WORLD TRADE  
ORGANIZATION  WT/DS264/AB/R 
11 August 2004 
 (04-3385) 
 Original:   English 
   
 
     
 
    
 
    
UNITED STATES – FINAL DUMPING DETERMINATION ON  
SOFTWOOD LUMBER FROM CANADA  
 
   
AB-2004-2 
 
 
    
 
     
Report of the Appellate Body  WT/DS264/AB/R 
 Page i 
 
 
 
I. Introduction................................................................................................................... ..............1  
II. Arguments of the Participants and the Third Participants ..........................................................5  
A. Claim of Error by the United States – Appellant........................................................... 5 
B. Arguments of Canada – Appellee .................................................................................. 9 
C. Claims of Error by Canada – Appellant ...................................................................... 11 
1. Allocation of Financial Expenses for Abitibi .................................................11  
2. Calculation of By-Produc t Revenue for Tembec............................................13  
D. Arguments of the United States – Appellee.................................................................. 15 
1. Allocation of Financial Expenses for Abitibi .................................................15  
2. Calculation of By-Produc t Revenue for Tembec............................................17  
E. Arguments of the Third Participants............................................................................ 19 
1. European Communities...................................................................................19  
2. Japan ...............................................................................................................21  
III. Issues Raised in this Appeal ................................................................................................... ..22 
IV. Article 2.4.2 of the Anti-Dumping Agreement – The Practice of Zeroing ................................23  
A. Introduction ................................................................................................................. 23 
B. The Panel's Findings ................................................................................................... 24 
C. Interpretation of Article 2.4.2 ...................................................................................... 28 
1. Introduction.....................................................................................................28  
2. "All Comparable Export Transac tions" in Article 2.4.2 .................................31  
3. "Margins of Dumping" in Article 2.4.2 ..........................................................32  
4. Other Methodologies as Context ....................................................................36  
5. Historical Background of Article 2.4.2...........................................................37  
6. Relevance of Appellate Body Report in  EC – Bed Linen ..............................38  
7. Article 17.6(ii) of the  Anti-Dumping Agreement ...........................................39  
8. Conclusion ......................................................................................................40  
V. Allocation of Financial Expenses for Abitibi ...........................................................................40  
A. Introduction ................................................................................................................. 40 
1. Factual Background ........................................................................................40  
2. Canada's Appeal..............................................................................................42  
B. Analysis....................................................................................................................... .44 
1. "Consider All Available Evidence on the Proper Allocation of Costs" 
in Article 2.2.1.1 .............................................................................................44  
2. Consequential Claims .....................................................................................49  WT/DS264/AB/R 
Page ii  
 
VI.
 Calculation of By-Produc t Revenue for Tembec......................................................................50  
A. Introduction ................................................................................................................. 50 
1. Background.....................................................................................................50  
2. The Panel's Findings.......................................................................................51  
3. Canada's Appeal..............................................................................................53  
B. Analysis....................................................................................................................... .54 
1. The United States' Argument That the Issue Raised by Canada Is an 
Issue of Fact....................................................................................................54  
2. Differential Treatment of Tembec and West Fraser .......................................56  
3. The "Requirement" to Apply a Methodo logy Consistent with "Normal" 
Practice ...........................................................................................................59  
4. Conclusion ......................................................................................................60  
5. Consequential Claims .....................................................................................60  
VII. Findings and Conclusions....................................................................................................... ..61 
 
ANNEX 1: Notification of an Appeal by the United States under paragraph 4 of  
Article 16 of the Understanding on Rules and Procedures Governing  
the Settlement of Disputes  
  WT/DS264/AB/R 
 Page iii 
 
 
TABLE OF CASES CITED IN THIS REPORT 
 
Short Title Full Case Title and Citation 
Chile – Price Band System  Appellate Body Report, Chile – Price Band System and Safeguard Measures 
Relating to Certain Agricultural Products , WT/DS207/AB/R, adopted 
23 October 2002 
EC – Bed Linen  Appellate Body Report, European Communities – Anti-Dumping Duties on Imports 
of Cotton-Type Bed Linen from India , WT/DS141/AB/R, adopted 12 March 2001, 
DSR 2001:V, 2049 
EC – Hormones  Appellate Body Report, EC Measures Concerning Meat and Meat Products 
(Hormones) , WT/DS26/AB/R, WT/DS48/AB/R, adopted 13 February 1998, 
DSR 1998:I, 135 
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, 97  
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  
US – FSC  Appellate Body Report, United States – Tax Treatment for "Foreign Sales 
Corporations" , WT/DS108/AB/R, adopted 20 March 2000, DSR 2000:III, 1619 
US – Hot-Rolled Steel  Appellate Body Report, United States – Anti-Dumping Measures on Certain Hot-
Rolled Steel Products from Japan , WT/DS184/AB/R, adopted 23 August 2001, 
DSR 2001:X, 4697 
US – Shrimp  
(Article 21.5 – Malaysia)  Appellate Body Report, United States – Import Prohibition of Certain Shrimp and 
Shrimp Products – Recourse to Article 21.5 of the DSU by Malaysia , 
WT/DS58/AB/RW, adopted 21 November 2001, DSR 2001:XIII, 6481 
US – Softwood Lumber V  Panel Report, United States – Final Dumping Determination on Softwood Lumber 
from Canada , WT/DS264/R, 13 April 2004 
US – Softwood Lumber VI  Panel Report, United States – Investigation of the International Trade Commission 
in Softwood Lumber from Canada , WT/DS277/R, adopted 26 April 2004 
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, 717 
 WT/DS264/AB/R 
Page iv  
 
 
TABLE OF ABBREVIATIONS USED IN THIS REPORT 
 
Abbreviation Description 
Abitibi  Abitibi-Consolidated Inc., one of the Canadian producers and exporters of 
softwood lumber subject to investigation  
Anti-Dumping Agreement  Agreement on Implementation of Article VI  of the General Agreement on Tariffs 
and Trade 1994   
COGS Cost of Goods Sold 
DSB Dispute Settlement Body 
DSU Understanding on Rules and Procedures Governing the Settlement of Disputes   
IDM USDOC's "Issues and Decision Memorandum for the Antidumping Duty 
Investigation of Certain Softwood Lumber Products from Canada" of 21 March 
2002 (Exhibit CDA-2 submitted by Canada to the Panel)  
Tembec Tembec Inc., one of the Canadian pr oducers and exporters of softwood lumber 
subject to investigation 
GATT 1994 General Agreement on Tariffs and Trade 1994  
USDOC United States Department of Commerce 
West Fraser West Fraser Inc., one of the Ca nadian producers and exporters of softwood 
lumber subject to investigation 
Working Procedures Working Procedures for Appellate Review , WT/AB/WP/7, 1 May 2003 
WTO World Trade Organization 
WTO Agreement Marrakesh Agreement Esta blishing the World Trade Organization  
  WT/DS264/AB/R 
 Page 1 
 
 
WORLD TRADE ORGANIZATION  
APPELLATE BODY 
 
 
United States – Final Dumping 
Determination on Softwood Lumber  from Canada  
 
United States,  Appellant/Appellee  
Canada,  Appellant /Appellee 
 
European Communities, Third Participant   
India, Third Participant   
Japan, Third Participant    AB-2004-2 
  Present:  
 Ganesan, Presiding Member 
 Baptista, Member  Janow, Member  
  I. Introduction 
1. The United States and Canada appeal certain issu es of law and legal interpretations in the 
Panel Report  United States – Final Dumping Determ ination on Softwood Lumber from Canada  (the 
"Panel Report").
 1  The Panel was established to consider  a complaint by Canada concerning anti-
dumping duties imposed by the United States on imports of certain softwood lumber products ("softwood lumber") from Canada.  Before the Panel,  Canada challenged a number of aspects of the 
Final Determination by the United States Depart ment of Commerce ("USDOC") that led to the 
imposition of anti-dumping duties.   
2. On 23 April 2001, USDOC initiated an anti-dumpi ng investigation of imports of softwood 
lumber from Canada.
 2
   Due to the large number of exporters  of softwood lumber, USDOC limited its 
investigation to the six largest Canadian producer s and exporters of that product, namely, Abitibi, 
Canfor, Slocan, Tembec, West Fraser, and Weyerhaeuser Canada.3  On 2 April 2002, USDOC 
published, in the United States Federal Regist er, a final anti-dumping duty order, which was 
                                                      
1WT/DS264/R, 13 April 2004. 
2Panel Report, para. 2.2. 
3Ibid.   WT/DS264/AB/R 
Page 2  
 
subsequently amended on 22 May 2002.
4  This order imposed anti-dumping duties on imports of 
softwood lumber from Canada, ranging from 2.18 per cent to 12.44 per cent.  5  The final anti-dumping 
order contained a number of product exclusions.6  The factual aspects of this dispute are set out in 
greater detail in paragraphs 2.1 to 2.6 of the Panel Report.  
3. The Panel considered claims by Canada that , in imposing anti-dumping duties on softwood 
lumber from Canada, the United States acted inconsiste ntly with Articles 2, 2.1, 2.2, 2.2.1, 2.2.1.1, 
2.2.2, 2.4, 2.4.2, 3, 5, 5.2, 5.3, 5.8, 6.10, 9, 9.3, and 18.1 of the  Agreement on Implementation of 
Article VI of the General Agreem ent on Tariffs and Trade 1994  (the " Anti-Dumping Agreement "), as 
well as with Articles VI:I and VI:2 of the  General Agreement on Tariffs and Trade 1994  (the 
"GATT 1994").  Canada asked the Panel to recommend that the Dispute Settlement Body (the "DSB") 
request the United States to bring its measure into conformity with its obligations under the 
Marrakesh Agreement Establishing  the World Trade Organization  (the " WTO Agreement "), to revoke 
the anti-dumping order in respect of softwood lumb er from Canada, and to return the cash deposits 
collected pursuant to the investigation and determination of dumping.7  
4. The Panel Report was circulated to Members of the World Trade Organization (the "WTO") 
on 13 April 2004.  In its Report, the Panel conclude d that the United States had acted inconsistently 
with: 
Article 2.4.2 of the [ Anti-Dumping ] Agreement in 
determining the existence of margins of dumping on the basis of a methodology incorporating the practice of "zeroing"[.]
8 
                                                      
4USDOC's final anti-dumping determination was published in the United States Federal Register as 
"Notice of Final Determination of Sales at Less Than Fair Value: Certain Softwood Lumber Products from 
Canada" (the "Final Determination"), United States Federal Register, 2 April 2002 (volume 67, number 63), 
p. 15539 (Exhibit CDA-1 submitted by Canada to the Panel);  and as "Notice of Amended Final Determination 
of Sales at Less Than Fair Value and Antidumping Duty Order: Certain Softwood Lumber Products from 
Canada", United States Federal Register, 22 May 2002 (volume 67, number 99), p. 36068 (Exhibit CDA-3 
submitted by Canada to the Panel).  Both these Notices make reference to a document entitled "Issues and Decision Memorandum for the Final Determination in th e Antidumping Duty Investigation of Certain Softwood 
Lumber Products from Canada" ("IDM") (Exhibit CDA-2 submitted by Canada to the Panel).  
 
5Panel Report, para. 2.6. 
 6Ibid., paras. 2.6 and 7.139. 
 7Ibid., para. 3.1(f). 
8Ibid., para. 8.1(a)(i).   WT/DS264/AB/R 
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5. The Panel further concluded that the United States had  not  acted inconsistently with: 
(i) Article 5.2 of the [ Anti-Dumping ] Agreement  in 
determining that the application contained such information as is required by Article 5.2;  
(ii)  Article 5.3 of the [ Anti-Dumping ] Agreement
  by 
determining that there was sufficient evidence of dumping to justify the initiation of the investigation; 
(iii)  Article 5.8 of the [ Anti-Dumping ] Agreement
  by not 
rejecting the application prior to initiation of the investigation, or by not te rminating the investigation, 
due to the alleged insuffici ency of the evidence on 
dumping; 
(iv)  Article 2.6 of the [ Anti-Dumping ] Agreement
  by 
determining there to be only a single like product and product under consideration;  
(v)  Article 2.4 of the [ Anti-Dumping ] Agreement
  by not 
granting an adjustment for differences in physical characteristics (differences in  dimensions), as requested 
by some respondents; 
(vi)  Articles 2.2, 2.2.1, 2. 2.1.1, 2.2.2 and 2.4 of the [ Anti-
Dumping ] Agreement
  in its calculation of the amounts 
for financial expense for softwood lumber in the case of Abitibi; 
(vii)  Articles 2.2, 2.2.1, 2. 2.1.1, 2.2.2 and 2.4 of the [ Anti-
Dumping ] Agreement
  in its calculation of the amounts 
for general and administrative costs for softwood lumber in the case of Tembec; 
(viii)  Articles 2.2, 2.2.1, 2.2.1.1, 2.2.2 and 2.4 of the [ Anti-
Dumping ] Agreement
  in its calculation of the amounts 
for general and administrative costs for softwood 
lumber in the case of Weyerhaeuser; 
(ix)  Articles 2.2, 2.2.1,  2.2.1.1 and 2.4 of the [ Anti-
Dumping ] Agreement  in its calculation of the amounts 
for by-product revenue from the sale of wood chips as 
offsets for Tembec and West Fraser;  
(x)  Article 2.4 of the [ Anti-Dumping ] Agreement  by not 
granting Slocan an adjustment for the net revenue earned on its trading of softwood lumber futures contracts, or Articles 2.2, 2.2.1, 2.2.1.1, and 2.2.2 of the 
Anti-Dumping Agreement
  by not taking this net 
revenue into account when determining the constructed (normal) value; WT/DS264/AB/R 
Page 4  
 
(xi)  Articles 1 and 18.1 of the [ Anti-Dumping ] Agreement , 
and Article VI of GATT 1994  with respect to Canada's 
claims referred to [in items (i)–(iv) above];  and 
(xii) Articles 1, 9.3 and 18.1 of the [ Anti-Dumping ] 
Agreement , and Article VI of GATT 1994 with respect 
to Canada's claims referred to [in items (v)–(x) 
above].
9 
6. The Panel found that, to the extent the Unite d States had acted inconsistently with the 
provisions of the  Anti-Dumping Agreement , it had nullified or impaired benefits accruing to Canada 
under that Agreement.  10  The Panel recommended that the DSB request the United States to bring its 
measure into conformity with the  Anti-Dumping Agreement , but denied Canada's request to make 
more specific suggestions regarding implementation.11
  
7. On 13 May 2004, the United States notified the DSB, pursuant to paragraph 4 of Article 16 of 
the  Understanding on Rules and Procedures Governing the Settlement of Disputes  (the "DSU"), of 
its intention to appeal certain issues of la w covered in the Panel Report and certain legal 
interpretations developed by the Pa nel, and filed a Notice of Appeal12 pursuant to Rule 20 of the 
Working Procedures for Appellate Review  (the " Working Procedures ").  On 24 May 2004, the United 
States filed its appellant's submission.  13  On 28 May 2004, Canada filed an other appellant's 
submission.  14  On 7 June 2004, Canada and the United States each filed an appellee's submission.  15  
On the same day, the European  Communities and Japan each filed a third participant's submission.  16
  
On the same day, India notified the Appellate Body S ecretariat of its intention to make a statement at 
the oral hearing as a third participant.17  
                                                      
9Panel Report, paras. 8.1(b)(i)–(xii).  The Panel deci ded to exercise judicial economy and not to rule on 
Canada's claim under Article 2.4 of the  Anti-Dumping Agreement  in respect of zeroing.  The Panel also 
exercised judicial economy in not ruling on Canada's claims under Articles 1, 9.3, and 18.1 of the Anti-Dumping 
Agreement  and Article VI of the GATT 1994 with respect to determining the existence of margins of dumping 
on the basis of a methodology incorporating the pr actice of "zeroing". (Panel Report, para. 8.1(c)) 
10Panel Report, para. 8.2. 
11Ibid., paras. 8.3–8.6.  
12WT/DS264/6, 18 May 2004, attached as Annex 1 to this Report.   
13Pursuant to Rule 21(1) of the  Working Procedures .  The United States appeals the Panel's finding 
that the United States acted inconsistently with Article 2.4.2.   
14Pursuant to Rule 23(1) of the  Working Procedures .  In its other appellant's submission, Canada 
challenges the Panel's findings related to the allocation of financial expenses for Abitibi and the calculation of 
by-product revenue for Tembec.   
15Pursuant to Rules 22(1) and 23(3) of the  Working Procedures . 
16Pursuant to Rule 24(1) of the  Working Procedures . 
17Pursuant to Rule 24(2) of the  Working Procedures .   WT/DS264/AB/R 
 Page 5 
 
 
8. The oral hearing was held on 22 June 2004.  Th e participants and third participants presented 
oral arguments and responded to questions put to them by the Members of the Division hearing the 
appeal.  
9. During the oral hearing, Canada requested author ization to file the preliminary results of an 
anti-dumping duty administrative review, concerni ng softwood lumber from Canada, conducted by 
USDOC and, according to Canada, published in the United States Federal Re gister on 14 June 2004, 
as well as a memorandum of USDOC of 2 June 2004.18  Canada argued that these documents "directly 
contradict the United States' assertions concerning its own practice and put into question the Panel's 
acceptance of the United States' position on the va luation of inter-divisional transfers of by-
products".19  The United States objected to this requ est, arguing that the introduction of these 
materials would be inconsistent with Article 17.5(ii) of the  Anti-Dumping Agreement  and with the 
Working Procedures .  The United States submitted that these materials constituted new factual 
evidence;  concerned a preliminary determination wh ich did not have a "separate legal status";  and 
were "not relevant" to USDOC's practice at the time  when the determinations subject to the present 
appeal were made.20  In response to the United States' objec tions, Canada argued that the documents it 
wished to introduce constituted "additional proof" that  there was no consistent practice on the part of 
USDOC and, therefore, the documents "pertained di rectly to a legal point raised by the Panel".21  The 
Division agreed that the materials at issue constitute d new factual evidence and, therefore, pursuant to 
Article 17.6 of the DSU, fell outside the scope of th e appeal.  Accordingly, the Division informed the 
participants in the course of the oral hearing that it denied Canada's request. 
II. Arguments of the Participants  and the Third Participants 
A. Claim of Error by the United States – Appellant 
10. The United States challenges the Panel's finding that the United States acted inconsistently 
with Article 2.4.2 of the  Anti-Dumping Agreement   in determining the existence of margins of 
dumping on the basis of a methodology incorporating the practice of zeroing (hereinafter "zeroing").  The United States argues that the Panel committed the following specific errors in its interpretation of 
Article 2.4.2. 
                                                     
 
18Canada noted that these documents only became available after the filing of Canada's other 
appellant's submission.  
19Canada's statement at the oral hearing.  Canada stated that it made this request pursuant to Rule 16 of 
the  Working Procedures . 
20United States' statement at the oral hearing.  
21Canada's statement at the oral hearing.   WT/DS264/AB/R 
Page 6  
 
