WT/DS533/R/Add.1  
 
24 August 2020  
(20-5726) Page: 1/81 
  Original: English  
 
  
UNITED STATES – COUNTERVAILING MEASURES ON SOFTWOOD 
LUMBER FROM CANADA  
REPORT OF THE PANEL  
Addendum  
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This addendum  contains Annexes A to C to the Report of the Panel to be found in document  
WT/DS533/R . 
 
 
_______________  
 
 
 
 
 
 
 
 
 
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LIST OF ANNEXES  
ANNEX  A 
PANEL DOCUMENTS  
Contents  Page  
Annex  A-1 Working Procedures of the Panel  4 
Annex  A-2 Additional Working Procedures of the Panel: Open Meetings  11 
Annex  A-3 Additional Working Procedures of the Panel Concerning Business Confidential 
Information  12 
Annex  A-4 Interim Review  14 
ANNEX B  
ARGUMENTS OF THE PARTIES  
Contents  Page  
Annex  B-1 Integrated executive summary of the arguments of Canada  41 
Annex  B-2 Integrated executive summary of the arguments of the United States  56 
ANNEX  C 
ARGUMENTS OF THE THIRD PARTIES  
Contents  Page  
Annex  C-1 Integrated executive summary of the arguments of Brazil  72 
Annex  C-2 Integrated executive summary of the arguments of the European Union  75 
Annex  C-3 Integrated executive summary of the arguments of Japan  78 
 
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  ANNEX  A 
PANEL DOCUMENTS  
Contents  Page  
Annex  A-1 Working Procedures of the Panel  4 
Annex  A-2 Additional Working Procedures of the Panel: Open Meetings  11 
Annex  A-3 Additional Working Procedures of the Panel Concerning Business Confidential 
Information  12 
Annex  A-4 Interim Review  14 
 
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  ANNEX  A-1 
WORKING PROCEDURES OF THE PANEL  
Adopted on 23 August 2018  
 
General  
 
1. (1) In this proceeding, the Panel shall follow the relevant provisions of the Understanding on 
Rules and Procedures Governing the Settlement of Disputes ("DSU"). In addition, the following 
Working Procedures apply.  
 
(2) The Panel reserves the right to mod ify these procedures, as well as any additional working 
procedures, as necessary, after consultation with the parties.  
 
Confidentiality  
 
2. (1) The deliberations of the Panel and the documents submitted to it shall be kept confidential. 
Members shall treat  as confidential information that is submitted to the Panel which the 
submitting Member has designated as confidential.  
 
(2) Nothing in the DSU or in these Working Procedures shall preclude a party or third party from 
disclosing statements of its own posi tions to the public.  
 
(3) If a party submits a confidential version of its written submissions to the Panel, it shall also, 
upon request of a Member, provide a non -confidential summary of the information contained in 
its submissions that could be disclose d to the public.  
 
(4) The parties and third parties shall treat business confidential information in accordance with 
the procedures set forth in the Additional Working Procedures of the Panel Concerning Business 
Confidential Information.  
 
Submissions  
 
3. (1) Before the first substantive meeting of the Panel with the parties, each party shall submit a 
written submission in which it presents the facts of the case and its arguments, in accordance 
with the timetable adopted by the Panel.  
 
(2) Each party shal l also submit to the Panel, prior to the second substantive meeting of the 
Panel, a written rebuttal, in accordance with the timetable adopted by the Panel.  
 
(3) Each third party that chooses to make a written submission prior to the first substantive 
meeting of the Panel with the parties shall do so in accordance with the timetable adopted by 
the Panel.  
 
(4) The Panel may invite the parties or third parties to make additional submissions in the course 
of the proceeding, including with respect to requests for preliminary rulings in accordance with 
paragraph 4 below.  
 
Preliminary rulings  
 
4. (1) The followi ng procedures shall apply if the responding party asks for a ruling that certain 
measures or claims are not properly before the Panel:  
 
If the United States considers that the Panel should make a ruling prior to the issuance of the 
Report that certain mea sures or claims in the panel request or Canada's first written submission 
are not properly before the Panel, the following procedure applies. Exceptions to this procedure 
shall be granted upon a showing of good cause.  
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  a. the United States shall submit any  such request for a preliminary ruling at the earliest possible 
opportunity and in any event no later than in its first written submission to the Panel. Canada 
shall submit its response to the request prior to the first substantive meeting of the Panel, at  
a time to be determined by the Panel in light of the request.  
b. The Panel may issue a preliminary ruling on the issues raised in such a preliminary ruling 
request before, during or after the first substantive meeting, or the Panel may defer a ruling 
on the issues raised by a preliminary ruling request until it issues its Report to the parties.  
c. In the event that the Panel finds it appropriate to issue a preliminary ruling prior to the 
issuance of its Report, the Panel may provide reasons for the rulin g at the time that the ruling 
is made, or subsequently in its Report.  
d. Any request for such a preliminary ruling by the United States prior to the first meeting, and 
any subsequent submissions of the parties in relation thereto prior to the first meetin g, shall 
be served on all third parties. The Panel may provide all third parties with an opportunity to 
provide comments on any such request, either in their submissions as provided for in the 
timetable or separately. Any preliminary ruling issued by the P anel prior to the 
first substantive meeting on whether certain measures or claims are properly before the Panel 
shall be communicated to all third parties.  
 
(2) The procedure set out in paragraph (1) is without prejudice to any of the parties' right to 
request other types of preliminary or procedural rulings in the course of the proceeding, and to 
the procedures that the Panel may follow with respect to such requests.  
 
Evidence  
 
5. (1) Each party shall submit all evidence to the Panel no later than during  the first substantive 
meeting, except evidence necessary for purposes of rebuttal, or evidence necessary for answers 
to questions or comments on answers provided by the other party. Additional exceptions may 
be granted upon a showing of good cause.  
 
(2) If any new evidence has been admitted upon a showing of good cause, the Panel shall accord 
the other party an appropriate period of time to comment on the new evidence submitted.  
 
6. (1) Where the original language of an exhibit or portion thereof is not a WTO working language, 
the submitting party or third party shall simultaneously submit a translation of the exhibit or 
relevant portion into the WTO working language of the submission . The Panel may grant 
reasonable extensions of time for the translation of exhibits upon a showing of good cause.  
 
(2) Any objection as to the accuracy of a translation should be raised promptly in writing, 
preferably no later than the next submission or meeting (whichever occurs earlier) following the 
submission which contains the translation in question. Any objection shall be accompanied by a 
detailed explanation of the grounds for the objection and an alternative translation.  
 
