WT/DS277/R 
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ANNEX A 
 
PARTIES' RESPONSES TO QUESTIONS 
FROM THE FIRST MEETING 
  
Contents Page 
Annex A-1 Canada's Responses to Questions from the Panel and the 
United States - First Meeting A-2 
Annex A-2 United States Response to Questions from the Panel – First 
Meeting A-21 WT/DS277/R 
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 ANNEX A-1 
 
 
CANADA'S RESPONSES TO QU ESTIONS FROM THE PANEL 
AND THE UNITED STATES - FIRST MEETING 
 
24 September 2003 
 
 
To Canada 
 1. Is Canada of the view that the standard of  review under Article 11 of the DSU is stricter 
than that under Article 17.6 of the AD Agreemen t?  If so, could Canada please provide the 
Panel with specific indications of the effect of that difference, in Canada's view, on the Panel's 
consideration of the claims in this case.     In this context, could Canada please co mment on the relevance and effect of the 
Declaration of Ministers at Marrakech relating to dispute settlement under the AD and SCM 
Agreements.   
1. Canada is not saying that the sta ndard of review under Article 11 of the DSU  is stricter than 
that under Article 17.6 of the Anti-Dumping Agreement but rather that  Articles 17.6 and 11 
complement each other and should be read t ogether.  As the Appellate Body stated in US – Hot-
Rolled Steel,
1 both provisions require that panels make an  “objective assessment” of the facts of the 
matter. 
 2. In US – Cotton Yarn , the Appellate Body clarified that an objective assessment of the matter 
requires a panel to assess whether the competent author ity has evaluated all relevant factors, examined 
all pertinent facts and provided a reasoned and ad equate explanation as to how the facts as a whole 
support its determination.
2  A panel must also consider whethe r the competent authority’s explanation 
addresses fully the nature and complexities of the data  and responds to other plausible interpretations 
of the data.3  The United States appears to accept these prin ciples and, in particular, to agree that 
under both the Anti-Dumping Agreement  and the SCM Agreement, the competent authority must 
provide reasoned and adequate explana tions of the nature described above.4  
 
3. Canada further notes that the European Commun ities appears to agree with both parties that 
the duties of panels under both provisions “do not differ significantly”5, but “fails to see, on which 
legal basis Canada would ask this Panel to determine whether the USIT C has considered all the facts, 
including those that should have been  before the ITC but were not raised by the interested parties”.6  
Canada would like to clarify that it is not clai ming that the Commission should have obtained certain 
additional information that is not in its administ rative record.  Canada’s challenge concerns the 
Commission’s evaluation of the record that was before it.    
                                                     
 
1 United States – Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan , Report of 
the Appellate Body, WT/DS184/AB/R, adopted 23 August 2001, para. 55 (“ US – Hot-Rolled Steel ”). 
2 United States – Transitional Safeguard Measure on Combed Cotton Yarn from Pakistan , Report of 
the Appellate Body, WT/DS192/AB/R, adopted 5 November 2001, para. 74 (“ US – Cotton Yarn”) . 
3 Ibid. 
4 First Written Submission of the United States, paras. 67-68. 
5 Third Party Submission of the European Communities, 22 August 2003, para. 16.  
6 Ibid., para. 23. [emphasis in original]  WT/DS277/R 
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 4. Finally, regarding the Declaration  of Ministers at Marrakech Relating to Dispute Settlement 
Under the AD and SCM Agreements , the Appellate Body has ruled that it “does not prescribe a 
standard of review to be applied”.7  In any event, Canada’s interpreta tion of the applicable standard of 
review for this dispute is compatible with the Mi nisters’ recognition of the “need for the consistent 
resolution of disputes arising from anti-dumping and countervailing duty measures”. 
 
2. Is Canada of the view that in a case such as this one, involving a single injury 
determination with respect to both subsidized and dumped imports, where most of the claims 
involve identical or almost identical provisi ons of the AD and SCM Agreements, there might 
appropriately be different conclu sions under the two Agreements? 
 5. Yes, there might appropriately be different  conclusions under the two Agreements because 
certain provisions in the Anti-Dumping Agreement  differ from those in the SCM Agreement .  For 
example, Article 15.7(i) of the SCM Agreement  lists as a factor the “nature of the subsidy or subsidies 
in question and the trade effects likely to arise theref rom”.  There is no similar reference in Article 3.7 
of the Anti-Dumping Agreement . Article 3.4 of the Anti-Dumping Agreement  lists as a relevant 
economic factor “the magnitude of the margin of dumping”.  There is no similar reference in 
Article 15.4 of the SCM Agreement .  Depending on the facts at issue, textual differences such as these 
could result in different conclusions under the two Agreements.  
3. Could Canada please address what it cons iders is required to demonstrate "special 
care" as provided for in Article 3.8 of th e AD Agreement and Article 15.8 of the SCM 
Agreement.  Canada does not appear to make  independent arguments with respect to these 
claims, but rather asserts (Canada's first submi ssion at para 65) that the "failure to take 
"special care" permeates the entire determinatio n of the [USITC]".  Could Canada indicate to 
the Panel what it would have expected to see in the determination as a demonstration that 
"special care" had, in fact, been taken?  In this  context, could Canada give any examples, either 
from Canadian practice, or any other Member's pr actice, of the elements of "special care" it 
would consider appropriate?  What elements does Canada consider could demonstrate the 
appropriate special care?  
6. The “special care” standard found in Article s 3.8 and 15.8 is inextricably linked to the 
predictive nature of a “threat of injury” determina tion and provides an important safeguard against the 
dangers inherent in such an exercise.
 8  In this regard, the admonition in Articles 3.7 and 15.7 that a 
determination of threat of injury  “shall be based on facts and not me rely on allegation, conjecture or 
remote possibility”, provides important context fo r the meaning of the “special care” standard.  
 
7. When  threat of injury is at issue,  the investigating authorities must undertake a particularly 
careful examination of all the required elements in Article 3 of the Anti-Dumping Agreement  and 
Article 15 of the SCM Agreement .9  The Commission’s errors in th is dispute are such that they 
demonstrate that it failed to undertake a review of the nature required by Article 3 of the Anti-
                                                      
7 United States – Imposition of Countervailing Dutie s on Certain Hot-Rolled Lead and Bismuth Carbon 
Steel Products Originating in the United Kingdom , WT/DS138/AB/R, adopted 7 June 2000, para. 49. 
8 The United States recognized this  linkage between special care and th e predictive nature of threat 
determination in the “Statement of Administrative Action” in Message from the President of the United States 
Transmitting the Uruguay Round Agreements, Texts of  Agreements Implementing Bill, Statement of 
Administrative Action and Required Supporting Statements , H.R. Doc. No. 103-316, vol. 1 (1994), p. 855 
(“SAA”)  “[b]ecause of the predictive na ture of a threat determination, and to avoid speculation and conjecture, 
the Commission will continue using special care in making such determinations as provided in the Agreements”.  
(Exhibit CDA-22) 
9 The examination must reflect the standard of “speci al care”; as stated at paragraph 64 of Canada’s 
First Written Submission, “sp ecial” means “particularly good; exceptiona l” and “care” means “serious attention; 
heed, caution”. WT/DS277/R 
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 Dumping Agreement  and Article 15 of the SCM Agreement  in injury determinations, much less exhibit 
the special care with which an investigating authority must analyze the threat of injury. 
 8. What amounts to “special care” will depend on the facts and circumstances of each investigation.  It is best illustra ted through examples of what does not
 amount to special care.  In this 
dispute, the Commission concluded that “we find that subject imports from Canada are entering  at 
prices that are likely to have a significant depr essing or suppressing effect on domestic prices and are 
likely to increase demand for further imports”10 despite lacking sufficient evidence regarding current 
prices from which to draw conclusions regarding current price effect, much less future price effect.11  
This is only one of many examples of the Commiss ion’s failure to exercise special care.  Other 
examples of a lack of special care by the Commissi on are found in Canada’s answers to Questions #6 
and #11 of the Panel.  9. Overall, the Commission was required to provide an objective, reasoned and adequate 
explanation of how the relevant factors and re cord evidence supported its  affirmative threat 
determination and why contrary record evidence did not warrant a negative threat determination.  The 
Commission did not do this and could not do this on the basis of the record before it.  Arriving at an affirmative threat determination notwithstanding th e paucity of analysis and evidence supporting such 
a determination clearly falls below the standard  of “special care” required in a threat case. 
 
4. Article 3.8 of the AD Agreement and Article 15.8 of the SCM Agreement provide that: 
 
“with respect to cases where injury is threatened by dumped [subsidized] 
imports, the application of anti-dumpi ng [countervailing] measures shall be 
considered and decided with special care”.  
Could Canada address the implications of the phr ase "the application of … measures" in terms 
of the timing of the obligations provided for in this provision?  Could Canada indicate how, in 
its view, the "special care" requirement affects or changes the obligation in Articles 3.1 of the 
AD Agreement and 15.1 of the SCM Agreement that  a determination of injury "shall be based 
on positive evidence and involve an objective examination
…".  Is Canada arguing that the 
“special care” provision means that there is a stricter, higher standard of review is applicable in cases of threat than in cases of present material injury?  If so, could Canada point to the legal 
basis for that argument.  Or is Canada argu ing that a stricter standard of determination 
applies 
in threat cases?  If so, what, in Canada's view , does such a stricter standard of determination 
entail, and how specifically does Canada consid er that the USITC's determination shows the 
lack of special care.  
 10. With respect to the timing of the obligati ons provided for in these provisions, the phrase “the 
application of… measures” must be interpreted in its context which includes the phrase “shall be 
considered and decided” and its location within the text of Article 3 of the Anti-Dumping Agreement  
and Article 15 of the SCM Agreement  - both of which are entitled “Determination of Injury” and 
contain obligations relating to the exam ination and determination of injury.
12  The “application of … 
measures” is “considered and decided” during the inju ry investigation and dete rmination phase.  Thus, 
                                                      
10 Commission Report, p.44. [emphasis added] (Exhibit CDA-1) 
11 First Written Submission of Canada, para. 107-112; see also: In the Matter of Certain Softwood 
Lumber Products from Canada:  Final Affirmative Threat of Injury Determination, Decision of the Panel, Case 
No. USA-CDA-2002-1904-07, September 5, 2003 (Can ada-US Free Trade Agreemen t Chapter 19 Binational 
Panel Review), available online at http://www.nafta-sec-alena.org , pp. 70-73 (“NAFTA Panel Decision”).  
(Exhibit CDA-23) 
12 Other Articles govern the imposition and application of anti-dumping and countervailing duties ( e.g., 
Articles 7 and 9 of the Anti-Dumping Agreement  and Articles 17 and 19 of the SCM Agreement ).  WT/DS277/R 
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 the requirement to take special care applies to this  phase, in particular to the making of a threat of 
injury determination.  In this regard, Canada notes the statement of the panel in Mexico – HFCS  that, 
“Article 3.8 specifies that special care must be used in deciding  cases of threat of material injury”.13 
Canada further notes that the United States, when implementing this obligation, clearly linked it to the determination of threat rather th an to the application of measures.
14 
 
11. With respect to whether the special care re quirement affects or changes the obligations in 
Article 3.1 of the Anti-Dumping Agreement  and Article 15.1 of the SCM Agreement  that a 
determination of injury “shall be  based on positive evidence and invol ve an objective examination…”, 
Canada notes that Articles 3.1 and 15.1 set out overarching requirements that all injury determinations 
must meet. However, a threat of injury determina tion must also meet the “special care” requirement in 
Articles 3.8 and 15.8.  In this dispute, the Commiss ion’s errors are of such a nature that they are 
inconsistent with the requirements under both the provisions of Articles 3.1 and 15.1 and  Articles 3.8 
and 15.8.  
12. As set out in paragraphs 31- 33 of Canada’s First Oral Statem ent, Canada is not arguing that 
the “special care” requirement means that a panel
 must adopt a stricter, higher standard of review for 
threat analysis than for a present injury analysis.  Rather, the special care requirement is imposed 
upon investigating authorities , and requires them to undertake a pa rticularly careful examination of 
the required elements of Article 3 of the Anti-Dumping Agreement  and Article 15 of the SCM 
Agreement  as a crucial safeguard against the dangers i nherent in the predictive nature of threat 
determinations.  That a stricter standard of determination applies in threat cases is apparent in the fact 
that in addition to the special care requirement,  Articles 3.7 and 15.7 impose further requirements on 
investigating authorities conducting threat determ inations that do not apply to present injury 
determinations – for example, the requireme nt to base the threat determination on, inter alia , a change 
in circumstances that is clearly foreseen and imminent.  As the Appellate Body noted in Mexico – 
HFCS , this obligation of Article 3.7 (and hence Arti cle 15.7) establishes a “high standard” and that 
standard is imposed in the first instance on investigating authorities.15  What amounts to a failure to 
exercise special care on the facts of this case is also  discussed in Canada’s answers to Questions #3, 
#6 and #11 of th Panel.  
5. In paragraph 31-33 of its oral Statemen t, Canada states that the "special care" 
obligation requires "an especially careful examinat ion of the required elements"  and that the 
"standard for determining threat is different, a nd if anything, higher than that for injury.  
Could Canada elucidate the basis for this position, in light of the standard for determinations of 
injury (including threat) in Articles 3.1 of th e AD Agreement and 15.1 of the SCM Agreement? 
 
13. Canada's reference to “standard” in this  context is to the substantive obligation ( i.e., the 
substantive requirements) impo sed upon investigating authorities
 for establishing threat of injury.  
Additional requirements apply to threat of injury determinations that do not apply to present injury 
determinations, namely the requireme nts in Articles 3.7 and 3.8 of the Anti-Dumping Agreement  and 
Articles 15.7 and 15.8 of the SCM Agreement , as described above.  The substantive standard for 
establishing threat of injury is, in this sense, different and, if anything, higher than the standard for 
establishing present injury, because i nvestigating authorities must comp ly with additional substantive 
obligations.  As noted above, the Appellate Body’s statement in Mexico – HFCS  that Article 3.7 
                                                      
13 Mexico – Anti-Dumping Investigation of High-Fruct ose Corn Syrup (HFCS) from the United States , 
Report of the Panel, WT/DS132/R, adopted 24 February 2000, para. 7.119 ( “Mexico – HFCS Panel Report”).  
[emphasis added] 
14 SAA, p. 855.  (Exhibit CDA-22) 
15 Mexico – Anti-Dumping Investigatio n of High Fructose Corn Syrup (HFCS) from the United States: 
Recourse to Article 21.5 of the DSU by the United States , Report of the Appellate Body, WT/DS132/AB/RW, 
adopted 21 November 2001, para 100 ( “Mexico – HFCS AB Report”).  WT/DS277/R 
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 imposes a “high standard” strongly suggests that it has already endorsed this interpretation.  The 
application of the obligations in Articles 3.8 and 15.8 and their relation to Articles 3.1 and 15.1 are 
discussed in Canada's answers to Questions #3 and #4 of the Panel.  
6. Could Canada discuss whether its claims  under Article 3.1 of the AD Agreement and 
Article 15.1 of the SCM Agreement are dependent on  the Panel's resolution of Canada's claims 
of violation of Articles 3.2, 3.4, and 3.7 of the AD Agreement and 15.2, 15.4, and 15.7 of the SCM Agreement?  If not, could Cana da please indicate to the Panel the arguments in support of 
independent claims of violation?  
14. Canada’s claims under Article 3.1 of the Anti-Dumping Agreement  and Article 15.1 of the 
SCM Agreement  are closely related to its claims under Articles 3.2, 3.4, 3.5 and 3.7 of the Anti-
Dumping Agreement  and Articles 15.2, 15.4, 15.5 and 15.7 of the SCM Agreement .  However, they 
are not dependent on those claims. On the facts of this dispute, the Commission’s investigation and 
determination give rise to violations of the overarc hing obligations in Articles 3.1 and 15.1 and, at the 
same time, the specific obligations in the other Ar ticles that Canada has invoked in its challenge.  
Given substantive differences in the obligations in Articles 3.1 and 15.1 compared to these other 
Articles, certain factual scenarios could give rise to violations of Articles 3.1 and 15.1 without 
violating the provisions of the other Articles.  Howe ver, Canada is not raising such facts in this 
dispute.  The same facts give rise to violations under the overarching provisions as well as the specific 
provisions Canada has invoked in this dispute. 
 
15. Articles 3.1 and 15.1 contain substantive a nd overarching obligations that must be observed 
by investigating authorities in making injury dete rminations.  These obligations inform the more 
detailed obligations in the re mainder of Articles 3 and 15.
16  As noted by the Appellate Body in 
Mexico – HFCS , “There is . . . a close relationship between the various paragraphs of Article 3 of the 
Anti-Dumping Agreement”.17  Articles 3.1 and 15.1 provide that an injury determination must be 
made on the basis of “positive evidence” and involve an “objective examination” of:  
  - the volume of the dumped or subsidized imports;   - the effect of the dumped or subsidized imports on prices in the domestic market for 
the like products; and 
  - the consequent impact of these imports on domestic producers of such products  16. In a threat context, Articles 3.1 and 15.1 require an objective examination of the likely
 
“volume”, “price effect” and “impact” of the subject imports.  Articles 3.2, 3.4, 3.5, and 3.7 of the 
Anti-Dumping Agreement  and Articles 15.2, 15.4, 15.5 and 15.7 of the SCM Agreement  expand on 
these requirements as well as enumerate factors relate d to the investigating authority’s examination of 
these issues.18  Thus, the examination that an investig ating authority must undertake under these 
provisions must also be “objective” and based on  positive evidence. If it is not, there will be a 
violation of overarching obligation in Articles 3.1 and 15.1. 
 