11. First, according to the United States, Article 2.4.2 provides no guidance as to how results of 
multiple comparisons are to be aggregated in order to calculate an overall margin of dumping for the 
product under consideration.  The United States submits  that, in fact, "Article 2.4.2 itself does not 
require that the results of those multiple comparisons be aggregated at all."
22 
12. The United States contends that the Panel "acknow ledged" that a permissible interpretation of 
the term "margins of dumping" in Article 2.4.2 "is that it refers to the results of comparing averages 
'for each category of product/transaction compared'."23 Accordingly, "the only comparison results 
identified in Article 2.4.2 are the results (' margins of dumping') derived from the multiple 
comparisons of the various groups of comparable transactions."24  The United States concludes that 
"[t]here is, therefore, no basis to read into Article 2.4.2 a requirement for an  additional  result derived 
from aggregating those margins of dumping."25  In other words, Article 2.4.2 "simply does not 
address the issue of aggregating the results of multiple comparisons."26  According to the United 
States, the term "margins of dumping" in Article 2.4. 2 refers to the results of "comparisons in which 
the normal value  exceeds  the export price".27  Comparison results in which the weighted average 
normal value is  less than  the weighted average export price are, "by definition, not margins of 
dumping."28  The United States concludes from this that, even if   "Article 2.4.2 could be read to 
implicitly require an aggregation, the only candidates for inclusion in that aggregation, by the Article's 
own terms, are  margins of dumping. "29 
13. The United States asserts, further, that, in fi nding that Article 2.4.2 addresses the issue of 
aggregating the results of multiple comparisons, the Panel failed to apply the standard of review set 
out in Article 17.6(ii) of the  Anti-Dumping Agreement , which "requires panels to recognize that a 
given provision of the [ Anti-Dumping ] Agreement  may be susceptible to multiple permissible 
interpretations, and to find a Memb er's actions consistent with its obligations if those actions are 
based on one of those permissible interpretations."30   
                                                      
22United States' appellant's submission, para. 28. 
23Ibid., para. 37. 
24Ibid. 
25Ibid. (original emphasis) 
26Ibid., para. 28. 
27Ibid., para. 23. (emphasis added) 
28Ibid., para. 39. (original emphasis)  The United States, refers in this regard, to the description of 
dumping contained in Article 2.1 of the Anti-Dumping Agreement . 
29Ibid. (emphasis added) 
30Ibid., para. 31.   WT/DS264/AB/R 
 Page 7 
 
 
14. Secondly, the United States contends that th e Panel's finding that Article 2.4.2 imposes an 
obligation to apply the results of certain comparisons as "offsets"31 to the results of other comparisons 
is inconsistent with the Panel's earlier finding that multiple comparisons are permissible.  A 
requirement to offset the amount of dumping found  on certain comparisons would deprive the term 
"comparable" of any meaning and would require  an investigating authority "to compare non-
comparable transactions."32  Moreover, according to the United Stat es, an offset requirement would be 
"equivalent to a requirement that all transactions, regardless of comparability, be incorporated into a 
single average-to-average comparison."33   
15. Thirdly, the United States contends that the Panel's interpretation is not supported by the 
context of Article 2.4.2.  Thus, although the Pane l appeared to agree that average-to-average and 
transaction-to-transaction comparisons should be subject to the same rule with respect to aggregation, 
the text on which the Panel relied in finding a rule  applicable to the average-to-average comparison 
methodology—namely, the phrase "all comparable e xport transactions"—has no textual equivalent for 
the second methodology.  According to the United States, "[t]here is no rational basis for an 
interpretation that assumes that Members intended to address aggregation of margins (in particular, 
offsets), but then only did so with respect to one out of three permissible methodologies."34  T h e  
United States suggests that "[p]erhaps that explai ns why the Panel majority chose to avoid this 
argument all together."35 
16. Fourthly, the United States argues that an exam ination of the historical background of the 
Anti-Dumping Agreement  demonstrates that two practices employed by individual Contracting 
Parties to establish margins of dumping at the time of the Uruguay Round negotiations are relevant 
for the interpretation of Article 2.4.2.  The first practice consisted of making "asymmetrical"36 
comparisons, that is, comparisons between indivi dual export transactions and weighted average 
normal values.  The second relevant practice was zero ing.  At the conclusion of the negotiations, 
negotiators were able to agree only on the issue of "asymmetry".37  Thus, according to the United 
States, it would be reasonable to expect that, absent modified text, zeroing woul d continue to be found 
consistent with the  Anti-Dumping Agreement .   
                                                      
31See for instance United States' appellant's submission, para. 4. 
32Ibid., para. 22. 
33Ibid., para. 45.  
34Ibid., para. 47. 
35Ibid., para. 47. 
36Ibid., paras. 52 and 54. 
37Ibid., paras. 51, 54, 63, as well as footnote 52 to para. 52 and footnote 56 to para. 54. WT/DS264/AB/R 
Page 8  
 
17. With respect to the relevance of  the Appellate Body Report in  EC – Bed Linen , the United 
States refers to the Appellate Body Report in  Japan – Alcoholic Beverages II ,  in which the Appellate 
Body found that dispute settlement reports "are not binding, except with respect to resolving the 
particular dispute between the parties to that dispute".
38  The United States submits that, similarly, the 
findings of the Appellate Body in  EC – Bed Linen   "do[] not govern the present appeal."39  T h e  
United States explains that it was not a party to that case and observes that the United States' practice 
of zeroing was not at issue in that appeal.  In addition, the United States points out that in the  EC – 
Bed Linen  dispute, the Appellate Body was not asked to, and therefore did not, address a number of 
the arguments advanced by the United States in the pr esent case.  For example, in this dispute, both 
parties and the Panel agree that multiple comparisons are consistent with Article 2.4.2.  According to 
the United States, this finding by the Panel and "its  fundamental importance to the issue at hand ... are 
cause for giving fresh consideration to the legal i ssues and arguments presented in this dispute."40     
18. Finally, the United States requests that, in th e event the Appellate Body reaches the question 
of whether the aggregation methodology applied by th e United States is consistent with Article 2.4 of 
the  Anti-Dumping Agreement , the concept of a "fair comparison" under that provision should be 
interpreted as referring to a comparison that is ma de in accordance with the specific rules set out in 
Article 2.4.  Thus, a "fair comparison" is ensure d by making due allowance for differences that affect 
price comparability, including the level of trade,  physical characteristics as well as terms and 
conditions of sale.  According to the United States, "[t]hese parameters are the sole textual basis for 
establishing the extent of the 'fair comparison' requirement".41  By making the required adjustments, 
the United States claims that it made a "fair comparis on" in this investigation within the meaning of 
Article 2.4. 
                                                      
38United States' appellant's submission, para. 56 (quoting Appellate Body Report, Japan – Alcoholic 
Beverages II , at 108). 
39Ibid. 
40Ibid., para. 62. 
41Ibid., para. 66.  WT/DS264/AB/R 
 Page 9 
 
 
B. Arguments of Canada – Appellee  
19. Canada requests the Appellate Body to uphol d the Panel's finding that the United States' 
practice of zeroing as applied in this case was inconsistent with Article 2.4.2 of the  Anti-Dumping 
Agreement . 
20. Canada emphasizes that the Appellate Body addressed the same issue in  EC – Bed Linen  and 
found that zeroing non-dumped transactions in a cal culation to determine the existence and amount of 
dumping for the product under investigation as a whol e is inconsistent with Article 2.4.2 of the  Anti-
Dumping Agreement .  According to Canada, "[t]here is no distincti on to be drawn between  EC – Bed 
Linen  and the present dispute."42  Canada submits that, as the Appellate Body found in  EC – Bed 
Linen , although "[a]n investigating authority enjoys c onsiderable discretion in defining the scope of 
the product under consideration ... a final determination of dumping must still be based on all of the 
export sales for the product under consideration."43  Thus, the  Anti-Dumping Agreement  "does not 
permit a determination of dumping for mode ls of the product under consideration."44  In other words, 
"margins of dumping" within the meaning of Article 2.4.2 "can only mean th e margins determined for 
the product as a whole."45  Canada concludes that "[i]n view of the legal and factual similarities 
between this case and  EC – Bed Linen  ... there is no legally justifiable reason for the Appellate Body 
to arrive at a conclusion in this case that would be materially different from that in its report in that 
case."46  In support of its argument, Canada notes that "the Appellate Body h as developed a coherent 
body of case-law or jurisprudence that provides guidance to WTO panels and also gives rise to 
'legitimate expectations' as to how the Appellate Body will rule in future cases."47 
21. Canada finds contextual support for its interpretation in Article 2.4 of the  Anti-Dumping 
Agreement .  Canada argues that "zeroing should be found inconsistent with the terms of Articles 2.4 
and 2.4.2 because it 'distorts' dumping findings, a nd therefore does not permit a 'fair' comparison."48  
In this regard, Canada refers to  the Appellate Body Report in  US – Corrosion-Resistant Steel Sunset 
Review ,  in which the Appellate Body found that "zeroing produces 'an inherent bias' that 'may distort 
                                                      
42Canada's appellee's submission, para. 16. 
43Ibid., para. 17. 
44Ibid. 
45Ibid., para. 40. 
46Ibid., para. 21. 
47Ibid., para. 19. 
48Ibid., para. 25. WT/DS264/AB/R 
Page 10  
 
not only the magnitude of a dumping margin, but also a finding of the very existence of dumping'."
49  
According to Canada, "[i]gnoring certain transacti ons that demonstrate an absence of dumping cannot 
be considered fair, for it serves to  prejudge  the outcome of the required analysis of whether dumping 
exists for the product under consideration as a whole."50  Thus, Canada does not agree with the United 
States that "'fairness' refers to 'in accordance with the rules or standards' [set out in Article 2.4]."51  
Instead, "fair", as used in Article 2.4, has a broader meaning.  According to Canada, "[t]here can be no 
fair comparison when an investigating authority does not actually average all model-specific values, 
but instead disregards those values calculated in respect of non-dumped models."52  
22. Canada agrees with the Panel that there wa s no need to rely upon negotiating history to 
interpret Article 2.4.2 because of "the clear meaning of the language of Article 2.4.2."53  Moreover, 
the "historical circumstances", to which the Unite d States refers, establish nothing more than that 
zeroing was an issue during the Uruguay Round negotiations. 
23. Canada further asserts that the Panel correctly r estricted its analysis to the weighted-average 
normal value to weighted-average export price met hodology, because that is the only methodology at 
issue in this dispute.  In any event, "[e]ven if it were appropriate to cons ider the permissibility of 
zeroing in transaction-to-transaction comparisons, the transaction-to-transaction analysis does not 
support the U.S. interpretation of Article 2.4.2."54  According to Canada, "the transaction-to-
transaction methodology requires that each transaction-specific comparison of an export price and a normal value be included in the calculation of the overall margin."
55  If it did not, an investigating 
authority could "select arbitrarily" the comparisons it uses to calculate the overall margin of dumping 
and thus "vitiate" the results of the transaction-to-transaction methodology.56 
                                                      
49Canada's appellee's submission, para. 25 (quoting Appellate Body Report, US – Corrosion-Resistant 
Steel Sunset Review , para. 135). 
50Ibid. (emphasis added) 
51Ibid., para. 26 (quoting United States' appellant's submission, para. 67). 
52Ibid. (footnote omitted) 
53Ibid.,  para. 27. (footnote omitted) 
54Ibid., para. 47.  
55Ibid., para. 48. (footnote omitted) 
56Ibid.   WT/DS264/AB/R 
 Page 11 
 
 
24. Finally, Canada submits that the example provided by the United States seeking to 
demonstrate that "averaging of multiple comparisons will always be equivalent to 'comparing a single 
average normal value to a single average export price'"57 is "wrong" "as a mathematical matter".58 
C. Claims of Error by Canada – Appellant 
1. Allocation of Financial Expenses for Abitibi  
25. With respect to the allocation of financial expe nses for Abitibi, Canada argues, first, that the 
Panel erred in finding that the requirement in Artic le 2.2.1.1 to "consider all available evidence on the 
proper allocation of costs" does not require an i nvestigating authority to assess the advantages and 
disadvantages of alternative proposed cost allocation methodologies.  Canada submits that the Panel's 
interpretation implies that the investigating aut hority's obligation can be met by simply "receiving 
evidence", as opposed to undertaking "meaningful consideration of that evidence."59   
26. In Canada's view, a "proper" allocation of costs within the meaning of Article 2.2.1.1 
demands a case-by-case examination, using the appropriate methodology, on the basis of "all available evidence".  USDOC made no factual finding s as to the advantages or disadvantages of either 
of the methodologies that it was required to "consider".  In the absence of any such fact-finding, 
explanation, or reasoning, the Panel, according to Canada, had no basis on which to conclude that 
USDOC had met the requirements of Article 2.2.1.1. 
27. Secondly, Canada submits that the Panel erred in  finding that Article 2.2.1.1 does not require 
an investigating authority to c onsider evidence on the allocation of a specific cost where that 
allocation has not been historically utilized by the producer or exporter.  Canada maintains that 
Article 2.2.1.1 does not impose a strict requirement that all types of cost allocation evidence provided 
by the producer or exporter must have been histor ically utilized.  In Canada's view, the phrase in 
Article 2.2.1.1 that begins with "including" does not impose a limitation on the consideration, by the 
investigating authority, of evidence submitted by a producer.  Instead, this phrase "limits the 
circumstances under which a producer's ev idence must be given controlling weight."
60  The use of the 
word "including", according to Canada, confirms that  this clause, rather than defining evidence that 
may be excluded from consideration, "defines par ticular evidence to be given particular weight".61 
                                                      
57Canada's appellee's submission, para. 58 (quoting United States' appellant's submission, para. 43).  
58Ibid., para. 61. 
59Canada's other appellant's submission, para. 2. 
60Ibid., para. 43. 
61Ibid., para. 44. WT/DS264/AB/R 
Page 12  
 
28. Canada reads Article 2.2.1.1 as containing an "express preference"
62 for the use of allocation 
methodologies used by producers, to the extent that these methodologies have been historically 
utilized.  Canada argues that the phrase "in partic ular in relation to", in the second sentence of 
Article 2.2.1.1, identifies the cost allocations to wh ich the historic utilization requirement applies;  the 
phrase furthermore narrows the scope of the evidence that an investigating authority may refuse to 
regard as "controlling"63 on the ground that the exporter or producer did not historically utilize this 
allocation methodology.  Furthermore, in Canada's view, the historic utilization requirement does not 
apply in the present case because th e evidence at issue "relates to the allocation of a general expense 
for which there has been no historic utilization".64    
29. Thirdly, Canada takes issue with the Pane l's conclusion that an unbiased and objective 
investigating authority could ha ve allocated Abitibi's financial expenses on the basis of USDOC's 
methodology.  This conclusion, acco rding to Canada, is based on an incomplete evaluation of the 
evidence, as the Panel did not evaluate USDOC's fa ctual determinations concerning the advantages 
and disadvantages of the different cost allocation methodologies.65  Rather, the Panel reached this 
conclusion as a result of its finding that no evalua tion of the merits of alternative cost allocation 
methodologies was required, as well as on its own finding that both USDOC's and Abitibi's 
methodologies had shortcomings.  In  Canada's view, the Panel's interpretation of the phrase "consider 
all available evidence"—such that no comparison of methodologies is required—is too narrow, and 
the shortcomings of the two methodologies identifie d by the Panel were not identified in USDOC's 
final determination.  Canada ther efore requests the Appellate Body to  declare the relevant conclusion 
of the Panel to be "without effect"66 and to "direct the United Stat es to weigh the advantages and 
disadvantages of these methodologies in order to r each a 'proper' determination on an accurate 
allocation of financial costs".67 
30. Canada also requests that the Appellate Body reverse the Panel's conclusion that the United 
States had not acted inconsistently with Articles 2.2, 2.2.1, and 2.4 of the  Anti-Dumping Agreement .  
In Canada's view, given the legal errors of the Pa nel with respect to Article 2.2.1.1, the Panel's 
                                                      
62Canada's other appellant's submission, para. 48. 
63Ibid., para. 46.   
64Ibid., para. 49.  
65In response to questioning at the oral hearing, Canada clarified that the Panel could not evaluate 
USDOC's determinations properly in so far as those determinations  themselves   were insufficient. 
66Canada's other appellant's submission, para. 53.    
67Ibid., para. 54.     WT/DS264/AB/R 
 Page 13 
 
 
findings in relation to Canada's cl aims of "consequential violations"68 of Articles 2.2, 2.2.1, and 2.4 
are also incorrect.  
2. Calculation of By-Product Revenue for Tembec  
31. With respect to the calculation of the by-produc t revenue for Tembec, Canada argues that the 
Panel erred in finding that the United States did not act  inconsistently with Articles 2.2 and 2.2.1.1 of 
the  Anti-Dumping Agreement .  According to Canada, USDOC treated Tembec differently from all 
other respondents in the underlying investigation,  on the ground that Tembec was organized as a 
single corporation, as opposed to being divided into legally separate entities.  In so doing, USDOC, in 
Canada's view, "fail[ed] to assess Tembec's by-p roduct offset in an objective and even-handed 
manner".69  
32. Canada argues, first, that the test applied by USDOC with regard to Tembec—as compared to 
all other respondents in the underlying investigati on—"operates systematically to inflate dumping 
margins".70  According to Canada, USDOC, in the inves tigation at issue, created a "new test" for 
internal transfers that relies upon the records kept by  a producer only if the internal transfer prices 
were "significantly lower" than market value.71  In Canada's view, this test "systematically lowers the 
by-product offset, but never raises it."72  As a result, USDOC's test, according to Canada, serves only 
to lower the by-product offset for corporations with internal transfer values;  therefore, by applying 
that test, USDOC did not exercise its discretion in an objective and even-handed manner.   
33. Secondly, Canada argues that USDOC's treatme nt of Tembec was not even-handed because 
USDOC applied the so-called "arm's-length test" in the case of some companies, but did not apply this 
test in the case of Tembec.  The jus tification for this "uneven treatment"73, according to Canada, was 
related solely to Tembec's corporate structure.  Canada submits that the Panel did not consider 
whether the different factual situations of the two respective companies provided reasonable 
justification for the differential treatment at issue.   
34. Canada also relies on the Appellate Body Report in  US – Hot-Rolled Steel   as support for its 
proposition that the different factual situations at issue in the present case do not justify the use of 
                                                      