7. (1) To facilitate the  maintenance of the record of the dispute and maximize the clarity of 
submissions, each party and third party shall sequentially number its exhibits throughout the 
course of the dispute, indicating the submitting Member and the number of each exhibit on it s 
cover page. Exhibits submitted by Canada should be numbered with CAN -001, CAN -002, etc. 
Exhibits submitted by the United States should be numbered USA -001, USA -002, etc. If the last 
exhibit in connection with the first submission was numbered CAN -005, th e first exhibit in 
connection with the next submission thus would be numbered CAN -006.  
 
(2) Each party shall provide an updated list of exhibits (in Word or Excel format) together with 
each of its submissions, oral statements, and responses to questions.  
 
(3) If a party submits a document that has already been submitted as an exhibit by the other 
party, it should explain why it is submitting that document again.  
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  Editorial Guide  
 
8. In order to facilitate the work of the Panel, each party and third party  is invited to make its 
submissions in accordance with the WTO Editorial Guide for Panel Submissions (electronic copy 
provided).  
 
Questions  
 
9. The Panel may pose questions to the parties and third parties at any time, including:  
 
a. Prior to any meeting, the Panel may send written questions, or a list of topics it intends to 
pursue in questioning orally in the course of a meeting. The Panel may ask different or 
additional questions at the meeting.  
b. The Panel may put questions to the parties and third parties orally in the course of a 
meeting, and in writing following the meeting, as provided for in paragraphs 14 and 20 
below.  
Substantive meetings  
 
10. The parties shall be present at the meetings only when invited by the Panel to appear before it. 
The Panel may open its meetings with the parties to the public, in accordance with the Additional 
Working Procedures for the Panel: Open Meetings.  
 
11. (1) Each party has the right to determine the composition of its own delegation when meeting 
with the Panel.  
 
(2) Each party shall have the responsibility for all members of its delegation and shall ensure 
that each member of its dele gation acts in accordance with the DSU and these Working 
Procedures, particularly with regard to the confidentiality of the proceeding and the submissions 
of the parties and third parties.  
 
12. Each party shall provide to the Panel the list of members of its delegation no later than 5.00  p.m. 
(Geneva time) three working days preceding the first day of each meeting with the Panel.  
 
13. A request for interpretation by any party should be made to the Panel as early as possible, 
preferably at the organization al stage, to allow sufficient time to ensure availability of 
interpreters.  
 
14. The first substantive meeting of the Panel with the parties shall be conducted as follows:  
 
a. The Panel shall invite Canada to make an opening statement to present its case first. 
Subsequently, the Panel shall invite the United States to present its point of view. Before 
each party takes the floor, it shall provide the Panel and other participants at the meeting 
with a provisional written version of its statement. In the even t that interpretation is 
needed, each party shall provide additional copies for the interpreters.  
b. Each party should avoid lengthy repetition of the arguments in its submissions. Each party 
is invited to limit the length of its opening statement to 60 m inutes. If either party considers 
that it requires more time for its opening statement, it should inform the Panel and the 
other party at least 5 days prior to the meeting, and it should also provide, at the same 
time, an estimate of the length of its stat ement. The Panel will accord equal time to both 
parties for their statements.  
c. After the conclusion of the opening statements, the Panel shall give each party the 
opportunity to make comments or ask the other party questions.  
d. The Panel may subsequent ly pose questions to the parties.  
e. Once the questioning has concluded, the Panel shall afford each party an opportunity to 
present a brief closing statement, with Canada presenting its statement first. Before each WT/DS533/R/Add.1  
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  party takes the floor, it shall provide  the Panel and other participants at the meeting with a 
provisional written version of its closing statement, if available.  
f. Following the meeting:  
i. Each party shall submit a final written version of its opening statement no later than 
5.00 p.m. (Gen eva time) on the first working day following the meeting. At the same 
time, each party should also submit a final written version of any prepared closing 
statement that it delivered at the meeting.  
ii. Each party shall send in writing, within the timeframe established by the Panel prior to 
the end of the meeting, any questions to the other party to which it wishes to receive a 
response in writing.  
iii. The Panel shall send in writing, within the timefra me established by the Panel prior to 
the end of the meeting, any questions to the parties to which it wishes to receive a 
response in writing.  
iv. Each party shall respond in writing to the questions from the Panel, and to any questions 
posed by the other  party, within the time -frame established by the Panel prior to the 
end of the meeting.  
 
15. The second substantive meeting of the Panel with the parties shall be conducted in the same 
manner as the first substantive meeting with the Panel, except that th e United States shall be 
given the opportunity to present its oral statement first. If the United States chooses not to avail 
itself of that right, it shall inform the Panel and the other party no later than 5.00 pm 
(Geneva  time) three working days day pri or to the meeting. In that case, Canada shall present 
its opening statement first, followed by the United States. The party that presented its opening 
statement first shall present its closing statement first.  
 
Third party session  
 
16. The third parties sh all be present at the third -party session of the first substantive meeting, 
when invited by the Panel to appear before it. The Panel may open the third -party session to the 
public, subject to the Additional Working Procedures for the Panel: Open Meetings.  
 
17. (1) Each third party has the right to determine the composition of its own delegation when 
meeting with the Panel.  
 
(2) Each third party shall have the responsibility for all members of its delegation and shall 
ensure that each member of its delegat ion acts in accordance with the DSU and these Working 
Procedures, particularly with regard to the confidentiality of the proceeding and the submissions 
of the parties and third parties.  
 
18. A request for interpretation by any third party should be made to  the Panel as early as possible, 
preferably upon receiving the working procedures and timetable for the proceeding, to allow 
sufficient time to ensure availability of interpreters.  
 
19. (1) Each third party may present its views orally during a session of  the first substantive meeting 
with the parties set aside for that purpose.  
 
(2) Each third party shall indicate to the Panel whether it intends to make an oral statement 
during the third party session, along with the list of members of its delegation, in  advance of 
this session and no later than 5.00 p.m. (Geneva time) three working days preceding the first 
day of the third party session of the meeting with the Panel.  
 
20. The third party session shall be conducted as follows:  
 
a. All parties and third parties may be present during the entirety of this session.  WT/DS533/R/Add.1  
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  b. The Panel shall first hear the oral statements of the third parties, who shall speak in 
alphabetical order. Each third party making an oral statement at the third party s ession 
shall provide the Panel and other participants with a provisional written version of its 
statement before it takes the floor. In the event that interpretation of a third party's oral 
statement is needed, that third party shall provide additional cop ies for the interpreters.  
c. Each third party should limit the length of its statement to 15 minutes, and avoid repetition 
of the arguments already in its submission.  
d. After the third parties have made their statements, the parties shall be given the 
opportunity to pose questions to any third party for clarification on any matter raised in that 
third party's submission or statement.  
e. The Panel may subsequently pose questions to any third party.  
f. Following the third party session:  
i. Each third pa rty shall submit the final written version of its oral statement, no later than 
5.00 p.m. (Geneva time) on the first working day following the meeting.  
ii. Each party may send in writing, within the timeframe to be established by the Panel 
prior to the en d of the meeting, any questions to a third party or parties to which it 
wishes to receive a response in writing.  
iii. The Panel may send in writing, within the timeframe to be established by the Panel prior 
to the end of the meeting, any questions to a th ird party or parties to which it wishes to 
receive a response in writing.  
iv. Each third party choosing to do so shall respond in writing to written questions from the 
Panel or a party, within a timeframe established by the Panel prior to the end of the 
meeting.  
Descriptive part and executive summaries  
 
21. The description of the arguments of the parties and third parties in the descriptive part of the 
Panel report shall consist of executive summaries provided by the parties and third parties, which 
shall be annexed as addenda to the report. These executive summaries shall not in any way 
serve as a substitute for the submissions of the parties and third parties in the Panel's 
examination of the case.  
 