                                                      
16 US – Hot-Rolled Steel,  para. 192. 
17 Mexico – HFCS AB Report , para. 123. 
18 In the context of the relationship between Articles 3.1 and 3.4 of the Anti-Dumping Agreement , the 
panel in Mexico – HFCS Panel Report , stated that “Article 3.1 requires that a determination of ‘injury’, which 
includes threat of material injury, involve an examination of the impact of imports, while Article 3.4 sets forth 
factors relevant to that examination”, para. 7.127.    WT/DS277/R 
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 17. With respect to the failure of the Commission to  base its determination of threat of injury on 
“positive evidence”, the evidence on the Commission’s record does not support an affirmative threat 
finding.  For example, there is no positive evidence:   - of “a significant rate of increase of [dumpe d or subsidized] imports” given that first, 
the evidence showed only a 2.8 percent in crease over the Commission’s period of 
investigation and second, that the Commission concluded, in light of its finding that subject imports had not had a significant price effect and the small increase in their market share, that subject imports did not have a significant impact on the domestic 
industry
19, and then made a finding of no present injury; 
 
 - of “sufficient freely disposable, or an i mminent, substantial increase in, capacity of 
the exporter indicating the likelihood of substantially increased dumped [subsidized] 
exports to the importing Member’s market, taking into account the availability of 
other export markets to absorb any additi onal exports” given the projections of the 
Canadian exporters showing that exports to the United States were expected to 
increase only slightly in absolute terms from the non-injurious levels of 2001 and to 
decrease as a percentage of total Canadian exports20; and 
  - that “imports are entering at prices that will have a significant depressing or 
suppressing effect on domestic prices and would likely increase demand for further 
imports” given that the Commission was unabl e to draw conclusions regarding the 
current effect of current prices of subject imports during the period of investigation. 
 18. With respect to the Commissi on’s failure to conduct an objective examination, a key issue in 
this dispute is whether the Commission provided a reasoned and adequate explanation of how the 
relevant facts supported its affirmative threat of injury determination.   
 19. This interpretation of the requirement for an “objective examination” finds support in the 
meaning of “objective assessment” under Article 11 of the DSU. An “objective
 assessment” has been 
interpreted by the Appellate Body to mean:  
[P]anels must examine whether the compet ent authority has evaluated all relevant 
factors; they must assess whether the competent authority has examined all the 
pertinent facts and assessed whether an ade quate explanation has been provided as to 
how those facts support the determination; and they must also consider whether the competent authority’s explanation addresses fu lly the nature and complexities of the 
data and responds to other plausi ble interpretations of the data.
21 
20. As discussed in Canada’s First Written Subm ission and First Oral Statement, the Commission 
did not provide such explanations in this dispute.  
7. Could Canada discuss whether its claims  under Article 12.2.2 of the AD Agreement and 
Article 22.5 of the SCM Agreement are dependent on  the Panel's resolution of Canada's claims 
of violation of Articles 3.2, 3.4, and 3.7 of the AD Agreement and 15.2, 15.4, and 15.7 of the SCM 
Agreement?  If not, could Cana da please indicate to the Panel the arguments in support of 
independent claims of violation?  
 
                                                     
 
19 Commission Report, p. 36.  (Exhibit CDA-1) 
20 Ibid., Table VII-2 
21 US – Cotton Yarn , para. 74. WT/DS277/R 
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 21. Canada wishes to make two distinct but re lated points to clarify the relationship between 
Canada’s claims under Article 12.2.2 of the Anti-Dumping Agreement  and Article 22.5 of the SCM 
Agreement and the rest of Canada’s claims under these Agreements.  
 22. First, Canada’s claims with respect to Ar ticles 12.2.2 and Article 22.5 are best understood as 
procedural claims, in the sense that these Articles set out specific obligations regarding the content
 of 
the public notice or separate report rega rding an affirmative determination, i.e., in the context of this 
case, what must be in the Commission’s Report or r easons.  These requirements include providing, in 
sufficient detail, all relevant information on the ma tters of fact and law as well as the reasons that 
have led to the imposition of final measures, incl uding reasons for the acceptance or rejection of 
relevant arguments or claims made by the exporters  and importers.  Canada’s point is that the Report 
in question here simply does not contain what it is  required to contain under Articles 12.2.2 and 22.5.  
Canada’s claims under the other provisions are substantive in nature and address how the 
Commission’s determination itself falls short of th e obligations set out in Articles 3 and 15 of the 
Anti-Dumping Agreement  and SCM Agreement , respectively.  
 
23. Canada’s second point is that Articles 12.2.2 and 22.5 do not  require an investigating 
authority to provide a “reasoned and adequate expl anation” of its decision.  Rather, as discussed 
above and in Canada’s pr evious submissions, this obligation flow s from the substantive obligations in 
Articles 3 and 15 viewed in the light of the standard of review under Article 11 of the DSU  and 
Article 17.6(i) of the Anti-Dumping Agreement .  Furthermore, Article 3.1 of the Anti-Dumping 
Agreement  and Article 15.1 of the SCM Agreement  also place related requirements on investigating 
authorities, for example, the need to base an injury determination on an “objective examination”.  
Therefore, the US assertion, in its closing statement at the first meeting of the Panel, that the “‘reasoned explanation’ obligation Canada has identified apparently flows from certain provisions in 
Article 12.2 of the Anti-Dumping Agreement and Artic le 22.5 of the Subsidies Agreement”, is clearly 
incorrect.
22   
 24. Finally, as a practical matter, Canada rec ognizes that it would be unusual for an injury 
determination to either satisfy th e obligations in Articles 3 and 15 but not Articles 12.2.2 and 22.5, or 
vice versa .  However, this possibility does not arise here  since the Commission’s determination fails 
under all these provisions.   
 
8. Is it Canada's view that all of the Articl e 3.4/Article 15.4 factors must be considered a 
second
 time in the context of a determination of threat of material injury?  If so, what would 
Canada argue such consideration must en tail?  How would Canada reconcile such a 
requirement with the views of the Panel in Mexico – Corn Syrup ?  Could Canada indicate to the 
Panel where in the text of the Agreements it fi nds an obligation for such a second consideration 
of these factors?  
25. In the context of a determination of threat of injury under the provisions of the Anti-Dumping 
Agreement  and the SCM Agreement , the required analysis of the “relevant economic factors and 
indices having a bearing on the state of the industr y” as set out in Article s 3.4 and 15.4 cannot be 
limited to the impact of the dumped or subsidized imports on the domestic industry in the past or the 
present.  In order to evaluate the likely impact of further dumped/subsidized imports on the domestic industry, the competent authority must undertake an an alysis of how any of the relevant factors listed 
in Article 3.4 and Article 15.4 will change in the future.  The task is to examine threat not as 
conjecture or speculation, and therefore also not as simple extrapolation, in taking into account 
relevant factors that could have a bearing on the stat e of the domestic industry in the future.  Thus, in 
the context of a threat of injury determination, an  evaluation of the impact of the projected increased 
subject imports in relation to the relevant factors in Articles 3.4 and 15.4 is required.  It is not a 
                                                     
 
22 US Closing Statement at First Panel Meeting, para. 4.  WT/DS277/R 
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 “second” examination of the Articles 3.4 and 15.4 factor s in the sense that examination of them in the 
threat context duplicates the examination in the current  injury context.  Examination of the Article 3.4 
and 15.4 factors in the threat of injury analysis is the first time that the investigating authority 
examines them in this predictive context.  
26. Canada is not suggesting that the examina tion of these factors in the two contexts are 
unrelated.  To the contrary, the threat analysis mu st take into account, and be consistent with, the 
current injury analysis.  That means, for example, that the Commission must find a change in 
circumstances from the conditions prevailing during  the period of investigation so that the non-
injurious status quo  would change and injury from dumping or subsidy would occur. 
 
27. In the absence of an evaluation of the relevant economic factors in the future, it is impossible for the competent authorities to determine whethe r likely increased dumped/subsidized imports would 
adversely affect the domestic industry in such a manner as to cause injury.  In other words, that 
imports are likely to increase does not necessarily mean  that they will account for an increased market 
share, have an adverse effect on domestic production,  sales and output, or adversely affect the profits 
of domestic producers, etc. in such a way that inju ry would occur.  It is only through an examination 
of the likely impact of the dumped imports on the do mestic industry concerned in the future that a 
reasoned determination that injury would likely occur can be made.  28. This interpretation of Articles 3.4 and 15.4 in  the context of threat of injury flows from the 
views of the panel in Mexico – HFCS .  For example, at paragraph 7.141 of its report the panel stated 
the following:  
Merely that dumped imports will increase, and will have adverse price effects, does 
not, ipso facto , lead to the conclusion that the dom estic industry will be injured – if 
the industry is in very good condition, or if there are other factors at play, dumped 
imports may not threaten injury .  Such a conclusion thus requires the investigating 
authority to analyze, based on the informati on before it, the likely impact of further 
dumped imports on the domestic industry .  SECOFI concluded that imports were 
likely to increase, based on the increases durin g the period of investigation, and the 
available capacity of the exporting producers, but there is no meaningful analysis, 
based on facts, concerning the likely impact of further dumped imports on the 
domestic industry in the final determination , e.g., whether such increased imports are 
likely to account for an increased share of  the growing Mexican market, have an 
effect on production or sales of sugar, or aff ect the profits of the domestic producers, 
etc, in such a manner as to constitute material injury.23 
29. Similarly, in this dispute, there is no meaningful  analysis, based on facts, concerning the 
likely impact of further dumped imports on the domestic industry  in the final determination of the 
Commission.  The Commission’s failure to assess the impact of the subject imports on the domestic industry in the future
, constitutes a violation by the United Stat es of its obligations in Articles 3.4 and 
15.4.  9. Is Canada of the view that Article 3.7 of the AD Agreement and Article 15.7 of the SCM 
Agreement require the identification of a specific ev ent or turning-point in time as a "change in 
circumstances" in order to justify an affirmative determination of threat of material injury?  If 
so, could Canada please comment of  the import of the footnote to this provision, which sets out 
as an example " that there is convincing reason to believe that there will be, in the near future, 
substantially increased importation of the product at dumped prices."  In addition, could Canada 
comment on the view that the "change in ci rcumstances" could be understood to encompass 
                                                     
 
23 Mexico – HFCS Panel Report , paras. 7.141 [emphasis added]. WT/DS277/R 
Page A-10  
 
 developments in the situation of the industry, and/or the dumped or subsidized imports, which 
lead to the conclusion that injury which ha s not yet occurred can be predicted to occur 
imminently, and need not refer to any specific even t.  Canada argues at paragraph 9 of its oral 
statement that "to establish threat, some im minent and foreseeable change from the non-
injurious present must be identified" but that "a" specific change need not be shown.   Could 
Canada expand on this assertion – what might cons titute the relevant change if not an event, 
and how must it be shown?  Could Canada indicate  what is the legal basis for its assertion that 
the change in circumstances must be explicitly identified?  
30. Article 3.7 of the Anti-Dumping Agreement  and Article 15.7 of the SCM Agreement  require 
that in order to justify an affirm ative determination of threat of injury, an investigating authority 
identify  “[t]he change in circumstances whic h would create a situation in which the dumping 
[subsidy] would cause injury”.  This interpretation is confirmed by the following statement of the 
Appellate Body in Mexico – HFCS :  
 
We note that Article 3.7 of the Anti-Dumping Agreement  provides that a 
determination of a threat of injury must be based on a change in circumstances that must be ‘clearly foreseen and imminent’.
24 
31. The change in circumstances need not be e xplicitly identified in the determination as “a 
specific event or turning point”, but some “clearly foreseen and imminent” change must be identified 
that would “create a situation in which the dumping [subsidy] would cause injury”.  As observed by 
the European Communities25, the phrase at issue does not require a determination of the precise 
moment in time when the change occurs, but rather  an analysis of the factors that would create a 
change in circumstances.  32. The factors listed in Article 3.7 of the Anti-Dumping Agreement  and Article 15.7 of the SCM 
Agreement  provide the context in which an investiga ting authority should analyse whether such a 
clearly foreseen and imminent change in circ umstances can be identified.  Footnote 10 to the Anti-
Dumping Agreement  provides an example of such a change – i.e., that there is a convincing reason to 
believe that there will be, in the near future, substantially increased importation of the product at 
dumped prices.  We note, however, that the exam ple in footnote 10 of substantially increased 
importation is not, in itself, a sufficient basis for a finding of threat of injury.  The investigating 
authority still has to conduct proper causation and non-attribution analyses in order to determine 
whether the change in circumstances would create a situation in which the dumping (subsidy) would 
cause injury.  33. With respect to a change in circumstances en compassing developments in the situation of the 
domestic industry, we note again that the change in  circumstances contemplated by Articles 3.7 and 
15.7 has to create a situation in which the dumping [subsidy]
 would cause injury.  Therefore, a 
deterioration of the condition of the domestic i ndustry to the point where the industry would be 
injured cannot amount to the required change in circumstances if the de terioration is not caused by the 
dumping [subsidy].  
34. The legal obligation to exp licitly identify the “change in circumstances” arises from the 
above-noted language of Articles 3.7 and 15.7 in the li ght of the applicable standard of review as well 
as from the requirement to undertake an objective examination under Articles 3.1 and 15.1.  In the circumstances of this dispute, such an examination could not be achieved without identifying the 
change in circumstances from the non-injurious status quo.   
 
                                                     
 
24 Mexico – HFCS AB Report , para. 100. 
25 Third Party Submission of the European Communities, 22 August 2003, para. 41.  WT/DS277/R 
 Page A-11 
 
 
 10. Are the elements identified in the bullet points at paragraph 23 of its oral statement 
those Canada considers necessary for a threat determination?  
 
35. The elements identified in the bullet points at  paragraph 23 of Canada’s  First Oral Statement 
are those contained in Articles 3.1 and 15.1 and re flect the overarching requirements to be met by 
determinations of injury – whether based on a finding of current injury or threat of injury.  As stated 
above in response to Question #6, these Articles re quire that injury determinations be based on 
positive evidence and an objective examination of th e volume, price effect and impact of subject 
imports.  In the threat context, due to its inherently predictive nature, the likely  volume, price effect 
and impact of subject imports form the focus of th e relevant examination.  These elements contained 
in Articles 3.1 and 15.1 are expanded upon by the re quirements set out in subsequent provisions in 
Articles 3 and 15.26  In other words, they are necessary, but  not exclusive, elements for a threat 
determination.   
11. Canada argues at paragraph 153 of its fi rst submission that the USITC "failed to 
examine and evaluate all evidence before it rel evant to the demonstration of the necessary 
causal relationship".  Could Canada indicate what it would have expected to find in an adequate determination regarding causal relationship?  
36. The causal relationship between the subj ect dumped and subsidized imports and the 
threatened injury is an essential requirement of Article 3.7 of the Anti-Dumping Agreement  and 
Article 15.7 of the SCM Agreement , which require an investigating authority to identify “the change 
in circumstances which would create a s ituation in which the dumping [subsidy]
 would cause injury ” 
[emphasis added].  As elaborated upon in Ar ticles 3.5 and 15.5 of those Agreements, the 
“demonstration of a causal relationship between the du mped [subsidized] imports and the injury to the 
domestic industry shall be based on an examination of all relevant evidence before the authorities”.  In 
addition, the authorities “shall also examine any known factors other than the dumped [subsidized] 
imports which at the same time are injuring the domestic industry, and the injuries caused by these other factors must not be attributed to the dumped [subsidized] imports”.  To ensure compliance with this non-attribution requirement, investigating author ities must separate and distinguish the effects of 
the other known factors from those attributed to th e subject imports.  Finally, the Commission had to 
provide a reasoned and adequate e xplanation of how the relevant facts pertaining to these causation 
issues supported its affirmative threat determination.   To be “adequate”, the Commission’s affirmative 
threat determination and its causati on finding had to comply with all of these requirements.  It did not 
do so.   37. The Commission’s investigation and determina tion falls short of the applicable requirements 
for several reasons: 
  - It failed to take into account its own finding that the United States was not self-
sufficient in lumber and that a significant volume of imports was needed to fulfil demand.
27  This finding, together with the Commission’s prediction of strong and 
                                                      