68Canada's other appellant's submission, para. 5. 
69Ibid., para. 75. 
70Ibid., para. 57.  In response to questioning at the oral hearing, Canada stated that Canada bases its 
claim on appeal in this respect on "Article 2.2 in the context of Article 2.2.1.1".   
71Ibid., para. 61. 
72Ibid. 
73Ibid., para. 62. WT/DS264/AB/R 
Page 14  
 
different methodologies.  Canada argues that, in  US – Hot-Rolled Steel , the Appellate Body found 
that the fact that certain sales were more highly pri ced than others did not permit the use of a different 
test by USDOC.  Canada claims that, despite di fferences in their respective corporate structure, 
Tembec and West Fraser, another respondent in the underlying investigation, were similarly situated, 
in that they both had the ability to determine pr icing in wood chips tran sactions between related 
parties.  The fact that USDOC, in the instance of West Fraser, measured cost of production by 
subtracting there from the value of all by-produc t revenue (market value), while, in the case of 
Tembec, USDOC subtracted the "surrogate cost"
74, or internal transfer value, of the by-product, 
demonstrates that USDOC failed to exercise its discretion in an even-handed fashion.   
35. Canada is of the view that USDOC's treatment "penalizes corporations that consume their 
own by-products rather than selling them to a who lly-owned affiliate for consumption in the same 
manner."75  The fact that USDOC may value interdiv isional sales of input products in the same 
manner in which it treated Tembec's offset sales has, in Canada's view, "no bearing"76 on whether 
USDOC's treatment of Tembec was even-handed wh en compared to other similarly-situated 
respondents.  Canada argues that USDOC has consiste ntly applied the so-called arm's length test for 
the valuation of by-products.  Canada points out that USDOC applied this test to Tembec at the 
preliminary stage in the anti-dumping proceedings, but  subsequently found that  its "normal" practice 
for valuing by-product offset s was to accept "low book values within a single corporation."77  I n  
Canada's view, USDOC's departur e from its normal practice in th is case demonstrates USDOC's 
failure to provide even-handed treatment. 
36. Finally, Canada submits that, because the Panel erred in finding that the United States did not 
act inconsistently with Article 2.2.1.1, the Panel also erred in failing to address Canada's claims of 
consequential violations of Articl es 2.2, 2.2.1, and 2.4 of the  Anti-Dumping Agreement .   
37. In addition to its arguments concerning the Pa nel's findings, Canada requests the Appellate 
Body "to recommend that the DSB request that the United States bring its measures into conformity 
with its WTO obligations, includi ng by revising the anti-dumping order and returning cash deposits 
                                                      
74Canada's other appellant's submission, para. 67 (ref erring to Panel Report, para. 7.318 which in turn 
quotes United States' response to Question 42 posed by the Panel, para. 98;  Panel Report, pp. A-103 and 104).  
75Ibid., para. 68.   
76Ibid., para. 70.  
77Ibid., para. 74. (footnote omitted)  WT/DS264/AB/R 
 Page 15 
 
 
imposed as a result of the  investigation, the Final Determ ination and the anti-dumping order 
concerning certain softwood lumber from Canada."78 
D. Arguments of the United States – Appellee  
1. Allocation of Financial Expenses for Abitibi  
38. The United States requests the Appellate Body to uphold the Panel's finding on the issue of 
allocation of financial expenses for Abitibi. 
39. At the outset, the United States argues that Canada, in its arguments, "distorts"79 the Panel's 
legal findings and conclusions.  Cont rary to Canada's claim, the Pane l did not reduce the obligation to 
"consider all available evidence" to an "extremely lo w threshold level", nor did the Panel find that this 
obligation could be satisfied by "merely accepting evidence".80  Equally, contrary to Canada's 
arguments, USDOC did not use USDOC's cost of goods sold ("COGS") methodology simply because 
that methodology was "consistent and predictable".81  Instead, the Panel found that USDOC's 
observation about the consistency and predictab ility of the COGS methodology was unrelated to 
USDOC's reasons for rejecting Abitibi's proposed a lternative methodology.  Finally, in the United 
States' view, Canada's arguments concerning th e Panel's discussion of "generic" and "specific"82 
reasoning used by USDOC also incorrectly imply that the Panel read Article 2.2.1.1 as permitting 
strict adherence to a methodology without any co nsideration of alternative methodologies.  The 
United States submits that the Panel "carefully an alyzed [USDOC's] determination to use the COGS 
methodology and properly concluded that [USDOC] had fulfilled its obliga tion to 'consider' all 
available evidence on the proper allocation of costs."83 
40. With respect to Canada's interpretation of Artic le 2.2.1.1, the United States first takes issue 
with the proposition that the clause of the second sen tence of Article 2.2.1.1 beginning with the word 
"including" limits the circumstances under which a producer's evidence must be given "controlling 
                                                      
78Canada's appellee's submission, para. 66.  See also Canada's other appellant's submission, para. 76.  
In response to questioning at the oral hearing, Canada confirmed that this request had been made pursuant to Article 19.1 of the DSU. 
79United States' appellee's submission, para. 24. 
80Ibid., para. 25 (referring to Canada's other appellant's submission, paras. 33 and 34). 
81Ibid., para. 26 (quoting Canada's other appellant's submission, para. 23). 
82Ibid., para. 28 (quoting Panel Report, para. 7.238). 
83Ibid., para. 29. WT/DS264/AB/R 
Page 16  
 
weight".  The United States submits, as a preliminary matter, that this is a new argument that Canada 
did not present to the Panel;  the United States cont ends that the Appellate Body should decline to 
examine an argument presented for the first time on appeal and relies, for this purpose, on the 
Appellate Body's findings in  US – FSC .
84   
41. On the substance of Canada's argument, the United States submits that Article 2.2.1.1 
contains no reference to the weight to be given to any particular piece of evidence.  The United States 
also disagrees with Canada's proposition that the use of the word "including" confirms that the clause 
beginning with this word only defines particular evidence to be given particular weight, and does not 
define evidence that may be excluded from considera tion.  Instead, as the Panel found, the word in the 
clause at issue that limits the consideration of  due evidence submitted by a producer is the word 
"provided".  Moreover, according to the United St ates, as Abitibi's proposed allocation had not been 
"historically utilized" by Abitib i, USDOC was not "obligated"85 to consider this alternative allocation 
methodology. 
42. The United States also submits that Canada's  "controlling weight" argument rests on a 
"strained and illogical reading"86 of the clause that begins with th e words "in particular".  The United 
States disagrees with Canada's reading of this cl ause as narrowing the scope of  the evidence that an 
investigating authority may refuse to regard as cont rolling, on the ground that the exporter or producer 
did not historically utilize the allocation methodology.   Instead, the clause at issue describes the types 
of cost allocations that authorities are required to consider.  The United States supports this reading 
with an analysis of the punctuation of that phrase th at, in its view, identifies the phrase at issue as a 
"parenthetical phrase"87;  thus, according to the United States, the "including" phrase is a stand-alone 
phrase, not modified by the "in particular" phrase. 
43. The United States submits furthermore that the Panel correctly found that USDOC had 
considered Abitibi's proposed cost allocation methodology.  The United States disagrees with 
Canada's assertion that USDOC had an obligation to make "factual findings as to the advantages or 
disadvantages of either of the methodol ogies that it was required to 'consider'."88  A requirement to 
"consider" is not a requirement to make express fact ual findings.  In any event, it was apparent from 
USDOC's determination that USDOC had given atte ntion to and had taken into account the evidence 
                                                      
84United States' appellee's submission, para. 32 (referring to Appellate Body Report, US – FSC , 
para. 102). 
85Ibid., para. 38. 
86Ibid., para. 39.  
87Ibid., para. 42. 
88Ibid., para. 46 (quoting Canada's other appellant's submission, para. 40).   WT/DS264/AB/R 
 Page 17 
 
 
made available by Abitibi89;  the United States relies on the findings of the panel in  US – Softwood 
Lumber VI  , concerning the meaning of the word "to consider", as support for its argument.90 
44. In the United States' view, because Canada's ar gument with respect to Article 2.2.1.1 is 
without merit, Canada's dependent argument that the Panel erred in finding that an unbiased and 
objective investigating authority could have used  the allocation used by USDOC must also be 
rejected. 
2. Calculation of By-Product Revenue for Tembec  
45. The United States requests that the Appellate B ody reject Canada's appeal concerning the 
Panel's finding on the by-product revenue offset calculation for Tembec.   
46. First, the United States argues that the ques tion raised by Canada—whether USDOC's by-
product offset calculation was objective and even-h anded—is a factual matter falling outside the 
scope of appellate review.  The United States quotes the Appellate Body Reports in  EC – Hormones  
and  Argentina – Footwear  (EC)   as support for its proposition.  Although the United States does not 
dispute the general proposition that an investigatin g authority must make its determination in an 
objective and even-handed manner, the United States submits that this obligation is not grounded in 
the text of Article 2.2.1.1.  As a consequence, Ca nada's argument should not be construed as raising a 
question about the consistency or inconsistency of a gi ven fact or set of facts with the requirements of 
Article 2.2.1.1.  Instead, in the United States' view, the question raised by Canada is a factual question 
of how the Panel assessed USDOC's actions and, th erefore, pursuant to Article 17.6 of the DSU, a 
question not subject to appellate review. 
47. Secondly, the United States submits that, even if  the Appellate Body were to consider the 
merits of Canada's arguments, the Appellate Body  should nevertheless dismiss Canada's appeal.  The 
United States notes that the Panel made the contested finding only assuming, arguendo , that 
Article 2.2.1.1 does impose an obligation posited by  Canada regarding rejection of a producer's 
records in particular circumstances, and that Cana da did not appeal that Panel finding.  The United 
States also argues that Canada's argument on even-handedness is "internally inconsistent"91, because 
                                                      
89In response to questioning at the oral hearin g, the United States submitted that Canada's 
understanding of the term "consider" relates to the investigating authority's weighing of the evidence, which, 
according to the United States, is a factual question and not a question of law or le gal interpretation that is 
within the scope of appellate review.  
90United States' appellee's submission, para. 46 (referring to Panel Report, US – Softwood Lumber VI , 
para. 7.67). 
91Ibid., para. 70.  WT/DS264/AB/R 
Page 18  
 
Canada argued, before the Panel, that the approach  used by USDOC for West Fraser should have been 
used for Tembec, and the approach  used for Tembec should have b een used for West Fraser.   
48. The United States further submits that Canada's  argument that the Panel erred in finding 
USDOC's by-product valuation to be objective a nd even-handed is based on the "flawed premise"
92 
that Tembec and West Fraser were similarly situated and that, therefore, USDOC should have valued each company's by-product offset using the same  methodology.  According to the United States, 
Canada offers no support for the proposition that West Fraser and Tembec were similarly situated.  In 
the United States' view, the different corporate st ructures of Tembec and West Fraser, respectively, 
justified the use of different methodologies by USDOC, because "the different corporate structures raised different questions for purposes of valuing by-product offsets".
93  
49. In the United States' view, Canada's reli ance on the Appellate Body Report in  
US – Hot-Rolled Steel  is misplaced.  According to the Un ited States, the Appellate Body Report in 
that dispute stands for the proposition that the same rule should apply in an "apples-to-apples" 
comparison—in that dispute, specifically, when comparing affiliated transactions to affiliated 
transactions.  By contrast, Canada's even-handedness argument in the present case is not based on an 
"apples-to-apples" comparison.  This is because, in th e United States' view, Canada is not arguing that 
USDOC treated  inter-divisional transfers   for one company differently from how it treated  inter-
divisional transfers   for another company;  instead, Canada is arguing that USDOC treated  inter-
divisional transfers   for one company differently from how it treated  sales to affiliated entities   for 
another company.  The United States maintains that Ca nada has failed to substantiate its assertion that 
Tembec and West Fraser were similarly situated.  As a result, Canada has not demonstrated that the things being compared—interdivisional transfer s, on the one hand, and sales between affiliated 
entities, on the other hand—are similar;  therefor e, in the United States' view, Canada's even-
handedness argument "must fail"
94, even on Canada's own terms.  
50. In sum, in the United States' view, the Pa nel correctly concluded that an unbiased and 
objective authority could have determined that the valuation in Tembec's books for internal transfers 
of wood chips was not unreasonable. 
                                                      
92United States' appellee's submission, para. 69.  
93Ibid.,  para. 71.  
94Ibid., para. 75.   WT/DS264/AB/R 
 Page 19 
 
 
51. In the event that the Appellate Body were to reve rse, in the light of Canada's other appellant's 
submission, any aspect of the Panel Report, the Un ited States requests the Appellate Body to decline 
Canada's request for specific recommendations.  The United States submits that Canada's request for 
an Appellate Body recommendation that the United States amend the final anti-dumping duty order, 
reduce the anti-dumping duties, and return cash de posits would "go beyond anything relevant to 
implementing a recommendation and ... seeks action nowhere called for under the WTO 
Agreement."95 
E. Arguments of the Third Participants 
1. European Communities  
52. The European Communities asserts  that the zeroing methodology as used by the United States 
in this case "differs in no meaningful way"96 from the methodology previously employed by the 
European Communities and found to be inc onsistent with Article 2.4.2 of the  Anti-Dumping 
Agreement  in  EC – Bed Linen .  
53. The European Communities asserts  that the United States misinterprets the term "comparable 
transactions" in Article 2.4.2.  According to th e European Communities, "comparable transactions" 
within the meaning of Article 2.4.2 "assumes that the transactions used to compute the margin of 
dumping have been made 'comparable' in an intermediary step by cleansing them from any other factors than dumping that might have influenced the prices."
97   
54. The European Communities agre es with the United States, Canada, and the Panel that 
multiple averaging is permitted under Article 2.4.2 but submits that "[t]he key flaw in the US 
argument is the assumption that it is not possible to aggregate the results of the model by model comparisons, because the different models are not 'comparable' between themselves."
98  According to 
the European Communities, "[t]his is false beca use the multiple averaging methodology is precisely 
the means to render transactions involving sub-pro ducts with different characteristics comparable."99  
Multiple comparisons are "nothing but intermediary steps leading to the calculation of an overall 
margin for all transactions for the whole product."100  Once multiple averaging has been applied, all 
transactions are considered to be "comparable"  within the meaning of Article 2.4.2 of the Anti-
                                                      
95United States' appellee's submission, para. 80.  
96European Communities' third participant's submission, para. 4.  
97Ibid., para. 29. 
98Ibid., para. 32 (referring to the United States' appellant's submission, para. 22).   
99Ibid., para. 33. 
100Ibid. WT/DS264/AB/R 
Page 20  
 
Dumping Agreement .  According to the European Communities, "[t]he US argument that ... different 
models are not 'comparable' is tantamount to sa ying that dumping is a factor affecting price 
comparability that requires an adjust ment, the adjustment being zeroing."
101  However, "[a]n 
adjustment for 'non-dumping', is not permitted by the Anti-Dumping Agreement  and [would be] 
contrary to the text and purpose of Article 2.4 and 2.4.2."102 
55. The European Communities points out that it is clear from the text of Article 2.4.2 that the 
calculation of the weighted average export pri ce for the product as a whole must include  all  
comparable export transactions. Article 2.4.2 of the  Anti-Dumping Agreement  "is, therefore, not 
'silent' on the obligation to aggregate or a requi rement to offset negative margins of dumping."103  The 
European Communities asserts that this obliga tion flows "from the obligation to make a  fair  
comparison on the basis of  all  comparable export transactions."104   
56. The European Communities also argues that the term "margins of dumping" in Article 2.4.2 
"relates to the entire subject product."105  Moreover, according to the European Communities, 
Article 2.4.2, "and particularly the wo rd 'margin', requires a simple and  complete  comparison 
between normal value and export pri ce, being one that does not prejudge  how the two elements to be 
compared are juxtaposed".106  In addition, the European Comm unities submits that "investigating 
authorities applying 'zeroing' necessarily act incons istently with Articles 3.1, 3.2 and 3.5 [of the]  Anti-
Dumping Agreement , because they examine the impact of non-dumped imports on domestic 
producers, when they are only entitled to examine the impact of dumped imports."107 
57. With respect to Article 2.4, the European Communities asserts that Article 2.4 creates an 
"overarching and independent obligation"108 to make a "fair comparison" between normal value and 
export price.  Relying on the "ordinary meaning"  of the word "fair", the European Communities 
asserts that the obligation to make a fair comparison "must involve a balanced comparison ... that is, a symmetrical comparison absent the specific conditio ns provided in Article 2.4.2, second sentence."
109  
According to the European Communities, by using "a model zeroing method without any 
                                                      
101European Communities' third participant's submission, para. 34. 
102Ibid. (footnote omitted) 
103Ibid., para. 36.  
104Ibid. (original emphasis) 
105Ibid., para. 46. 
106Ibid., para. 50. (original emphasis;  underlining added) 
107Ibid., para. 53. 
108Ibid., para. 63. 
109Ibid., para. 65.  WT/DS264/AB/R 
 Page 21 
 
 
justification"110, the United States acted inconsistently with its obligation to make a "fair comparison" 
under Article 2.4 of the  Anti-Dumping Agreement . 
2. Japan  
58. Japan requests that the Appellate Body reject the arguments raised by the United States on 
appeal and find that USDOC acted incons istently with Article 2.4.2 of the  Anti-Dumping Agreement  
by applying the practice of zeroing to determine the ex istence of "margins of dumping" in this case. 
59. Japan submits that Article VI:1 of the GATT 1994 and Article 2.1 of the  Anti-Dumping 
Agreement  clarify that the determination of dumping must  be made on the basis of the product under 
consideration as a whole and "not on a tr ansaction-specific or model-specific basis."111  Japan adds 
that those provisions, read together with Article 6.10 of the  Anti-Dumping Agreement ,  require that 
the "determination of dumping must be based on an overall dumping margin for all export sales by an exporter/producer."
112  Thus, there is an "abundant textual basis" in the  Anti-Dumping Agreement  to 
conclude that "the overall margin of dumping mu st be the aggregate of both negative and positive 
margins, and that zeroing is prohibited in establishing the margin of dumping."113 
60. Japan moreover disagrees with the United States' interpretation of the word "comparable" as 
used in Article 2.4.2.  According to Japan, that wo rd confirms that the investigating authority is under 
an obligation to make due allowance for differen ces which affect price comparability and to make a 
fair comparison between normal value and export pri ces pursuant to Article 2.4.  Having defined the 
scope of the product under consider ation, investigating authorities must then determine the existence 
of dumping and injury with respect to that same pr oduct.  Japan further refers to the Appellate Body 
Report in  EC – Bed Linen  and asserts that "[v]arious models of  the 'product' are, by definition, 
comparable".114  Accordingly, Japan disagrees with the Un ited States that certain product types "must 
be treated differently from other types"115 of the same product.  For these reasons, the United States' 
interpretation of the word "comparable", wh ich contradicts other provisions of the  Anti-Dumping 
Agreement , should be rejected.  
61. Japan submits moreover that zeroing is also prohibited by virtue of the requirement in 
Article 2.4 to conduct a "fair comparison" between the export price and the normal value of the 
                                                      
110European Communities' third participant's submission, para. 65.  
111Japan's third participant's submission, para. 6.  
112Ibid., para. 21. 
113Ibid. 
114Ibid., para. 26. 
115Ibid. WT/DS264/AB/R 
Page 22  
 
product under investigation.  This is so because, "[b]y artificially decreasing prices of certain export 
sales, the zeroing method inflates, and in some cases, creates, a positive margin of dumping."
116  In 
this regard, Japan refers to the Appellate Body Report in  US – Corrosion Resistant Steel Sunset 
Review ,  in which the Appellate Body found that "the inherent bias in a zeroing methodology of this 
kind may distort not only the magnitude of a dumping margin, but also a finding of the very existence of dumping."
117   
III. Issues Raised in this Appeal 
62. The issues raised in this appeal are: 
(a) whether the Panel erred in finding, in para graphs 7.224 and 8.1(a)(i) of the Panel 
Report, that the United States acted inconsistently with Article 2.4.2 of the Agreement 
on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 
(the " Anti-Dumping Agreement ") in determining the existence of margins of dumping 
on the basis of a methodology incorporating the practice of "zeroing"; 
(b) whether the Panel erred in finding, in para graphs 7.238–7.245 and 8.1(b)(vi) of the 
Panel Report, that the United States did not act  inconsistently with Articles 2.2, 2.2.1, 
2.2.1.1, and 2.4 of the  Anti-Dumping Agreement  in its calculation of the amount for 
financial expenses for softwood lumber in the case of Abitibi;  and 
(c) whether the Panel erred in finding, in para graphs 7.319–7.326 and 8.1(b)(ix) of the 
Panel Report, that the United States did not act  inconsistently with Articles 2.2, 2.2.1, 
2.2.1.1, and 2.4 of the  Anti-Dumping Agreement   in its calculation of the amount for 
by-product revenue from the sale of wood chips in the case of Tembec. 
                                                      