22. Each party shall submit an integrated executive s ummary. The integrated executive summary 
shall summarize the facts and arguments as presented to the Panel in the party's first and second 
written submissions, its oral statements, and where possible, its responses to questions following 
the first substant ive meeting, and its responses to the second set of questions and comments 
thereon following the second substantive meeting. The timing of the submission of the integrated 
executive summaries shall be indicated in the timetable adopted by the Panel.  
 
23. Each integrated executive summary shall be limited to no more than 20 pages.  
 
24. The Panel may request the parties and third parties to provide executive summaries of facts and 
arguments presented in any other submissions to the Panel for which a deadline  may not be 
specified in the timetable.  
25. Each third party shall submit an integrated executive summary of its arguments as presented in 
its written submission and statement in accordance with the timetable adopted by the Panel. 
This integrated executiv e summary may also include a summary of responses to questions, if 
relevant. The executive summary to be provided by each third party shall not exceed six pages.  
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  Interim review  
 
26. Following issuance of the interim report, each party may submit a written request to review 
precise aspects of the interim report and request a further meeting with the Panel, in accordance 
with the timetable adopted by the Panel. The right to request such  a meeting shall be exercised 
no later than at the time the written request for review is submitted.  
 
27. In the event that no further meeting with the Panel is requested, each party may submit written 
comments on the other party's written request for rev iew, in accordance with the timetable 
adopted by the Panel. Such comments shall be limited to commenting on the other party's 
written request for review.  
 
Interim and Final Report  
 
28. The interim report, as well as the final report prior to its official  circulation, shall be kept strictly 
confidential and shall not be disclosed.  
 
Service of documents  
 
29. The following procedures regarding service of documents shall apply:  
 
a. Each party and third party shall submit all documents to the Panel by submi tting them to 
the DS Registry (dsregistry@wto.org), in Microsoft Word format and in PDF format, either 
on a CD -ROM, a DVD or as an e -mail attachment.  
b. The electronic version of documents shall constitute the official version for the purposes of 
the reco rd of the dispute. Should there be any discrepancy between the Microsoft Word 
format and PDF format of the documents, the PDF format shall constitute the final version 
of the party's submission.  
c. All e-mails from the parties and third parties to the Pan el shall be addressed to 
dsregistry@wto.org, and copied to other WTO Secretariat staff whose e -mail addresses 
have been provided to the parties and third parties in the course of the proceeding. If a CD -
ROM/DVD is provided, the submitting party or third pa rty shall provide the DS Registry with 
four copies of such CD -ROM/DVD.  
d. In addition, each party and third party is invited to submit all documents through the Digital 
Dispute Settlement Registry (DDSR) within 24 hours following the deadline for submitti ng 
the documents to the DS Registry. If the parties or third parties have any questions or 
technical difficulties relating to the DDSR, they are invited to consult the DDSR User Guide 
(electronic copy provided) or contact the DS Registry at dsregistry@wto. org. As soon as 
possible and in any case no later than 10 days following a submission, each party and third 
party shall provide the DS Registry (Office No. 2047) with a paper copy of any document 
submitted to the Panel.  
e. Each party shall serve any docum ent submitted to the Panel directly on the other party. 
Each party shall, in addition, serve any submissions in advance of the first substantive 
meeting with the Panel directly on the third parties. Each third party shall serve any 
document submitted to th e Panel directly on the parties and on all other third parties. A 
party or third party may submit its documents to another party or third party in electronic 
format only, either on a CD -ROM, a DVD or as an e -mail attachment. Each party and third 
party shal l confirm, in an e -mail, that copies have been served on the parties and third 
parties, as appropriate, at the time it provides each document to the Panel.  
f. Each party and third party shall submit its documents to the DS Registry and serve copies 
on the  other party (and third parties where appropriate) by 5:00 p.m. (Geneva time) on 
the due dates established by the Panel.  
g. As a general rule, all communications from the Panel to the parties and third parties will be 
via e-mail.  WT/DS533/R/Add.1  
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  Correction of clerical e rrors in submissions  
 
30. The Panel may grant leave to a party or third party to correct clerical errors in any of its 
submissions (including paragraph numbering and typographical mistakes). Any such request 
should identify the nature of the errors to be corrected, and should be ma de promptly following 
the filing of the submission in question.  
 
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  ANNEX A -2 
ADDITIONAL WORKING PROCEDURES OF THE PANEL: OPEN MEETINGS  
Adopted on 23 August 2018  
 
 
1. The Panel will start substantive meetings with the parties (dates of substantive meetings 
provided for in its Timetable) with a session open to the public at which no confidential information 
shall be referred to or disclosed ("non -confide ntial session").  
 
2. At such sessions, each party will be asked to make opening and closing statements which shall 
not include confidential information. After both parties have made their opening statements, each 
party will be given the opportunity to pos e questions or make comments on the other party's 
statement, as described in the Working Procedures adopted by the Panel. The Panel may pose any 
questions or make any comments during such session. Such questions shall not include confidential 
information.  
 
3. The Panel shall proceed to a closed session ("confidential session") at the request of any party, 
at any time, or when the Panel considers it necessary. During a confidential session, the parties may 
make statements or comments and pose questions that  involve confidential information. The Panel 
may also pose questions during the confidential session. The Panel shall reserve time that may be 
used for a confidential session, if necessary, at each substantive meeting.  
 
4. The Panel will start the third p arty session of its first substantive meeting with the parties by 
opening a portion of this session to the public ("non -confidential third party session"). At this portion 
of the third party session, no confidential information shall be referred to or disc losed. Each 
third party wishing to make its statement in the non -confidential third party session shall do so, but 
shall ensure that its statement does not include confidential information. After such third parties 
have made their statements, questions or comments from the parties or the Panel may be presented 
concerning these statements, as foreseen in the Working Procedures adopted by the Panel. Such 
questions or comments shall not include confidential information. To the extent that the Panel or 
any of t he other third parties considers it necessary, the Panel shall then conclude this portion of 
the third party session and proceed to a third party closed session ("confidential third party session") 
during which other third parties shall make their statemen ts.  
 