26 As discussed at paragraphs 58-59 of Canada’s First Written Submission, the Appellate Body has 
recognized that these oblig ations inform the more detailed obligatio ns in succeeding paragraphs, including 
Articles 3.2, 3.4, 3.5, 3.7 and 3.8 of the Anti-dumping Agreement  and Articles 15.2, 15.4, 15.5, 15.7 and 15.8 of 
the SCM Agreement . 
27 The Commission recognized that “[a]pparent domestic consumption exceeds domestic production 
capabilities. As a result some imports are required in th e US market to satisfy demand.” (Commission Report, 
pp. 24-25). (Exhibit CDA-1)  What is meant by “some” can be ascertained by examining the data appended to 
the Commission Report. Even assuming that US producers could operate their mills at 100 percent capacity on a 
sustained basis and that they could obtain the necessary ti mber supply to feed that capacity (both unrealistic 
assumptions), for 2001 the total US production capacity of 40.0 billion board feet (Table III-6, Commission 
Report, p. III-11 (Exhibit CDA-1)) falls almost 14 billion board feet short of total apparent consumption of WT/DS277/R 
Page A-12  
 
 improving demand in the US market, suggests that any increase in Canadian imports 
would continue serving demand that the US industry could not meet, indicating an absence of the necessary causal relationship. 
  - It failed to take into account the likely mark et share of Canadian imports in the future. 
In its present injury analysis, the stable ma rket share held by Canadian imports was 
pivotal to its findings that subject imports did not have a significant price effect and did not have a significant impact on the domestic industry.
28  The necessary causal 
relationship for threat of injury could not  be ascertained without reference to this 
crucial factor.  Without a finding of a significant increase in subject import market 
share in the future, the Commission could not  conclude that an increase in subject 
imports would have a significant impact on pricing and therefore a significant impact 
on the domestic industry.  
  - It failed to take into account the implica tions of its finding that the subject imports 
were “at least moderately substitu table” with the like domestic product.
29  Inherent in 
this finding is the realization that competition between subject imports and the like domestic product was attenuated to some exte nt.  Even if substitutability is high for 
some products, it is limited for others, and products for which su bstitutability is only 
moderate constitute a significant portion of s ubject imports and US production.  As a 
result, the Commission should have consider ed whether the projected increase in 
subject imports would occur in those typ es of lumber for which substitutability is 
more limited and competition is therefore a ttenuated.  For example, what portion of 
the Commission’s projected increase in subject imports would serve end uses for which US species such as Southern Yellow Pine are not well suited, or would supply demand that US producers could not meet or  could meet only to a limited extent?  
The Commission did not even consider this important causal question. 
  - It failed to address the significance of its own acknowledgement that there had been 
“substantial and increasing integration in the North American lumber market”.
30  This 
increasing integration is likely to affect the impact of the subject imports on the domestic industry in the future and, therefore, whether or not the necessary causal 
relationship exists. 
  - It failed to take into account its finding  that US domestic producers were responsible 
for purchasing or importing a “sizeable volume” of the subject imports.
31  Did this 
mean that US producers needed to fill out their product lines with products they could 
                                                                                                                                                                     
softwood lumber in the US market (53.9 billion board feet: Table IV-2, Commission Report, p. IV-4 (Exhibit 
CDA-1)).  This means that under these unrealistic assumptions, the US industry could supply only 74 per cent of 
US demand.  At 92 percent capacity utilization, the hi ghest utilization achieved over the seven-year period 
shown in Table III-6, the shortfall is just over 17 billio n board feet and at the average capacity utilization over 
the seven-year period (88.7 per cent), the shortfall is well over 18 billion board feet. 
28 Commission Report, pp. 35-36.  (Exhibit CDA-1) 
29 The finding of at least moderate substitutability is grounded in part in the conclusions of the 
Commission Staff that “[f]or a given end use, softwood lumber of different species or from different regions is generally interchangeable.  However, for some uses, a specific species is frequently preferred because of its 
particular characteristics …” [emphasis added] and “a relatively hi gh degree of substitution between domestic 
softwood lumber and subject imports from Canada for a given species and/or a particular set of preferred lumber 
characteristics .  However, differences in physical characteris tics among available specie s in each country, as 
well as customer preferences for particular species , may limit overall substitutability” [emphasis added], 
Commission Report, pp. I-15 and II-5.  (Exhibit CDA-1) 
30 Commission Report, p. 27.  (Exhibit CDA-1) 
31 Ibid.  WT/DS277/R 
 Page A-13 
 
 
 not produce themselves in order to meet US consumer demand?  Did the fact that US 
producers were selling a sizeable volume of these imports in their own domestic market reduce the price threat of Canadian  imports in that market?  These important 
questions regarding the existence of th e necessary causal relationship, which the 
Commission itself acknowledged to be “pertinent”  and “relevant” to its analysis, were 
not even considered, let alone explained. 
 38. With respect to non-attribution, the Commissi on fails to even acknowledge the requirement to 
separate and distinguish the effects of other factors, such as the role of the US domestic industry, from 
the effects of the subject imports.  Pursua nt to the Appellate Body’s statements in US– Hot-Rolled 
Steel , the absence of such an analys is means that in this case, the Commission had no rational basis to 
conclude that softwood lumber from Canada is th reatening to cause inju ry to the US domestic 
industry.
32  Furthermore, the examination the Commission failed to conduct should have, at the very 
least, included:  
 - An examination of the contribution of the US industry to any future injury.  The 
Commission acknowledged the US industry’s own contribution to the oversupply that led to the price declines during the period of investigation.
33  What was the likely 
response of the US industry to the Commi ssion’s projected increase in demand?  
Clearly, an analysis of the likely response was relevant to ascertaining the cause of 
any threatened injury in the future – ju st as it was critical to the Commission’s 
analysis of current injury.   
  - Other factors that also should have been  examined include: the future role of non-
subject imports, changes in patterns of cons umption, the growth of engineered wood 
products, constraints on domestic producti on and timber supplies in the US, and the 
cyclical nature of the softwood lumber industry. 
  - Once examined, moreover, the effects of those other known factors should have been 
separated and distinguished from those attributed to subject imports. 
 39. What would Canada have expected to find in an adequate determination regarding causal 
relationship? At the very least, the foregoi ng deficiencies ought to have been addressed.  
 
12. At paragraph 52 of its oral statement, Canada argues that "the subsidies at issue did not 
and would not have injurious trade effects".  Is Canada of the view that in the absence of a 
finding that the nature of the subsidies is such that they will have injurious trade effects, an 
affirmative determination of threat of materi al injury is precluded in a countervailing duty 
investigation?   
40. No, Canada is not saying this . Canada recognizes that Articles 3.7 and 15.7 both state that no 
one of the enumerated factors can necessarily give decisive guidance.  However, this does not mean 
that a factor cannot give decisive guidance in the circumstances of a particular case .  Where an 
investigating authority concludes that a subsidy woul d have no effect on trade this conclusion can be  
central to a finding that the domestic industry in quest ion was not threatened by injury and thus there 
would be no basis for the application of countervailing duties.   41. This analysis applies in th is case because of the nature of the stumpage subsidy at issue. 
Standing timber, like other inputs that are in situ  natural resources, exists within a rent market and as 
the Nordhaus study showed by applying standard principles of Ricardian rent theory, the amount of 
                                                     
 
32 US – Hot-Rolled Steel , pp. 222-223.  
33 Commission Report, n217. WT/DS277/R 
Page A-14  
 
 the fee or charge for the input, unless they are out side the normal range, has no impact on marginal 
cost, price or quantity of the downstream product that  the input goes into.  Here, the economic rent for 
standing timber is derived from the demand for lumber , and the output of lumber is not determined by 
stumpage charges in the normal range. No matter how  low the stumpage charge is – as long as it is 
positive and in this case it is agreed that charges were positive – then the quantity of logs produced 
will be no greater, and their prices will be no lower, than they would be in a competitive market. In 
such circumstances, there will be no trade effect from the subsidy in question.   42. Thus, an objective examination of the eviden ce regarding the nature of the subsidy and its 
likely trade effects should have led the Commission to  conclude that the stumpage charges levied by 
Canadian provinces would not lead to an increase in imports beyond the non-injurious level observed 
in the period of investigation.  As such, the Comm ission’s finding that imports were likely to increase 
substantially and cause injury could not be based  on positive evidence or an objective examination 
and, therefore, should have led the Commission to ma ke a negative threat of injury determination.  
 13. In its oral statement, Canada states that the Agreements "require" a likelihood of substantially increase dumped and subsidised ex ports (paragraph 62) and that the USITC "did 
not find the requisite imminent, substantial increase " in capacity.  Is Canada of the view that in 
the absence of affirmative findings or conclusions on these factors, an affirmative determination 
of threat of material injury is precluded?  
43. Article 3.7(ii) and 15.7(iii) re quire that when an investigating authority considers “sufficient 
freely disposable, or an imminent, substantial incr ease in, capacity of the exporter”, it do so in the 
context of whether this capacity indicates a like lihood of substantially increased dumped [subsidized] 
exports.  That is what Canada meant when it referred,  at paragraph 62 of its First Oral Statement, to 
“the likelihood of substantially increased dumped and subsidized exports to the United States that the 
Agreements require”.  
 44. To find that an imminent, substantial in crease in capacity indicated a likelihood of 
substantially increased imports, the Commission would have had to first find an imminent, substantial 
increase in capacity.  But the Commission did not and could not on the basis of the evidence on the record find that “requisite” imminent, substantial increase in capacity.  Indeed, the data on the record 
indicated either a slight decline in capacity over th e 2002-2003 period or a slight increase of less than 
one percent annually.
34 
 45. With respect to disposable capacity, the Un ited States did not address whether the Canadian 
producers’ disposable capacity indicated substantially  increased exports.  In fact, the evidence on the 
record indicated that the projections of Canadian  producers were for only a slight increase in exports. 
 46. Therefore, the Commission could not rely on Articles 3.7(ii) and 15.7(iii) to support its finding of a likely substantial increase in imports.  47. The fact that an investigating authority cannot rely on Articles 3.7(ii) and 15.7(iii) is not, in 
itself, fatal to an investigating aut hority’s threat of injury finding.  In the present case, what is fatal to 
the Commission’s threat of injury finding is that it  is not supported by any of the factors enumerated 
in Articles 3.7 and 15.7 and the Commission’s analysis of the other factors it cites in support of its 
finding was similarly flawed.  14. The Panel understands that Canada is not arguing that a combined analysis of injury caused by dumped and subsidized imports is per se  inconsistent with the cited Agreements. As 
Canada is not challenging combined analysis per se , could Canada please explain in detail what 
                                                     
 
34  First Written Submission of Canada, para. 103.  WT/DS277/R 
 Page A-15 
 
 
 violation is being alleged in this regard? Is Cana da referring to the violations it has otherwise 
asserted, in which case it would appear that this  claim is dependent on the Panel's findings on 
those other claims?  Is Canada of the view that, in the event the Panel finds a violation of any other provision of the relevant Agreements, the injury determination as a whole should be deemed inconsistent with both the AD and SC M Agreements?  At paragraph 122 of its oral 
statement, Canada asserts that the USITC failed to explain why it was appropriate to conduct a 
combined analysis in this case.  Could Canada indicate to the Panel where in the Agreements it 
finds an obligation to provide such an explanatio n?  Could Canada address, in this context, the 
relevance of the discussion in the USITC determination (Exhibit USA-1) at pages 29-31?  
48. As Canada explained in its First Written Subm ission, the obligation the United States failed to 
fulfil in cross-cumulating was the requirement to satisfy the specific requirements of each of the 
Agreements at issue.  The violations that flow from this claim are consequential to the finding of 
violations under the specific requirements of the Anti-Dumping Agreement  and separately under the 
SCM Agreement .  Although most of the threat factors iden tified in Articles 3 and 15 are the same in 
subsidy and dumping cases, the requirement in Article 15.7(i) of the SCM Agreement  that an 
investigating authority consider the nature of the s ubsidy and its likely trade effects (addressed in the 
answers to Questions 12 and 15) has no counterpart in  Article 3.  If the Panel finds a violation of any 
of the common provisions in Articles 3 and 15, the injury determination as a whole should be found to 
be inconsistent with both the Anti-Dumping  and SCM Agreements , and the Panel should recommend 
that the United States bring itself into conformity with its WTO obligations. 
 
49. Canada has also submitted that the Unite d States has failed to provide a reasoned and 
adequate explanation of why it conducted a combined  injury analysis in the circumstances of this 
case.  As Canada has explained in response to Ques tion #1 above and in its previous submissions, the 
obligation to provide a reasoned a nd adequate explanation flows from the substantive obligations of 
Articles 3 and 15 when viewed in the light of the standard of review under Articles 11 of the DSU  and 
17.6(i) of the Anti-Dumping Agreement . In the circumstances of this case, i.e., the incomplete overlap 
between dumped and subsidized exports and the fact that the nature of the subsidy involved and the 
lack of trade effects from this subsidy was a central  issue in the investigation, the Commission should 
have provided a reasoned and adequa te explanation of its decision to conduct a combined analysis of 
both dumped and subsidized imports.  The Commiss ion did not provide such an explanation. 
 
50. The discussion at pages 29-31 of the Commi ssion’s Report addresses two US law arguments 
that Canada advanced before the Commission as  to why the Commission is precluded from cross-
cumulating subsidized and dumped imports from the sa me country under US law.  Canada notes that 
in the NAFTA proceeding, the Commission ac knowledged that the reason it gave for cross-
cumulating, i.e., that it was mandated to do so under US law – was incorrect and that in fact it had 
discretion to decide whether to cross-cumulate or  not.  The NAFTA Panel accordingly held that the 
Commission’s decision to cross-cumulate was contrary to law and ordered the Commission to reconsider its decision and provide a “reasoned conclusion” on the issue.
35  In this case, Canada has 
advanced different arguments based on the United States’ obligations under the WTO Agreements it 
has cited. 
 
15. Could Canada please address why it consid ers that the USITC acted inconsistently in 
declining to rely on the Nordhaus study, with pa rticular reference to the information set out in 
Exhibit USA-5 at pages D-22-27?  
51. The nature and trade effects of a subsidy is a factor listed in paragra ph (i) of Article 15.7 of 
the SCM Agreement  that should be considered in threat of injury determinations (in this regard see 
Canada' answers to Questions 12 and 35).  That th is factor was relevant to the Commission's 
                                                     
 
35 NAFTA Panel Decision, pp. 40-41.  (Exhibit CDA-23) WT/DS277/R 
Page A-16  
 
 determination is confirmed by the considerable  argument and evidence on this point that was 
presented to the Commission during its investiga tion and by the Commission's failed attempt to 
address this factor in its Final Determination.  52. The Commission’s treatment of this  factor is inconsistent with the SCM Agreement  because 
the Commission failed to examine all pertinent facts re lated to this factor and to provide a reasoned 
and adequate explanation as to how those facts s upported its determination.   In particular, the 
Commission failed to address fully the nature and comple xities of the data related to this factor and to 
respond to the interpretations of this evidence a dvanced by the Canadian parties.  Since one 
interpretation, that the subsidies at issue had no trad e effects, detracted from an affirmative threat of 
injury finding from subsidized imports, it was par ticularly important that the Commission adequately 
evaluate and examine this factor.  It did not do so.  53. The Commission’s limited discussion of the Nordhaus study did not satisfy these requirements because the Commission (a) mischaracterized the economic principles underlying the 
study, and (b) incorrectly stated  that the record evidence it cited conflicted with Dr. Nordhaus’ 
analysis when that evidence was either irre levant or actually supported his analysis. 
 54. Each of the three statements that the Co mmission used to justify its assertion that “the 
economic theory presented by CLTA is not clearly a pplicable in this market” is not only conclusory 
and superficial but incorrect: 
 
• The Commission’s entire discussion is based on the premise that “Ricardian rent 
theory relies on the assumption of fixed supply.”  As explained in Exhibit CDA-25, the Nordhaus study did not assume a fixed supply of harvestable timber. Consistent 
with economic theory, the Nordhaus study recognized that stumpage charges outside the normal range may affect timber supply, and demonstrated that stumpage charges 
in the normal range do not affect such supply, as the Canadian parties expressly 
explained to the Commission. 
 
• The Commission’s proposition that “lumber supply is not necessarily fixed” was not 
disputed.  That lumber supply varies is i rrelevant to Dr. Nordhaus’ study, which 
addressed whether timber supply was affected by Canadian stumpage charges.  In any 
event, as explained in Exhibit CDA-25, ne ither of the two pieces of record evidence 
cited by the Commission contradicts Dr. Nordhaus’ analysis of timber supply. 
 
• The Commission stated that “the record also  contains several other studies that have 
reached different conclusions regarding the effects of stumpage fees on output”.  As explained in Exhibit CDA-25, none of the four studies discussed in the cited page of Exhibit USA-5 undermines the analysis in the Nordhaus study that stumpage charges 
in the normal range do not affect the supply of logs or lumber. 
 
55. Given the implications of the position that the subsidies did not have any trade effects for the 
Commission’s threat of injury finding, its failure to provide a reasoned and adequate explanation for 
rejecting the arguments of the Canadian exporters falls far short of the above-noted requirements and 
of the requirement to take “special care” under Artic les 3.8 and 15.8.  The Commission’s finding that 
the record contained conflicting evidence about the na ture and trade effects of the subsidy should have 
been the beginning, not the end, of the Commission’s analysis.   WT/DS277/R 
 Page A-17 
 
 
 To both parties 
 33. Could the parties please address the distinct ions they see, if any, between "finding", 
"evaluation" and "consideration" in the context of  analysis of factors in a determination under 
Article 3 of the AD Agreement and/or Article 15 of the SCM Agreement. 
 
56. Canada’s position is that there is a distin ction between a “finding”, on the one hand, and 
“evaluation” and “consideration”, on the other.  In  the context of an investigation involving a 
determination of threat of injury  pursuant to Article 3.7 of the Anti-Dumping Agreement  and 15.7 of 
the SCM Agreement , an investigating authority is required to make a finding on whether “further 
[dumped or subsidized] exports are imminent and that, unless protective action is taken, material 
injury would occur”.    57. As stated at paragraph 24 of Canada’s First Or al Statement at the first substantive meeting of 
the Panel, Article 3.7 of the Anti-Dumping Agreement  and 15.7 of the SCM Agreement  provide that an 
investigating authority should “consider” certain fact ors.  The term “consider” requires that it must be 
apparent in the relevant documents in the record th at the investigating authority has given attention to 
and taken into account the factors re quired to be considered.  This re quires an examination of factors 
that goes beyond a mere recitation of factors in th e abstract without putting the facts into context
36, 
but does not necessarily require an explicit “finding” or determination by the investigating authorities 
on each relevant factor.  However, Articles 3.7 an d 15.7 require that the “totality of the factors 
considered must lead to the conclusion that furthe r [dumped or subsidized] exports are imminent and 
that, unless protective action is taken, material injury would occur”.  58. It is also important to note that pursuant to th e applicable standard of review under Article 11 
of the DSU  and Article 17.6(i) of the Anti-Dumping Agreement , it is the duty of the Panel to assess 
whether the investigating authority has evaluated all relevant factors, whether it has examined all the 
pertinent facts, and whether it provided an adequa te explanation as to how those facts support its 
determination.
37  In effect, this standard defines when an investigating authority can be considered to 
have acted consistently with the  Anti-Dumping Agreement  and the SCM Agreement  in the course of its 
“consideration” of the relevant f actors under Articles 3.7 and 15.7.  In this light, an investigating 
authority’s “consideration” of relevant factors mu st include an examination or evaluation of such 
factors. 
 59. As discussed at paragraph 146 of Canada’s First Written Su bmission, an “evaluation” has 
been interpreted to mean “a pr ocess of analysis and assessment requiring the exercise of judgement on 
the part of the investigating authority” and “not si mply a matter of form”.  The investigating authority 
must “assess the role, relevance and relative weight of each factor in the particular investigation”.  
Moreover, an “evaluation” implies the analysis of data through placing it in context in terms of the particular evolution of the data pertaining to each factor individually, as well as in relation to other 
factors examined.  Thus, an investigating author ity’s findings on whether “further [dumped or 
subsidized] exports are imminent and that, unless pr otective action is taken, material injury would 
occur” must be the result of a proper “considera tion” and “evaluation” of relevant factors.   
 