116Japan's third participant's submission, para. 12. 
117Ibid., para. 13 (quoting Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review , 
para. 135).  WT/DS264/AB/R 
 Page 23 
 
 
IV. Article 2.4.2 of the Anti-Dumping Agreement – The Practice of Zeroing 
A. Introduction 
63. We begin by identifying the precise scope of the appeal before us.  First, we note that both 
Canada and the United States agree that this dispute relates to the consistency,  with Article 2.4.2 of 
the  Anti-Dumping Agreement , of a methodology incorporating the practice of zeroing (hereinafter 
"zeroing")  as applied  in the anti-dumping investigation at i ssue in this case.  In other words, no 
methodology, as such , has been challenged in this appeal.118  Secondly, we understand that Canada's 
claim before the Panel was limited to the consiste ncy of zeroing when used in calculating margins of 
dumping on the basis of a comparison of a weighted average normal value with a weighted average of 
prices of all comparable export transactions (the "weighted-average -to-weighted-average 
methodology") under Article 2.4.2 of the  Anti-Dumping Agreement .  Therefore, in this appeal, we are 
not required to, and do not address, the issue of whether zeroing can, or cannot, be used under the 
other methodologies prescribed in Article 2.4.2, na mely, comparing normal value and export prices on 
a transaction-to-transaction basis (the "transac tion-to-transaction methodology"), or comparing a 
normal value established on a weighted average basis to  prices of individual export transactions (the 
"weighted-average-to-individual methodology").119 
64. We next set out a brief description of zeroing as applied by the United States Department of 
Commerce ("USDOC") in this case.  First, USDOC divided the product under investigation (that is, 
softwood lumber from Canada) into sub-groups of iden tical, or broadly similar, product types.  Within 
each sub-group, USDOC made certain adjustments to  ensure price comparability of the transactions 
and, thereafter, calculated a weighted average nor mal value and a weighted average export price per 
unit of the product type.  When the weighted av erage normal value per unit exceeded the weighted 
average export price per unit for a sub-group, the difference was regarded as the "dumping margin" 
for that comparison.  When the weighted average normal value per unit was equal to or less than the 
weighted average export price per unit for a sub- group, USDOC took the view that there was no 
                                                      
118Canada's response to questioning at the oral hearing.  See also Panel Report, footnote 341 to 
para. 7.187 and footnote 343 to para. 7.196.  See also Canada's appellee's submission, para. 2, in which Canada 
submits that the Panel found that the United States' practi ce of "zeroing" "as applied" was inconsistent with the 
requirements of the  Anti-Dumping Agreement . 
 119The Panel found in paragraph 7.219 of the Panel Report that: 
... it is not within the Panel's terms of  reference to rule on whether zeroing 
can, or cannot, be used when determining the overall margin of dumping under the other comparison methodologies set forth in Article 2.4.2, i.e., 
transaction-to-transaction and weighted  average normal value-to-individual 
transaction export price. (footnote omitted) WT/DS264/AB/R 
Page 24  
 
"dumping margin" for that comparison.  USDOC aggregated the results of those sub-group 
comparisons in which the weighted average nor mal value exceeded the weighted average export 
price—those where the USDOC considered there was a "dumping margin"—after multiplying the 
difference per unit by the volume of export transactions  in that sub-group.  The results for the sub-
groups in which the weighted average normal value wa s equal to or less than the weighted average 
export price were treated as zero for purposes of this  aggregation, because there was, according to 
USDOC, no "dumping margin" for those sub-groups.  Finally, USDOC divided the result of this 
aggregation by the value of all export tran sactions of the product under investigation ( including the 
value of export transactions in the sub-groups  that were not included in the aggregation ).  In this 
way, USDOC obtained an "overall margin of dumping", for each exporter or producer, for the product under investigation (that is, softwood lumber from Canada).
120 
65. Thus, as we understand it, by zeroing, the inves tigating authority treats as zero the difference 
between the weighted average normal value and the we ighted average export price in the case of those 
sub-groups where the weighted average normal value is less than the weighted average export price.  
Zeroing occurs only at the stage of aggregation of th e results of the sub-groups in order to establish an 
overall margin of dumping for the product under investigation as a whole.   
66. We now turn to the interpretations and finding s of the Panel regarding the consistency of 
zeroing with Article 2.4.2 of the  Anti-Dumping Agreement .   
B. The Panel's Findings  
67. The Panel121 found that zeroing as applied in this case is inconsistent with Article 2.4.2 of the 
Anti-Dumping Agreement , which provides: 
                                                      
 120For a description of the methodology at issue in this dispute, see United States' response to 
Question 109 posed by the Panel, paras. 52–56;  Pane l Report, pp. B-49 and B-50.  Zeroing as applied by 
USDOC is also described in paragraph 7.185 of the Panel Report.  
121One member of the Panel dissented with respect to the finding of the Panel that zeroing is not 
permitted under Article 2.4.2.    WT/DS264/AB/R 
 Page 25 
 
 
Article 2 
Determination of Dumping 
... 
2.4.2 Subject to the provisions governing fair comparison in 
paragraph 4, the existence of margins of dumping during the 
investigation phase shall normally be established on the basis of a 
comparison of a weighted average normal value with a weighted average of prices of all comparable export transactions or by a comparison of normal value and export prices on a transaction-to-transaction basis.  A normal value established on a 
weighted average basis may be co mpared to prices of individual 
export transactions if the authorities find a pattern of export prices which differ significantly among different purchasers, regions or time periods, and if an explanation is provided as to why such  differences cannot be taken into account appropriately by the use of a weighted 
average-to-weighted average or transaction-to-transaction 
comparison. 
68. The methodology followed by USDOC in this case involved "multiple averaging", by which 
we mean the practice of investigating authorities of  sub-dividing the product under investigation into 
sub-groups of comparable transactions and dete rmining a weighted average normal value and a 
weighted average export price for the transactions in each sub-group.
122  The Panel stated that "in 
practice, the issue of zeroing arises in the contex t of the weighted average-to-weighted average 
methodology only where the investigating authorit y engages in so-called 'multiple averaging'."123   
69. The Panel's approach was to consider first whether multiple averaging is permissible under 
Article 2.4.2, and, if so, whether zeroing as applied in  this case is permissible.  In considering whether 
multiple averaging is permissible under Article 2.4.2,  the Panel examined the text of that provision 
and concluded that "[i]f the drafters [of the  Anti-Dumping Agreement ] had intended to require that the 
existence of a dumping margin for a product always  be calculated by comparing a single weighted 
average normal value and a single weighted average of prices of  all  export transactions"124, the word 
"comparable" would not have been included in Ar ticle 2.4.2, as it "would serve no purpose in the 
text."125  The Panel observed that "[t]he word 'compara ble', in its ordinary meaning, indicates that a 
weighted average normal value is not to be compared  to a weighted average export price that includes 
                                                      
122For the sake of clarity, we point out that "multiple averaging" occurs at the level of sub-groups prior 
to the stage of aggregatio n, whereas zeroing, as noted above, occu rs at the stage of aggregation.   
123Panel Report, para. 7.200.  See also infra , footnote 142. 
124Ibid., para. 7.203. (emphasis added) 
125Ibid. WT/DS264/AB/R 
Page 26  
 
non-comparable export transactions".
126  The Panel went on to find that the term "all comparable 
export transactions" in Article 2.4.2 would "appear to signify that Members may only compare those 
export transactions which are comparable, but that it [sic] must compare  all  such transactions."127 
70. The Panel then turned to Article 2.4 of the  Anti-Dumping Agreement , which provides in 
relevant part: 
Article 2 
Determination of Dumping 
... 
2.4 A fair comparison shall be made between the export price 
and the normal value.  This comparison shall be made at the same 
level of trade, normally at the ex-factory level, and in respect of sales 
made at as nearly as possible the same time.  Due allowance shall be 
made in each case, on its merits, for differences which affect price 
comparability , including differences in conditions and terms of sale, 
taxation, levels of trade, quantities,  physical characteristics, and any 
other differences which are also demonstrated to affect price 
comparability. (footnote omitted;  emphasis added) 
71. The Panel noted that one way to ensure "price co mparability" between transactions is to make 
"due allowance[s]" pursuant to Article 2.4.  The Panel emphasized, however, that it was "not 
convinced that this method ... is the exclusive means allowed by the [ Anti-Dumping ] Agreement   to 
ensure comparability."128  The Panel explained that:  
[w]hile some differences, such as differences in taxation, may be 
easy to quantify and adjust for, adjustments for differences in 
physical characteristics may be complex and highly uncertain, depending upon the number and extent of the differences in physical 
characteristics, and the extent to which those reflect differences in 
costs of production. .... It is therefore not surprising that many investigating authorities – and responde nt exporters – prefer to limit 
to the extent possible the need fo r such adjustments by performing 
their comparisons on the basis of groups of transactions sharing 
common characteristics.
129 
                                                      
126Panel Report, para. 7.203.  
127Ibid., para. 7.204. (original emphasis) 
128Ibid., para. 7.207. 
129Ibid.  WT/DS264/AB/R 
 Page 27 
 
 
72. Based, inter alia , on this analysis of Article 2.4.2, the Panel concluded,  and agreed with the 
parties to the dispute , that the use of "multiple averaging is not prohibited"130 by the  Anti-Dumping 
Agreement .  
73. The Panel next turned to examine whether zer oing, as applied by USDOC in this case when 
aggregating the results of multiple comparisons, is permissible under Article 2.4.2.  The Panel 
explained that it saw the calculation of margin s of dumping for a product under investigation as a 
"coherent process"131, which starts with the determination of  normal value, and continues with the 
establishment of the export price.  The Panel further opined that Article 2.4.2 applies to the process of 
calculating a margin of dumping  as a whole , and not merely to one stage of that process, namely, 
multiple averaging.  Relying on the Appellate Body Report in  EC – Bed Linen , the Panel emphasized 
that "Article 2.4.2 requires that all comparable e xport transactions have to be taken into account when 
the weighted average normal value is compared to the weighted average of prices of all comparable 
export transactions."132  The Panel noted that "[t]hrough the use of zeroing ... the entirety of the prices 
of some export transactions, i.e., those export tran sactions where the weighted-average-export-price is 
greater than the weighted-average-normal-value, in  the second stage of the process, are not taken into 
account."133  
74. The Panel concluded that, when calculati ng margins of dumping for the product under 
investigation, the United States was required, by virt ue of Article 2.4.2, to establish such margins "on 
the basis of a comparison of the weighted-average-n ormal-value with the weighted average of prices 
of all comparable export transactions, that is, fo r all transactions involving all types of the product 
under investigation."134  By not "taking into account all comparable export transactions"135 in its 
calculation of the overall margin of dumping, the United States had, according to the Panel, acted 
inconsistently with Article 2.4.2 of the  Anti-Dumping Agreement .   
75. We begin our analysis of Article 2.4.2 in the light of the arguments raised on appeal. 
                                                      
130Panel Report, para. 7.211. 
131Ibid., para. 7.214. 
132Ibid., para. 7.215. 
133Ibid., para. 7.216. (footnote omitted) 
134Ibid., para. 7.224.  
135Ibid. WT/DS264/AB/R 
Page 28  
 
C. Interpretation of Article 2.4.2 
1. Introduction
 
76. Article 2.4.2 of the  Anti-Dumping Agreement136 permits the use of three methodologies, 
applicable during the investigation phase, for establ ishing the existence of "margins of dumping".  
The first two methodologies are set out in the first sentence of Article 2.4.2, which provides that the 
existence of "margins of dumping" during an inv estigation phase "shall normally be established on the 
basis of a comparison of a weighted average normal value with a weighted average of prices of all 
comparable export transactions or by a comparison of normal value and export prices on a transaction-to-transaction basis."  The third me thodology is set out in the second sentence of 
Article 2.4.2, which provides that, under the specifi ed circumstances, the existence of "margins of 
dumping" may be determined by comparing a we ighted average normal value with prices of 
individual export transactions.   
77. As stated above
137, this appeal is concerned with USDO C's use of zeroing in establishing the 
existence of "margins of dumping" using the firs t methodology specified under the first sentence of 
Article 2.4.2—"a comparison of a weighted average normal value with a weighted average of prices 
of all comparable export transactions".  On this issue, the participants disagree as to the proper 
interpretation of the terms "margins of dumpi ng" and "all comparable export transactions".   
78. The United States asserts that, after having co rrectly found that "multiple averaging" is 
permitted under Article 2.4.2, the Pa nel erred in proceeding further and finding that the United States 
acted inconsistently with Article 2.4.2 "in dete rmining the existence of margins of dumping on the 
basis of a methodology incorporating the practice of 'zeroing'."138  The United States argues that the 
term "margins of dumping" in Article 2.4.2 does not refer to margins of dumping for the product 
under investigation as a whole, but instead refers to "the results of comparing averages 'for each 
category of product/transaction compared'."139  More specifically, "margins of dumping", according to 
the United States, is used in Article 2.4.2 to refer to the results of multiple comparisons "in which the 
normal value exceeds the export price".140  Finally, the United States posits that Article 2.4.2 "does 
not address the issue of aggregating th e results of  multiple comparisons."141   
                                                      
136This provision is set out in para. 67 of this Report.   
137See supra , para. 63.  
138United States' appellant's submission, para. 73 (quoting Panel Report, para. 8.1(a)(i)).   
139Ibid., para. 37 (quoting Panel Report, para. 7.210).   
140Ibid., para. 22.   
 141Ibid., para. 28.  WT/DS264/AB/R 
 Page 29 
 
 
79. The position of the United States hinges on two distinct propositions.  First , that multiple 
averaging is permitted under Artic le 2.4.2 and that the term "all comparable export transactions" 
refers  only  to all comparable export transactions  within each sub-group .  Secondly , that the term 
"margins of dumping" in Article 2.4.2 does not refer to margins of dumping for the product as a 
whole, but instead refers to "margins of dumping" for individual product types in cases in which the investigating authority conducts multiple averaging.   Thus, the United States argues that Article 2.4.2 
deals only with multiple comparisons at sub-group levels, and does not address the issue of how the 
results of such comparisons are to be aggregated in order to calculate an overall margin of dumping 
for the product as a whole. 
80. We note that there is no disagreement among th e participants in this dispute as to the 
permissibility of "multiple averaging" under Article 2. 4.2.  All participants agree that an investigating 
authority may choose to divide the product under investigation into product types or models
142 for 
purposes of calculating a weighted average normal va lue and a weighted average export price for the 
transactions involving each product type or mode l or sub-group of "comparable" transactions.143  In 
addition, we note that Canada has not claimed, with  regard to the investigation at issue, that the 
United States has acted inconsistently with Artic le 2.4.2 when calculating the weighted average 
normal value and weighted average export price fo r each sub-group of comparable transactions.   
81. We agree with the participants in this di spute that multiple averaging is permitted under 
Article 2.4.2 to establish the existence of margins of  dumping for the product under investigation.  We 
disagree with those who suggest that the Appellate Body Report in  EC – Bed Linen  is premised on 
an assumption that multiple averaging is prohibited.  The issue of multiple averaging was not before 
the Appellate Body in  EC – Bed Linen  and the reasoning of the Appellate Body in that case should 
therefore not be read as prohibiting that practice.  This is not to say that  EC – Bed Linen  is not 
                                                      
142In this regard, the Panel notes that:  
[a]lthough multiple averaging based on different types or models may be 
particularly common, multiple averaging may also be used in other contexts.  
For example, an investigating authority  might perform multiple averaging in 
respect of sales made at different levels  of trade (e.g., retail versus wholesale) 
or on the basis of sub-periods of the period of investigation (the latter may 
arise in cases where hyper-inflationary  economies are involved).  Thus, an 
investigating authority might well resort to multiple averaging to ensure 
comparability even in a case of absolute product homogeneity, i.e., where all 
of the product under investigation is identical and is being compared to transactions involving identical goods in the market of the exporting country.   
 (Panel Report, para. 7.201 (footnote omitted)) 
143See United States' appellant's submission, para. 23;  European Communities' third participant's 
submission, para. 30.  See also Panel Report, para. 7.211.  See also Panel Report, para. 7.202, where the Panel 
notes that there was no dispute as to the "appropriateness or consistency" with the  Anti-Dumping Agreement  of 
multiple averaging as such.   WT/DS264/AB/R 
Page 30  
 
relevant in this appeal.  Indeed, there are a number of  relevant findings to which we refer to below.  
However, the Appellate Body did not rule on mu ltiple averaging in that case and therefore it is 
incorrect to argue, as the United States does, that "[t] he agreement of both parties to this dispute and a 
unanimous Panel that Article 2.4.2 permits multiple  comparisons is a fundamental departure from the 
premise"
144 of the Appellate Body Report in  EC – Bed Linen .   
82. Although all participants in this dispute agr ee on the permissibility of  multiple averaging, 
they disagree as to the proper interpretation of the terms "all comparable export transactions" and 
"margins of dumping" in Article 2.4.2 as they rela te to zeroing.  The United States argues that once 
"all comparable export transactions" have been ta ken into account at the sub-group level, the 
requirement of Article 2.4.2 is satisfied and that, th erefore, the obligation to consider "all comparable 
export transactions" does not extend to the aggreg ation stage.  A contrary interpretation of 
Article 2.4.2 would, according to the United States, require investigating authorities to compare 
"dumped" and "non-dumped" transactions, which the United States considers to be non-comparable, 
at the aggregation stage. 
83. In contrast, Canada argues that the "word 'all' ope rates to ensure that every transaction is fully 
included in the calculation of the dumping margin"145 and that the word "'comparable' must relate to 
the entire product under consideration."146  Canada further submits that the United States' definition of 
the word "comparable" is "inc onsistent with its own practice"147 and that "[t]here is no difference as to 
comparability between different models that ar e dumped versus those that are not dumped."148  The 
European Communities similarly submits that "[t]he  United States misinterprets the term 'comparable 
transactions' in Article 2.4.2"149, and that "[o]nce the multiple averaging methodology has been 
applied, all transactions ar e considered 'comparable'."150 
84. The second area of their disagreement concerns th e proper interpretation of the term "margins 
of dumping" as used in Article 2.4.2.  That disagre ement turns on the question of whether that term 
applies to the product under investigation as a w hole, or, at the sub-group level, when multiple 
averaging is undertaken.   
                                                      
144United States' appellant's submission, para. 60.  
145Canada's appellee's submission, para. 23. 
146Ibid., para. 24. 
147Ibid., para. 36. 
148Ibid., para. 37. 
149European Communities' third participant's submission, para. 29. 
150Ibid., para. 33.  WT/DS264/AB/R 
 Page 31 
 