5. During the confidential sessions referred to above, the following persons shall be admitted 
into the meeting room:  
 
• Members of the Panel;  
• Members of the delegations of the parties;  
• Members of the delegations of the third parties throughou t the third party session;  
• WTO Secretariat staff assisting the Panel.  
 
6. As set out below in paragraph 7, a live closed -circuit television broadcast of the Panel meeting 
to a separate viewing room in the WTO shall be used to allow other WTO Members, O bservers, staff 
members, and registered members of the public to observe the non -confidential sessions.  
 
7. The viewings will be open to officials of WTO Members, Observers and staff members of the 
WTO Secretariat upon presentation of their official badges. Accredited journalists and 
representatives of relevant non -governmental organizations (NGOs) may indicate to the Secretariat 
(Information and External Relations Division) their interest in attending the viewings. No later than 
four weeks b efore the substantive meetings, the WTO Secretariat will place a notice on the 
WTO website informing the public of the non -confidential sessions. The notice shall include a link 
through which members of the public can register directly with the WTO. The da te(s) of the deadline 
for public registration will be informed to the parties as soon as it has been established.  
 
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  ANNEX A -3 
ADDITIONAL WORKING PROCEDURES OF THE PANEL CONCERNING  
BUSINESS CONFIDENTIAL INFORMATION  
 
Adopted on 23 August 2018  
 
 
1. The following procedures apply to business confidential information (BCI) submitted in the 
course of the present Panel proceedings.  
2. For the purposes of these proceedings, BCI is defined as any information that has been 
designated as such by a party or a third party submitting the information to the Panel. The parties 
or third parties shall only designate as BCI information that is no t available in the public domain, the 
release of which would cause serious harm to the interests of the originator(s) of the information. 
BCI may include information that was previously treated by the US Department of Commerce as 
confidential or proprietar y information protected by Administrative Protective Order in the course of 
the countervailing duty proceeding at issue in this dispute, entitled Softwood Lumber from 
Canada  (C-122-858). In addition, these procedures do not apply to any BCI if the entity w hich 
provided the information in the course of the aforementioned investigation has agreed in writing to 
make the information publicly available.  
3. If a party considers it necessary to submit to the Panel BCI as defined above from an entity 
that submitte d that information in the investigation at issue, the party shall, at the earliest possible 
date, obtain an authorizing letter from the entity and provide such authorizing letter to the Panel, 
with a copy to the other party. The authorizing letter from the  entity shall authorize both Canada 
and the United States to submit in this dispute, in accordance with these procedures, any confidential 
information submitted by that entity in the course of the investigation. Each party shall, at the 
request of the othe r party, facilitate the communication to an entity in its territory of any request to 
provide an authorizing letter referred to above. Each party shall encourage any entity in its territory 
that is requested to grant the authorization referred to in this p aragraph to grant such authorization. 
If an entity refuses to grant the authorization letter, a party may bring the situation to the attention 
of the Panel. The Panel shall consider what steps to take, which may include requesting information 
pursuant to A rticle 13 of the DSU. The Panel may, where necessary, draw appropriate inferences 
from a failure to provide information to the Panel.  
4. No person may have access to BCI except a member of the Secretariat or the Panel, an 
employee of a party or third part y, or an outside advisor to a party or third party for the purposes 
of this dispute. However, an outside advisor to a party or third party is not permitted access to BCI 
if that advisor is an officer or employee of an enterprise engaged in the production, sale, export, or 
import of the products that were the subject of the investigation at issue in this dispute, or an officer 
or employee of an association of such enterprises.  
5. A person having access to BCI shall treat it as confidential, i.e. shall not d isclose that 
information other than to persons authorized to have access to it pursuant to these procedures. 
Each party and third party is responsible for ensuring that its employees and/or outside advisors 
comply with these procedures. BCI obtained under these procedures may be used only for the 
purpose of providing information and argumentation in this dispute and for no other purpose. All 
documents and electronic storage media containing BCI shall be stored in such a manner as to 
prevent unauthorized acc ess to such information. Third parties' access to BCI shall be subject to the 
terms of these procedures.  
6. A party submitting BCI shall mark the cover and/or first page of the document containing BCI, 
and each page of the document, to indicate the presen ce of such information. The specific 
information in question shall be placed between double brackets, as follows: [[xx,xxx.xx]]. The 
first page or cover of the document shall state "Contains Business Confidential Information on 
pages  xxxxxx ", and each page  of the document shall contain the notice "Contains Business 
Confidential Information " at the top of the page. A party submitting BCI in the form of, or as part WT/DS533/R/Add.1  
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  of, an Exhibit  shall, in addition to the above, so indicate by putting "BCI" next to the exhibi t number 
(e.g. Exhibit  CAN-001 (BCI)).  
 
7. Documents previously submitted to or created by the U.S. Department of Commerce 
containing information that has been designated as Confidential or Business Proprietary Information 
for the purpose of the underlying U.S. investigation, and marked as business  proprietary information, 
or words to that effect (including headers and bracketing), that have also been designated as BCI 
in this dispute, shall be deemed to comply with the requirement set out in paragraph 6. When a 
party submits a document previously s ubmitted to or created by the U.S. Department of Commerce, 
that party shall mark on the cover of the document "This document was submitted to or created by 
the U.S. Department of Commerce and retains its original confidentiality markings ".  
8. Where BCI is  submitted in electronic format, the file name shall include the terms "Business 
Confidential Information " or "BCI". In addition, where applicable, the label of the storage medium 
shall be clearly marked with the statement "Business Confidential Informatio n" or "BCI".  
9. Where a party submits a document containing BCI to the Panel, the other party or third party 
referring to that BCI in its documents, including written submissions and oral statements, shall 
clearly identify all such information in those do cuments. All such documents shall be marked and 
treated as described in paragraph 6. In the case of an oral statement containing BCI, the party or 
third party making such a statement shall inform the Panel before making it that the statement will 
contain B CI, and the Panel will ensure that only persons authorized to have access to BCI pursuant 
to these procedures are present or observing the session at that time. The written versions of such 
oral statements submitted to the Panel shall be marked as provided  for in paragraph 6.  
10. If a party or third party considers that information submitted by the other party or a third 
party should have been designated as BCI and objects to its submission without such designation, 
it shall forthwith bring this objection to the attention of the Panel and the other party, and, where 
relevant, the third parties, together with the reasons for the objection. Similarly, if a party or 
third party considers that the other party or a third party designated as BCI information which  should 
not be so designated, it shall forthwith bring this objection to the attention of the Panel and the 
other party, and, where relevant, the third parties, together with the reasons for the objection. The 
Panel shall decide whether information subject  to an objection will be treated as BCI for the purposes 
of these proceedings on the basis of the criteria set out in paragraph 2.  
11. The Panel will not disclose BCI, in its report or in any other way, to persons not authorized 
under these procedures to have access to BCI. The Panel may, however, make statements of 
conclusion drawn from such information. Before the Panel circulates its final report to the Members, 
the Panel will give each party an opportunity to review the report to ensure that it does no t contain 
any BCI.  
12. Submissions, exhibits, and other documents or recordings containing BCI will be included in 
the record forwarded to the Appellate Body in the event of an appeal of the Report of the Panel.  
 
