WORLD TRADE
ORGANIZATIONWT/DS236/2
26 October 2001
(01-5326)
Original:  English
UNITED STATES – PRELIMINARY DETERMINATIONS
WITH RESPECT TO CERTAIN SOFTWOOD LUMBER FROM CANADA
Request for the Establishment of a Panel by Canada
The following communication, dated 25 October 2001, from the Permanent Mission of
Canada to the Chairman of the Dispute Settlement Body, is circulated pursuant to Article 6.2 of the
DSU.
_______________
On 21 August 2001, the Government of Canada requested consultations with the Government
of the United States pursuant to Article 4 of the  Understanding on Rules and Procedures Governing
the Settlement of Disputes  (the "DSU"), Article XXII of the General Agreement on Tariffs and Trade
1994  ("GATT 1994"), and Article 30 of the  Agreement on Subsidies and Countervailing Measures
(the "SCM Agreement") concerning the prelim inary countervailing duty determination and the
preliminary critical circumstances determination made by the US Department of Commerce (DOC)
on 9 August 2001, with respect to certain softwood lumber from Canada.   Canada's request for
consultations with the Government of the United Sates also concerned US measures on company-
specific expedited reviews and administrative reviews.
Canada and the United States held consultations on 17 September 2001.  These consultations
failed to settle the dispute.
In view of the foregoing, Canada hereby requests that a Panel be established at the next
meeting of the DSB, to be held on 5 November 2001, pursuant to Articles 4 and 6 of the DSU,Article XXIII of GATT 1994 and Article 30 of the SCM Agreement.  Canada further requests that the
Panel have the standard terms of reference as set out in Article 7 of the DSU.
Canada requests that the Panel consider the claims and find the US measures are inconsistent
with US obligations under the WTO Agreements, as set out below.
1. The DOC's Preliminary Countervailing Duty Determination
Canada considers the DOC's preliminary determination to be inconsistent with:
(a) Articles 1.1(a), 10, 17.1(b), 17.5, 19.4 and 32.1 of the SCM Agreement and
Article VI:3 of GATT 1994  since it treats the right to harvest standing timber
(stumpage) as constituting a "financial contribution", whereas to the contrary, a right
of access to harvest a natural resource is not encompassed in the definition of
"financial contribution" in Article 1.1 of the SCM Agreement;WT/DS236/2
Page 2
(b) Articles 1.2, 2, 10, 17.1(b) and 32.1 of the SCM Agreement since it finds stumpage to
be "specific" solely based on the unsupported and incorrect assertion that there are
only two industries that use provincial stumpage;
(c) Articles 1.1(b), 14, 14(d), 10, 17.1(b), 17.5, 19.4 and 32.1 of the SCM Agreement and
Article VI:3 of GATT 1994 since it erroneously finds a benefit conferred by
government charges for the right of access to a natural resource, and erroneously
measures the benefit under the "adequacy of remuneration" standard by reference to
conditions in another country rather than prevailing market conditions in Canada;
(d) Articles 1.1(b), 10, 17.1(b), 17.5, 19.4 and 32.1 of the SCM Agreement and
Article VI:3 of GATT 1994 since it presumes that an alleged benefit from stumpagepasses through an arm's-length transaction to a downstream recipient;
(e) Articles 10, 17.5, 19.4, and 32.1 of the SCM Agreement and Article VI:3 of
GATT 1994  since it inflates the subsidy rate by calculating a "weighted average
country-wide rate" based upon only a portion of Canadian production and exports ofsoftwood lumber to the United States; and
(f) Articles 10, 17.2, 17.5, 19.4 and 32.1 of the SCM Agreement and Article VI:3 of
GATT 1994  since, as implemented in DOC instructions transmitted to the United
States Customs Service on September 4, 2001, it imposes provisional measures inexcess of the subsidy preliminarily found to exist.
2. The DOC's Preliminary Determination of Critical Circumstances
Canada considers the DOC's preliminary determination of critical circumstances to be
inconsistent with Articles 17.1(b), 17.3, 17.4, 17.5, 19.4 and 20.6 of the SCM Agreement since there
is no basis in the SCM Agreement for the application of provisional measures pursuant to a
preliminary determination of critical circumstances.
With respect to the preliminary determinatio n of critical circumstances itself, Canada
considers this determination to be inconsistent with Articles 3.1(a), 17.1(b), 17.5, 19.4 and 20.6 of the
SCM Agreement and Article VI:3 of GATT 1994  because:
(a) it is based upon a measure erroneously found to be an export subsidy and that in any
event was found to be de minimis ;
(b) it purports to apply a rate that is in ex cess of the rate determined for subsidies found
to have been bestowed inconsistently with GATT 1994 and the SCM Agreement;
(c) it was made without the requisite finding of injury caused by massive imports of
softwood lumber benefiting from this alleged export subsidy;
(d) it attributes to an alleged subsidy inc onsistent with the SCM Agreement an increase
in imports resulting from the impending and then actual expiration of the Canada-US
Softwood Lumber Agreement; and
(e) it is based on a finding of a "massive" increase in imports that was measured without
taking into account all Canadian exports of softwood lumber to the United States.WT/DS236/2
Page 3
3. US Law on Expedited and Administrative Reviews
Finally, regarding US law on expedited and administrative reviews, the measures at issue are:
section 777A(e)(2)(A) and (B) of the Tariff Act of 1930, US DOC regulations at 19 C.F.R. 351.214(k)
and 351.213(b) and (k), and the operation  of these measures in the ongoing US countervailing duty
proceeding against certain softwood lumber products from Canada.
These measures fail to provide for company-specific expedited reviews or administrative
reviews in countervailing duty cases in which the investigation was conducted on an aggregate or
country-wide basis, and mandate that a single country-wide duty rate calculated in an administrative
review supersedes all individual rates previously  determined in the countervailing duty proceeding.
Canada considers these measures to be inconsistent with US obligations under Article VI:3 of
the GATT 1994 and Articles 10, 19.3, 19.4, 21.1, 21.2 and 32.1 of the SCM Agreement. Canada also
considers that the United States has failed to ensure that its laws and regulations are in conformity
with its WTO obligations as required by Article 32.5 of the SCM Agreement and Article XVI:4 of the
WTO Agreement.
__________