60. It is Canada’s position that the Commission’ s examination of relevant factors under each of 
the relevant provision in Articles 3 a nd 15 and, consequently, its determin ation of threat of injury fall 
short of these requirements in this dispute.  As Canada demonstrates in its rebuttal submission, the 
totality of the factors that were considered by the Commission could not lead to the conclusion that 
                                                     
 
36 Canada’s First Oral St atement, paras. 24-27. 
37 See also: Canada’s response to Question 1 of the Panel and the report of the Appellate Body in US – 
Cotton Yarn , para. 74.   WT/DS277/R 
Page A-18  
 
 further dumped or subsidized exports  are imminent and that, unless protective action is taken, injury 
would occur.  
34. The Panel notes that Article 3.7 of the AD Agreement and Article 15.7 of the SCM 
Agreement provide that "In making a determinat ion  regarding the existence of a threat of 
material injury, the authorities should
 consider, inter alia , such factors as:.." (emphasis added).  
In this context, could the parties comment on the view that consideration of all the listed factors 
is not mandatory, and that the fa ilure to consider at all, or to adequately consider, one of the 
listed factors, is not fatal to the de termination at issue before a Panel? 
 61. While the factors listed in Articles 3.7 and 15.7 are not mandatory in the sense that the 
Agreements require that all enumerated factors must be considered in each case, the WTO Members 
clearly thought them to be of such importance to  a threat determination that they set them out 
explicitly.
38  In any event, this issue does not arise in th e case before this Panel since the Commission 
itself thought that the factors were relevant as seen by its attempt to address each of them.  
 
62. Whether a failure to consider at all, or to adequately consider, one of these factors constitutes 
a violation of Articles 3.7 and 15.7 will depend on the facts of the particular case.  Ultimately, an 
investigating authority must be able to demonstrate that the totality of the factors considered leads to 
the conclusion that further dumped [subsidized] imports are imminent and that, unless protective 
action is taken, injury would occur.  In the c ase at issue, the Commission has clearly failed to 
demonstrate and explain how the factors it did consid er led to its conclusion and as a result, failed to 
comply with the obligations of 3.7 and 15.7.   
35. Could the parties please address what, in  their view, is required to demonstrate 
consideration of the "trade effects" arising from  subsidies under Article 15.7(i)?  What do the 
parties consider would be relevant trade effects that should be taken into account? 
 
63. As the Appellate Body has stated, Article 3. 1 and 15.1 are overarching provisions that set out 
a Member’s fundamental substantive obligations in making an injury determination.  These provisions 
require that a determination involve consideration of the volume of imports, the effect of imports on 
prices and the consequent impact of imports on the domestic producers in question.  It follows that 
consideration of “trade effects” under Article 15.7(i) of the SCM Agreement  address whether the 
subsidy in question is affecting volume  and prices of the imports at issue. 
 64. Moreover, in cases where participants have a dvanced fundamental arguments about the nature 
of the trade effects of the subsidies involved, and in  particular that these subsidies have had no impact 
on the volume and price of imports, i.e., have no trade effect, an investigating authority must show 
that it has come to a view on this evidence and prov ided a reasoned and adequate explanation of what 
role that view plays in the final decision to which it came.   65. This is particularly true in this case because of  the nature of the stumpage subsidy at issue.  
As discussed in answer to Question #12 and in Cana da’s previous submissions ,  standing timber, like 
other inputs that are in situ natural resources, exis ts within a rent market and as the Nordhaus study 
showed applying standard principles of Ricardian rent theory, the amount of the fee or charge for the input, unless they are outside the normal range, has no impact on marginal cost, price or quantity of the downstream product that the input goes into.  Here, the economic rent for standing timber is 
derived from the demand for lumber, and the output of lumber is not determined by stumpage charges 
in the normal range.  No matter how low the stumpage  charge is – as long as it is positive and in this 
                                                     
 
38 The importance the United States itself  confers upon these factors is refl ected in the fact that they are 
mandatory under US legislation.  Tariff Act of 1930 , Subtitle IV – Countervailing and Anti-Dumping Duties, 19 
U.S.C. § 1677(7)(F)(i).  (Exhibit CDA-24)  WT/DS277/R 
 Page A-19 
 
 
 case it is agreed that charges were positive – then the quantity of logs produced will be no greater, and 
their prices will be no lower, than they would be in a competitive market.  In such circumstances, 
there will be no trade effect from the subsidy in question.  66. Because this evidence represented a powerful de monstration of how stumpage would not lead 
to an increase in imports beyond the non-injuriou s level observed in the POI, the Commission should 
have addressed it, particularly if it was going to make an  affirmative determination of threat of injury.   
 
36. Could the parties please discuss, in detail,  their interpretation of the phrase "clearly 
foreseen and imminent" as used in Article 3.7 of the AD Agreement and Article 15.7 of the SCM 
Agreement, with specific reference to what th ey consider to be the relevant time frames 
involved?  Would the parties discuss, in addition , what precisely they consider should be found 
to be clearly foreseen and imminent.   
67. As discussed at paragraphs 76-77 of Cana da’s First Written Submission, the change in 
circumstances which would create the situation in  which the dumping or the subsidy would cause 
injury must be clearly anticipated and on the bri nk of happening.  The rele vant timeframe involved 
will vary depending on the facts and circumstances of  each case but certainly will be in the near term 
and not in the medium to long term.  In this in stance, the Commission examined projections for the 
eighteen months after its vote in May 2002.  Ther e was no evidence before th e Commission for this 
period that demonstrated a “change in circumstan ces” which would create a situation in which the 
dumping or the subsidy would cause injury.  It is that  “change in circumstances” that must be clearly 
foreseen and imminent.  Canada addresses what am ounts to such a change in circumstances in its 
response to Question # 9 of the Panel. WT/DS277/R 
Page A-20  
 
 Questions posed by the United States to Canada 
 1. At paragraph 120 of its 4 September 2003, oral statement, Canada states that “the United States simply does not understand Ca nada’s argument” regarding combined 
investigations.  Canada then goes on to contend,  at paragraph 122, that the United States failed 
to comply with what Canada refers to as “the specific requirements of the Anti-Dumping 
Agreement  and the SCM Agreement , as well as Article VI of the GATT 1994.”  However, the 
alleged specific requirements that Canada lists, with  the exception of the nature of the subsidies, 
are not distinct but rather are co mmon to both covered Agreements.  In light of this fact, the 
United States asks that Canada clarify its position on combined investigations.     
 
68. Canada’s response to this qu estion is provided by Ca nada’s Oral Statement and by our answer 
to Question #14 of the Panel.  
2. At paragraph 25 of its 4 September 2003 oral statement, Canada refers to the discussion 
of the term “considered” in the Thailand- H-Beams  panel report.  Following the statement 
quoted by Canada, the panel in that report stat ed: “We therefore do not read the textual term 
‘consider’ in Article 3.2 to require an explicit ‘finding’ or ‘determination’ by the investigating 
authorities . . .” ( Thailand- H-Beam , Panel Report, para. 7.161)  At the first substantive meeting 
of the Panel in the present dispute, Canada stat ed that it agreed with the interpretation of the 
panel in Thailand-H-Beams  that the obligation to “consider” does not require an investigating 
authority to make an explicit “finding.” Pl ease confirm that this is Canada’s position. 
 
69. Yes. This is Canada’s position.  However,  it must be apparent from the record that the 
investigating authority has given attention to and ta ken into account the factors to be considered.  The 
investigating authority must go beyond simply reciting f acts. It must put the factors into context.  See 
paragraph 83 of Ca nada’s First Written Submission and para graphs 22-29 of Canada’s First Oral 
Statement.  WT/DS277/R 
 Page A-21 
 
 
 ANNEX A-2 
 
 
UNITED STATES RESPONSE TO QUESTIONS 
FROM THE PANEL – FIRST MEETING 
 
24 September 2003 
 
 
Q16: Could the United States please address its understanding of the "special care" 
requirement in Article 3.8 of the AD Agreement and Article 15.8 of the SCM Agreement?  What elements does the United States consider could demonstrate the appropriate special care?  
Could the United States indicate to the Panel where, in its view, the USITC determination 
demonstrates the requisite special care?  
 
1. The covered Agreements do not state what  constitutes “special care”, nor has any panel 
explicitly addressed this provision .  The covered Agreements do not support Canada’s attempt to 
interpret “special care” as a special review standard fo r either the Panel or the investigating authority.  
The United States understands the “ special care” langua ge to be a recognition that projections about 
the future must be based on present and past facts.   While a threat analys is is a future-oriented 
analysis, it cannot be based on allegation, conjecture or remote possibility; rather it must be based on 
the facts.
1 
 
2. Article 3.8 of the Anti-Dumping Agreemen t and Article 15.8 of the SCM Agreement are 
exhortations to be mindful of the future-oriented nature of a threat analysis as the evidence is 
reviewed.  A threat determination necessarily uses  facts from the present and the past to form a 
conclusion about the future.2  Projections necessarily are based on extrapolations from existing data.3  
                                                      
1 Article 3.7 of the Agreement on Implementation of  Article VI of the General Agreement on Tariffs 
and Trade 1994 (the Anti-Dumping Agreement) and Article 15.7 of the Agreement on Subsidies and 
Countervailing Measures (the SCM Agreement). 
 2 See United States-Safeguard Measures on Imports of  Fresh, Chilled or Frozen Lamb Meat from New 
Zealand and Australia , Appellate Body Report, WT/DS177/AB/R,  WT/DS178/AB/R, adopted 16 May 2001, 
para. 136 (“ US-Lamb Meat ”); United States-Transitional Safeguard Measure on Combed Cotton Yarn from 
Pakistan , Appellate Body Report, WT/DS192/AB/R, adopted 5 November 2001, para. 77, n.50 (“ US-Cotton 
Yarn ”).  Specifically, the Appellate Body in US-Lamb Meat  stated:  
 
As facts, by their very nature, pertain to th e present and the past, the occurrence of future 
events can never be definitely proven by facts.  There is, therefore, a tension between a 
future-oriented “threat” analysis, which, ultim ately, calls for a degree of “conjecture” about 
the likelihood of a future event,  and the need for a fact-based determination.  Unavoidably, 
this tension must be resolved through the use of  facts from the present and the past to justify 
the conclusion about the future, namely that se rious injury is “clearly imminent”.  Thus, a 
fact-based evaluation, unde r Article 4.2(a) of the Agreement on Safeguards , must provide the 
basis for a projection that there is  a high degree of likelihood of serious injury to the domestic 
industry in the very near future. 
 3 See Mexico - Anti-Dumping Investigation of High Fruc tose Corn Syrup (Mexico - HFCS) from the 
United States , Appellate Body Report, WT/DS132/AB/R, adopted 21 November 2001, paras. 83 and 85 
(“Mexico - HFCS” ); US - Cotton Yarn , AB Report, para. 77; US - Lamb Meat , AB Report, para. 136; 
United States - Definitive Safeguard Measures on Imports of Certain Steel Products , WT/DS248/R, 
WT/DS249/R, WT/DS251/R, WT/DS252/R, WT/DS253/R , WT/DS254/R, WT/DS258/R, WT/DS259/R, Panel 
Report, circulated 11 July 2003, para. 10.173, n. 5032 (“ US - Steel Safeguards ”). WT/DS277/R 
Page A-22  
 
 Indeed, Article 3.7 requires that projections be based on facts .  Article 3.8 simply reinforces this point 
by describing the approach to be  taken in reviewing the facts. 
 3. It is evident in the ITC’s Report that the Commission based it threat determination on 
consideration of all of the facts.  The ITC based  its prospective analysis on objective facts and 
rejected assertions and opinions not based on sufficient factual evidence.
4  The Commission’s reliance 
on a thorough factual record and its  careful analysis of that record demonstrate its compliance with 
the special care language in the covered Agreements .  Canada, on the other hand, has urged that the 
ITC should have based its findings on assertions and opinion, which are favourable to Canada’s 
interests, but are not sufficien tly supported by the evidence.5 
 
4. The special care taken by the ITC is demonstr ated in the detailed analysis and extensive 
documentation – including past and present data –  provided to support each finding throughout the 
ITC’s opinion, from its conditions of competition section on pages 21- 27 of the ITC Report to the 
present injury analysis on pages 31-37 of the ITC Re port to the threat of injury analysis on pages 
37-44 of the ITC Report.  Q17. Article 3.8 of the AD Agreement and Arti cle 15.8 of the SCM Agreement provide that: 
 
“with respect to cases where injury is threatened by dumped [subsidized] 
imports, the application of anti-dumpi ng [countervailing] measures shall be 
considered and decided with special care”.  
Could the United States address the implications of the phrase "the application of … measures" 
in terms of the timing of the obligations provided for in this provision?  Is the United States of 
the view that the "special care" requirement affe cts or changes the obligation in Articles 3.1 of 
the AD Agreement and 15.1 of the SCM Agreement that a determination of injury "shall be based on positive evidence and involve an  objective examination …".  If so, how?  
 5. The “special care” language in Article 3.8 of  the Anti-Dumping Agreement and Article 15.8 
of the SCM Agreement supplement rather than alte r or modify the obligations in Article 3.1 and 
Article 15.1 of the respective Agreements that a de termination of injury “shall be based on positive 
evidence and involve an objective examination".
6  As discussed in response to question 16, 
projections about future events involve extrapolatio ns from existing data.  Article 3.8 and Article 15.8 
reinforce in the threat context th e requirement in Article 3.1 and Ar ticle 15.1 to base determinations 
on positive evidence.  For example, a threat of injury determination must be based on positive 
evidence tending to show a likelihood to import at injuri ous levels.  Special care refers to the analysis 
                                                      
 4 See US - Lamb Meat , Panel Report, para. 7.129:  
 
. . . the requirement to base a threat determination on  objective facts, and the rejection of “assertions”, 
“opinions” and “conclusions” that are not based on suffi cient factual evidence, it is possible to draw at least 
some inferences on how to conduct a threat analysis.  These elements suggest (i) th at a threat determination 
needs to be based on an analysis which takes objective and verifiable data from the recent past . . . as a 
starting-point so as to avoid basing a determination on allegation, conjecture, or remote possibility . . . .. 
5 See, e.g. , Canada’s First Written Submission, paras. 7, 8, and 120. 
 6 The Appellate Body in Thailand - H-Beams   provided some guidance on the relationship between 
Article 3.1 of the Antidumping Agreement and considera tion of the evidence for f actors listed in the threat 
provision, Article 3.7.  The Appellate Body stated:  
 
107. . . . An injury determination conducted pursuant to the provisions of Article 3 of the 
Anti-Dumping Agreement  must be based on the totality  of that evidence. . . .  WT/DS277/R 
 Page A-23 
 
 
 involved in making projections about future ev ents.  Moreover, basing the future-oriented 
determination on facts rather than allegation, conject ure or remote possibility is in accord with the 
requirement that the investigating authority conduct an “objective examination.”  In the context of a 
threat analysis, an objective examination would invo lve taking “objective and verifiable data from the 
recent past . . . as a starting-point so as to avoid b asing a determination on a llegation, conjecture, or 
remote possibility” and evaluating it in an unbiased manner.7 
 
6. The Panel’s question concerning timing suggests an interpretation of Article 3.8 of the Anti-
Dumping Agreement (and Article 15.8 of the SCM Ag reement) whereby the provision may pertain to 
actions taken by a Member after  its investigating authority has determ ined that injury is threatened by 
dumped (or subsidized) imports.  According to that interpretation, the provision presumes an 
affirmative threat determination and governs what happens afterwards, in  light of that determination.  
Under an alternative interpretation –  the one the United States understands Canada to be assuming in 
this case8 – ADA Article 3.8 and SCMA Article 15.8 may pertain to the process of making a threat 
determination itself.  7. The United States is of the view that the Pane l need not decide whether either interpretation 
or both are permissible, because, under either interpretation, Canada’s claim must fail.  If ADA 
Article 3.8 and SCMA Article 15.8 pertain to actions  taken after an investigating authority makes an 
affirmative threat determination, then Canada’s clai m is beyond the terms of re ference of this Panel.  
As the title of this dispute indicates, Canada has ask ed the Panel to consider the investigation of the 
US International Trade Commission, not the actions  of other US Government agencies following that 
investigation.
9 
 