 
 WT/DS533/R/Add.1  
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  ANNEX A -4 
INTERIM REVIEW  
 
1  INTRODUCTION  
1.1.  In accordance with Article  15.3 of the DSU, this section of the Report sets out our response to 
the parties'  requests made at the Interim Review stage. Our assessment of the parties'  requests and 
comments is informed by the following considerations:  
a. The Interim Review stage is not an opportunity for parties to reargue the case or to 
"introduce new legal issues and evidence or to e nter into a debate with the Panel".1 
b. The descriptions of the arguments of the parties in our Report are not meant to and do 
not reflect the entirety of the parties'  arguments. Rather, they highlight the principal 
points of those arguments that we consi dered relevant to our resolution of the issues in 
dispute and addressed in our findings.2 Finally, we note that the executive summaries 
of the arguments of the parties, set out in Annexes B1 -B2, were prepared by the parties 
themselves, and reflect, or sho uld reflect, the judgement of each party as to its main 
arguments.  
c. A panel may develop its own reasoning in reaching its findings, provided that it does so 
consistently with the requirements of due process. A panel is not required to "test" its 
intended  reasoning with the parties in advance.3 
1.2.  Where appropriate, we have modified aspects of the Report in the light of the parties'  requests 
and comments.4 Due to the changes implemented as a result of our review, the numbering of 
footnotes in the Fina l Report has changed from the Interim Report. The text below refers to the 
numbers in the Interim Report, with the numbers in the Final Report in parentheses for ease of 
reference, if different.  
1.3.  In addition to the modifications specified below, the P anel also corrected a number of 
typographical and other non -substantive errors throughout the Report, including some identified by 
the parties. The Panel is grateful for the parties' assistance in this regard.  
 
1 Panel Report, India – Quantitative Restrictions , para. 4.2. 
2 A panel has "the discretion to address explicitly in [its] reasoning only the arguments and evidence [it] 
deem[s] necessary to resolve a particular claim a nd support the reasoning [it is ] requir ed to provide" . (Panel 
Report, India – Agricultural Products , para. 6.7 (referring to Appellate  Body Reports, EC – Poultry , para. 135; 
and US – COOL , para.  414)).  
3 Appellate  Body Report, US – Tuna II (Mexico)  (Article  21.5 – Mexico), para.  7.177. 
4 On 15 June 2020, following the parties ' comments on the Interim Report and the submissions on the 
other party 's comments, the United  States  requested our leave ( which  we granted ) to file an additional letter 
where it contended that the Panel had the authority under Article  15 of the DSU to review its factual and legal 
findings in the Interim Report, and to reconsider a legal conclusion. On 19 June 2020, Canada responded to the 
United States' letter contending  that while Article 15.2 allows for the opportunity for a party to request that a 
panel review precise aspects of its factual and legal findings, in Canada's view, the ordinary meaning of the 
provision confirms that interim revi ew is not a vehicle for a broad review of the entirety of a panel's legal 
conclusions . We note that previous panels, such as the panel in  Indonesia – Iron or Steel Products , have taken 
the view that the y are not required to defend their findings and conclu sions during the interim review stage. 
(Panel Report,  Indonesia – Iron or Steel Products , Annex A -3, para. 2.3). Panels have also considered that a 
request under Article  15.2 of the DSU to review precise aspects of the Interim  Report may include requests t o 
reconsider factual or legal findings.  (Panel Report,  US – Tuna II (Mexico) , para 6.3 ). In this particular case,  we 
do not find it appropriate to modify our analysis or interpretation of the legal provisions at issue , as the 
relevant paragraphs of the Rep ort adequately explain the Panel 's reasoning.  WT/DS533/R/Add.1  
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  2  THE UNITED  STATES'  SPECIFIC REQUESTS FOR RE VIEW  
2.1  Paragraph 7.20  
2.1.  The United  States asks the Panel to replace the term "external stumpage benchmarks" with 
"stumpage benchmarks from other provinces" to clarify that the Panel's  inquiry relates to the 
question of "provincial boundaries".5  
2.2.  Canada objects to the United  States'  request. Canada considers that it is clear from the context 
of the sentence, and the discussion immediately preceding and following paragraph 7.20, that the 
Panel intends for the phrase "external stumpage benchmarks " to refer to benchmark prices that are 
within the "country of provision", but emanate outside of a relevant "region" or "regional market".6 
Canada considers that this is consistent with the Panel's  use of the phrases "a benchmark external 
to that region"  and "external benchmark" in paragraph 7.31, to which, Canada notes, the 
United  States does not similarly object.7 Canada suggests that the Panel replace the phrase "external 
stumpage benchmark" with a reference to "benchmarks outside the relevant region"  in the event 
the Panel would like to ensure that the phrase "external stumpage benchmark" is not somehow 
misunderstood.8 
2.3.  In light of the United  States'  request, we have replaced the term "external stumpage 
benchmarks" with the term "stumpage benchm arks from outside those regions" in paragraph 7.20.  
2.2  Section 7.2 heading and paragraph 7.20 (and paragraphs 7.10, 7.12, 7.13, 7.14, 7.29, 
7.30, 7.31, 7.32, 7.34, 7.43, 7.45, and 7.46)  
2.4.  The United  States argues that the text of Article  14(d)  does not refer to regional markets, nor 
does it impose an obligation on an investigating authority to use regional prices as a "starting point" 
in its benefit determination. The United  States argues that the Panel's  interpretation imposes a new 
obligation which  could be understood to require regional prices to be used as the "starting point" in 
all cases, except where proven otherwise.9 Based on the above, among other reasons, the 
United  States requests the Panel to delete references to a required "starting poi nt" in an 
investigating authority's  benefit assessment.10 For the same reasons, the United  States requests 
that the Panel delete the similar references to an obligation to "first" consider regional prices, as 
that phrase appears in paragraphs 7.31, 7.34, and 7.49 ("first provide"; "first consider"; "to have 
first considered"; "obligation to first consider")  and references to an obligation to consider regional 
prices "before" other benchmarks, as that phrase appears in paragraphs 7.20, 7.31, 7.43, 
and 7.48.11  
2.5.  Further, the United  States contends that Canada did not argue for such a required "starting 
point", despite the Interim Report suggesting that it did.12 For the United  States, "it is fair to say 
that the USDOC ought to consider these prices, but unnecessary to say when, and in what order, it 
ought to have considered them".13 The United  States contends that there is no need for the Panel 
to prescribe what the USDOC (or an investigating authority in general)  should do "first", "before", 
or as a "starting point" and that no basis exists for the Pan el to find such an obligation.14 
2.6.  Canada contends, at the outset, that the United  States'  requested revision goes to the heart 
of the Panel's  conclusions, and effectively seeks a reversal of integral elements of the 
Panel's  analysis concerning the st ate of the law regarding benchmark selection under 
Article  14(d)  and the Panel's  application of the law in this dispute. Canada asserts that the 
 
