's claim in the alternative, that the Maritimes Stumpage Benchmark is 
a measure of ongoing conduct, we consider that Canada has not established either the repeated 
application of the conduct, or the likelihood that such conduct would continue.  
7.782.   Because we find that Canada has not demonstrated the existence of the measure, we do  not 
consider it necessary to separately examine whether the alleged measure is WTO -consistent.  
8  CONCLUSIONS AND RECOMMENDATION  
8.1.  For the reasons set out in this Report, we conclude as follows:  
a. The USDOC acted inconsistently with Article 14(d) of the SCM Agre ement by improperly 
rejecting the proposed private stumpage and log prices in Ontario as a valid stumpage 
benchmark to determine the adequacy of remuneration for Crown timber provided to the 
respondent companies by the province.  
 
1546 In reaching this conclusion we note that a measure has been found to be ongoing conduct in 
three  WTO cases, US – Continued Zeroing , US – Orange Juice (Brazil) , and US – Supercalendered  Paper . We 
consider that the present case is distinguishable from the  facts in all of these three  disputes. In both US – 
Continued Zeroing  and in US – Orange Juice (Brazil) the issue was continued use of the same "zeroing 
methodology". Here, however, Canada has not shown the existence of the same methodology. In particular, as 
discussed above, the specific benchmark used by the USDOC differs across the determinations relied u pon by 
Canada. In addition, in US – Orange Juice (Brazil) the panel concluded that Brazil had established the existence 
of the USDOC's  continued use of zeroing procedures as a "measure" in the form of "ongoing conduct" under 
the orange juice anti -dumping d uty order. In support of this view, the panel relied on the following evidence 
(a) a computer programme used by the USDOC that was instructed to use zeroing; (b)  evidence from the 
USDOC's  determination where it stated that US domestic law defines "dumping margin"  as the "amount by 
which the normal value exceeds the export price or constructed export price of the subject merchandise", and 
that outside the context of anti -dumping investigations involving the W -W methodology, the USDOC interprets 
this statutor y definition to mean that a dumping margin exists only when normal value is greater than the 
export price of constructed export price. (Panel Report, US – Orange Juice (Brazil) , paras.  7.191 -7.192).  Here, 
however, Canada does not show that the USDOC interp rets the statutory obligation to use an in -country 
benchmark to mean that whenever it assesses the adequacy of remuneration of standing timber provided by 
the Canadian provinces of Alberta, Ontario, or Québec it will use a benchmark based on private transa ctions 
from the maritime provinces. As regards the panel and Appellate  Body report in US – Supercalendered Paper , 
as noted in fn 1526 above, unlike the present case , the panel found that the substance of the questions and 
the USDOC's  conduct remained the same across the relevant determinations. Here, however, we consider that 
the USDOC's  conduct is not the same, and as noted above, is driven by (a)  the requirement to  use a 
benchmark based on transactions in the country of provision; and (b)  the underlying facts and circumstances 
of the case.  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  b. The USDOC acted inconsisten tly with Article 14(d) of the SCM Agreement by improperly 
rejecting the proposed BCTS auction prices in British Columbia as a valid stumpage 
benchmark to determine the adequacy of remuneration for Crown timber provided to the 
respondent companies by the pr ovince.  
c. The USDOC acted inconsistently with Article 14(d) of the SCM Agreement by improperly 
rejecting the proposed auction stumpage prices in Québec as a valid stumpage benchmark 
to determine the adequacy of remuneration for Crown timber provided to the r espondent 
companies by the province.  
d. The USDOC acted inconsistently with Article 14(d) of the SCM Agreement by improperly 
rejecting the proposed TDA log prices in Alberta as a valid stumpage benchmark to 
determine the adequacy of remuneration for Crown tim ber provided to the respondent 
companies by the province.  
e. The USDOC acted inconsistently with Article 14(d) of the SCM Agreement by erroneously 
finding that the Nova Scotia benchmark price reasonably reflected the prevailing market 
conditions in Alberta, O ntario, and Québec, and by failing to make the necessary 
adjustments to the Nova Scotia benchmark price, such that the benchmark price related 
or referred to the prevailing market conditions in the market where the good was provided.  
