. /.WORLD TRADE
ORGANIZATIONWT/DS236/1
G/L/468G/SCM/D44/1
27 August 2001
(01-4101)
Original:  English
UNITED STATES – PRELIMINARY DETERMINATIONS
WITH RESPECT TO CERTAIN SOFTWOOD LUMBER FROM CANADA
Request for Consultations by Canada
The following communication, dated 21 August 2001, from the Permanent Mission of
Canada to the Permanent Mission of the United States and to the Chairman of the Dispute Settlement
Body, is circulated in accordance with Article 4.4 of the DSU.
_______________
My authorities have asked me to request consultations with the Government of the
United States pursuant to Article 4 of the Understanding on Rules and Procedures Governing the
Settlement of Disputes (the DSU), Article XXII  of the General Agreement on Tariffs and Trade 1994
(GATT 1994), and Article 30 of the Agreement on Subsidies and Countervailing Measures (the SCM
Agreement), concerning the preliminary countervailing duty determination and the preliminary
critical circumstances determination made by the US Department of Commerce on 9 August 2001,
with respect to certain softwood lumber from Canada.
Regarding the preliminary countervailing duty determination, Canada considers this
determination to be inconsistent with US obligations under Articles 1, 2, 10, 14, 17.1, 17.5, 19.4, and32.1 of the SCM Agreement and Article VI:3 of GATT 1994.  Such inconsistencies include the
determination's treatment of stumpage as a "financial contribution", its finding that stumpage is
"specific",  its presumption that an alleged benefit from stumpage passes through an arm's-length
transaction to a downstream recipient , its measurement of the "adequacy of remuneration" by
reference to conditions in another country rather than prevailing market conditions in Canada, and itsinflation of the subsidy found by calculating a "weighted average country-wide rate" based upon only
a portion of Canadian exports of softwood lumber to the United States .
With respect to the preliminary critical circ umstances determination, Canada considers this
determination to be inconsistent with Articles 17.1, 17.3, 17.4, 19.4 and 20.6 of the SCM Agreementbecause it is based upon an alleged export subsidy that was found to be de minimis , purports to apply
a rate that is in excess of the rate determined for subsidies found to have been bestowed inconsistently
with GATT 1994 and the SCM Agreement, was made without the requisite finding of injury caused
by massive imports of softwood lumber benefiting from this alleged export subsidy, and was based on
a distorted finding of "massive imports".  Furthermore, there is no basis in the SCM Agreement forthe application of provisional measures pursuant to such a determination.
Canada also requests consultations with the Government of the United Sates concerning
certain US measures that, inter alia , fail to provide for company-specific expedited reviews or
administrative reviews in countervailing duty cases in which the investigation was conducted on anaggregate or country-wide basis, and that mandate that a single country-wide duty rate calculated inWT/DS236/1
G/L/468
G/SCM/D44/1
Page 2
an administrative review supersedes all individual rates previously determined in the countervailing
duty proceeding.
The US measures at issue with regard to expedited and administrative reviews are
section 777A(e)(2)(A) and (B) of the Tariff Act of 1930, US Department of Commerce regulations at
19 C.F.R. § 351.214(k) and § 351.213(b) and (k), and the operation  of these measures in the ongoing
US countervailing duty proceeding against certai n softwood lumber products from Canada.  Canada
considers these measures to be inconsistent with US obligations under Article VI:3 of the GATT 1994
and Articles 10, 19.3, 19.4, 21.1, 21.2 and 32.1 of the SCM Agreement. Canada also considers that the
United States has failed to ensure that its laws and regulations are in conformity with its WTOobligations as required by Article 32.5 of the SCM Agreement and Article XVI:4 of the WTO
Agreement.
Given the immediate and significant trade impact of the affirmative preliminary
countervailing duty and critical circumstances determinations, Canada requests urgent consultationspursuant to Article 4.8 of the DSU.  These measures, which have effect as of 19 May 2001, affect
approximately $CDN 26 million in trade per day in softwood lumber from Canada, already
representing a cost of nearly $CDN one half billion. Furthermore, this cost to the Canadian softwood
lumber industry is increasing at over $CDN 5 million per day.  These measures have already resulted
in the closure of a number of lumber mills, with more closures being imminent and in significantlayoffs of workers in mills still operating.
I look forward to receiving your reply to this  request and, in accordance with Article 4.8 of
the DSU, to selecting a mutually acceptable date for holding consultations within 10 days from the
date of receipt of this request.  Canada welcomes any suggestions that the United States may wish tomake concerning dates on which the consultations could take place.
__________