5 United  States'  request for interim review, para. 4. 
6 Canada's  comments on the United  States'  request for interim review,  pp. 8-9. 
7 Canada's  comments on the United  States'  request for interim review,  pp. 8-9. 
8 Canada's  comments on the United  States'  request for interim review,  p. 9. 
9 United  States'  request for interim review, para. 10. 
10 United  States'  request for interim review, paras.  5-11. 
11 United  States'  request for interim review, para. 11. 
12 United  States'  request for interim review, para. 7. 
13 United  States'  request for interim review, para. 12. 
14 United  States'  request for interim review, para. 12. WT/DS533/R/Add.1  
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  United  States'  request therefore falls outside the scope of the interim review and asks the Panel to 
reject the  United  States'  request on this basis alone.15  
2.7.  Canada further argues that the United  States fails to explain how the Panel's  legal findings and 
reasoning, without references to the required "starting point" in question , would still require the 
USDO C to examine benchmarks in the relevant regional market, other than asserting "that this was 
somehow required by the 'unique facts' of this case".16 For Canada, the United  States'  request also 
fails on its merits as a starting point for assessing the adeq uacy of remuneration does not create a 
new obligation. Canada contends that the Panel's  interpretation reflects nothing more than the 
simple logic that an investigating authority should begin its benefit analysis with a benchmark that 
meets the requirement s of Article  14(d)  by reflecting the prevailing market conditions for the 
government -provided good. Canada submits that the Panel's  interpretation is consistent with the 
reasoning of the Appellate  Body in US – Softwood Lumber IV  and US – Carbon Steel (Indi a), as well 
as the panel in US – Coated Paper (Indonesia) .17  
2.8.  Canada also rejects the United  States'  contention that Canada did not argue that in -market 
prices for the government -provided good should be considered as a "starting point"  for assessing  
adequacy of remuneration. Canada asserts that the United  States focuses on Canada's  infrequent 
use of the specific phrase "starting point", while ignoring the fact that as  a matter of substance , 
Canada clearly argued that in -market prices for the governme nt-provided good should be considered 
a "starting point" for assessing adequacy of remuneration.18  
2.9.  Further, Canada considers as "baseless" the United  States'  argument that the Panel's  Interim 
Report imposes a "new obligation" that could be understo od as requiring regional prices to be used 
as a "'starting point'  in all cases, except where proven otherwise".19 Canada asserts that the Panel 
explained that a regional benchmark would only be required as a starting point for assessing 
adequacy of remune ration where " the record shows  that the prevailing market conditions for the 
government -provided good differ from the prevailing market conditions for the same or similar goods 
sold in other parts of the country of provision".20 Canada further points to other places in the Interim 
Report where the Panel made similar observations.21  
2.10.   We consider that paragraphs 7.21 -7.30 of our Report set out adequate reasoning to support 
the legal interpretation with which the United  States takes issue. We therefore decline the 
United  States'  request. As regards the United  States'  contention that Canada did not argue for the 
required "starting point" in question in an investigating authority's  benefit assessment, we note that 
contrary to t he United  States'  view, Canada does expressly make that argument at paragraph  300 
of Canada's  first written submission. Further, we accept Canada's comment that the same argument 
can be inferred from the relevant paragraphs22 of Canada's  first written sub mission. We therefore 
reject the United  States'  contentions in this regard.  
2.3  Paragraphs 7.23, 7.27, 7.28, 7.30, 7.31, 7.32, and 7.33  
2.11.   The United  States requests that the Panel delete the phrase "results from" in the paragraphs 
in question and re place it with the language of Article  14(d), e.g. "[a] price that results from  relates 
to the prevailing market conditions".23 According to the United  States, the Interim Report uses the 
 