f. The USDOC acted incons istently with the chapeau  of Article 14 of the SCM Agreement by 
using the unreliable Nova Scotia survey for calculating the benchmark price to determine 
the adequacy of remuneration for Crown timber provided to respondent companies by 
Alberta, Ontario, and  Québec.  
g. The USDOC acted inconsistently with Article 14(d) of the SCM Agreement by failing to 
consider the full remuneration paid by respondent companies in Alberta, Ontario, Québec, 
and New Brunswick in determining the adequacy of remuneration for Crown t imber 
provided to the respondent companies by these provinces.  
h. With respect to Canada's claims under Article 14(d) of the SCM Agreement concerning the 
USDOC 's use of the Washington State log price benchmark for determining the adequacy 
of remuneration for Crown timber provided by British Columbia:  
i. The USDOC acted inconsistently with Article 14(d) of the SCM Agreement because it 
failed to adjust its benchmark on account of the (1) conversion factors used in 
British  Columbia, (2) utility -grade and beetle -killed logs in the harvest of the 
Canadian  respondents.  
ii. The USDOC acted inconsistently with Article 14(d) of the SCM Agreement because it 
did not have proper basis to conclude that stand -as-a-whole pricing was not a 
prevailing market condition in British Colum bia, and thus had no basis to not take this 
condition into account when adjusting its benchmark to reflect the prevailing market 
conditions in British Columbia.  
iii. Canada has not established that the Washington State log price benchmark was per se 
inconsisten t with Article 14(d), i.e. irrespective of adjustments to the benchmark, 
because of the differences in market conditions between Washington State and 
British  Columbia.  
iv. Canada has not established that the USDOC acted inconsistently with Article 14(d) of 
the SCM Agreement because it did not adjust its benchmark on account of the higher 
transportation costs incurred by the Canadian respondents, compared to producers in 
eastside Washington to bring their lumber to their primary US markets.  
i. The USDOC acted incon sistently with Article 14(d) of the SCM Agreement by improperly 
setting -to-zero the results of certain comparisons between the prices of examined 
transactions and the benchmark price in determining the adequacy of remuneration for 
Crown timber provided to respondent companies by New Brunswick and British Columbia.   WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  j. The USDOC acted inconsistently with  Article 1.1(a)(1)(iv) of the SCM Agreement  by 
determining that  the export -permitting process for British Columbia logs was a financial 
contribution in the form  of government direction or entrustment to provide goods.  
k. The USDOC acted inconsistently with Article 1.1(a)(1)(i) of the SCM Agreement by 
characterizing the reimbursements provided by New Brunswick to JDIL, and by Québec to 
Resolute, as financial contribu tions in the form of grants. Consequently, the 
USDOC's  benefit findings in respect of these reimbursements were inconsistent with 
Article  1.1(b) of the SCM Agreement.  
l. The USDOC acted inconsistently with Articles 1.1(b) and 14(d) of the SCM Agreement by 
using a benchmark that did not relate to the prevailing market conditions within the market 
where BC Hydro purchased biomass electricity from West Fraser and Tolko, and therefore 
incorrectly determined if a benefit was conferred. We decline  to rule on Canada 's claim 
that the USDOC improperly rejected the alternative benchmarks submitted by the 
interested parties as Canada has failed to make a prima facie case in that regard.  
m. The USDOC acted inconsistently with Article 1.1(b) of the SCM Agreement with re spect to 
the turn -down payments that BC Hydro made to Tolko by failing to assess whether a 
benefit was conferred consistently with Article  1.1(b). The USDOC acted inconsistently 
with the first sentence of Article  14(d) in that it failed to assess whether t he purchase of 
goods was made for more than adequate remuneration.  
n. The USDOC acted inconsistently with Articles 1.1(b) and 14(d) of the SCM Agreement by 
using a benchmark that did not relate to the prevailing market conditions within the market 
where Hydro -Québec purchased biomass electricity from Resolute and therefore 
incorrectly determined if a benefit was conferred.  