 
85. With these considerations in mind, we turn ne xt to examine the terms "all comparable export 
transactions" and "margins of dumping"  as they apply to this dispute.  As both of these terms occur in 
the same sentence and relate to establishing the exis tence of margins of dumping under Article 2.4.2, 
we emphasize that they should be interpreted in an integrated manner. 
2. "All Comparable Export Transactions" in Article 2.4.2  
86. Article 2.4.2 requires that the existence of ma rgins of dumping "shall normally be established 
on the basis of a comparison of a weighted average normal value with a weighted average of prices of all comparable export transactions ". (emphasis added)  It is clear from the language of Article 2.4.2 
that a weighted average normal value is to be co mpared with a weighted average of the prices of 
"comparable" export transactions, a nd not with prices of "non-comparab le" export transactions.  At the 
same time, the word "all" in "a ll comparable export transactions" makes it clear that Members cannot 
exclude from a comparison any transaction that is "comparable".  Thus, we agree with the Panel that the 
term "all comparable export tr ansactions" means that a Member "may only compare those export 
transactions which are comparable, but [] it must compare  all  such transactions."
151 
87. It is not in dispute in this case that, in the cal culation of the weighted average export price for 
each sub-group, USDOC took into account "all comparable export transactions", and thus no comparable export transactions were  excluded at the sub-group level.
152 
88. However, the participants have divergent views with respect to the aggregation of the results 
of the multiple comparisons of "all comparable expor t transactions".  The United States is of the view 
that Article 2.4.2 does not require the aggregation of the results of such comparisons, and that, even if 
there were such a requirement, it would be permissi ble to exclude the results of those comparisons 
where the weighted average normal value is less than the weighted average export price (which 
comparisons according to the United States cons titute "non-dumped comparisons").  The United 
States emphasizes that Article VI:1 of the General Agreement on Tariffs and Trade 1994  (the 
"GATT 1994") "explicitly condemns  dumping"153 and that the  Anti-Dumping Agreement  "does not 
recognize a 'negative dumping margin'."154  As we understand it, the United States is of the view that a 
                                                      
151Panel Report, para. 7.204. (original emphasis)  In re sponse to questioning at the oral hearing, all the 
participants and third participants indicated that they agreed with this interpretation. 
152The United States stated at the or al hearing that the United States  and Canada "both agree that the 
United States made comparisons between comparable subs ets of export and normal value transactions based on 
distinctions in level of trade and ph ysical characteristics.  Additionally, th e United States and Canada both agree 
that when these comparisons were made, all comparable transactions were included  in the subsets." (United 
States' statement at the oral hearing) 
153United States' appellant's submission, para. 44. (original underlining) 
154Ibid., para. 38. WT/DS264/AB/R 
Page 32  
 
requirement to include results of "non-dumped" co mparisons at the aggregation stage would amount 
to giving offsets unjustifiably to "dumped" amounts from "non-dumped" amounts. 
89. In contrast, Canada, the European Communities, India, and Japan are of the view that the 
terms "dumping" and "dumping margins" in the  Anti-Dumping Agreement  apply to the product under 
investigation  as a whole , and that, therefore, the results of multiple comparisons must be aggregated 
in their entirety to establish the existenc e of margins of dumping for the product  as a whole .  In their 
view, the  Anti-Dumping Agreement  does not permit a determination of "dumping" at the level of a 
product type or model.  Moreover, according to  Canada and the European Communities, treating 
comparisons at the sub-group level as "dumped" or "non-dumped" is inconsistent with Article 2.4.2 
and amounts to "prejudging" the outcome of an analysis to determine whether dumping exists for the product under investigation as a whole.   
90. There is no basic disagreement among the participants that "all comparable export 
transactions" must be taken into account in establishi ng margins of dumping.  Rather, the participants' 
disagreement centres on how the results of multiple co mparisons are interpreted and aggregated when 
all comparable transactions have admittedly been taken into account at the sub-group level.
155  And 
this disagreement flows, in essence, from the part icipants' respective interpretations of the terms 
"dumping" and "margins of dumping" in the  Anti-Dumping Agreement —whether these terms apply at 
the product or sub-product level.  We therefore tu rn now to an analysis of these terms as used in 
Article 2.4.2 of the  Anti-Dumping Agreement.  
3. "Margins of Dumping" in Article 2.4.2  
91. As we noted above, the United States' position rests on the proposition that "margins of 
dumping" can be established, and "dumping" can be found, at the  sub-group level .  According to the 
United States, the term "margins of dumping" in Artic le 2.4.2 refers to the results of those multiple 
comparisons "in which the normal value exceeds the export price".156  In addressing this argument, we 
turn first to Article VI:1 of the GATT 1994 and Article 2.1 of the  Anti-Dumping Agreement , which 
define "dumping" in the context of the GATT 1994 and the  Anti-Dumping Agreement , respectively.   
92. Specifically, Article VI:1 defines "dumping" as occurring where " products   of one country are 
introduced into the commerce of another count ry at less than the normal value of the  products ". 
                                                      
155See supra , footnote 152. 
156United States' appellant's submission, para. 22.  At  the oral hearing the Un ited States stated that 
"'margins of dumping' is the term used in Article 2.4. 2 to describe the results of those multiple comparisons 
when the normal value is greater than the export price.  If the normal value is less than or equal to the export 
price, that comparison did not involve dumping and there is no margin of dumping for that comparison." 
(United States' statement at the oral hearing)  WT/DS264/AB/R 
 Page 33 
 
 
(emphasis added)  This definition is reiterated in Article 2.1 of the  Anti-Dumping Agreement ,  which 
provides that: 
Article 2 
Determination of Dumping  
2.1 For the purpose of this Agreement, a product  is to be 
considered as being dumped, i.e. introduced into the commerce of another country at less than its normal value, if the export price of the product  exported from one country to another is less than the 
comparable price, in the ordinary  course of trade, for the like  
product  when destined for consumption in the exporting country. 
(emphasis added) 
93. It is clear from the texts of these provisions that  dumping is defined in relation to a product as 
a whole as defined by the investigating authority.   Moreover, we note that the opening phrase of 
Article 2.1—"[f]or the purpose of this Agreemen t"—indicates that the definition of "dumping" as 
contained in Article 2.1 applies to the entire Agreem ent, which includes, of course, Article 2.4.2.  
"Dumping", within the meaning of the  Anti-Dumping Agreement , can therefore be found to exist only 
for the product under investigation as a whole, and ca nnot be found to exist only for a type, model, or 
category of that product.   
94. Other provisions of the  Anti-Dumping Agreement   confirm this view.  For example, 
Article 9.2 (as well as Article VI:2 of the GATT 1994)  stipulate that an anti-dumping duty is to be 
imposed in respect of the  product  under investigation.
157  In addition, Article 6.10 of the  Anti-
Dumping Agreement   provides that the investigating auth orities "shall, as a rule, determine an 
individual margin of dumping for each know n exporter or producer concerned  of the product under 
investigation ". (emphasis added) 
                                                      
157Article 9.2 of the  Anti-Dumping Agreement  provides in relevant part: 
Article 9  
Imposition and Collection of Anti-Dumping Duties 
... 
9.2 When an anti-dumping duty is imposed in respect of any product , 
such anti-dumping duty shall be collect ed in the appropriate amounts in each 
case, on a non-discriminatory basis on imports of such product from all 
sources found to be dumped and causing injury ... . (emphasis added) WT/DS264/AB/R 
Page 34  
 
95. Having examined the definition of "dumping", we  now turn to examine the term "margin of 
dumping" as defined in Article VI:2 of the GATT 1994, second sentence, which provides that: 
... the margin of dumping is the price difference determined in 
accordance with the provisions of paragraph 1 [of Article VI of the 
GATT 1994]. (footnote omitted) 
96. The Appellate Body found in  EC – Bed Linen  that "[w]hatever the method used to calculate 
the margins of dumping ... these margins must  be, and can only be, established for the  product   under 
investigation as a whole."
158  While "dumping" refers to the introduction of a product into the 
commerce of another country at less than its normal va lue, the term "margin of dumping" refers to the 
magnitude of dumping.  As with dumping, "margi ns of dumping" can be found only for the product 
under investigation as a whole, and cannot be found to  exist for a product type, model, or category of 
that product.   
97. It is clear that an investigating authority  may undertake multiple averaging to establish 
margins of dumping for a product under investigati on.  In our view, the results of the multiple 
comparisons at the sub-group level are, however, no t "margins of dumping" within the meaning of 
Article 2.4.2.  Rather, those results reflect only in termediate calculations made by an investigating 
authority in the context of establishing margins of  dumping for the product under investigation.  Thus, 
it is only on the basis of aggregating  all  these "intermediate values" that an investigating authority 
can establish margins of dumping for the product under investigation as a whole.   
98. We fail to see how an investigating authority could properly establish margins of dumping for 
the product under investigation as a whole without aggregating  all  of the "results" of the multiple 
comparisons for  all  product types.  There is no textual basis under Article 2.4.2 that would justify 
taking into account the "results" of only some mult iple comparisons in the process of calculating 
margins of dumping, while disregarding other "results ".  If an investigating authority has chosen to 
undertake multiple comparisons, the investigating au thority necessarily has to take into account the 
results of  all  those comparisons in order to establish margins of dumping for the product as a whole 
under Article 2.4.2.  Thus we disagree with the Un ited States that Article 2.4.2 does not apply to the 
aggregation of the results of multiple comparisons.   
                                                      
158Appellate Body Report, EC – Bed Linen , para. 53. (original emphasis)  The Appellate Body further 
explained in  US – Hot-Rolled Steel   that "'margins' means the individual margin of dumping determined for 
each of the investigated exporters and producers of the product under investiga tion, for that par ticular product." 
(Appellate Body Report, US – Hot-Rolled Steel , para. 118) (footnote omitted)  WT/DS264/AB/R 
 Page 35 
 
 
99. Our view that "dumping" and "margins of dumping" can only be established for the product 
under investigation as a whole is in consonance with the need for consistent treatment of a product in 
an anti-dumping investigation.  Thus, having defined the product under investigation, the 
investigating authority must treat that  product  as a whole for, inter alia , the following purposes:  
determination of the volume of dumped  imports, injury determination, causal link between dumped 
imports and injury to domestic industry, and cal culation of the margin of dumping.  Moreover, 
according to Article VI:2 of the GATT 1994 and Article 9.2 of the  Anti-Dumping Agreement , an anti-
dumping duty can be levied only on a dumped pro duct.  For all these purposes, the product under 
investigation is treated as a whole, and export tr ansactions in the so-calle d "non-dumped" sub-groups 
(that is, those sub-groups in which the weighted average normal value is less than the weighted 
average export price) are not excluded.  We see no basis, under the  Anti-Dumping Agreement , for 
treating the very same sub-group transactions as "non-dumped" for one purpose and "dumped" for 
other purposes.  Indeed, in the anti-dumping investig ation at issue in this dispute, the product as a 
whole—softwood lumber—has been treated as a "dumpe d" product, except at the stage of zeroing. 
100. Moreover, we observe that Article 2.4.2 c ontains no express language that permits an 
investigating authority to disregard the results of  multiple comparisons at the aggregation stage.  
Other provisions of the  Anti-Dumping Agreement  are explicit regarding the permissibility of 
disregarding certain matters.  For example, Article 2.2.1 of the  Anti-Dumping Agreement , which 
deals with the calculation of normal value, sets forth the  only  circumstances under which sales of the 
like product may be disregarded.159  Similarly, Article 9.4 of the Anti-Dumping Agreement  expressly 
directs investigating authorities to "disregard" zero and  de minimis  margins of dumping, under 
certain circumstances, when calculating the weighted  average margin of dumping to be applied to 
exporters or producers that have not been individu ally investigated.  Thus, when the negotiators 
sought to permit investigating authorities to disreg ard certain matters, they did so explicitly.  
101. We now turn to the implications of zeroing as applied in this case.160  Zeroing means, in 
effect , that at least in the case of  some  export transactions, the export prices are treated as if they 
were less than what they actually are.  Zeroi ng, therefore, does not take into account the  entirety  of 
the  prices  of  some  export transactions, namely, the prices of export transactions in those sub-groups 
                                                      
159Article 2.2.1 of the  Anti-Dumping Agreement  stipulates that: 
[s]ales of the like product in the domes tic market of the exporting country ... 
may be disregarded in determining normal value  only if the authorities 
determine that such sales are made within an extended period of time in 
substantial quantities and are at prices which do not provide for the recovery of all costs within a reasonable period of time.  (footnotes omitted;  emphasis 
added) 
160For a description of zeroing, see supra , para 64. WT/DS264/AB/R 
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in which the weighted average normal value is  less than the weighted average export price.
161  Zeroing 
thus inflates the margin of dumping for the product as a whole. 
102. We understand the United States to argue that a prohibition of zeroing would amount to a 
requirement to compare "dumped" and "non-dumped"  transactions at the aggregation stage.  The 
United States contends that results of multiple comparisons in which the weighted average normal 
value exceeds the weighted average export pri ce may be excluded because they do not involve 
"dumping".  As we have stated earlier, the terms "dumping" and "margins of dumping" in Article VI 
of the GATT 1994 and the  Anti-Dumping Agreement  apply to the product under investigation as a 
whole and do not apply to sub-group levels.  The treatment of comparisons for which the weighted 
average normal value is less than  the weighted average export price as "non-dumped" comparisons is 
therefore not in accordance with the re quirements of Article 2.4.2 of the  Anti-Dumping Agreement.   
103. For all these reasons, we do not agree with the United States that the results of comparisons at 
the sub-group level constitute margins of dumping.  Nor do we agree with the United States that the 
results of the comparisons in which the weighted  average normal value is less than the weighted 
average export price could be excluded in calculating a margin of dumping for the product under 
investigation as a whole.    
4. Other Methodologies as Context  
104. We recall that the issue of whether zeroing is  permitted under the transaction-to-transaction 
methodology or the average-to-individual methodology is not before us in this appeal.  The United 
States does not argue otherwise162, but it emphasizes that this issue must be considered as it provides 
"important context"163 for consideration of the permissibilit y of zeroing under the average-to-average 
methodology.   
105. We fail to see how we could find that the tr ansaction-to-transaction and average-to-individual 
methodologies could provide contextual support for th e United States' interpretation of Article 2.4.2 
without examining first whether zeroing is permitted under those methodologies.164  Indeed the United 
                                                      
161We note that the Panel reached the same conclusion in para. 7.216 of its Report. 
162United States' response to questioning at the or al hearing.  The United States acknowledged that 
"there is not a formal claim before you under these two methodologies."  
163United States' response to questi oning at the oral hearing.  
164In response to questioning at the oral hearing, the United States asserted that, in its view, zeroing is 
permitted under all three methodologies set out in Article 2.4.2.  In contrast, Canada argued that zeroing is 
permitted under the third methodology but prohibited under the first two methodologies set out in Article 2.4.2.  WT/DS264/AB/R 
 Page 37 
 
 
States faulted the Panel for making observations in this regard.165  As we have observed, the United 
States acknowledged at the oral hearing that the issu e before us is confined to determining whether 
zeroing is prohibited under the average-to-average methodology.166   
106. We turn now to examine the United States' argu ments concerning the relevance to this case of 
the historical background of Article 2.4.2. 
5. Historical Background of Article 2.4.2  
107. The United States argues that recourse to th e circumstances of the conclusion of the  Anti-
Dumping Agreement   is appropriate in this case as a s upplementary means of interpretation under 
Article 32 of the  Vienna Convention on the Law of Treaties .167  Specifically, the United States argues 
that an examination of the historical background168 of the  Anti-Dumping Agreement  demonstrates 
that two practices employed by WTO Members to establish "margins of dumping" at the time of the Uruguay Round negotiations are relevant for an interp retation of Article 2.4.2.  The first practice 
consisted of making "asymmetrical" comparisons, th at is, comparisons between individual export 
transactions and weighted average normal values in  anti-dumping investigations.  The second practice 
was zeroing.  The United States asserts that, because  the negotiators were able to agree only on the 
issue of "asymmetry"
169 at the conclusion of the negotiations, it would be reasonable to expect, that, 
absent modified text in the Anti-Dumping Agreement  addressing zeroing, that practice would 
continue to be consistent with the  Anti-Dumping Agreement .   
108. We are unable to agree with the United States.  The material to which the United States refers 
does not, in our view, resolve the issue of whether the negotiators of the  Anti-Dumping Agreement  
intended to prohibit zeroing.  In any event, we ha ve concluded, based on the ordinary meaning of 
Article 2.4.2 read in its context, that zeroing is prohibited when establishing the existence of margins 
of dumping under the weighted-average-t o-weighted-average methodology.   
                                                      
165See United States' appellant's submission, para. 47 (referring to Panel Report footnote 361 to 
para. 7.219). 
166See supra , para. 63. 
167Done at Vienna, 23 May 1969, 1155 U.N.T.S. 331;  8 International Legal Materials 679. 
168The "historical background" that the United States invokes as support for its position consists of 
prior GATT panel reports and certain proposals submitted by various delegations in the context of the 
negotiations on the  Anti-Dumping Agreement .  (See United States' appellant's submission, paras. 50–54)  At the 
oral hearing, the United States acknowledged that these materials do not constitute "travaux préparatoires". 
169By "asymmetry" the United States refers to the practice of establishing margins of dumping by 
comparing "an average on one side of the comparison [to] a single transaction on the other side [of the 
comparison]" (United States' appellant's submission, para. 51) WT/DS264/AB/R 
Page 38  
 
6. Relevance of Appellate Body Report in  EC – Bed Linen
 
109. With regard to the relevance to this a ppeal of the Appellate Body Report in  EC – Bed Linen , 
the United States has requested that the Appellate  Body not "import wholesale the findings and 
reasoning"170 from that case.  In making this request, the United States underlines that it was not a 
party to the dispute in  EC – Bed Linen , that the arguments raised in that case were different, and that 
the United States' practice of zeroing was not at issue in that appeal.171   
110. Canada acknowledges that the "Appellate Body is not subject to a strict doctrine of stare 
decisis ", but adds that "the suggestion that each case st ands on its own and should be decided without 
regard to the recommendations and rulings of the Dispute Settlement Body in other WTO cases would 
deny the major achievement of a coherent body of WTO case-law or jurisprudence."172   
111. The Appellate Body found in  Japan – Alcoholic Beverages II   that: 
[a]dopted panel reports are an important part of the GATT acquis .  
They are often considered by subsequent panels.  They create legitimate expectations among WT O Members, and, therefore, 
should be taken into account where they  are relevant to any dispute.  
However, they are not binding, ex cept with respect to resolving the 
particular dispute between the parties to that dispute.
173 
  The Appellate Body further clarified in  US – Shrimp (Article 21.5 – Malaysia) that:  
[t]his reasoning [from Japan – Alcoholic Beverages II ] applies to 
adopted Appellate Body Reports as well.  Thus, in taking into 
account the reasoning in an adopted Appellate Body Report ⎯ a 
Report, moreover, that was directly relevant to the Panel's disposition 
of the issues before it ⎯ the Panel did not err.  The Panel was correct 
in using our findings as a tool for its own reasoning.174 
112. Bearing these previous findings in mi nd, and noting Article 3.2 of the Understanding on 
Rules and Procedures Governing the Settlement of Disputes  (the "DSU"), which states that "the 
dispute settlement system of the WTO is a central element in providing security and predictability to 
the multilateral trading system," we have given full c onsideration to the particular facts of this case 
and to the arguments raised by th e United States on appeal, as well as to those raised by Canada and 
                                                      