15 Canada's  comments on the United  States'  request for interim review,  pp. 2-4 (referrin g to Panel 
Report s, Indonesia – Iron or Steel Products , Annex A -3, para. 2.4; Japan – DRAMs (Korea) , para. 6.2; and  
US – Poultry (China) , para. 6.32). 
16 Canada's  comments on the United  States'  request for interim review,  p. 4. 
17 Canada's  comments on the United  States'  request for interim review,  pp. 4-5 (referring to 
Appellate  Body Report s, US – Softwood Lumber IV , para. 90; US – Carbon Steel (India) , para. 4.154;  and 
Panel Report, US – Coated Paper (Indonesia) , para. 7.33). 
18 Canada's  comments on the United  States'  request for interim review,  p. 5 (referring to Canada 's 
first written submission, paras.  45-50, 51-54, and 59 ). 
19 Canada's  comments on the United  States'  request for interim review,  p. 5 (referring to the 
United  States' request for interim review, para. 10). 
20 Canada's  comments on the United  States'  request for interim review,  p. 5 (quoting Interim Report, 
para. 7.30 (emphasis added) ). 
21 Canada's  comments on the United  States'  request for interim review,  p. 5 (referring to  Interim 
Report, paras.  7.31 and 7.34).  
22 Canada 's first written submission, paras.  45-50, 51-54, and 59 . 
23 United  States'  request for interim review, para. 13. (emphasis original)  WT/DS533/R/Add.1  
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  phrase "results from" to describe a requirement to use as a benchmar k "[a] price that results from  
the prevailing market conditions" while the text of Article  14(d)  states that "[t]he adequacy of 
remuneration shall be determined in relation to  the prevailing market conditions". The United  States 
argues that the use of this  phrase imposes an obligation that is not found in the text of 
Article  14(d)  of the SCM  Agreement.  
2.12.   Canada proposes that the Panel reject the United  States'  request as an overly broad request 
for review of the Panel's  legal reasoning, which falls ou tside the scope of interim review.24 Further, 
Canada submits that paragraph 7.23 of the Report demonstrates that the Panel has not replaced 
the legal obligation that a benchmark must "relate to" prevailing market conditions with the phrase 
"results from".  Rather, the Panel indicated that prices that, as a factual matter, result or emanate 
from the market for the government -provided good will inherently meet the legal threshold of 
relating to  prevailing market conditions in Article  14(d).25 Canada contends  that the Panel also 
explained that an investigating authority is not under an obligation to rely on prices resulting or 
emanating from the market for the government -provided good in all circumstances. The Panel 
acknowledged that an investigating authority  may have to resort to prices outside of the relevant 
market, or even another country, that are "carefully selected and adjusted" so that they reflect or 
relate to "the prevailing market conditions for the government -provided good".26  
2.13.   We consider that paragraphs 7.23, 7.27, and 7.30 of the Report provide ample explanation 
of the reasons why we consider it appropriate to include in our Report the relevant considerations 
with which the United  States takes issue. We therefore do not believe it is nece ssary to amend our 
findings and we decline the United  States'  request.  
2.4  Paragraphs 7.21, 7.22, 7.23, 7.27 (and footnote 65 (footnote 67 of the Final Report)), 
7.31, and 7.32  
2.14.   The United  States requests that the Panel revise and remove from the Final Report the 
concept that " the prevailing market conditions for the government -provided good are different from 
the prevailing market conditions for the same or similar goods " in paragraphs 7.27, 7.31, and 7.32, 
and other relevant paragraphs that r ely on this reasoning.27 The United  States contends that the 
Panel's  reliance on the concept of " the good that the government actually sold " reads into 
Article  14(d)  a limitation that is not found in the text, i.e. that the prevailing market conditions for 
the good in question refers to the particular terms and conditions of the government transaction and 
not the prevailing market conditions for the good in general. For the United  States, in doing so, the 
Panel artificially creates two sets of what it calls "prevailing market conditions" and thus frustrates 
the possibility of a proper benchmark comparison.28 For the United  States, "the good i n question is 
not just the particular item the government provided, but also that good writ large".29 The 
United  States contends that the Panel applies its own phraseology in a way that precludes a 
benchmark comparison and instead requires a reconstructio n of the government sale itself, including 
all of its terms and conditions, up to the point where no difference can exist between the benchmark 
and the allegedly subsidized transaction.30 The United  States also takes issue with that the 
Panel's  reference in paragraph 7.22 to the panel finding in US – Anti Dumping and Countervailing 
Duties (China)  that the "benchmark must reflect the 'factual situation'  found to exist in respect of 
the government provided good", arguing that the panel in that case made that  finding in the context 
of whether to grant credits for transactions that did not confer a benefit.31 
2.15.   Canada proposes that the Panel reject United  States'  request, as it calls for broad revisions 
to the legal interpretation developed by the Panel a nd does not properly fall within the scope of 
interim review.32 Further, Canada contends that the United  States'  request is based on a 
misinterpretation of the Panel's  reasoning.33 Canada argues that contrary to the 
 
24 Canada's  comments on the United  States'  request for  interim review,  pp. 3 and 6.  
25 Canada's  comments on the United  States'  request for interim review,  p. 6. 
26 Canada's  comments on the United  States'  request for interim review,  p. 6 (referring to 
Interim  Report, para. 7.27).  
27 United  States'  request for interim review, para. 26. 
28 United  States'  request for interim review, para. 15. (emphasis original)  
29 United  States'  request for interim review, para. 16. 
30 United  States'  request for interim review, para. 16. 
31 United  States'  request for interim review, para. 19. 
32 Canada's  comments on the United  States'  request for interim review,  pp. 3 and 7.  
33 Canada's  comments on the United  States'  request for interim review,  p. 7. WT/DS533/R/Add.1  
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  United  States'  contention, nowhere doe s the Panel equate prevailing market conditions for the 
government -provided good with specific terms and conditions associated with the provision of that 
good. Canada asserts that the Panel instead found that "prevailing market conditions" refer to the 
market conditions that prevail in the market into which the government good is provided.34 
2.16.   Canada further contends that the United  States'  request rests on the false premise that a 
government -provided good will always be provided into a single nationa l market with prevailing 
market conditions that are uniform across the country.35 Canada argues that the Panel, however, 
rejected that argument in paragraphs 7.25, 7.26, and 7.27, explaining that, while it may sometimes  
be the case that there is a single,  national set of prevailing market conditions for a 
government -provided good in different parts of a country of provision, it is certainly not always the 
case.36 Canada avers that the Panel has neither "draw[n] a distinction between the 'prevailing 
market  conditions'  solely on the question of whether the good is provided by the government or 
not", nor "assumed that the government transaction has its own unique and transaction -specific 
'prevailing market conditions'".37 Canada submits that instead the different sets of "prevailing market 
conditions" arising out of the government provision of a good refer to a situation where "the 
prevailing market conditions for the relevant good changed from one region to another within  the 
country of provision".38 
2.17.   Canada also disagrees with the United  States'  argument that the Panel's  reliance on the 
"'factual situation'  found to exist in respect of the government -provided good" is "inapposite". For 
Canada, the statement that th e panel in US – Anti-Dumping and Countervailing Duties (China)  made, 
and on which this Panel relies, went to the "the basic requirement of Article  14(d), as expressed by 
the phrase 'prevailing market conditions for the good … in question".39 
2.18.   We con sider that paragraphs 7.24 -7.32 of our Report provide ample explanation of the 
relevant considerations with which the United  States takes issue. We therefore do not believe it is 
necessary to amend our findings and decline the United  States'  request. Nonet heless, to provide 
further clarity we have added a footnote to paragraph 7.22 of the Report to address the 
United  States'  concerns. This footnote appears as footnote 61 in the Final Report.  
2.5  Paragraphs 7.40, 7.41 (and footnote 106), 7.42, and 7.44  
2.19.  The United  States takes issue with the Panel's  consideration that the USDOC, by finding that 
the unadjusted Nova Scotia benchmark prices reasonably reflected the prevailing market conditions 
in each of Alberta, Ontario, and Québec, therefore, also nece ssarily found – albeit implicitly  – that 
the prevailing market conditions in Alberta, Ontario, and Québec, as against each other, were 
similar.40 The United  States asserts that the USDOC was tasked with considering benchmarks for 
each of the stumpage prog rams at issue and, in doing so, the USDOC compared each province to 
the Nova Scotia benchmark. For the United  States, this is different than comparing the other 
individual provinces to each other. The United  States therefore asks the Panel to remove all 
references to an "implicit" finding by the USDOC from the Final Report to avoid factual inaccuracy.41 
2.20.   Canada does not object to the removal of the second, third, and fifth sentence of 
paragraph  7.41, and its corresponding footnotes, 106 and 108 of th e Interim Report. While Canada 
notes that the Panel's  logic reflects the United  States'  arguments during the course of the 
proceedings, Canada considers that removing references to the USDOC's  "implicit" finding, as 
described, would not disturb the critica l aspects of the Panel's  finding in the relevant paragraphs, in 
particular, pertaining to the USDOC's  failure to reasonably and adequately address whether each of 
 