8. If, on the other hand, the provisions at i ssue pertain to the process of making a threat 
determination, Canada’s claim must fail, because Cana da has failed to make a prima facie showing of 
any violation.  In arguing that the United States violated ADA Article 3.8 and SCMA Article 15.8, 
Canada simply reiterates its allegations of other violations of the covered agreements.10  Canada has 
indicated in vague terms that a failure to ta ke “special care” involves whether cautiousness of 
approach is exemplified.  Yet, Canada fails to demonstrate an absence of cautiousness.  Accordingly, 
under this interpretation of ADA Article 3.8 and SC MA Article 15.8, Canada’s claim must fail. 
 9. Because Canada’s claim must fail under either  interpretation of the relevant provisions, the 
Panel should refrain from deciding which interp retation is permissible or whether both are 
permissible.  If the Panel nevertheless chooses to deci de this interpretative question, the United States 
would draw to the Panel’s attention certain contextual  elements.  While the words  “the application of 
. . . measures” might suggest the first interpretati on above (i.e., that the provisions pertain after
 a 
threat determination has been made), on the other ha nd, the inclusion of the paragraph in Article 3 and 
Article 15 may provide support for the second interpre tation (i.e., that the provisions pertain to how a 
threat determination is made).  Q18. Could the United States clarify its view regarding consideration of the Article 3.4/ Article 15.4 factors in the context of a determinat ion of threat of material injury?  Specifically, 
                                                     
 
7 See US - Lamb Meat , Panel Report, para. 7.129. 
8 See Canada First Written Submission, para. 64 (“Thus, when threat of material injury is at issue, the 
investigating authorities must undertake an especially meticulous examination of all the required elements in 
Article 3 of the Anti-Dumping Agreement  and Article 15 of the SCM Agreement .”). 
9 See  Canada First Written Submission, para. 169 (Canada basing its claim under ADA Article 3.8 and 
SCMA Article 15.8 on what it alleges to be “sho rtcomings of the Commission’s determination”). 
10 See  Canada First Written Submissi on, para. 168 (Canada basing its claim under ADA Article 3.8 
and SCMA Article 15.8 on allegations “as discussed above with respect to the violations of Article 3 of the 
Anti-Dumping Agreement  and Article 15 fo the SCM Agreement ”). WT/DS277/R 
Page A-24  
 
 could the United States address whether it is ne cessary to consider the likely impact of dumped 
and/or subsidized imports on the condition of th e industry in the future, with reference to the 
Article 3.4/Article 15.4 factors, in  the context of  a determination of threat of material injury?  
If so, what would the United States envision argue such consideration must entail?  
 10. In making a threat of material injury de termination, the investigating authority should 
consider the evidence regarding the factors listed in Article 3.7 of the Anti-Dumping Agreement and 
Article 15.7 of the SCM Agreement, as well as th e present and past evidence regarding the factors 
listed in Articles 3.2 and 3.4 of the Anti-Dumpi ng Agreement and Articles 15.2 and 15.4 of the SCM 
Agreement.  Consideration of these factors estab lishes a background against which the investigating 
authority can evaluate whether dumped and subs idized imports will likely increase substantially, 
likely will have price effects, and consequently w ill affect the industry’s condition in such a manner 
that material injury would occur in the absence of protective action. 
 11. Where the investigating authority has consider ed the Article 3.4 and Article 15.4 factors one 
time, it need not consider them a second time.  Canada ’s contention that there is a requirement that the 
factors in Article 3.4 of Anti-Dumping Agreem ent and Article 15.4 of the SCM Agreement be 
considered a second time in the context of a threat analysis has no basis in the covered Agreements.  
Neither the Appellate Body nor any Panel has found such a requirement.  Moreover, it is not clear 
what Canada contemplates would be involved in such a second analysis of the Article 3.4 and 
Article 15.4 factors that would not involve specula tion and conjecture.  Significantly, Canada has 
failed to explain why it considers a second analys is of these factors required under the covered 
Agreements, when Canada itself does not conduct such  an additional analysis in its own trade remedy 
proceedings.
11  Canada’s argument seems to be tied to its  overarching failure to recognize that threat 
of injury generally involves a continuation of a dverse conditions, and thus  the threat and present 
material injury analyses necessarily are in tertwined rather than entirely separate. 
 
12. The Panel in Mexico-HFCS specifically recogni zed that consideration of the factors relating 
to the impact of imports on the domestic i ndustry “establish a background against which the 
investigating authority can evaluate whether i mminent further dumped imports will affect the 
industry’s condition in such a manner that material  injury would occur in the absence of protective 
action, as required by Article 3.7".12  The Mexico-HFCS panel did not find that two separate analyses 
of Article 3.4 factors were required.  It was concer ned that those factors did not appear to have been 
considered at all.13  Moreover, as discussed in the US first written submission, two very important 
                                                      
11 See, e.g., The Dumping of Leather Footwear with Metal Toe Caps, Originating in or Exported from 
the People’s Republic of China, Excluding Waterproof Footwear Subject to the Finding Made by the Canadian 
International Trade Tribunal in Inquiry No. NQ-2000-004 , Inquiry No. 2001-003 at 11-20 (CITT, 
27 Dec. 2001) (USA-26). 
12 Mexico-HFCS , Panel Report, para. 7.132.  The Panel stated:  
 
 With respect to the question of threat of material injury, we believe an investigating authority cannot 
come to a reasoned conclusion, based on an unbias ed and objective evaluation of the facts, without 
taking into account the Article 3.4 factors relating to the impact of imports on the domestic industry.  
These factors all relate to an evaluation of th e general condition and operations of the domestic 
industry. . . . Consideration of thes e factors is, in our view, necessary in order to establish a background 
against which the investigating authority can evaluate whether imminent further dumped imports will 
affect the industry’s condition in such a manner that material injury would occur in the absence of protective action, as required by Article 3.7. 
13 The Panel in  Mexico-HFCS , Panel Report, para. 7.140 (emphasis added), states:  
 
 The final determination reflects no meaningful analys is of a number of the Article 3.4 factors: the 
Mexican sugar industry’s profits, output, productiv ity, utilization of capacity, employment, wages, 
growth, or ability to raise capital.  Moreover, there is no analysis of the condition of the Mexican sugar  WT/DS277/R 
 Page A-25 
 
 
 facts distinguish this case from Mexico-HFCS:  first, it is possible, by reading the Commission’s final 
determination here, where it was not in Mexico -HFCS, to understand the overall condition of the 
domestic industry with respect to the Article 3. 4 factors; and second, in this case, the domestic 
industry was currently experiencing substantial decl ines in its condition, particularly its financial 
performance, which was not the case in Mexico-HFCS. 
 
13. It is evident in the Views of the Commissi on that the ITC properly conducted a “meaningful 
evaluation” of all of the relevant factors liste d in Article 3.4 of Anti-Dumping Agreement and 
Article 15.4 of the SCM Agreement and that its fi ndings are supported by positive evidence.  Canada 
fails to recognize that a finding of vulnerability by its nature is a finding about the future, i.e., an 
assessment of industry’s suscep tibility to future injury.14  In brief, the ITC’s evaluation of the 
evidence regarding relevant factors resulted in findi ngs that the condition of the domestic industry had 
deteriorated primarily as a result of declining prices and that the industry was in a vulnerable state.  Consideration of these factors constituted positive evid ence justifying the ITC’s determination that the 
domestic industry was on the verge of material injury by reason of the continued dumped and 
subsidized softwood lumber imports from Canada. 
 Q19. Could the United States elucidate the basis fo r the conclusion that the likely increase in 
imports would be "substantial"?  What percentage or volume of increase would be necessary in order 
to support that conclusion, and could the United Stat es indicate where in the USITC determination or 
report such a projected increase can be found or derived? 
 
14. The Commission’s consideration in the context of its threat of injury analysis of likely 
substantial increases in subject im ports begins with subj ect import volumes both in absolute terms and 
relative to consumption already at significant le vels.  The Commission found that the volume of 
subject imports from Canada increased  by 2.8 per cent from 1999 to 2001.
15  As a share of apparent 
domestic consumption, subject imports from Canada  increased from 33.2 per cent in 1999 to 34.3 per 
cent in 2001.16  Conversely, subject imports by value declined by 16 per cent.17  The evidence shows 
increases even with the restraining effect of the SLA in place, and substantial increases during periods 
without trade restraints.   15. Of course, a threat analysis looks at whethe r these imports, which in this case already were at 
injurious levels, are likely to be injurious in th e imminent future.  The evidence demonstrates that 
subject imports will continue to enter the US market at this significant level and are projected to 
                                                                                                                                                                    
 
industry during the period of investigation, or projected for the near future.  It is therefore not possible, 
by reading the final determination, to understand the overall condition of the domestic industry with 
respect to the Article 3.4 factors.   Yet without an understanding of the condition of the industry, it is 
not possible, in our view, for SECOFI to have come to a reasoned conclusion, based on an objective 
evaluation of the facts, concerning the likely impact of dumped imports.  Such a conclusion must, in 
our view, reflect the projected impact of further imports on the particular domestic industry, in light of its condition.  In order to conclude that there is a threat of material injury to a domestic industry that is 
apparently not currently injured,  despite the effects of dumped imports during the period of 
investigation, it is necessary to have an understanding of the current condition of the industry as background. 
14 The ordinary meaning of the term “vulnerable” is “able to be wounded;” or “liable to damage or 
harm”.  The New Shorter Oxford English Dictionary  , 1993 (Oxford: Clarendon Press, p. 3605) (USA-21). 
15 The volume of imports of softwood lumber from Canada increased from 17,983 mmbf in 1999 to 
18,483 mmbf in 2001.  USITC Report at Tables IV-1 and C-1. 
16 ITC Report at Table IV-2 and C-1. 
17 The value of subject imports decreased from $7.1 billion in 1999 to $6.0 billion in 2001.  ITC Report 
at Tables IV-1 and C-1. WT/DS277/R 
Page A-26  
 
 increase.  Canada acknowledges that imports at this level would continue and even increase
18, and that 
Canada is “a much smaller market  with abundant timber resources".19 
 
16. The Commission based its conclusion of likely substantial increases in subject imports on six 
subsidiary findings:20  (1) Canadian producers’ excess capacity  and projected increases in capacity, 
capacity utilization, and production21;  (2) the export orientation of Canadian producers to the US 
market22;  (3) the increase in subject imports over the pe riod of investigation;  (4) the effects of 
expiration of the SLA;  (5) subject import tre nds during periods when there were no import 
restraints23; and (6) forecasts of strong and improving demand in the US market.24 
 
17. The second part of this question suggests that  there is an absolute amount or percentage 
change in import volumes that would necessarily be “s ubstantial” in all or most cases.  Determination 
of threat of injury is by its nature industry specific and dependent on the particular industry’s 
circumstances.  As part of this analysis, the cove red Agreements direct the investigating authority to 
consider whether the evidence indicates the likelihood  of substantially increased imports but does not 
direct the investigating authority to find that impor ts will increase by a certain amount or to project 
the increase level.25  The Appellate Body has recognized that ultimately a threat analysis calls for 
projections about the likelihood that the threat wi ll ascend to injury and as such can never be 
definitely proven.26  As the Appellate Body in Mexico-HFCS recognized 
 
the “establishment” of facts by investig ating authorities includes both affirmative 
findings of events that took place during the period of investigation as well as 
                                                      
18 Canada First Written Submission, para. 7. 
19 Canada’s Opening Statement at First Panel Meeting (Sept. 4, 2003) at para. 4. 
20 Each of these findings is discussed in detail in the ITC Report at 40-43 and in the US First Written 
Submission at paras. 117-184.  Each of the six subsidiary factors considered and discussed by the Commission related directly to threat factors regarding a signif icant rate of increase in imports and sufficient freely 
disposable production capacity set forth in the covered Agreements. 
21 The Canadian producers had excess capacity and proj ected increases in capac ity and production, and 
improvements in capacity utilization in 2002 and 2003.  Thus, despite the excess capacity already available in 
2001 as capacity utilization declined to 84 per cent from 90 per cent in 1999, the evidence demonstrated that 
Canadian producers expected to further increase their ability to supply the US softwood lumber market.  In particular, capacity utilization was project ed to increase to 90 per cent in 2003, as capacity also was projected to 
increase. 
22 Canadian producers rely on sales in the US mark et for about two-thirds of their production, which 
means that their success, and probably  survival, is tied to the importing market.  Moreover, Canadian producers 
had incentives such as mandatory cut requirements to produce more softwood lumber and export it to the US 
market.  Canada has offered no positive evidence to refu te the ITC’s reasonable conclusion, discounting export 
projections, that production increases wo uld be distributed accordi ng to historic pr oportions.  The fact is, the US 
market had been very important to Canadian producers and was expected to continue to be. 
23 The facts demonstrate that without restraints impor ts have increased.  Increases stopped when the 
SLA was imposed; substantial increases (ranging from 9.2 per cent to 12.3 per cent) in imports occurred when 
the SLA expired; and increases in imports stopped when preliminary CVD duties were imposed.  This evidence provides a clear indicator of how subj ect imports have entered, and would enter, the US market in the imminent 
future if not subject to trade restraints and supports th e ITC’s finding of likely substantial increases in subject 
imports.  Canada offers nothing but speculation about other reasons why imports were not restrained during those periods. 
24 Canada has not refuted the ITC’s findin gs regarding forecasts for US demand, i.e., that the US 
market would continue to be a very attractive, and necessary, one for Canadian imports (a market that consumes about 65 per cent of Canadian production); that subject imports would continue to play an important role in the 
US market; and even that there would likely be increases in such imports. 
25 See, e.g. , US - Lamb Meat , AB Report, para. 125. 
26 See US - Lamb Meat , AB Report, para. 136; see also Mexico-HFCS , AB Report, paras. 85; 
US-Cotton Yarn , AB Report, para. 77; US-Steel Safeguards , Panel Report, para. 10.173, n. 5032.  WT/DS277/R 
 Page A-27 
 
 
 assumptions relating to such events made by  those authorities in the course of their 
analyses.  In determining the existence of a threat  of material injury, the 
investigating authorities will necessarily have to make assumptions relating to 
the “occurrence of future  events” since such future events “can never be 
definitively proven by facts ”.  Notwithstanding this intrinsic uncertainty, a “proper 
establishment” of facts in a determination of threat of material injury must be based 
on events that, although they have not ye t occurred, must be “clearly foreseen and 
imminent”, in accordance with Article 3.7 of the Anti-Dumping Agreement .27 
In Mexico - HFCS  and other disputes, the Appellate Body has recognized that a threat of injury 
determination does not require projecting by a certa in amount levels of increases or absolute volume 
in order to make a finding of a likeli hood of substantially increased imports. 
 
Questions 20, 21, and 22: 
 20. The United States asserts that "an evolutio n of adverse trade trends can cause a threat 
of injury to ripen into actual injury".  Woul d the United States agree that there must be some 
identification of that evolution, in terms of "change in circumstances" under Article 3.7/Article 15.7, in an investigating authority's determination?  Could the United States indicate where, in its determination, the USITC addressed the question of "change in circumstances"?  
21. Could the United States indicate whether the USITC considered that there was a 
likelihood of substantially increased importation as a "change in circumstances"?  22. Could the United States indicate whether the USITC considered that the projected attribution of oversupply to Canadian lumber as a "change in circumstances"?  
 
18. Since questions 20, 21, and 22 all involve th e “change in circumstances” issue, we have 
responded to them together to avoid duplication in our responses.  19. The Anti-Dumping Agreement and the SCM Ag reement recognize that injury to a domestic 
industry need not, and frequently does not, occur su ddenly, but rather often involves a progression of 
injurious effects ascending from a threat of material injury, and if not prevented, to present material 
injury.  Therefore, a determinati on that an industry is threatened  with material injury would be 
warranted when conditions of trade clearly indicate th at material injury likely will occur imminently if 
demonstrable trends in trade adverse to the dom estic industry progress, or if clearly foreseeable 
adverse events occur.  Threat of in jury is an anticipation of material injury that must be on the verge 
of occurring, i.e., clearly foreseen and imminent. 
 20. Article 3.7 of the Anti-Dumping Agreement and Article 15.7 of the SCM Agreement provide 
in relevant part: “A determination of a threat of ma terial injury shall be based on facts and not merely 
on allegation, conjecture or remote possibility.  The change in circumstances which would create a 
situation in which the dumping would cause injury must be clearly foreseen and imminent”.  The 
Anti-Dumping Agreement provides as an example of  the change in circumstances “that there is 
convincing reason to believe that there will be, in the near future, substantially increased importation 
of the product at dumped [or subsidized] prices".
28 
 
                                                      
27 Mexico - HFCS , AB Report, para. 85  (emphasis added). 
28 Article 3.7 and n. 10 of the Anti-Dumping Agreement.   The text of the covered Agreements also uses 
the plural “circumstances” which reinforces that it contem plates a sequence of projected events rather than “a” 
single event. WT/DS277/R 
Page A-28  
 
 21. While the text provides a clear example in whic h the change in circumstances is a sequence of 
projected events, it sets no requirement to explicitly  “identify” that change in circumstances, as 
Canada alleges.
29  Nor has any WTO or GATT dispute settleme nt panel interpreted the Agreements to 
require such explicit “identification.”  Nor does the negotiating history of the Agreements support 
such an interpretation.30 
 
22. Consistent with all of its actual obliga tions under the covered Agreements, including 
Articles 3.7 and 15.7, the Commission provided a de tailed explanation of how the totality of the 
evidence supported its conclusion that there will be  in the near future substantially increased 
importation of softwood lumber from Canada at dumpe d and subsidized prices.  In doing so, the ITC 
addressed the likely events and facts that were clear ly foreseen for dumped and subsidized imports in 
the imminent future which would affect the US ma rket and would cause material injury to the US 
industry to occur. 
 23. The United States has provided a detailed accounting of the facts and likely events 
demonstrating the progression or change in circum stances which would create a situation in which the 
dumped and subsidized imports would cause material injury in its second submission at paragraph 18.  
This progression of injurious effects was addresse d by the Commission throughout its analysis.
31  
Briefly, the facts demonstrating a progression of injurious effects justifying the Commission’s determination that subject imports constitute a threat of material injury to the domestic industry in the 
United States include:  the volume of subject imports already was significant; subject imports had increased during the period of investigation even w ith the restraining effect of the Softwood Lumber 
Agreement (SLA); imports had some adverse pri ce effects on domestic prices; and the condition of 
the domestic industry had deteriorated, primarily as a result of substantial declines in prices, and thus 
was in a vulnerable state.  These findings in the pres ent injury analysis foresh adow injury and clearly 
support the existence of a threat of material injury .  The ITC’s affirmative threat determination is 
                                                     
 
29 Canada repeatedly alleges that the ITC failed to comply with this nonexistent “obligation to 
identify.”  See Canada’s Opening Statement at First Panel Meeting, paras. 35, 36, 41, and 45. 
 30 The GATT Committee on Anti-Dumping Practi ces adopted “Recommendation concerning 
Determination of Threat of Material Injury” on 21 October 1985, which provided the same example of the 
change in circumstances now includ ed in note 10 of the WTO Anti-Dumping Agreement.  Moreover, the 
recommendation provided the following further clarificati on on the change in circumstances and the progression 
from threat to injury:  
 
3.   The change in circumstances of which [GATT] Article 3.6 speaks may also occur during an 
anti-dumping investigation.  Even where the basis for the initiation of an anti-dumping investigation 
was sufficient evidence of threat of material injury (as well as dumping and causal link), actual material 
injury may have occurred by the end of the investigation, when the final determination concerning injury is made.
 