170United States' appellant's submission, para. 58. 
171We note that the United States was a th ird participant in that dispute.   
172Canada's appellee's submission, para. 19. 
173Appellate Body Report, Japan – Alcoholic Beverages II , at 108. (footnote omitted) 
174Appellate Body Report, US – Shrimp (Article 21.5 – Malaysia) , para. 109.  WT/DS264/AB/R 
 Page 39 
 
 
the third participants.  In doing so, we have take n into account the reasoning and findings contained in 
the Appellate Body Report in  EC – Bed Linen , as appropriate.175 
7. Article 17.6(ii) of the  Anti-Dumping Agreement    
113. The United States claims that, in finding that "zeroing" is prohibited under Article 2.4.2, the 
Panel failed to apply the standard of revi ew set out in Article 17.6(ii) of the  Anti-Dumping 
Agreement , which provides, in relevant part, that: 
... the panel shall interpret the rele vant provisions of the Agreement 
in accordance with customary rule s of interpretation of public 
international law.  Where the panel finds that a relevant provision of the Agreement admits of more than one permissible interpretation, 
the panel shall find the authorities' me asure to be in conformity with 
the Agreement if it rests upon one of those permissible interpretations. 
114. The United States also claims that "the Panel  acknowledged   that the term 'margins of 
dumping' in Article 2.4.2 may be in the plural  'precisely because multiple averaging produces a 
dumping margin for each category of product/transaction compared ... '."
176  Thus, according to the 
United States, the Panel "effectively acknowledged that it was  permissible  to interpret Article 2.4.2 
as addressing only the manner in which comparisons between export price and normal value are to be 
made."177  The United States submits that if the Panel had applied the standard of review set out in 
Article 17.6(ii) of the  Anti-Dumping Agreement , it would have ended its analysis of Article 2.4.2. 
with that acknowledgment.  
115. We do not agree with the United States.  Our r eading of the Panel Report does not indicate to 
us that the Panel  acknowledged  that margins of dumping can be established for sub-groups.  Rather, 
the Panel emphasized that "[ a]lthough it could be argued  that this phrase is in the plural precisely 
because multiple averaging produces a dumping margin for each category of product/transaction 
compared, it could just as well be the case that it is in the plural because in  many cases there will be 
multiple exporters or producers."178  In our view, "margins of dumping" is in the plural because a 
                                                      
175We note that neither the United States nor Canada has argued that the reasoning and findings of the 
Appellate Body should  not  be taken into account in this case. (United States' appellant's submission,  
paras. 55–58;  Canada's appellee's submission, paras. 18–21) 
176United States' appellant's submission, para. 34 (quoting Panel Report, para. 7.210). (emphasis added)  
177Ibid. 
178Panel Report, para. 7.210. (emphasis added) WT/DS264/AB/R 
Page 40  
 
single investigation may involve establishing marg ins of dumping for a number of exporters or 
producers
179, and may relate to more than one country.180 
116. The United States also claims that its interpretation of Article 2.4.2 is "permissible", inter 
alia, on the ground that "margins of dumping" within the meaning of Article 2.4.2 can be established 
for product types.  In our view, the  Anti-Dumping Agreement , when interpreted in accordance with 
customary rules of interpretation of public internat ional law, as required by Article 17.6(ii), does not 
permit establishing margins of dumping for product types when the product as a whole is under 
investigation.  The United States' interp retation of Article 2.4.2 is, therefore, not  a "permissible 
interpretation" of that provision within the meaning of Article 17.6(ii).181  Hence, we see no error on 
the part of the Panel with respect to the Pane l's obligations under Article 17.6(ii) of the  Anti-Dumping 
Agreement .   
8. Conclusion  
117. In the light of the foregoing, we uphold the Panel's finding that the United States acted 
inconsistently with Article 2.4.2 of the  Anti-Dumping Agreement  in determining the existence of 
margins of dumping on the basis of a methodology incorporating the practice of "zeroing".182   
V. Allocation of Financial Expenses for Abitibi 
A. Introduction 
1. Factual Background  
118. Before we begin our analysis, we review the background information that is relevant to the 
issue raised by Canada on appeal.   
                                                      
179In this regard, we observe that Article 6.10 of the  Anti-Dumping Agreement   requires that the 
investigating authorities "shall, as a rule, determine an individual margin of dumping for each known exporter 
or producer  concerned of the product under investigation." (emphasis added) 
180See Article 3.3 of the  Anti-Dumping Agreement .   
181We note that the Panel referred in footnote 343 to para. 7.196 of the Panel Report to the IDM's 
references to Sections 771(35)(A) and 771(35)(B) of the Un ited States' Tariff Act.  Our task in this appeal is 
confined to clarifying certa in provisions of the WTO  Anti-Dumping Agreement   as applied by USDOC in the 
anti-dumping investigation at issue.  
182Panel Report, paras. 7.224 and 8.1(a)(i).    WT/DS264/AB/R 
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119. The issue on appeal pertains to the alloca tion of financial expenses for Abitibi for its 
softwood lumber production.  In its investiga tion, USDOC, "consistent with its 'established 
practice'"183  adopted the so-called cost-of-goods-sol d ("COGS") methodology to calculate and 
allocate financial expenses.184  In essence, this methodology allocat es the total financial expenses for 
the company as a whole to the product under investig ation (softwood lumber in this case) on the basis 
of a comparison of the total cost of goods sold for the entire production of the company, on the one 
hand, and the total cost of goods sold for the pr oduct under investigation, on the other.  Hence its 
nomenclature, the "cost of goods sold" methodology.185   
120. In its questionnaire, USDOC requested Abitibi to calculate and allocate its financial expenses 
on the basis of the COGS methodology.  However, in  its response to the questionnaire, Abitibi used a 
different methodology for calculating and allocati ng financial expenses for its softwood lumber 
production, namely a "total assets-based methodology".186  Abitibi claimed that softwood lumber 
production requires fewer assets than production of Abitib i's other products (that is, it is less capital 
intensive) and, therefore, requires less financing th an the production of Abitib i's other products, such 
as newsprint, pulp, and other pape r products.  Under this alternat ive methodology, Abitibi allocated 
its financial expenses "among its different busin ess segments based on the total assets required to 
produce and sell each different product as a  percentage   of the  total  assets used to produce and sell 
all  [Abitibi's] products."187  From this asset-based ratio, Abitibi then derived its financial expenses for 
its softwood lumber production and then divided th is amount by the cost of goods sold for that 
production. 188 
                                                      
183Panel Report, para. 7.228.  
184Although in describing the methodologies at issue we use the term "financial expenses", which may 
include many types of financial expenses, the financial expense at issue in this case is, in essence, the net 
interest expense of Abitibi for its softwood lumber production.  
185For details on the COGS methodology followed by USDOC, see United States' appellee's 
submission, para. 11.  
186Canada's other appellant's submission, para. 20.  See also Canada's other appellant's submission, 
para. 17. 
187Ibid., para. 19. (emphasis added) 
188With respect to Abitibi's allocation methodology, see also Canada's other appellant's submission, 
para. 18.  WT/DS264/AB/R 
Page 42  
 
121. USDOC nevertheless applied its own me thodology and, in doing so, stated: 
[USDOC] disagree[s] with Abitibi that [it] should depart from its 
established practice of calculating th e financial expense ratio based 
on the financial expenses and cost  of goods sold from the parent 
company's audited consolidated financial statements (i.e., based on the concept that money is fungible).  Because there is no bright-line definition in the Act of what a financial expense is or how the 
financial expense rate should be calculated, [USDOC] has developed 
a consistent and predictable prac tice for calculating and allocating 
financial expenses.  This method is  to calculate the rate as the 
percentage of net interest expense over cost of sales, based on the consolidated financial statemen ts of the respondent's parent 
company.  Further, the record of this investigation does not support 
the conclusion that [USDOC]'s methodology distorts the allocation of Abitibi's financial expenses.  Setting aside Abitibi's assumptions that the debt of the company only relates to assets belonging to the pulp and paper activities, [USDOC]'s method addresses Abitibi's concern that those activities are more capita l intensive.  Specifically, those 
activities would have a higher depreciation expense on their 
equipment and assets.  Thus, when the consolidated financial expense rate is applied to the cost of manufacturing of lumber products, less interest will be applied because the total cost of manufacturing for lumber products includes a lower depreciation expense.  In view of 
the above factors, [USDOC has] used  the verified cost of goods sold 
including depreciation submitted as part of Abitibi's revised financial expense ratio calculation to allo cate the company's net financial 
expenses.
189  
2. Canada's Appeal  
122. On appeal, Canada raises three issues:  first, Canada refers to the finding of the Panel that the 
phrase "consider all available evidence on the proper allocation of costs", in the second sentence of 
Article 2.2.1.1, "does not require that inv estigating authorities compare various allocation 
methodologies to assess their advantages and disadva ntages but to 'consider' all available evidence on 
the proper allocation of costs."190  Canada argues that this finding of the Panel equates the requirement 
to "consider" to a "mere requirement for an inv estigating authority to take notice of evidence 
presented to it".191  Secondly , Canada reads Article 2.2.1.1 as c ontaining an "express preference" for 
the use of allocation methodologies used by the producer s, in so far as they have been historically 
utilized192;  however, Canada would not agree that investigating authorities are  never   required to 
                                                      
189Panel Report, para. 7.228 (quoting USDOC Issues and Decision Memorandum, Comment 15, p. 77).  
(Exhibit CDA-2 submitted by Canada to the Panel) (footnote omitted) 
190Panel Report, para. 7.238.  
191Canada's other appellant's submission, para. 34.   
192Ibid., para. 48.   WT/DS264/AB/R 
 Page 43 
 
 
consider available evidence provided by a produ cer that has not been "historically utilized".193  
Canada relies for this position on the phrase "in particular in relation to", which follows the 
"historically utilized" phrase, arguing that it "narrows  the scope of the eviden ce that an investigating 
authority may refuse to regard as 'controlling'."194  Thirdly , with respect to Article 2.2.2 of the  Anti-
Dumping Agreement , Canada appeals the Panel's finding that  an unbiased and objective investigating 
authority could have allocated Abitibi’s financia l expenses on the basis of USDOC's methodology.  
Canada requests that the Appellate Body declare th is conclusion of the Panel to be "without effect"195 
and "direct the United States to weigh the advantages and disadvantages of these methodologies in order to reach a 'proper' determination on an accurate allocation of financial costs".
196 
123. The United States requests the Appellate Body to uphold the Panel's findings concerning the 
allocation of financial expenses for Abitibi.  Accordi ng to the United States, Canada's appeal is based 
in part on a mischaracterization of the Panel's findi ngs;  for instance, the Panel did not, according to 
the United States, find that the obligation to "c onsider" could be satisfied by "merely accepting 
evidence".  The United States further submit s that the phrase in the second sentence of 
Article 2.2.1.1—"including that which is made available by the exporter or producer"— limits   the 
requirement to consider evidence submitted by a producer to circumstances where a proposed 
allocation has been historically utilized.  As fo r the phrase beginning with "in particular in relation 
to", in the second sentence of Article 2.2.1.1, the Unite d States contends that it relates to the first part 
of the second sentence of Article 2.2.1.1, and not to the phrase beginning with "including".  
Consequently, the phrase beginning with "in particular  in relation to" does not modify the requirement 
with respect to using historically utilized alloca tions.  The United States furthermore argues that 
USDOC was not obligated to make factual findings as  to the advantages or disadvantages of either of 
the methodologies that it considered.  According to  the United States, it is evident from USDOC's 
determination that USDOC gave a ttention to and took into account the evidence presented by Abitibi.  
In the United States' view, the Panel therefore co rrectly found that USDOC had "considered" Abitibi's 
proposed cost allocation methodology within the meaning of Article 2.2.1.1. 
                                                      
193In this regard, we note footnote 17 to para. 19 of Canada's other appellant's submission which states: 
As required by both Canadian and U.S. generally accepted accounting 
principles, Abitibi reports in its financial statements and normal accounting 
the total amount of financial expense incurred in a given period as a distinct income statement line item, "Interest on long term debt," without allocation 
to particular products.  Abitibi Section A Questionnaire Response (June 22, 
2001), Annex 12, at 249 (Exhibit CDA-82). 
194Canada's other appellant's submission, para. 46.  
195Ibid., para. 53. 
196Ibid., para. 54. WT/DS264/AB/R 
Page 44  
 
124. We will address these issues in turn.   
B. Analysis  
125. Before we begin our analysis, it is useful to set out the full text of the first and second 
sentence of Article 2.2.1.1.  
126. Article 2.2.1.1, first sentence, stipulates that: 
For the purpose of paragraph 2, costs shall normally be calculated on 
the basis of records kept by the exporter or producer under investigation, provided that such records are in accordance with the 
generally accepted accounting principl es of the exporting country and 
reasonably reflect the costs associated with the production and sale of the product under consideration.   
 Article 2.2.1.1, second sentence provides: 
Authorities shall consider all available evidence on the proper 
allocation of costs, including that which is made available by the exporter or producer in the course of  the investigation provided that such allocations have been histori cally utilized by the exporter or  
producer, in particular in relation to establishing appropriate 
amortization and depreciation periods and  allowances for capital expenditures and other development costs. 
1. "Consider All Available Evidence on the Proper Allocation of Costs" in 
Article 2.2.1.1  
127. Canada argues that the Panel erred in finding that the second sentence of Article 2.2.1.1 "does 
not require that investigating authorities compar e various allocation methodologies to assess their 
advantages and disadvantages but to 'consider' a ll available evidence on the proper allocation of 
costs."197 
                                                      
197Canada's other appellant's submission, para. 24 (quoting Panel Report, para. 7.238).  WT/DS264/AB/R 
 Page 45 
 
 
128. The Panel found, in this respect, as follows: 
Finally, Canada argues that DOC could not have complied with its 
obligations under Article 2.2.1. 1 without assessing the advantages 
and disadvantages of the methodology used by DOC and asset-based allocation methodologies in light of the evidence submitted by Abitibi.  In our discussion of Article 2.2.1.1 in paragraphs 7.236-7.237 supra , we have set out our understanding with respect to the 
obligations imposed by that provision.  In our view, Article 2.2.1.1, 
when stating that "[a]uthorities sha ll consider all available evidence 
on the proper allocation of costs ", does not require that investigating 
authorities compare various allocation methodologies to assess their advantages and disadvantages but to "consider" all available evidence 
on the proper allocation of costs .  We find that DOC met the 
requirement set forth in Article 2.2.1.1.198 
129. We observe, as a preliminary matter, that we disagree with Canada's claim that the Panel 
reduced the requirement to "consider all available evidence" to a mere procedural requirement that 
can be fulfilled, to use Canada's language, by simply "receiving evidence"199 or "tak[ing] notice of 
evidence".200  We do not see anything in the Panel report that would suggest that the Panel intended to 
interpret the phrase "consider all available ev idence" in the manner identified by Canada. 
130. Nevertheless, our reading of th e Panel Report on this question s hows that the Panel gave scant 
attention to the interpretation of the word "consid er" when dealing with Canada's specific argument 
that USDOC "could not have complied with its ob ligations under Article 2. 2.1.1 without assessing the 
advantages and disadvantages of the methodology used by [US]DOC and asset-based allocation 
methodologies in light of the evidence submitted by Abitibi".201 
131. The Panel refers to paragra phs 7.236 and 7.237 of its Report as "set[ting] out [its] 
understanding"202 of the obligations203 imposed by Article 2.2.1.1.  A plain reading of those 
paragraphs reveals, however, that the Panel did not examine either the meaning or scope of the word 
"consider" as used in the second sentence of Article 2. 2.1.1.  The Panel merely restated the text of 
Article 2.2.1.1 and did not offer any analysis of the phrase "consider all available evidence".  In 
paragraph 7.238, before addr essing Canada's argument concerning the requirement to compare 
                                                      
198Panel Report, para. 7.238. (original italics;  underlining added) 
199Canada's other appellant's submission, para. 2. 
200Ibid., paras. 2 and 34. 
201Panel Report, para. 7.238. 
202Ibid. 
203The obligations in the Panel's view are: that costs be calculated on the basis of records kept by the 
exporter or producer under investigation;  that investig ating authorities consider all available evidence on the 
proper allocation of costs including that which is made available by respondents in the context of an anti-dumping investigation;  and that costs be  adjusted under certain circumstances.   WT/DS264/AB/R 
Page 46  
 
alternative allocation methodologies, the Panel addr essed certain other arguments by Canada relating 
to the second sentence of Article 2.2.1.1, but not  relating to the issue whether a comparison of 
allocation methodologies was required under that provision.   The Panel then made the broad and 
unqualified statement that "Article 2.2.1.1 ... does no t require that investigating authorities compare 
various allocation methodologies to asses their advantages and disadvantages."
204   
132. We are unable to discern any reasons in the Panel Report for the Panel's assertion that 
Article 2.2.1.1, in requiring an authority to "c onsider all available evidence", does not require the 
comparison of allocation methodologies to asses their advantages and disadvantages.  Nor can we infer the Panel's reasoning from its findings addressi ng other arguments made by Canada with respect 
to the requirement to "consider all available evid ence", which findings Canada does not appeal.  None 
of the statements made by the Panel on the other arguments made by Canada
205, taken separately or 
read together, discloses the Panel's view as to the proper interpretation of the phrase "consider all 
available evidence on the proper allocation of cost s".  Nor do we see a finding or statement by the 
Panel that, in this particular case, USDOC's consid eration of evidence included explicitly or implicitly 
a comparison of alternative allocation methodologies.206  The Panel simply concluded, without 
providing any reasoning, that the phrase "consider a ll available evidence on the proper allocation of 
costs" "does not require that investigating au thorities compare various allocation methodologies to 
assess their advantages and disadvantages".207  By not qualifying the statement in any way, we cannot 
but read the Panel to mean that a comparison of allocation methodologies is  never  "require[d]" by 
the second sentence of Article 2.2.1.1.   
133. Having explained our understanding of the Pa nel's approach to the phrase "consider all 
available evidence on the proper allocation of costs", we  turn to our own analysis of that phrase.  We 
begin, as always, with the ordinary meaning of the terms of the provision in question, in their context and in the light of their object and purpose.  The ordinary meaning of the term "consider" is, inter 
                                                     