o. The USDOC acted inconsistently with Articles 1.1(b) and 14(d) of the SCM Agreement by 
improperly rejecting the Merrimack Study as a benchma rk to assess if 
Hydro -Québec's  purchases of electricity from Resolute conferred a benefit.  
p. The USDOC erred by characterising the LIREPP as a financial contribution to Irving through 
NB Power in the form of revenue foregone, rather than a purchase of goods consistent 
with Article 1.1(a)(1)(iii), and as a result, failed to properly assess the alleged benefit to 
the Irving Group in accordance with Article 1.1(b) and the first sentence of Article 14(d) 
of the SCM Agreement.  
q. Canada has not established that the U SDOC acted inconsistently with Articles 2.1(a) 
and (b) of the SCM Agreement in concluding that the ACCA  for Class 29 assets was de jure 
specific.  
r. Canada has not demonstrated the existence of a "Maritimes Stumpage Benchmark" as a 
measure of present and continued application, or as ongoing conduct, and therefore we 
do not need to address Canada's claims under Articles 1.1(b) and 14(d) of the 
SCM Agreement challenging the Maritimes Stumpage Benchmark.  
8.2.  We exercise judicial economy with respect to the follow ing claims:  
a. Canada's claim that the USDOC acted inconsistently with Articles 1.1(b), 19.3, and 19.4 
of the SCM Agreement and Article VI:3 of the GATT 1994 by improperly setting -to-zero 
the results of certain comparisons between the prices of examined tran sactions and the 
benchmark price, in determining the adequacy of remuneration for Crown timber provided 
to respondent companies by New Brunswick and British Columbia.  
b. Canada's claim that the USDOC acted inconsistently with Article 19.4 of the 
SCM Agreement  and Article VI:3 of the GATT 1994 by relying on the unreliable Nova Scotia 
survey for calculating the benchmark price to determine the adequacy of remuneration for 
Crown timber provided to respondent companies by Alberta, Ontario, and Québec.  WT/DS533/ R 
BCI deleted, as indicated [[***]]  
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  c. Canada's cl aims under Articles 11.2 and 11.3 of the SCM Agreement regarding the 
USDOC's initiation of an investigation against the export -permitting process for 
British  Columbia logs, in light of the finding set out in paragraph 8.1(j) above.  
d. Canada's claims under Ar ticles 10, 19.1, 19.3, and 19.4 of the SCM Agreement and 
Article  VI:3 of the GATT 1994 concerning the USDOC's attribution of certain alleged 
subsidies to the production of softwood lumber products, and therefore the 
USDOC's  failure to ascertain the precise  amount of subsidies attributable to the product 
under investigation.  
8.3.  For the procedural reasons set out in this Report, we decline to rule on Canada 's claim under 
Article 14(d) of the SCM Agreement in respect of the USDOC 's use of Irving's purchases of 
Nova Scotia private timber as a stumpage benchmark for determining the adequacy of remuneration 
for Crown timber provided by New Brunswick. Considering that Canada did not properly make out 
that claim, we have no basis to conclude that the USDOC was under an  obligation to consider using, 
as a starting point, in its benefit analysis a stumpage benchmark from within New Brunswick. We, 
therefore, have no basis, and decline to rule on Canada's claim under Article 14(d) that the USDOC 
improperly rejected the propo sed stumpage benchmark in New Brunswick to determine the 
adequacy of remuneration for Crown timber provided to the respondent companies by that province.  
8.4.  For the procedural reasons set out in this Report, we also decline to rule on Canada's claims 
under A rticles 19.3 and 19.4 of the SCM Agreement concerning certain reimbursements related to 
the respondent companies' obligations to perform silviculture provided by New Brunswick to JDIL, 
and by Québec to Resolute.  
8.5.  Under Article 3.8 of the DSU, in cases where  there is an infringement of the obligations 
assumed under a covered agreement, the action is considered prima facie  to constitute a case of 
nullification or impairment. We conclude that, to the extent that the measures at issue are 
inconsistent with SCM A greement, they have nullified or impaired benefits accruing to Canada under 
that agreement.  
8.6.  Pursuant to Article 19.1 of the DSU, we recommend that the United States bring its measure 
into conformity with its obligations under SCM Agreement.  
 
 
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