 
4.   On the other hand the change in circumstances during an anti-dumping investigation may also lead 
to a situation of neither threat of injury nor material injury.  
 
5.   It is important to domestic producers that anti-dumping procedures and anti-dumping relief be 
available in cases where dumping and threat of mate rial injury are present but before injury has 
actually materialized, as Article VI of the Ge neral Agreement recognizes .  However, as the 
Anti-Dumping Code provides, anti-dumping relief based on the threat of injury must be confined to 
those cases where the conditions of trade clearly indi cate that material injury will occur imminently if 
demonstrable trends in trade adverse to domestic industry continue, or if cl early foreseeable adverse 
events occur.  
 
GATT Doc. No. ADP/25, BISD 32/182-183. 
31 See  ITC Report at  pages 31-44.  WT/DS277/R 
 Page A-29 
 
 
 based on the following evidence:  (1) six factors showing a likelihood of substantial increases in 
subject imports based on evidence regarding, in ter alia, Canadian producers’ excess production 
capacity and projected increases in capacity, capacity utilization and production, the export orientation of Canadian producers to the US mark et and subject import trends during periods when 
there were no import restraints, such as the SLA.;  (2) likely price pressure resulting from the excess 
supply in the US market caused by these increases in imports, particularly with evidence that prices 
declined substantially at the end of the period of investigation; and 3) the consequent threat of 
material injury to a domestic industry, which alr eady was in a vulnerable state, resulting from the 
likely increases in imports and price effects.  For the foregoing reasons, the Commission determined that an industry in the United St ates was threatened with material injury by reason of imports of 
softwood lumber from Canada that are subsidized by the Government of Canada and sold in the 
United States at less than fair value.  24. Specifically, in response to Panel question 21, we note that the ITC c onsidered the evidence 
regarding the six findings demonstrating the lik elihood of substantially increased importation as 
elements of the progression of circumstances, i.e., the change in circumstances, which would create a 
situation in which the dumping and subsidies woul d cause injury.  In response to Panel question 22, 
we note that the ITC considered that the likely subs tantial increases in subject imports would result in 
excess supply to the US market.  Evidence regardi ng likely excess supply, which generally caused the 
substantial price declines in 2000 that led to the deterioration in the condition of the domestic 
industry, indicated that US producers had curbed their production, but that overproduction “remains a 
problem in Canada".
32  Therefore, the Commission reasonably found that the additional subject 
imports, which it concluded were likely, would further increase th e excess supply in the market, 
putting further downward pressure on prices, and as su ch were elements of the progression, i.e., the 
change in circumstances, which would create a situ ation in which the dumped and subsidized imports 
would cause injury to the US industry. 
 
Q23:    Could the United States point to the specifi c passages in the USITC determination and 
report that, in its view, demonstrate the "consid eration" of each of the relevant factors in its 
decision, as distinct from the recitation of facts?  
 
25. The ITC’s consideration of the relevant fact ors that it relied on in making its determinations 
are set forth on pages 21-27 and 31-44 of the ITC Report.33  It is evident in the ITC Report that the 
Commission appropriately considered the relevant factors and did not provide a mere recitation of 
facts, as Canada has asserted.  In addressing whet her an investigating authority had considered 
factors, the Panel in Thailand-H-Beam explained th at when investigating authorities put figures into 
context, they went beyond a mere recitation of trends in the abstract.34  The following excerpt from 
the Views of the Commission regarding excess Cana dian production capacity is illustrative of the 
ITC’s consideration of relevant factors and demonstrat es that the ITC did not merely recite facts.  The 
ITC stated:  
                                                     
 
32 See, e.g.,  ITC Report at 35, n. 217 citing  Petitioners’ Posthearing Brief at 2 and Appendix H, Exh. 2 
at 11 (Bank of America, “Wood & Building Products Quarterly,” at 11 (Nov. 2001)). (USA-5). 
33 Specifically, the ITC considered and addressed the volume of imports and likely substantial increases 
in imports on pages 31 and 40-43 of the ITC Report, price effects and likely price effects on pages 32-35 and 
43-44, nature of the subsidies on page 39, other threat factors on page 44, the vulnerable condition of the domestic industry on pages 36-39, and possible other causal factors on pages 21-27. 
34 Thailand - H-Beams , Panel Report, para. 7.170 (“the authorities did consider the ‘significance’ of the 
increase in imports.  We note in particular in this re gard that the authorities went beyond a mere recitation of 
trends in the abstract and put the im port figures into context.  For exampl e, the statement that ‘imports from 
Poland increased continuously’ indicates that the increase had persisted over some period.”). WT/DS277/R 
Page A-30  
 
 Canadian producers’ capacity increased from 32,100 mmbf in 1999 to 32,800 mmbf  
in 2001, following a steady increase from 1995 to 1999.
35  Canadian production 
capacity in 2001 was 10.4 per cent higher than in 1995.  Canadian production declined from 29,041 mmbf in 1999 to 27,457 mmbf in 2001.
36  Nevertheless, 
Canadian production in 2001 was 5.2 per cen t higher than that of 1995; Canadian 
capacity utilization peaked in 1999 at 90.5 per cent, and was 88.9 per cent in 2000 
and decreased again to 83.7 per cent in 2001.37  In the three years prior to the period 
of investigation, also while under the SLA, Canadian capacity utilization had been at 
a relatively stable level ranging from 87.3 pe r cent to 87.7 per cent.  In 2001, excess 
Canadian capacity was 5,343 mmbf, 10 pe r cent of US apparent consumption.38  
Furthermore, in their questionnaire responses, Canadian producers projected 
additional capacity increases, improvements in capacity utilization, and additional 
production in 2002 and 2003.39  Thus, despite the excess capacity already available in 
2001 as capacity utilization declined to 83.7 per cent40, Canadian producers expect to 
further increase their ability to supply  the US softwood lumber markets41,42 
 
Q24: Would the United States agree that, in ord er to make an affirmative  determination of 
threat of material injury, it is necessary to undertake an assessment of the condition of the 
domestic industry in light of the impact of fu ture dumped or subsidized imports?  Could the 
United States indicate where, in its determination, the USITC discussed the projected impact of future imports on the domestic industry?   
 
26. The Commission assessed the condition of th e domestic industry and found that it “is 
vulnerable to injury in light of declines in its  performance over the period of investigation, 
particularly its financial performance".
43  The Commission’s analysis of the vulnerable condition of 
the domestic industry is on pages 37-39 of the ITC Re port.  In brief, the record reflects that many 
performance indicators declined significantly from 1999 to 2000, and then declined slightly or 
stabilized from 2000 to 2001.44  With respect to the domestic industry’s financial performance in 
particular, the evidence also generally shows dec lines during the period of investigation, with a 
dramatic drop from 1999 to 2000, as prices declined.45 
 
27. Moreover, the ITC considered  the consequent impact of the likely substantial increases in 
imports and likely price effects.  The evidence demons trates that subject imports already at significant 
levels will continue to enter the US market at significant levels and are projected to increase 
                                                      
35 ITC Report at Table VII-1.  Canadian producers’ questionnaire responses (covering nearly 80 per 
cent of production in Canada) followed similar trends with production declining from 22,452 in 1999 to 
21,770 mmbf in 2001.  Reported capacity in Canada was 24,871 mmbf in 1999 and 25,804 mmbf in 2001, and 
reported capacity utilization was 90.3 per cent in 1999, 88.8 per cent in 2000, and 84.4 per cent in 2001.  ITC Report at Table VII-2. 
36 ITC Report at Table VII-1. 
37 ITC Report at Table VII-1. 
38 ITC Report at Table VII-1. 
39 ITC Report at Table VII-2.  Canadian produc ers projected capacity incr eases to 26,206 mmbf, 
production increases to 23,698 mmbf, and capacity utilization increases to 90.4 perc ent in 2003.  Id. 
40 The reported capacity utilization in questionnaire responses was similar at 84.4 per cent.  ITC Report 
at Table VII-2. 
41 The reported capacity utilization in questionnaire responses was similar at 84.4 per cent.  ITC Report 
at Table VII-2. 
42 ITC Report at 40. 
43 ITC Report at 37. 
44 See  ITC Report at 37-38. 
45 See  ITC Report at 37-38.  WT/DS277/R 
 Page A-31 
 
 
 substantially.  The Commission found that the add itional subject imports would increase the excess 
supply in the market, putting further downward pressur e on prices.  Prices at the end of the period of 
investigation in the third and fourth quarters of 2001 had substantially declined to levels as low as 
they had been in 2000.  Evidence regarding likely excess supply, which generally caused the 
substantial price declines in 2000 that led to the deterioration in the condition of the domestic 
industry, indicated that US producers had curbed their production, but that overproduction “remains a 
problem in Canada".46  The Commission reasonably found that subject imports were likely to increase 
substantially and were entering at prices that ar e likely to have a significant depressing or suppressing 
effect on domestic prices, and are likely to increase demand for further imports.  Moreover, the additional subject imports, which it concluded were likely, would further increase the excess supply in 
the market, putting further downward pressure on prices, thereby adversely impacting the US 
industry.  The Commission’s assessment of the impact of future imports on the domestic industry is primarily on pages 43 and 44 of the ITC Report.  28. Where the investigating authority has consider ed the Article 3.4 and Article 15.4 factors once, 
it is not required to undertake a separate, second eval uation, as part of an entirely distinct threat 
analysis.  This does not mean that additional an alysis appropriate for assessing whether further 
dumped and subsidized exports w ould have a consequent adverse impact on the domestic industry 
may not be required depending on the facts.  Fo r example, in a case where the domestic industry is 
healthy and profitable during the period of investig ation, it may be appropriate to provide a more 
detailed discussion of how its condition would likely be affected by further imminent dumped and 
subsidized imports.  Such discussion would show how the condition would deteriorate and material 
injury would occur.  On the other hand, in a case, as the one before this Panel, where the domestic 
industry is already in a vulnerable state and wher e the condition has deteriorated significantly during 
the period of investigation, resulting primarily from declines in prices caused by excess supply, the 
focus is on the likely substantial increases in imports and likely effects of declining prices rather than 
whether the condition of the industry is deteriorating. 
 
Q25: Could the United States indicate where in its determination the USITC concluded that 
the elements asserted by Canada to be "known factors other than the dumped imports which at 
the same time are injuring the domestic industry"  were not, in fact, such known factors injuring 
the domestic industry?  
 
29. In assessing the conditions of competition pertinent to the softwood lumber industry, the Commission considered and assessed whether other f actors were potentially causing injury to the 
domestic industry.  This assessment is primarily on pages 21-27 of the ITC Report.  For a more 
detailed discussion of this issue, please see the United States’s response to question 26. 
 
Q26: At paragraph 29 of its oral statement, the United States argues that the USITC 
specifically considered other fact ors potentially causing injury, referring to domestic supply, 
nonsubject imports, cyclical demand and hous ing construction cycles, North American 
integration, and other product substitutes.  Is it the United States' argument that these factors were not other known causal factors or were did no t constitute a cause of injury at the same 
time as the subject imports?   Could the United States indicate where in the USITC's 
determination such a conclusion is to be found?  Could the United States indicate whether the USITC addressed these other factors in the context of  its analysis of causation with respect to 
threat of material injury?  Could the United St ates indicate where that discussion is to be 
found?  
 
30. The ITC considered all of these factors allege dly causing injury to the domestic industry.  The 
ITC found that the alleged other factors – nons ubject imports, cyclical demand and housing 
                                                     
 
46 See, e.g.,  ITC Report at 35, n. 217. WT/DS277/R 
Page A-32  
 
 construction cycles, North American integration and other product substitutes –  are not other known 
causal factors.  The Commission considered and assessed these alleged other factors on pages 21-27 of the ITC Report.  While the ITC did not explic itly state that these alleged other factors are not 
known other factors, it is clear from the analysis that none of them rise to the level of “other known factors injuring the domestic industry”.
47  For example, the ITC’s conc lusion that the evidence did not 
support finding that substitute produc ts are other causal factors is apparent in the Commission’s 
finding that “While these substitute  products have increased in importance over the last few years, 
they still account for a small share of the ma rket traditionally utilizing softwood lumber".48  
Furthermore, in making this statement the Commi ssion relied on evidence provided by Canadian 
exporters and stated that “[f]or example, while EWPs  are perceived to have a fairly significant share 
of the market for structural framing applications , CLTA [i.e., exporters’ co alition] estimated that 
EWPs accounted for only 5 per cent of the US market".49  The Commission considered alleged other 
factors in a manner similar to other substitute produc ts and found each not to be an other known factor 
causing injury to the domestic industry.  
31. Moreover, the ITC found that the evidence dem onstrates that domestic supply would not be a 
known causal factor in the imminent future, as it had been in the 1999-2000 period
50, when likely 
substantial increases in subject imports with likely  price depressing effects would cause injury to the 
domestic industry.  The Commission considered dom estic supply on pages 24-25, 34-35, 37-38, and 
43-44 of the ITC Report.  Specifically, the ITC exam ined constraints on domestic producers’ ability to 
meet demand and took into consideration domest ic producers ’ past contribution to oversupply 
conditions.  The evidence cited by the ITC indicat ed that the domestic producers had curbed their 
production, but that “overproduction remains a problem in Canada.”  Thus, while domestic 
overproduction had contributed to adverse price effe cts in 2000, the evidence demonstrated that it was 
no longer contributing to excess supply, while Canadi an imports continued to oversupply.  Moreover, 
the evidence demonstrated that domestic producti on capacity was fairly level during the period of 
investigation, following a small but steady incr ease between 1995 and 1999, as apparent consumption 
increased.51  Domestic capacity utilization was 87.4 per cent in 2001.  With the exception of a peak in 
1999 at 92 per cent, it had consiste ntly held this level from 1995-2001.52  In contrast, Canadian 
capacity utilization had declined in 2001 to 83.7 per cen t, a rate substantially lower than that reported 
                                                      
47 The Panel in  Thailand - H-Beams  recognized that the absence of an explicit finding in the final 
determination regarding the significance of the volume of imports and price effects would not make them 
inconsistent with the requirements of the appropriate prov isions if consideration is apparent from the relevant 
documents in the record.  Thailand - H-Beams , Panel Report, paras. 7.161, 7.170-7.171, and 7.179-7.180. 
48 ITC Report at 24 and n.145, and II-4. 
49 ITC Report at II-4 and n.15.  Mo reover, Petitioners maintained that  it was only in residential housing 
floor applications, which make up less than 6.5 per cent of softwood lumber consumption, that substitute 
products hold anything more than a minimal share.  Pe titioners’ Prehearing Brief at 40-44 (USA-8); Petitioners’ 
Posthearing Brief at Appendix A-28 - A-33 (USA-5). 
50 The Commission had found in its present material in jury analysis that excess domestic supply was an 
other known factor that contributed in conjunction with excess import supply to the decline in prices and the injury to the domestic industry, particularly in the 1999-2000 period. 
51 ITC Report at Table III-6 and C-1 (public data).  Domestic producers based on public data reported 
production capacity of 39,800 mmbf in 1999, 40,100 mmbf in 2000, and 40040 mmbf in 2001.  Id.  Domestic 
producers ’ questionnaire responses reported production capacity of 22,847 mmbf in 1999, 24,233 mmbf in 
2000, and 24,709 mmbf in 2001, although the industry c overage is not necessarily comparable to the public 
data.  Id. at Table III-7 and C-1. 
52 ITC Report at Tables III-6 and C-1 (public data).   Domestic capacity utilization based on public data 
was 86.1 per cent in 1995, 87.6 per cent in 1996, 89.9 per cent in 1997, 88.5 per cent in 1998, 92.0 per cent in 
1999, 89.7 per cent in 2000 and 87.4 per cent in 2001.  Id.  Domestic producers’ questionnaire responses 
reported similar capacity utilization rates:  92.8 per cent in 1999, 88.5 per cent in 2000, and 86.1 per cent in 
2001.  Id. at Tables III-7 and C-1.  WT/DS277/R 
 Page A-33 
 
 
 for any other year in the 1995-2001 period.53  As discussed above, in spite of this decline in capacity 
utilization rates, Canadian producers projected s light increases in capacity, increases in production, 
and a return of capacity utilization to 90.4 per cent in 2003.54  On the other hand, domestic production 
of softwood lumber had declined by 4.4 per cent from 1999 to 2001.55  These facts concerning 
domestic supply reinforce the ITC’s a ffirmative threat determinations. 
 