 
204Panel Report, para. 7.238.  
205These statements by the Panel are as follows:  that "using generic reasoning in support of a specific 
determination [does not] constitute[], in and of itself, a reason which would justify a conclusion that [the 
requirement to 'consider all available evidence' has been violated]";  that USDOC's statement th at the "record of 
this investigation does not support the conclusion that [USDOC's] methodology distorts the allocation of 
Abitibi's financial expenses" "could not have been made without [US]DOC having examined the evidence and 
considered the arguments relevant to the issue";  and that an examination of the discussion, in the USDOC's 
Issues and Decision Memorandum, following that statement, "shows that [US]DOC considered the main 
argument that Abitibi put forward in support of its proposed allocation methodology". (Panel Report, 
para. 7.238) 
206In this regard, see supra , para. 121. 
207In this regard, we note that Canada has, however, not made a claim under Article 12.7 of the DSU 
that the Panel failed to set out a "basic rationale" for its finding.   WT/DS264/AB/R 
 Page 47 
 
 
alia,  to "look at attentively", "reflect on", or  to "weigh the merits of ".208  In the context of the second 
sentence of Article 2.2.1.1, we read the term "cons ider" to mean that an investigating authority is 
required, when addressing the question of proper a llocation of costs for a producer or exporter, to 
"reflect on" and to "weigh the merits of" "all availa ble evidence on the proper allocation of costs".  As 
we stated above, the requirement to "consider" evidence would not be satisfied by simply "receiving evidence" or merely "tak[ing] notice of evidence".
209 
134. We observe that the second sentence of Article  2.2.1.1 requires the consideration of "all 
available evidence on the  proper   allocation of costs". (emphasis added)  The word " proper ", in our 
view, supports our reading of the word "consider", because it suggests some degree of deliberation on the part of the investigating authority in "consider [ing] all available evidence" , so as to ensure that 
there is a proper allocation of costs.  The nature of  this deliberative process will depend on the facts of 
a particular case before the investigating authority. 
135. We are aware that the term "comparison", which is derived from the verb "compare", is used 
in other provisions of the  Anti-Dumping Agreement .  For instance, Articles 2.4 and 2.4.2 refer to the 
"comparison" of export prices and normal value, fo r purposes of establishing the existence of margins 
of dumping.  As both the word "consider" and the word "comparison" are used in the  Anti-Dumping 
Agreement , it follows, in our view, that the non-inclusion, by the drafters of the  Anti-Dumping 
Agreement , in Article 2.2.1.1 of the word "compare" is  not a mere oversight, but rather a purposeful 
act of drafting.
210   However, as we explain below, we do not believe that this requires an 
interpretation that the second sentence of Article 2.2.1.1 does not, under any circumstances , require 
an investigating authority to compare methodologies.  
136. At the oral hearing, we requested the particip ants to clarify their understanding of the word 
"consider" for purposes of interpreting the second senten ce of Article 2.2.1.1.  Canada stated that 
"consideration" and "compari son" "are very close."  The United Stat es, in turn, stated that "one way to 
consider might be to in fact compare different allocations.  There might be other ways in which those 
types of allocations could be considered". 
137. The second sentence of Article 2.2.1.1 requires an  investigating authority to "consider" all 
available evidence on the proper allocation of costs,  which in certain circumstances may require the 
                                                      
208Shorter Oxford English Dictionary , 5th ed., W.R. Trumble, A. Stevenson (eds.) (Oxford University 
Press, 2002), Vol. 1, p. 493. 
209See s upra , para. 129 as well as footnotes 199 and 200 thereto.   
210The French and Spanish versions, which are equally authentic, also employ different terms in this 
regard.  Whereas Article 2.2.1.1 uses the terms "prendre en compte" and "tomar en consideración", respectively, 
Article 2.4.2 uses the terms "comparaison" and "comparación", respectively.   WT/DS264/AB/R 
Page 48  
 
investigating authority to consider alternative a llocation methodologies.  Therefore, the issue before 
us is not simply whether the word "consider", in a nd of itself, entails a requirement to "compare".  
Rather, the issue before us is whether a requireme nt to "consider all available evidence on the proper 
allocation of costs" does or does not require an i nvestigating authority to "compare" advantages and 
disadvantages of alternative cost allocation methodologies. 
138. In our view, the parameters of the obligation to "consider all available evidence" will vary 
case-by-case.  It may well be that, in the light of the facts of a particular case, the requirement to 
"consider all available evidence" may be satisfied by the investigating authority without comparing 
allocation methodologies or aspects thereof.  Howeve r, in other instances—su ch as where there is 
compelling evidence available to the investiga ting authority that more than one allocation 
methodology potentially may be appropriate to ensure  that there is a proper allocation of costs—the 
investigating authority may be required to "reflect on" and "weigh the merits of" evidence that relates 
to such alternative allocation methodologies, in or der to satisfy the requirement to "consider all 
available evidence".  Thus, although the second senten ce of Article 2.2.1.1 does not, as a general rule, 
require investigating authorities to compare allocation methodologies to assess their respective 
advantages and disadvantages in each and every case, there may be particular instances in which the 
investigating authority may be required to compare th em in order to satisfy the explicit requirement of 
the second sentence of Article 2.2.1.1 to "consider all available evidence on the proper allocation of 
costs".    
139. In the light of the foregoing analysis, we disag ree with what we understand to be the Panel's 
interpretation of the phrase "consider all available ev idence", namely, that an investigating authority is 
never   required, by virtue of the requirement to "cons ider all available evidence", to "compare various 
allocation methodologies to assess their advantages and disadvantages".
211  In our view, that 
interpretation will not always hold true.  We therefor e reverse the Panel's finding that "Article 2.2.1.1 
... does not require that investigating authorities compare various allocation methodologies to assess 
their advantages and disadvantages but to 'consider' all available evidence on the proper allocation of 
costs".212 
140. We emphasize that our reversal of the Panel finding is limited to a disagreement with the 
Panel's interpretation of the  legal standard  against which the Panel assessed USDOC's approach to 
this issue.  We are  not  expressing a view or making any finding on whether USDOC, in the instant 
                                                      
211See supra , para. 132.  
212Panel Report, para. 7.238.  WT/DS264/AB/R 
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case, should have "compared" its own and Abitib i's methodologies and, assuming USDOC was under 
such an obligation, whether USDOC in fact complied with it.   
141. At the oral hearing, Canada clarified that it was  not  requesting us to  both  reverse the Panel's 
finding on Article 2.2.1.1  and  to find that the United States acted inconsistently with 
Article 2.2.1.1.213  Instead, Canada stated that it requested us  only  to  reverse   the Panel's aforesaid 
finding under Article 2.2.1.1.214  We therefore do not proceed to complete the legal analysis and 
examine whether the United States did or did not act c onsistently with Article 2.2.1.1 in relation to the 
phrase "consider all available evidence". 
142. As we have reversed the Panel's finding under Article 2.2.1.1 on the basis of the Panel's 
interpretation of the phrase "consider all available evidence on the proper allocation of costs", we are 
not required to address Canada's related arguments concerning the phrase "historically utilized", or its 
argument relating to the sufficiency of factual evid ence on the basis of which the Panel concluded that 
an unbiased and objective investigating authority c ould have used USDOC's cost allocation method. 
2. Consequential Claims  
143. Canada has also appealed the Panel's findings th at the United States did not act inconsistently 
with Articles 2.2, 2.2.1, and 2.4 of the  Anti-Dumping Agreement .215  The Panel found that Canada's 
claims before it under Articles 2.2, 2.2.1, and 2. 4 "rest upon a finding of violation of either 
Article 2.2.1.1 or 2.2.2 or of both."216  As the Panel found that the United States had violated neither 
Article 2.2.1.1 nor Article 2.2.2, it rejected Canada's "dependent"217 claims under Articles 2.2, 2.2.1, 
and 2.4.  Canada does not disagree with the Panel' s characterization of its claims under Articles 2.2, 
                                                      
213In its other appellant's submission, Canada requested the Appellate Body to: 
reverse  the Panel’s finding in paragraphs 7.236-7.245 and 8.1(b)(vi) of its 
report and find, instead, that the United States violated Articles 2.2, 2.2.1, 
2.2.1.1 and 2.4 of the [ Anti-Dumping ] Agreement  by imposing anti-dumping 
duties without properly weighing eviden ce on the proper allocation of costs 
under Article 2.2.1.1 and determining that an unbiased and objective 
investigating authority could make this determination without considering 
factual findings made by that investigating authority[.]  
(Canada's other appellant's submission, para. 76) 
 214Canada's opening statement at the or al hearing.  Moreover, Canada stat ed that "the facts were heavily 
contested ... and Canada does not believe that this is a point on which the Appellate Body can complete the 
analysis." 
215Panel Report, paras. 7.245 and 8.1(a)(vi).  
216Ibid., para. 7.245. 
217Ibid. WT/DS264/AB/R 
Page 50  
 
2.2.1, and 2.4 as "dependent"
218 on a violation of Article 2.2.1.1;  indeed, Canada itself describes these 
claims of violations as "consequential".219  Canada submits that "given the legal errors made by the 
Panel in respect of Article 2.2.1.1, the Panel's determ inations with respect to Article 2.2, 2.2.1 and 2.4 
are also incorrect."220  
144. As we have reversed the Panel's findings under Article 2.2.1.1, we must, as a consequence, 
reverse the Panel's findings that rest upon a finding of  a violation of Article 2.2.1.1.  We therefore 
reverse the Panel's findings pursuant to Articles 2.2, 2.2.1, and 2.4 of the  Anti-Dumping Agreement .   
145. We note that Canada requests us not only to re verse the Panel's findings under Articles 2.2, 
2.2.1, and 2.4 of the  Anti-Dumping Agreement , but also to find that the United States acted 
inconsistently with these provisions.  At the oral hearing, Canada confirmed that it wished us to 
complete the Panel's legal analysis to this effect.  However, there is no finding by us of a violation of 
Article 2.2.1.1—which violation w ould constitute the premise for a violation of Articles 2.2, 2.2.1, 
and 2.4—and, therefore, there is no basis for us  to determine as a consequence whether the United 
States has acted inconsistently with Articles 2.2, 2.2.1, and 2.4 of the  Anti-Dumping Agreement . 
VI. Calculation of By-Product Revenue for Tembec 
A. Introduction 
1. Background  
146. Before we begin our analysis, we review the background information that is relevant to the 
issue raised by Canada on appeal.   
147. As explained by the Panel, wood chips are one of the by-products of the process of sawing 
logs into softwood lumber.221  These wood chips are subsequently sold by sawmills, for example, to 
pulp mills to produce paper.  In calculating the co st of production of softwood lumber for Tembec and 
West Fraser, two companies under investigation, USDOC treated the revenue generated by those 
companies' "sales"222 of wood chips as income and subtracted from the cost of production of softwood 
lumber the amount of that income.  The issue ra ised by Canada before the Panel concerned the 
determination of the appropriate amounts to be attributed to the sales of wood chips by Tembec and 
                                                      
218Panel Report, para. 7.245. 
219Canada's other appellant's submission, para. 5. 
220Ibid. 
221Panel Report, para. 7.306. 
222In this Report, we refer to the sales to affiliated pa rties by West Fraser, as well as the interdivisional 
transfers by Tembec, as "sales".   WT/DS264/AB/R 
 Page 51 
 
 
West Fraser.223  More specifically, the issue before the Pa nel was "the extent to which [USDOC] was 
required to, or precluded from, deriving wood chip revenue from valuations in the records of the 
producers in question."224 
148. The Panel observed that Tembec and West Fraser had different corporate structures.  The 
Panel stated that Tembec was a single entity including, inter alia , sawmills and pulp mills, and that 
Tembec's sawmills sold wood chips to Tembec's pulp mills through " interdivisional transactions "225, 
that is, through  transactions within the same company .  In contrast, West Fraser, according to the 
Panel Report, "was divided in legally separate companies"226, and sold wood chips to  " affiliated 
parties "227 (and not to entities within the same company ). 
149. In the case of West Fraser, USDOC valued sales transactions to  affiliated   parties based on 
the price of wood chips sold by West Fraser  to  unaffiliated   parties because the transactions between 
affiliated parties did not occur at "arm's length pr ices".  In contrast, in the case of Tembec, USDOC 
concluded that the values contained in Tembec's records for  interdivisional transfers   (that is, 
transfers between various divisions of the company) of wood chips were  reasonable  and  non-
preferential ;  USDOC therefore rejected Tembec's arguments  that these internal transfer prices were 
below market prices, and declined  to value the wood chips trans actions according to actual market 
prices derived from arm's length sales made by Tembec to unaffiliated parties.228   
2. The Panel's Findings  
150. We next review briefly the Panel's findings c oncerning the valuation of wood chip revenue for 
Tembec.   
151. Canada claimed before the Panel that, in valu ing wood chip revenue on the basis of the values 
recorded in Tembec's books, USDOC acted inconsistent ly with Article 2.2.1.1, because it used records 
kept by the exporter which did not "reasonably refl ect the costs associated with the production and 
                                                      
223Before the Panel, Canada argued that USDOC should have used, with respect to West Fraser, the 
values included in that company's records for sales of w ood chips to affiliated parties in British Columbia.  With 
respect to Tembec, Canada argued that USDOC was requi red to disregard the values recorded in Tembec's 
books for internal transfers of wood chips and, instead, to us e the values of transactions with unaffiliated parties.  
(Panel Report, para. 7.307)   
224Panel Report, para. 7.307.  
225Ibid., para. 7.299. 
226Ibid., para. 7.320. 
227Ibid., para. 7.299.  
228USDOC IDM, Comment 11, pp. 60 and 61.  See also Panel Report, paras. 7.307, 7.314, and 7.327.   WT/DS264/AB/R 
Page 52  
 
sale of the product under consideration".  Canada ar gued that Article 2.2.1.1 obliges an investigating 
authority to  reject   such records.   
152. The Panel disagreed with Canada's contention that Article 2.2.1.1  requires   that an 
investigating authority  reject   the records of an exporter or pr oducer, where calculation of costs for 
the product under investigation woul d be overstated or understated if the investigating authority were 
to use those records as a basis for its cost calculations.  The Panel therefore rejected Canada's claim.
229  
The Panel proceeded, however, with its analysis, in addressing other arguments made by Canada, on 
the assumption  that Article 2.2.1.1 imposes on an investig ating authority the obligation posited by 
Canada, that is, to reject an exporter's record wh en the records do not "reasonably reflect the costs 
associated with the production and sale of  the product under consideration."   
153. Canada also argued before the Panel that US DOC applied a different methodology in the case 
of Tembec than in the case of West Fraser and thereby failed to act in an even-handed manner.  
Canada asserted that, by applying a different methodology to Tembec than to West Fraser, USDOC 
acted in an other than "even-handed" manner.  According to Canada, the methodology applied to 
Tembec would "penalize" corporations that consum e their own by-products rather than selling these 
by-products to other separate entities.230  The Panel observed that West Fraser and Tembec "were in 
different factual situations";  specifically , that Tembec was a "single entity including, inter alia , 
sawmills and pulp mills", while "West Fraser w as divided in legally separate companies."231  T h e  
Panel found that, in the light of the different factua l situations of the two companies, USDOC did not 
"discriminate[] against Tembec by treating it differently from West Fraser."232  Moreover, the Panel 
found that USDOC's treatment of Tembec was th e same as that normally applied by USDOC for 
"valuing costs in interdivisional sales."233  As a result, the Panel rejected Canada's claim that USDOC 
"acted in a biased, non-objective or non-even-hande d manner in applying a methodology to Tembec 
different from that used with respect to West Fraser."234 
154. The Panel furthermore rejected Canada's claim th at Article 2.2.1.1 requires that a by-product 
offset must reasonably reflect the  market value   for that by-product.  The Panel also concluded that an 
                                                      
229Panel Report, para. 7.316.  
230In addition, Canada claimed that Article 2.2.1.1 requires that a by-product offset must reasonably 
reflect the  market value   of this by-product, and that USDOC's valuation was incorrect because it assumed—
erroneously, according to Canada—that by-products have costs and can yield profits. Finally, Canada also 
brought claims under Articles 2.2, 2.2.1, and 2.4 of the  Anti-Dumping Agreement . (Panel Report,  
paras. 7.321–7.325) 
231Panel Report, para. 7.320.  
232Ibid. 
233Ibid. 
234Ibid.  WT/DS264/AB/R 
 Page 53 
 
 
unbiased and objective investigating authority "could have used the actual cost of the input as 
recorded in Tembec's books as a benchmark for valu ing internal transfers of wood chips" and that 
such an authority "could have determined that the valuation in Tembec's books for internal transfers of 
wood chips was not unreasonable."235 
3. Canada's Appeal  
155. Canada appeals only the Panel's conclusions concerning Tembec, and does not appeal those 
concerning West Fraser.236  However, in its arguments on appeal , Canada refers to USDOC's approach 
to valuing by-product revenue for West Fraser in support of its argument that USDOC failed to treat 
Tembec in an even-handed manner.  Canada argues that corporate structure provides "no rationale"237 
for the use of different tests in the valuation of by-products.  USDOC's "new test"—the test it applied 
to Tembec—is not even-handed because "it serves only to lower the by-product offset for corporations 
with internal transfer values."238   
156. Canada further argues that USDOC applied its ar m's-length test to West Fraser to determine 
whether affiliated by-product sales reflected "market value", but did not apply that test in the case of 
Tembec.  The reason for this uneven treatment, in Canada's view, was related solely to Tembec's 
corporate structure.   
157. Canada submits that the Panel did not consider  whether the "different factual situations" 
provided a reasonable justification for the different  treatment by USDOC and relies on the Appellate 
Body's ruling in  US – Hot-Rolled Steel   to argue that USDOC "failed to exercise its discretion in an 
even-handed fashion".239  Canada argues that USDOC's "only normal practice with by-products is to 
use the arm's length test to valu e these offsets at market value"240, but that, in the underlying 
investigation, USDOC determined that "its new 'nor mal' practice" for valuing by-product revenue was 
                                                      
235Panel Report, para. 7.324.  The Panel also rejected Canada's claims regarding Articles 2.2, 2.2.1, and 
2.4 because Canada had based these claims on the premise that the United States had acted inconsistently with 
Article 2.2.1.1.  Given that Canada had not establishe d that the United States had acted inconsistently with 
Article 2.2.1.1, the Panel rejected Canada's claims under Articles 2.2, 2.2.1, and 2.4 as well. (Panel Report, 
paras. 7.325 and 7.326) 
236Before the Panel, Canada claimed that USDOC erred both in its valuation of the by-product revenue 
for Tembec, as well as for West Fraser.  The Panel exam ined separately the conclusions of USDOC in relation 
to Tembec and West Fraser, respectively, and concluded that, with respect to both companies, USDOC had not 
acted inconsistently with Article 2.2.1.1 of the  Anti-Dumping Agreement . (See Panel Report, paras. 7.314–7.326 
for Tembec and paras. 7.327–7.348 for West Fraser) 
237Canada's other appellant's submission, para. 57.  
238Ibid., para. 61. 
239Ibid., paras. 64 and 67 (referring to Panel Report, para. 7.320) 
240Ibid., para. 72. WT/DS264/AB/R 
Page 54  
 
to "accept low book values within a single corporation."
241  In Canada's view, USDOC's departure 
from its normal practice in this case demonstrates US DOC's failure to provide even-handed treatment. 
158. The United States "does not dispute the genera l proposition that an investigating authority 
must make its determinations in an objective and even-handed manner"242;  however, the United 
States submits that the question whether USDOC' s by-product offset calculation was objective and 
even-handed is a  factual   matter falling outside the scope of appellate review.  The United States 
argues that, if the Appellate Body were not to agree that this is a factual matter and thus decides to 
consider the merits of Canada's appeal, it should reject the claim.  The United States asserts that 
Canada's argument is based on the "flawed premise"243 that Tembec and West Fraser were similarly 
situated and that, therefore, USDOC should have va lued each company's by-product revenue using the 
same methodology.  According to the United States , the different corporate structures of these two 
companies justified the use of different me thodologies by USDOC.  Canada's reliance on the 
Appellate Body Report in  US – Hot-Rolled Steel   is thus misplaced, because in that dispute the 
Appellate Body found that the same rule should a pply when comparing similar things, that is, when 
comparing affiliated transactions to affiliated tran sactions.   However, according to the United States, 
in this case, "Canada has not demonstrated that th e things being compared—interdivisional transfers, 
on the one hand, and sales between affiliated entities, on the other hand—are similar".244 
B. Analysis 
159. Before addressing the substance of Canada's appeal, we address the argument by the United 
States concerning our jurisdiction on this aspect of the appeal . 
1. The United States' Argument That the I ssue Raised by Canada Is an Issue of 
Fact 
160. The United States submits that the issue rais ed by Canada on appeal—whether USDOC 
exercised its discretion in calculating wood chip of fset revenue for Tembec in an "objective" and 
"even-handed" manner—is "a factua l [issue] and, accordingly, is beyond the scope of appellate 
review".245   
                                                      
241Canada's other appellant's submission, para. 74. (footnote omitted) 
242United States' appellee's submission, para. 62. 
243Ibid., para. 69. 
244Ibid., para. 75. 
245Ibid., para. 55.  The United States maintains that the Appellate Body should decline to consider 
Canada's argument for failure to raise an issue of law covered in the Panel Report or a legal interpretation 
developed by the Panel, within the meaning of Article 17.6 of the DSU. (United States' appellee's submission, 
paras. 55 and 63)  WT/DS264/AB/R 
 Page 55 
 
 
161. As we have noted, the United States does " not dispute the general proposition that an 
investigating authority must make its determinati ons in an objective and even-handed manner, as the 
Panel correctly found that [USDOC] did in this case"246, but does not find such an obligation in 
Article 2.2.1.1 of the  Anti-Dumping Agreement .  The United States further asserts that: 
Given that Canada’s ar gument is premised on an obligation not found 
in Article 2.2.1.1, Canada’s ar gument should not be construed as 
raising a question about the consiste ncy or inconsistency of a given 
fact or set of facts with the requirements of that provision.  Rather, it 
is a pure factual question of how the Panel assessed [USDOC's] 
actions.247 
162. We also note that, in  US – Hot-Rolled Steel , the Appellate Body stated: 
Although we believe that the  Anti-Dumping Agreement  affords 
WTO Members discretion to determine how to ensure that normal value is not distorted through the inclusion of sales that are not "in the ordinary course of trade", that discretion is not without limits.  In particular, the discretion must be exercised in an  even-handed   way 
that is fair to all parties affect ed by an anti-dumping investigation .248 
(original italics;  underlining added) 
163. In our view, the issue raised by Canada—whether  an investigating authority has exercised its 
discretion in an even-handed manner—is a question of la w.  The fact that such an "obligation [is] not 
found in Article 2.2.1.1" is not dispositive.  Whet her a particular approach of an investigating 
authority is, or is not, even-handed is, ultimat ely, a matter of the "legal characterization"249 of facts  
and, as such, a matter of law.  We are thus unable to  agree with the United States that the issue raised 
by Canada with respect to the lack of even-ha nded treatment on the part of USDOC is beyond the 
scope of appellate review.   
164. We now turn to the two factual assertions that serve as the basis for Canada's legal argument 
concerning even-handed treatment, namely that the two companies, Tembec and West Fraser, were "similarly situated" and that USDOC acted inconsiste ntly with its "normal practice" for valuing by-
products in the case of Tembec.  Without embracing Canada's articulation of the elements of even-handed treatment, we examine Canada's arguments on appeal.   
165. Canada argues that USDOC, in evaluating whether Tembec's records "reasonably reflect" the 
cost of production of the product under consideration (t hat is, softwood lumber), failed to exercise its 
                                                     
 
246United States' appellee's submission, para. 62.   
247Ibid., para. 63.   
248Appellate Body Report, US – Hot-Rolled Steel , para. 148. 
249Appellate Body Report, EC – Hormones , para. 132.  WT/DS264/AB/R 
Page 56  
 
discretion in an even-handed manner.  In this r espect, we understand Canada to argue that USDOC's 
treatment of Tembec was other than even-handed because Tembec and West Fraser were "similarly 
situated" and were treated differently in the valu ation of their by-product revenue (that is, wood 
chips)
250;  Canada also argues that USDOC failed to provide even-handed treatment to Tembec 
because USDOC, in this case, "d epart[ed] from normal practice"251, which practice, according to 
Canada, is to apply the "arm's length test for the valuation of by-products".252   
2. Differential Treatment of Tembec and West Fraser  
166. The first sentence of Article 2.2.1.1, the provi sion under which the Panel made the contested 
finding, stipulates: 
For the purpose of paragraph 2, costs shall normally be calculated on 
the basis of records kept by the exporter or producer under 
investigation, provided that such records are in accordance with the 
generally accepted accounting principl es of the exporting country and 
reasonably reflect the costs associated with the production and sale of the product under consideration. 
167. Canada contends that USDOC's treatment of Tembec was not even-handed because Tembec 
was treated unlike any other respondent (more specif ically, that Tembec was treated differently from 
West Fraser) and that USDOC's "internal transfer  test systematically increases dumping margins".
253  
Canada relies upon the Appella te Body's findings in  US – Hot-Rolled Steel  as the basis for its claim, 
and argues that in that case, the Appellate Body re jected the proposition that "high-priced sales were a 
different factual situation [from low-priced sal es] to which a different test would apply".254  Canada 
submits that the "essence of the Panel's error in the instant case was no diffe rent", because the Panel 
accepted USDOC's contention that the "different fact ual situations" at issue permitted differential  
treatment of different respondents. 
                                                      
250Canada's other appellant's submission, para. 67.  
251Ibid., para. 74.  
252Ibid., heading II.A.3, p. 26.  See also Canada's other appellant's submission, para. 72.  We note that 
Canada's appeal relates to the Panel's  arguendo   finding, which the Panel made on the assumption that 
Article 2.2.1.1 contains the obligation— previously rejected by the Panel—for an investigatin authority to reject, 
as the basis for cost calculations, the re cords of an exporter or producer that do not "reasonably reflect" the cost 
of production of the product under consideration. (See Panel Report, paras. 7.316 and 7.317) 
253Canada's other appellant's submission, heading II.A.1, p. 22. 
254Ibid., para. 64.    WT/DS264/AB/R 
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168. We recall the following statement of USDOC:  
[w]ith respect to Tembec, the facts of this case differ slightly [from 
the situation of West Fraser] in that the wood chip transactions are between divisions of the same legal entity.
255   
169. In this regard, the Panel stated that: 
West Fraser and Tembec were in different factual situations.  While 
Tembec was a single entity including, inter alia , sawmills and pulp 
mills, West Fraser was divided into legally separate companies.  For this reason, we do not consider th at [US]DOC discriminated against 
Tembec by treating it differently from West Fraser.
256 
170. As both parties have referred to certain findings in the Appellate Body Report in  US – Hot-
Rolled Steel , we briefly turn to consider the relevance of  that appeal for the issue before us.  In  US – 
Hot-Rolled Steel , the Appellate Body addressed USDOC's approach to determining whether sales to 
affiliated parties were or were not made in the ordi nary course of trade.  The analysis in that case did 
not involve the issue of whether two different resp ondents were or were not similarly situated, or 
whether the investigating authority was required to ac t in an even-handed manner in its treatment of 
two such respondents.  It is nece ssary to bear these factual differe nces in mind when relying on the 
Appellate Body Report in  US – Hot-Rolled Steel  in this appeal. 
171. Canada acknowledged at the oral hearing that neither the methodology applied by USDOC to 
Tembec, nor the methodology applied by USDOC to West Fraser, taken separately and independently of each other, is incompatible with the Anti-Dumping Agreement .
257  Canada's claim is that USDOC's 
approach to valuation of by-product revenue in the case of Tembec stands in "unjustifiable contrast"258 
to USDOC's approach in the case of West Fraser.  Canada contends that there is no reason "why Tembec, in its inter-divisional transfers, should be  treated differently from the affiliated transactions 
between West Fraser and its affiliates, some of which were wholly-owned subsidiaries."
259  Canada 
also argues that, if two respondents in an anti-dumpi ng investigation are "similarly situated, then there 
is no reason to differentiate."260  However, Canada said that if we were to find that the two 
respondents  were  not "similarly situated", Canada wo uld "insist only on a consistency 
                                                      
255USDOC IDM, Comment 11, p. 60.  
256Panel Report, para. 7.320.  
257Canada's response to questioning at the oral hearing. 
258Canada's other appellant's submission, para. 67.  
259Canada's response to questioning at the oral hearing.   
260Ibid. WT/DS264/AB/R 
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requirement".
261  The logical consequence of Canada's position, therefore, is that if the two 
respondents are  not  similarly situated, the application of the same methodology to both respondents 
would not  necessarily  be required.   
172. Canada further submits that the Panel "did not consider whether the 'different factual 
situations' provided a reasonable justif ication for the different treatment".262  Canada argues that, 
although Tembec and West Fraser differ in their corpor ate structure, this difference is not a reasonable 
justification for applying different methodologies to  the two companies, because both companies also 
share   certain characteristics.  According to Canada, Tembec is a "large corporation that has many 
divisions that operate for the most part as indepe ndent entities" and West Fraser "operates sawmills 
and controls wholly owned subsidiaries".263  As a result, according to Canada, "both companies have 
the ability to determine related-party pricing for wood chips".264    
173. In our view, Canada objects to the Panel's char acterization of the two companies, which led 
the Panel to conclude that the two companies were differently situated (such that, as a consequence, 
the application of different methodologies was justified) .  We note that the Panel, in its brief analysis 
of this issue, based itself on the fact that Tembec was a "single entity including, inter alia , sawmills 
and pulpmills", while West Fraser was "divided in le gally separate companies".  On the basis of these 
facts, the Panel drew the conclusion that West Fraser and Tembec were "in different factual situations", such that USDOC "[did not] discriminate[] against Tembec by treating it differently from West Fraser" and that, therefore USDOC had not "acted in a biased, non-objective or non-even-
handed manner".
265   
174. We recall our view266 that the question whether an inv estigating authority exercised its 
discretion in an even-handed manner is a  legal   issue;  in contrast, the underlying question in the case 
before us whether two companies were or were not in "different factual situations" is a question of 
fact.  This being a factual question, we must determin e whether there is any reason for us to interfere 
with the Panel's factual finding on this point.  As the Appellate Body has often observed, it will not 
interfere lightly with a Panel's assessment of the facts.267  We are not persuaded that in this case the 
                                                      
261Canada's response to questioning at the oral hearing. 
262Canada's other appellant's submission, para. 63 (quoting Panel Report, para. 7.320). 
263Ibid., para. 66.   
264Ibid. 
265Panel Report, para. 7.320.  
266Supra , para. 163.  
267Appellate Body Report, US –  Wheat Gluten , para. 151.  See also Appellate Report,  EC – Hormones , 
para. 132 and Appellate Body Report, Chile – Price Band System , para. 224.  WT/DS264/AB/R 
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Panel, in exercising its function as the trier of fact s, committed an error that warrants disturbing the 
Panel's factual finding.   
175. We further recall that the logic of Canada's pos ition is that if two respondents are not similarly 
situated, the application of the same methodology to both respondents would not  necessarily  be 
required.  As we do not disturb the Panel's factua l finding that Tembec and West Fraser were "in 
different factual situations", the basis for Canada's appeal regarding lack of even-handed treatment of 
Tembec has not been established.   
176. We now turn to Canada's argument that USDO C "has consistently applied the arm's length 
test for the valuation of by-products"268 and that, by departing from this "normal practice"269 in the 
case of Tembec, USDOC failed to accord even-handed treatment to Tembec. 
3. The "Requirement" to Apply a Met hodology Consistent with "Normal"  
Practice  
177. As we have noted above, Canada argues that, if the Appellate Body were to find that Tembec 
and West Fraser were  not  similarly situated, Canada w ould "only insist on a consistency 
requirement".270  According to Canada, USDOC's "only norma l practice with by-products is to use the 
arm's length test to value th ese offsets at market value".271  To address this argument, we will assume, 
arguendo , that Canada's "consistency with normal practi ce" criterion is applicable when determining 
whether the exercise of discretion by an i nvestigating authority is even-handed.   
178. As stated above, Canada is of the view that in its approach to valuing Tembec's by-product 
revenue, USDOC "depart[ed] from [its] normal practice"272 of valuing by-products.  The participants 
disagree on what constitutes USDOC's "normal" practi ce in this regard.  Canada argues that this 
"normal practice" is that used by USDOC in a previous case to value  by-products273, while the United 
States contends that the appropriate practice is USDOC's general approach to valuing  inputs in 
interdivisional transfers .  The facts concerning USDOC's normal practice on by-product revenue 
valuation in interdivisional transfers are thus contested.   
                                                      
268Canada's other appellant's submission, heading II.A.3, p. 26.  
269Ibid., para. 74.  
270Canada's response to questioning at the oral hearing.  We again recall Canada's argument that 
USDOC's "departure from normal practice in this case demonstrates its failure to provide even-handed 
treatment".  ( Ibid., para. 74) 
271Ibid., para. 72.   
272Ibid., para. 74. 
273Canada refers to the Notice of Final Determinati o n  o f  S a l e s  a t  L e s s  T h a n  F a i r  V a l u e :   P u r e  
Magnesium From Israel, 66 Fed. Reg. 49349 (Dept. Comm. Sept. 27, 2001).  ( Ibid., para. 72) WT/DS264/AB/R 
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179. The Panel found, as a matter of fact , that the methodology applied by USDOC to Tembec's 
wood chip sales was the same as that normally applied by USDOC for "valuing costs in 
interdivisional sales".
274  We understand the Panel to find th at USDOC had not departed from its 
normal practice regarding valuations in interdivisional transactions in the case of Tembec. 
180. Here again, we are not persuaded that there is  any reason that warrants disturbing the Panel's 
factual finding with respect to consistency of the methodology applied in the case of Tembec.   
4. Conclusion  
181. We recall that in this case Canada' articula tion of the elements of even-handed treatment 
depends on factual findings that the two comp anies are "similarly situated" and that USDOC 
"depart[ed] from [its] normal practice".  On these tw o elements the Panel made factual findings to the 
contrary, and we have not disturbed these factual findings.  Therefore, even assuming for the sake of 
argument that the two elements put forward by Cana da in this case could possibly serve as a basis for 
even-handed treatment, Canada's case falls on its own grounds.  We wish to make it clear that we are 
not making a finding as to whether Canada has corr ectly articulated the elements of even-handed 
treatment for the purposes of this  case.  Accordingly, we uphold the Panel's findings that the United 
States did not act inconsistently with Article 2.2.1.1 of the  Anti-Dumping Agreement . 
5. Consequential Claims  
182. Canada submits that "[a]s a result of the Panel' s findings in relation to Article 2.2.1.1, the 
Panel concluded that the United States did not act inconsistently with its obligations under 
Articles 2.2, 2.2.1 and 2.4 of the [ Anti-Dumping Agreement ]."275  As we have upheld the Panel's 
finding under 2.2.1.1, we consequently uphold the Pa nel's findings that the United States did not act 
inconsistently with Articles 2.2, 2.2.1, and 2.4 of the  Anti-Dumping Agreement . 
                                                      
274Panel Report, para. 7.320. 
275Canada's other appellant's submission, para. 75.  WT/DS264/AB/R 
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VII. Findings and Conclusions 
183. For the reasons set out in this Report, the Appellate Body: 
(a) upholds  the Panel's finding, in paragraphs 7.224 and 8.1(a)(i) of the Panel Report, that 
the United States acted inconsistently with Article 2.4.2 of the  Anti-Dumping 
Agreement  in determining the existence of margins of dumping on the basis of a 
methodology incorporating the practice of "zeroing"; 
(b) reverses  the Panel's finding, in paragraphs 7. 238–7.245 and 8.1(b)(vi) of the Panel 
Report, that the United States did not act inconsistently with Articles 2.2, 2.2.1, 
2.2.1.1, and 2.4 of the  Anti-Dumping Agreement   in its calculation of the amount for 
financial expense for softwood lumber for Abitibi, but does not make findings  on 
whether the United States acted consistently  or inconsistently with these provisions;  
and 
(c) upholds  the Panel's findings, in paragraphs 7. 319–7.326 and 8.1(b)(ix) of the Panel 
Report, that that the United States did not act inconsistently with Articles 2.2, 2.2.1, 2.2.1.1, and 2.4 of the  Anti-Dumping Agreement  in its calculation of the amount for 
by-product revenue from the sale of wood ch ips as offsets in the case of Tembec. 
184. The Appellate Body  recommends  that the Dispute Settlement Bo dy request the United States 
to bring its measure into conform ity with its obligations under the  Anti-Dumping Agreement .    WT/DS264/AB/R 
Page 62  
 
Signed in the original at Geneva this 22nd day of July 2004 by:  
 
    
_________________________ 
A.V. Ganesan 
Presiding Member 
   
 _________________________ _________________________ 
 Luiz Olavo Baptista Merit E. Janow 
 Member Member  WT/DS264/AB/R 
 Page 63 
 
 
ANNEX 1 
 WORLD TRADE  
ORGANIZATION  WT/DS264/6 
18 May 2004 
 (04-2166) 
 Original:   English 
 
 
UNITED STATES – FINAL DUMPING DETERMINATION ON  
SOFTWOOD LUMBER FROM CANADA   
 
Notification of an Appeal by the United States  
under paragraph 4 of Article 16 of the Understanding on Rules  
and Procedures Governing the Settlement of Disputes (DSU)  
   The following notification, dated 13 May 2004, from the Delegation of the United States, is 
being circulated to Members.   
_______________ 
 
Pursuant to Article 16 of the Understanding on Rules and Procedures Governing the 
Settlement of Disputes ("DSU") and Rule 20 of the Working Procedures for Appellate Review, the 
United States hereby notifies its decision to appeal  to the Appellate Body certain issues of law 
covered in the Report of the Panel on United States – Final Dumping Determination on Softwood 
Lumber from Canada (WT/DS264/R) and certain legal interp retations developed by the Panel. 
 
The United States seeks review by the Appellate  Body of the Panel's legal conclusion in 
paragraphs 7.224 and 8. 1(a)(i) of the Panel's Report, and the reasoning leading thereto.  Therein, the 
Panel found that the determination of the U.S. Department of Commerce was inconsistent with 
Article 2.4.2 of the Agreement on Implementation of Article VI of the General Agreement on Tariffs 
and Trade 1994 inasmuch as it was based on a methodology whereby sales in the United States of 
different models or types of merchandise at a bove their normal value were not accounted for by 
offsetting or reducing the amount of dumping found to have occurred with respect to other models or 
types (a methodology referred to by the Panel as "zer oing").  This finding is in error and is based on 
erroneous findings on issues of law and related le gal interpretations contai ned in paragraphs 7.213 
through 7.223 of the Panel's Report. 
 
__________