32. It is important to understand that consideration and explanation of a factor in any section of 
the ITC Report does not limit its application to that section of the report.  The report must be viewed as a whole, with analysis conducted in any particul ar section potentially having a bearing on analysis 
in other sections.  Moreover, if it is evident that an  alleged other factor is not a known other factor at 
all and respondents offer no positive evidence, only speculative theories about the future, duplicative 
analyses of the same alleged other factors woul d serve no purpose.  One example where evidence 
demonstrates that an alleged other factor is not  a “known” other factor is nonsubject imports.  The 
Commission found that “[w]hile nonsubject imports were  present in the US market during the period 
of investigation, they never exceeded 3 pe r cent of apparent domestic consumption".
56  T h e  
Commission recognized that the volume of nonsubject imports (from Brazil, Chile, New Zealand, 
Germany, Sweden, Austria, and other countries) increased from 937 mmbf in 1999 to 1,378 mmbf in 
2001, and that as share of apparent domestic consum ption, nonsubject imports increased from 1.7 per 
cent in 1999 to 2.6 per cent in 2001.57  The incremental increase in subject import volume in mmbf 
between 1999 and 2001 was approximately the same as the increase in nonsubject import volume.  
However, this comparison must be placed in pers pective:  subject imports are responsible for an 
enormous volume of imports during the period of investigation, accounting for 33.2 per cent to 
34.3 per cent of US apparent c onsumption in the 1999-2001 period58, compared with  nonsubject 
imports, which “never exceeded 3 per cent  of apparent domestic consumption".59  Moreover, subject 
imports were subject to import restraints for most of the period of investigation; nonsubject imports 
were not restrained. 
 
33. Canada’s speculative theories have failed to  explain how an imminent increase in such a 
small total volume of nonsubject imports relative to apparent consumption and Canada ’s substantial 
share of apparent consumption, might  rise to the level of causing injury  to the domestic industry.  This 
conclusion is particularly apt wh en Canada acknowledges that its exports to the US market will 
continue at, and even increase above, the signi ficant level of imports during the period of 
investigation.  Moreover, nonsubject  imports were not even alleged to  increase, let alone to significant 
levels, unless trade remedies were imposed against Canadian imports.60  The Commission 
appropriately considered nonsubject  imports and found them not to be an other known factor causing 
injury to the domestic industry. 
                                                      
53 ITC Report at Tables VII-1 (public data).  Canadian capacity utilization based on public data was 
87.8 per cent in 1995, 87.7 per cent in 1996, 87.4 per cent in 1997, 87.3 per cent in 1998, 90.5 per cent in 1999, 
88.9 per cent in 2000 and 83.7 per cent in 2001.  Id.  Canadian producers ’ questionnaire responses reported 
similar capacity utilization rates:  90.3 per cent in 1999, 88.8 per cent in 2000, 84.4 per cent in 2001 and 
projections of 88.5 per cent in 2002, and 90.4 per cent in 2003.  Id. at Table VII-2. 
54 ITC Report at Table VII-2. 
55 ITC Report at Tables III-6 and C-1 (public data). 
56 ITC Report at 25. 
57 USITC Report at 25 n.152. 
58 USITC Report at 32. 
59 USITC Report at 25. 
60 The ITC Report reported that: “Some importers stated that any restrictions on the supply of Canadian 
softwood lumber to the US market would result in an increased supply of imports from other sources, 
particularly European sources, to meet US demand for softwood lumber.”  ITC Report at II-3.  The evidence 
also shows the share of US imports held in 2001 by the following European countries: Germany, 1.0 per cent; 
Sweden, 0.8 per cent, Austria, 0.5 per cent.  All nonsubject imports accounted for 6.9 per cent of the overall 
quantity of softwood lumber imports into the US market in 2001.  Id. at II-7, n. 23. WT/DS277/R 
Page A-34  
 
  
Q27.   In paragraph 94 of its first written submission, Canada asserts that the USITC's 
discussion of certain evidence presented by Canadi an parties during the investigation contains 
"fundamental errors". Could the United States respond specifically to this argument?  
 34. Canada’s claim of “fundamental error” in pa ragraph 94 of its first written submission is based 
on the erroneous premise that the Canadian produ cers’ economic theory was the only “information” 
before the ITC and that this theory was uncontest ed and proven fact.  But Canada has provided the 
Panel with a one-sided analysis of this issue a nd ignored the conflicting evidence presented to the 
Commission regarding the applicability of the econom ic models and their alleged effects.  The 
domestic producers presented the ITC with argumen ts, economic analysis and economic studies to 
refute the economic theory provided by Canadian parties.  Indeed, evidence presented to the ITC 
during its investigation squarely placed in question whether the Ricardian rent  theory was applicable 
to the timber and lumber markets, whether the th eory’s underlying premise regarding supply was 
correct, and whether the results regarding the effects of the stumpage fees on output were very 
different.  In any event, theory is not fact.  While an alytically useful in appropriate contexts, it is still 
distinguishable from hard statistical information.  35. One issue on which the Commission had conflic ting evidence from the parties was whether 
the lumber/timber market is a “rent” market, th at is a market in which the quantity supplied
 does not 
vary with price over a relevant range.  As the context of the ITC's discussion, and the sources 
referenced, make clear, the Commission's use of the term  "fixed supply" refers to the lack of variation 
in the quantity supplied, not to any assumption that timber supply is somehow exogenously fixed.61  
The fact is the Canadian parties used a similar shorthand formulation (i.e., characterizing factors as “fixed”) in their own submissions.
62  As for the Commission’s use of the term "lumber supply" rather 
than "timber supply," it may have been more preci se to use the term “lumber and timber supply,” 
since the discussion involved the raw material of ti mber for the subject product, lumber.  The cited 
materials clearly relate to the raw material fo r lumber, i.e., the elasticity of timber supply. 
 36. The Commission’s consideration and discussi on of the economic theories presented by the 
parties is not undermined by alleged “fundamental e rrors.”  Canada’s allega tions should be rejected 
when it is clear, as it is here, that although the IT C’s terminology might have been more precise, the 
Commission appropriately understood and cons idered the conflicting evidence regarding the 
economic theories that had been presented to it.  37. Moreover, the ITC found that, despite all the evidence of record, the uncertainties regarding 
these competing economic theories provided by the parties were such as to preclude reasoned and 
adequate conclusions.  Therefore, the ITC approp riately considered the parties’ arguments and 
provided a reasoned explanation but found it coul d not reach a finding on the competing economic 
theories.  As evident in the View s of the Commission, its considera tion of the nature of the subsidy 
threat factor was not a reason that led to its dete rminations and thus, it neither supported nor detracted 
from those determinations that the domestic industry w as threatened with material injury by reason of 
the subject imports. 
 
Q28. Could the United States please explain th e basis for the USITC's conclusion regarding 
significant price effects in this case, in light of  the finding of moderate substitutability of US 
domestic and imported Canadian lumber?  
                                                     
 
61 ITC Report at 39, n. 245.  See also Hearing Transcript at 41-45 (testimony of landowner that quantity 
supplied was reduced when price fell); Petitioners' Posthearing Brief at Appendix D-24 (nominal annual 
allowable cut in Canadian provinces do not effectively constrain supply). 
62 See e.g. , CLTA Posthearing Brief, vol. 2, Tab T, at 4 n.11 ("Some goods or productive factors are 
completely fixed in amount regardless of price.").  WT/DS277/R 
 Page A-35 
 
 
  
38. Given its finding of likely significant increases in subject import volumes, its finding of at least moderate substitutability, its finding that prices of a particular species affect the prices of other 
species, and its present finding that the substan tial volume of subject imports had some adverse 
effects on prices for the domestic product, the Comm ission concluded that subject imports were likely 
to have a significant price-depressing effect on domestic prices in the immediate future, and are likely 
to increase demand for further imports.  The evidence at  the end of the period of investigation showed 
substantial declines in prices in the third and f ourth quarters of 2001, to levels as low as 2000.  
Moreover, the evidence regarding supply, whic h generally was considered the cause for the 
substantial price declines in 2000 that led to the deterioration in the condition of the domestic 
industry, indicated that US producers had curbed their production, but that overproduction “remains a 
problem in Canada”.  Therefore,  the ITC reasonably found that the additional subject imports, which 
it concluded were likely, would further increase the excess supply in the market, putting further 
downward pressure on prices.  Moreover, the evidence demonstrated that pressure would come from excess Canadian supply rather than a combination of  import and domestic supply, thereby resulting in 
a threat of material injury to the US industry. 
 39. These findings by the Commission are not affected by the Commission’s finding of moderate substitutability between domestic a nd imported softwood lumber.  Despite the differences in many of 
the imported and domestic species of softwood lumber , the moderate substitutability finding must be 
considered in the context of the Commission’s finding  that the evidence demonstrated that prices of a 
particular species will affect the prices of other species,  particularly those that are used in the same or 
similar applications.
63  As discussed in the US first written submission and the ITC Report, the 
evidence provided by purchasers and home builders showed that subject imports and domestic species 
of softwood lumber are used in the same appli cations and that regional preferences merely reflect 
availability of species.64 
 
40. In particular, the Annual Builders Survey by the National Association of Home Builders 
Research Center (NAHBRC) provide d clear evidence that SPF, SYP, and Douglas fir/hem fir are all 
used in such same construction applications as lumb er joists, light frame exterior walls, roof trusses, 
and roof rafters.65  The Commission recognized that while regional preferences existed – species often 
were used in close proximity to where they are m illed – these preferences seemed to reflect in large 
part availability of species, which is affected by transportation costs.66  This was demonstrated in 
                                                      
63 See, e.g. , Random Lengths  (“Competition from Canadian S-P- F prevented ES-LP narrows from 
rallying from $5 drops early in the week.” at 9, 26 Oct. 2001; “Warmer weather, a drop in interest rates, and an 
abrupt rise in S-P-F prices all got credit for boosting buyer interest in Southern Pine.” at 4, 20 Apr. 2001;  “As 
SPF prices climbed and supplies tightened in Canada, mo re buyers turned to US produced Hem-Fir and ES-LP” 
at 4, 13 Apr. 2001; “Western and Eastern S-P-F were the leaders, pulling other dry species along.” at 4, 2 Feb. 
2001); Wickes  (“Species switching by many long-term purchasers of S-P-F forced most North of the border to 
finally return prices to a more realistic level as th e need to move wood into the inventory pipeline became 
evident.” 5 Sept. 2001; “Producers in the US secured most of the available business from buyers who had no 
qualms in switching species to take advantage of the pricing discrepancies.  Truss manufacturers started the 
charge as they switched from S-P-F MSR to alternative #2  grade SYP helping mills in the South post increases 
across the board”.  21 Aug. 2001).  Petitioners’ Pr ehearing Brief at 13 and Appendix C (USA-8). 
64 See  ITC Report at 25-27, 33, and 43; US First Written Submission at paras. 36-37, 203-206, and 
269-278.  A majority of purchasers (36 of 51) responding to the Commission questionnaire reported that US and Canadian softwood lumber can be used in the same general applications, recognizing that performance 
characteristics and customer preferences place some limitations on interchangeability among species.  ITC 
Report at II-6, II-8, and Table II-5; Petitioners’ Preh earing Brief, Vol. II at Exhibit 85 (USA-5). 
65 Dealers/Builders’ Posthearing Brief at Exhibit 3 at 5, 10, and 15 (USA-10). 
66 ITC Report at II-7-8, V-2 - V-4. WT/DS277/R 
Page A-36  
 
 evidence provided by builders and pur chasers at the Commission’s hearing.
67  Thus, these regional 
preferences do not reflect a lack of substitutab ility but simply a predisposition toward locally-milled 
species.  As the Commission has r ecognized in prior investigations, Canadian softwood lumber and 
the domestic like product generally are interchang eable, notwithstanding differences in species and 
preferences.68 
 
41. The ITC based its findings on consideration of the totality of the facts, including the evidence 
provided by purchasers and home builders, that there are other products that both countries produce that compete with each other; Canadian softwood lumber and the domestic like product generally are 
interchangeable; subject imports and domestic species are used in the same applications; regional 
preferences exist, but do not reflect a lack of  substitutability, but instead simply reflect a 
predisposition toward locally-milled species; and evid ence demonstrated that prices of different 
species have an effect on other species’ prices, particul arly those that are used in the same or similar 
applications.  42. It is evident that imported and domestic softwood lumber, notwithstanding differences in 
species, are interchangeable and compete with each ot her.  Thus, the Commission’s finding of at least 
moderate substitutability, in conjunction with the evid ence that different species  are used in the same 
applications and the evidence regarding the effect of prices of one species on those of another species, 
fully supports the Commission’s conc lusion of likely price effects. 
 
Q29. Could the United States explain the ba sis for the USITC's conclusion regarding 
significant price effects in this case, in light of the absence of any conclusions regarding 
underselling?  
 
43. Article 3.7(iii) of the Anti-Dumping Agreemen t and Article 15.7 (iv) of the SCM Agreement 
state that an investigating authority “should consider , inter alia . . . whether imports are entering at 
prices that will have a significant depressing or suppressing effect on domestic prices, and would 
likely increase demand for further imports”.  Thus, th e listed factors for a threat analysis in the 
covered Agreements do not include required consideration of underselling.  Article 3.2 of the Anti-
Dumping Agreement and Article 15.2 of the SCM Agreement, on the other hand, state that an 
investigating authority “shall consider” whether th ere has been a significant price under cutting “or” 
significant price depression or suppression.  Articles 3.2 and 15.2 use the disjun ctive “or” rather than 
the conjunctive “and” in setting fo rth the applicable obligation.
69  This shows a recognition that price 
depression or suppression may occur whether or not there is price undercutting.  Thus, the fact that the 
Commission determined, as agreed to by all parties to the proceeding70, that making direct 
                                                      
67 Hearing Transcript at 185-190 and 204-209 (USA-11 and USA-23) (Florida:  floor joists - SYP, 
wall/framing - SPF, headers - SYP, trusses - SYP,  Id . at 185-190, 204; Texas:  fl oor joists - SYP, wall/framing - 
SYP, headers - SYP, trusses - SYP, Id . at 205; Indiana and West:  floor joists - SPF, wall/framing - SPF, headers 
- SPF, trusses - SPF, Id . at 205-207; Massachusetts:  floor joists  - SPF, wall/framing - SPF, headers - SYP, 
trusses - SYP, Id . at 206); ITC Report  at II-8 ( e.g., purchasers’ comments on species preferences);  and 
Dealers/Builders’ Prehearing Brief at Exhs. 2, 3, 4, 6, 8, 9, 11, 13, 14 15, 16, 17, 21, and 23 (USA-12); 
Petitioners’ Posthearing Brief at 5-6 (USA-5). 
68 See, e.g. , Softwood Lumber III , USITC Pub. 2530 at 28-29, and 34 (USA-24), aff’d in part , In the 
Matter of Softwood Lumber from Canada , USA-92-1904-02, Decision of the Panel Reviewing the Final 
Determination of the US International Trade Commission , at 25-28 (26 July 1993) 
69 See  Article 3.2 of the Antidumping Agreement and Article 15.2 of the SCM Agreement.  See also  
Thailand-H-Beams , Panel Report, para. 7.171 (regarding “or” contained in Article 3.2 for consideration of 
volume of imports, Panel considered it sufficient for authority  to consider absolute volume rather than both it 
and relative.) 
70 The Commission noted that it had encountered similar problems obtaining useful pricing data for 
assessing underselling in prior Softwood Lumber cases.  The parties agreed that, in this industry, accurate price  WT/DS277/R 
 Page A-37 
 
 
 cross-species price comparisons in order to asse ss underselling was inappropriate, does not have a 
bearing on the ITC’s conclusion regarding significant pri ce effects at all and particularly in its threat 
analysis.71,72 
 
44. As discussed in the US first written submissi on, the fact that the differences in species of 
softwood lumber did not lend itself to direct price comparisons did not preclude a price trends 
analysis to consider whether there was a corre lation between the prices that indicated price 
suppression or depression.73  First, the Commission found that the evidence indicated that prices of a 
particular species will affect the prices of other species,  particularly those that are used in the same or 
similar applications, as discussed in response to question 28.74  Moreover, both the questionnaire and 
public data on the record permitted an analysis of price trends.  In particular, the Commission considered pricing information for so ftwood lumber published in Random Lengths
, which is the 
source the industry most cited throughout this investigation as a pricing guide.75  The Commission 
reasonably found, based on the price trends analysis discussed in its opinion76, that subject imports 
were likely to have a significant de pressing effect on domestic prices. 
 
Q30. At page 40 of the USITC determination (Exhibit USA-1), the USITC states "We find 
that subject imports are likely to increase substant ially based on several factors: …".  Could the 
United States clarify whether each of the factors listed in the remainder of that sentence was considered to support the conclusion set out, or whether the listed facto rs are those which were 
considered, and that some of them supported the finding of likely increased imports while 
others did not?  
 
                                                                                                                                                                    
 
comparisons are difficult to compile.  See, e.g. , Transcript at 93, 269-273 (USA-11); Dealers/Builders’ 
Posthearing Brief at 12-14 (USA-10). 
 71 ITC Report at 34-34.  The Commissi on found that because of the nature  of this market, direct price 
comparisons between domestic products and subject imports are highly problematic whether based on 
questionnaire or public data.  While the Commission collected pricing data for six specific softwood lumber 
products from purchasers, the Commission placed little we ight on this informatio n because the reported 
quantities of softwood lumber involved in the deliver ed price comparisons are very limited.  The Commission 
concluded that it could not draw any conclusions rega rding underselling from the questionnaire data in these 
investigations.  
While there are a number of different sources of public pricing information regarding softwood lumber 
products (including Random Lengths , Crow’s , Madison’s , and the Southern Pine Bulletin ), these data series do 
not yield improved comparisons, despite their much broader coverage.  Although prices of one species affect those of others, absolute price levels differ, making direct cross-species comparisons inappropriate for purposes 
of an underselling analysis.  Thus, the Commission concluded that it could not determine, based on this record, 
whether there has been significant underselling by subject imports.  ITC Report  at V-3 - V-5. 
72 In conducting a price underselling analysis, the Co mmission makes direct comparisons of prices for a 
comparable product, i.e.  , same model, same size and grade of a speci es of lumber, etc., and calculates a margin 
of underselling or overselling for the import prices relative to the domestic prices. 
73 See US First Written Submission, paras. 201-202 an d 241.  A price suppression or depression 
analysis considers trends for import and domestic prices to  determine certain specific correlations between them.  
The pricing trend data is not necessarily limited to a size/grade or model.  Using this trends analysis and other evidence, the Commission determines whether imports have prevented increases in prices for domestic products 
that otherwise would have occurred (suppression) or whether imports in the market have exerted downward 
pressure on domestic prices (depression). 
74 ITC Report at 26-27, 32-35, and 43. 
75 ITC Report  at V-4-5.  Random Lengths, Inc. collects weekly price data from suppliers and 
purchasers and calculates weighted-average prices based on such factors as the size of the transaction and the 
quality of the lumber. Random Lengths publishes these data in its weekly and annual publications.   Id . 
76 ITC Report at 32-35 and 43. WT/DS277/R 
Page A-38  
 
 45. The Commission found that subject imports are likely to increase substantially based on 
evidence regarding each of the six factors listed on pa ge 40, and discussed in detail on pages 40-43, of 
the ITC Report.  The ITC found that each of the six factors supported its conclusion.  Q31. Could the United States please indicate the facts that form the basis for the USITC's 
conclusion that there would be an imminent substantial increase in imports?  
 
46. The United States refers the Panel to its res ponse to question 19, the substance of which also 
responds to question 31.  
Q32. The Panel understands that Canada is not arguing that a combined analysis of injury 
caused by dumped and subsidized imports is pe r se inconsistent with the cited Agreements. 
Could the United States comment on the view that , in the event the Panel finds a violation of 
any other provision of the relevant Agreements, the injury determination as a whole should be deemed inconsistent with both the AD and SCM Agreements?  
 
47. The ITC’s determinations are consistent  with all US obligations under both covered 
Agreements.  With the exception of consideration of  the record evidence rega rding the “nature of the 
subsidies” factor pursuant to Article 15.7(i) of the SCM Agreement, the ITC’s analysis of injury by 
reason of dumped and subsidized im ports involved factors, evidence, analysis, and findings common 
to both Agreements.  Thus, if the Panel were to  find a violation, it necessarily would involve a 
provision (with the one noted exception) common to both the Anti-Dumping Agreement and the SCM 
Agreement.  Canada’s attempts to raise the same claims it has made regarding specific provisions under Article 3 of the Anti-Dumping Agreement an d Article 15 of the SCM Agreement as a separate 
alleged violation on the basis of a combined inve stigation or cross-cumulation violation should be 
rejected.  As Canada concedes, none of its cl aims relate to cross-cumulation or combined 
investigations at all, but rather are attempts to  establish duplicative violations based on the same 
claims.  Its arguments under the head ing of “Combined Investigations” are simply restatements of its 
arguments concerning particular provisions of the co vered Agreements.  The Panel should reject these 
combined investigation arguments fo r the same reasons it should reject  the particular arguments, as 
discussed in this and other US submissions.  Q33. Could the parties please address the distin ctions they see, if any, between "finding", 
"evaluation" and "consideration" in the context of  analysis of factors in a determination under 
Article 3 of the AD Agreement and/or Article 15 of the SCM Agreement.  
 
48. There is a clear distinction between “findi ng,” on the one hand, and both “evaluation” and 
“consideration”, on the other, in the context of analyzing factors in making a determination under 
Article 3 of the Anti-Dumping Agreement and Article  15 of the SCM Agreement.  Simply, “finding” 
involves a conclusion whereas “evaluation” and “cons ideration” involve the process of assessment 
and do not require that a finding be made at all.  Any distinction between “evaluation” and 
“consideration” is less clear and seems to have more  to do with the provision in which the term is 
used than with a marked difference in th e meaning of the term in the abstract.
77 
 
49. The term “consider” is used in Articles 3.2 and 3.7 of the Anti-Dumping Agreement and 
Articles 15.2 and 15.7 of the SCM Agreement regard ing the analysis of listed factors involving the 
volume and price effects of dumped and subsidized im ports, and the existence of a threat of material 
injury.  The term “evaluation” is used in Artic le 3.4 and Article 15.4 of  the covered Agreements 
regarding the examination of the impact of th e dumped and subsidized imports on the domestic 
                                                      
77 In a review of dispute settlement reports, it seem s that the terms are used interchangeably when the 
term “evaluation” has been interpreted, but that reference to “evaluation” is less frequent, if at all, when the term 
“consideration” has been interpreted.  WT/DS277/R 
 Page A-39 
 
 
 industry.  The covered Agreements require the Commissi on to consider or evaluate the listed factors.  
They do not require the Commission to make findings on each factor.  50. As discussed in paras. 111-116 of the US fi rst written submission, the term “consider” has 
been interpreted to mean, “inter alia: ‘contem plate mentally, especially in order to reach a 
conclusion;’ ‘give attention to’; an d ‘reckon with; take into account.’".
78 Accordingly, the term 
“consider” has not been read to require an e xplicit “finding” by the investigating authority.79  Rather it 
is sufficient, if it is apparent in the relevant docum ents in the record, that the ITC has given attention 
to and taken the factor into account.  
51. While Canada conceded that “consider” do es not mean  “make a finding” during the first 
Panel meeting, its characterization of what constitut es consideration in conjunction with its concept of 
an adequate and reasoned explanation is not  noticeably different from making a finding. 
 52. The term “evaluation” of evidence has been interpreted to mean “the act of analysis, 
judgement, or assessment".
80  Particularly, in the context of Article 3.4, it has been stated that “for an 
investigating authority to ‘evaluat e’ evidence concerning a given factor in the sense of Article 3.4, it 
must not only gather data, but it must analyze and interpret those data".81 
 
53. In its recent report in EC-Pipe, the Appellate Body stated that an obligation to evaluate all 
fifteen economic factors, pursuant to Article 3.4 of  the Anti-Dumping Agreement, is distinct from the 
manner in which the evaluation is to be set out in the published document.82  In fact, it recognized that 
                                                      
 78 Thailand - H-Beams , Panel Report, para. 7.161.  While this dispute involves an analysis of the term 
“shall consider” pursuant to Article 3.2 of the Antidumpi ng Agreement, the conclusion that “consider” does not 
mean “make a finding” would equally apply to the less stringent term “should consider”, contained in 
Article 3.7 of the Anti-Dumping Agreement and Artic le 15.7 of the SCM Agreement.  The Panel in Thailand - 
H-Beams  stated:  
 
 We examine the nature of the obligation in Article 3.2.  We note that the text of Article 3.2 
requires that the investigating authorities “conside r whether there has been a significant increase in 
dumped imports.”  The Concise Oxford Dictionary  defines “consider” as, inter alia : “contemplate 
mentally, especially in order to reach a conclusion ;” “give attention to”; and “reckon with; take 
into account.”   We therefore do not read the textual term “consider” in Article 3.2 to require an 
explicit “finding” or “determination” by the investigating authorities  as to whether the increase in 
dumped imports is “significant.”  While it would ce rtainly be preferable for a Member explicitly to 
characterize whether any increase in imports as “signifi cant,” and to give a reas oned explanation of that 
characterization, we believe that th e word “significant” does not necessar ily need to appear in the text 
of the relevant document in order for the requirements of this provision to be fulfilled.  Nevertheless, we consider that it must be apparent in the relevant documen ts in the record that the investigating 
authorities have given attention to and taken into account  whether there has been a significant 
increase in dumped imports, in absolute or relative terms.
 
 
Id. (emphasis added). 
79 See Thailand - H-Beams , Panel Report, para. 7.161. 
80 Egypt - Definitive Anti-Dumping Measures on Steel Rebar from Turkey , Panel Report, WT/DS211/R, 
adopted 1 Oct. 2002, para. 7.44 (“Egypt-Rebar”) . 
81 Egypt - Rebar , Panel Report, para. 7.44; see also Thailand - H-Beams , Panel Report, paras. 
7.236-7.237 (“evaluation of the mandatory factors must be apparent in the documents forming the basis of our 
review”). 
82 While the language in Article 3.4 of the Anti-Dumping Agreement is “shall evaluate,” this analysis 
would equally apply to the less restrictive “should consider” pursuant to Article 3.7 of the Anti-Dumping 
Agreement and Article 15.7  of the SCM Agreement. WT/DS277/R 
Page A-40  
 
 an authority’s evaluation of a factor may be  implicit in the analyses of other factors.
83  What is 
important, the Appellate Body explained, is that the investigating authority’s decisional path be 
reasonably discernible, not that there be a discussion of each factor.  54. Moreover, the Appellate Body’s analysis in EC -Pipe is consistent with the recognition in the 
covered Agreements that: “No one of these factors by  itself can necessarily give decisive guidance but 
the totality of the factors considered must lead to the conclusion that further dumped [subsidized] 
exports are imminent and that, unless protective ac tion is taken, material injury would occur".
84 
 
Q34. The Panel notes that Article 3.7 of the AD Agreement and Article 15.7 of the SCM 
Agreement provide that "In making a determinat ion  regarding the existence of a threat of 
material injury, the authorities should consider, in ter alia, such factors as:.." (emphasis added).  
In this context, could the parties comment on the view that consideration of all the listed factors 
is not mandatory, and that the fa ilure to consider at all, or to adequately consider, one of the 
listed factors, is not fatal to the de termination at issue before a Panel?  
 
55. First, it is evident in the ITC Report that th e Commission considered all the factors listed in 
Article 3.7 of the Anti-Dumping Agreement and Ar ticle 15.7 of the SCM Agreement.  Nonetheless, 
the text of this threat provision, “should consid er, inter alia, such factors”, specifically uses the 
permissive term “should consider ” rather than the mandatory te rm “shall consider”.  This 
distinguishes these provisions from Article 3.2 and Artic le 15.2 of the covered Agreements.  Thus, the 
text of the threat provision could be interpreted as not  requiring the consideration of all listed factors.  
Further, inclusion of the term “ inter alia ”, or among others, in this provision appears to recognize that 
factors other than those listed may be considered, to  the extent they are relevant to a particular 
industry and case.  The Commission found it appropriate to do so in this case.  56. Article 3.7 of the Anti-Dumping Agreement and Article 15.7 of the SCM Agreement also 
conclude with the following language: 
 
No one of these factors by itself can necessarily give decisive guidance but the totality of the factors considered must l ead to the conclusion that further dumped 
(subsidized) exports are imminent and that, unless protective action is taken, material 
injury will occur. 
The threat provision recognizes that not all, and pe rhaps none, of the listed factors will necessarily be 
relevant to or dispositive of, the facts and circum stances of each case.  Accordingly, if one of the 
listed factors was not considered at all, or not adequately considered
85, it would not be fatal to the 
determination at issue, particularly since it is “the totality of the factors” and not any one in particular 
that must lead to the conclusion.  Q35. Could the parties please address what, in  their view, is required to demonstrate 
consideration of the "trade effects" arising from  subsidies under Article 15.7(i)?  What do the 
parties consider would be relevant trade effects that should be taken into account?  
 
                                                     
 
83 European Communities – Anti-Dumping Duties on Malleable Cast Iron Tube or Pipe Fittings from 
Brazil , Appellate Body Report, WT/DS219/AB/R, circulated 22 July 2003, para. 160-161 (“EC-Pipe ”). 
84 Article 3.7 of the Anti-Dumping Agreement and Article 15.7 of the SCM Agreement. 
85 As discussed in response to question 33, consideration of a factor has been interpreted in other 
dispute settlement proceedings to be adequate if its “apparent in the relevant documents in the record that the investigating authorities have given attentio n to and taken [it] into account. . . .”  Thailand - H-Beams , Panel 
Report, para. 7.161.  WT/DS277/R 
 Page A-41 
 
 
 57. Article 15.7(i) of the SCM Agreement states that  an investigating authority should consider:  
“the nature of the subsidy or subsidies in question and the trade effects likely to arise therefrom”.   
 58. An interpretative question of this nature should be considered in the context of the facts of a 
particular case.  The Commission considered the “natur e of the subsidy and trade effect” factor in its 
threat of material injury analysis, as evident in  the Views of the Commission.  Specifically, the 
Commission examined the information presented to it by the US Department of Commerce regarding 
11 programmes that Commerce found conferred counter vailable subsidies to Canadian producers and 
exporters of softwood lumber.
86  While Commerce provided the Commission  information regarding 
the nature of the subsidies, Commerce explicitl y made no findings regarding the effects of the 
subsidies.87 
 
59. In considering this information, the Co mmission recognized that none of the subsidies 
identified by Commerce are subsidies described in Article 3 or 6.1 of the SCM Agreement.88  Thus, 
this case did not involve any export subsidies.  Ho wever, when export subsidies are involved, the 
Commission has considered the relevant trade effects that may result from such subsidies. 
 
60. In this case, parties to the underlying proceedings presented the Commission competing 
economic theories about the nature and effects of the countervailable subsidies.  It is evident in the 
Views of the Commission that the ITC fully consider ed all of the evidence presented on this issue by 
the parties.89  However, it declined to adopt the positions  of any of the parties due to the conflicting 
evidence and economic theories specifically regarding the effects of stumpage fees on lumber output.
90 
 
61. The Commission consideration in this case of wh ether there were trade effects likely to arise 
from the subsidies is consistent with US obligatio ns under Article 15.7(i) of the SCM Agreement. 
 
Q36. Could the parties please discuss, in deta il, their interpretation of the phrase "clearly 
foreseen and imminent" as used in Article 3.7 of the AD Agreement and Article 15.7 of the SCM Agreement, with specific reference to what th ey consider to be the relevant time frames 
involved?  Would the parties discuss, in addition , what precisely they consider should be found 
to be clearly foreseen and imminent.  
 
62. Threat of material injury is material injury  that has not yet occurred, but remains a future 
event whose actual materialization cannot, in fact, be  assured with absolute certainty but with clear 
likelihood.
91  The term “imminent,” in the context of a threat of injury analysis under the Safeguards 
Agreement, has been found to relate “to the mo ment in time when the ‘threat’ is likely to 
                                                      
86 ITC Report at 39 (USA-1). 
87 Canadian exporters had requested that Commerce consider whether Canadian Provincial stumpage 
charges have trade- or market-distorting effects, but Commerce specifically made no finding regarding the 
“effects” of the subsidies.  Issues and Decision Memo randum from Bernard T. Carreau to Faryar Shirzad (Mar. 
21, 2002) (appended to final Commerce CVD determination) (USA-2).  Under US law, antidumping and countervailing duty investigations involve a bifurcated system with certain responsibilities assigned to 
Commerce and others assigned to the IT C.  Specifically related to this issue, Commerce investigates whether the 
government of a country is providing, directly or indirectly, a countervailable subsidy.  19 U.S.C. § 1671(a).  Thus, Commerce collects information en abling it to determine the existence of a countervailable subsidy and 
information needed for it to determine the net countervailable subsidy; the Commission on the other hand has no 
authority to collect such information or look behind Commerce’s findings.  See  19 U.S.C. §§ 1677(5)(A), 
1677(5)(B), 1677(5)(E), 1677(5A), 1677(5B), and 1677(6). 
88 USITC Report at 39, n.249. 
89 USITC Report at 39. 
90 ITC Report at 39, n. 245 (USA-1). 
91 US - Lamb Meat , AB Report, para. 125: WT/DS277/R 
Page A-42  
 
 materialize".
92  Threat of injury, thus, is an anticipation of  material injury that must be on the verge of 
occurring, i.e., clearly foreseen and imminent, which will differ from case to case.  The term “clearly 
foreseen” relates to the “likelihood” that the injury will materialize.  While there is a recognition that 
“future events ‘can never be definitively proven by facts,’” projections based on the past and present 
facts permit an assessment of whether there is a hi gh degree of likelihood of injury in the very near 
future.93,94 
 
63. The relevant time frames for consideration of  whether dumped and subsidized imports would 
cause injury, i.e., would be clearly foreseen and i mminent, should be evaluated in light of the facts 
and circumstances of each industry, product, and ma rketplace.  There is no bright-line test to 
determine when injury is “imminent”,  nor do es the term necessarily mean “immediate”.  The 
“imminent” time frame applicable to a threat of injury analysis will vary from case-to-case.  In this 
case, the Commission found it appropriate to the f acts and circumstances of the softwood lumber 
industry and market to consider evidence for a one-to- two year period in the future in its threat of 
injury analysis, i.e., 2002 and 2003.  
                                                     
 
92 US-Lamb Meat , AB Report, para. 125. 
93 See Mexico-HFCS  , AB Report, paras. 83 and 85; US-Lamb Meat , AB Report, paras. 125 (“To us, 
the word ‘clearly’ relates also the factual  demonstration of the existence of the ‘threat.’”) and 136. 
94 The GATT Committee on Anti-Dumping Practi ces adopted “Recommendation concerning 
Determination of Threat of Material Injury” on 21 October 1985, which provides some further clarification on 
the phrase “clearly foreseen and imminent:”