34 Canada's  comments on the United  States'  request for in terim review,  p. 7 (referring to 
Interim  Report, para. 7.30).  
35 Canada's  comments on the United  States'  request for interim review,  p. 7. 
36 Canada's  comments on the United  States'  request for interim review,  pp. 7-8. 
37 Canada's  comments on the United  States'  request for interim review,  p. 8 (referring to the 
United  States'  request for review of the Interim Report, paras.  20 and 24 ). 
38 Canada's  comments on the United  States'  request for interim review,  p. 8 (referring t o 
Interim  Report, para. 7.25).  
39 Canada's  comments on the United  States'  request for interim review,  p. 8 (referring to Panel Report, 
US – Anti-Dumping and Countervailing Duties (China) , para. 11.56).  
40 United  States'  request for interim review, para. 28. 
41 United  States'  request for interim review, para. 29. WT/DS533/R/Add.1  
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  Alberta, Ontario, and Québec had different prevailing market conditions with respect to Nova Scotia, 
despite the ample evidence before it demonstrating their differences.42  
2.21.   Canada suggests that should the Panel remove the aforementioned references, it should also 
remove the reference to the "implicit finding" in question in footnote 110 a t paragraph 7.42 of the 
Interim Report. Canada submits that it is well within the Panel's  standard of review, as 
paragraphs  7.50 and 7.60 of the Interim Report set out, to critically examine all relevant evidence 
before the investigating authority in order  to determine whether an investigating 
authority's  conclusions were reasoned and adequate, and internally consistent, in light of the 
evidence before it.43 
2.22.   We note that our reasoning with which the United  States  takes issue, reflects the 
United  States'  own arguments44 during the course of the proceedings that "the USDOC has 
demonstrated … that the prevailing market conditions for the good in question were not categorically 
different between provinces".45 However, bearing in mind that Can ada does not object to the 
United  States'  request to remove all references to an "implicit" finding by the USDOC from the 
Report, we have decided to accommodate that request and have accordingly modified the relevant 
paragraphs.  
2.23.   The United  States f urther argues that paragraph 7.42 incorrectly describes as " ex post " the 
explanations of the USDOC's  investigation that the United  States provided in this proceeding. 
According to the United  States, in doing so, the Panel ascribes to the United  States an a rgument it 
did not make.46 In particular, the United  States contends that it did not argue that "there may be 
no appropriate basis upon which to delineate between conditions in one region and another", but 
merely summarized its understanding of Canada's  arguments regarding "regional markets" and their 
implications in the context of this dispute. The United  States further avers that because it did not 
make the argument attributed to it by the Panel, the United  States could not have been attempting 
to provid e any ex post rationalization . The United  States proposes that the Panel delete from 
paragraph 7.42 the reference to the argument in question as constituting ex post rationalization.47 
2.24.   Canada considers that removing the reference to the United  States'  arguments in question 
would not disturb the critical aspects of the Panel's  finding in paragraph 7.42. Therefore, Canada 
does not object to the removal of the last sentence of 7.42.48  
2.25.   We have decided to accommodate the United  States ' request with respect to paragraph 7.42, 
bearing in mind that Canada does not object to the request, and have modified the paragraph 
accordingly.  
2.26.   The United  States requests that the Panel delete paragraph 7.44 in its entirety.49 The 
United  States asserts that the USDOC examined voluminous facts about specific provinces and the 
conditions within those provinces in the course of its inquiry, but that did not then obligate the 
USDOC to make its assessment on the basis of province -specific differences,  as requested by 
individual Canadian provinces or other interested parties in the underlying investigation.50 For the 
United  States, paragraph 7.44 of the Interim Report does not reflect an accurate characterization of 
the USDOC's  inquiry in its proper co ntext.51 
2.27.   Canada asks the Panel to reject the United  States'  request to delete paragraph 7.44, on the 
basis that it is an attempt to relitigate points that were made during the proceedings and raises 
questions about the merits of the Panel's  analysi s and findings.52 Canada submits that, as 
paragraph  7.44 indicates, the USDOC's  own questionnaires and determinations demonstrate how 
the USDOC itself treated the provinces in question as separate markets. For Canada, the 
 
42 Canada's  comments on the United  States'  request for interim review,  pp. 9-10. 
43 Canada's  comments on the United  States'  request for interim review,  p. 10. 
44 See fn 110 of the Interim Report.  
45 United  States'  comments on Canada 's response to Panel  question No. 161, para. 41 
46 United  States'  request for interim review, para. 30. 
47 United  States'  request for interim review, para. 31. 
48 Canada's  comments on the United  States'  request for interim review,  p. 10. 
49 United  States'  request for interim review, para. 32. 
50 United  States'  request for interim review, para. 32. 
51 United  States'  request for interim review, para. 32. 
52 Canada's  comments on the United  States'  request for interim review,  p. 10. WT/DS533/R/Add.1  
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  United  States'  contention that th is incorrectly describes the USDOC's  own approach is without 
merit.53 Canada, however, does not object to the removal of the reference to an "implicit finding" in 
the second last sentence of paragraph 7.44, should the Panel be inclined to accept the 
Unite d States'  request on this particular point.54 
2.28.   We consider that the relevant paragraph does not, as the United  States asserts, suggest that 
the USDOC's  examination of voluminous facts about specific provinces and the conditions within 
those province s in the course of its inquiry "obligate[d] the USDOC to make its assessment on the 
basis of province -specific differences". Instead, the Panel notes that " [i]n light of the fact that the 
USDOC itself solicited a significant volume of evidence pertaining t o differences in prevailing market 
conditions across the regions in question", it finds it perplexing that the USDOC failed to adequately 
explain the finding based on that evidence. We consider that paragraph 7.44 adequately sets out 
the basis for this con clusion. We therefore decline the United  States'  request. Further, we have 
removed references to the "implicit finding" in the last sentence of paragraph 7.44 in accordance 
with Canada's  suggestion.  
2.6  Paragraph 7.24, footnote 63 (footnote 65 of the Fin al Report)  
2.29.   The United  States proposes that the Panel delete this footnote in its entirety as it inaccurately 
presents the United  States'  argument.55  
2.30.   Canada asks the Panel to reject the United  States'  request, as it considers that the 
United  States mischaracterizes the content of the footnote, which concerns the logical implications 
of the United  States'  arguments in this dispute.56 Canada submits that the phrase "based on the 
United  States'  own argument" in the footnote indicates that the P anel intends to explain the logical 
implications of the United  States'  response to Panel question No. 154, which are at odds with the 
USDOC's  findings in the final determination.57 Canada further submits that should the Panel wish to 
consider a clarificat ion to this footnote, it could replace the relevant text with:  "[t]herefore, based 
on the United  States'  own logic …".58 
2.31.   We decline the United  States'  request, considering that the footnote describes the 
United  States'  argument as it was set out at  paragraph 6 of the United  States'  response to Panel 
question No. 154. We have, however, in light of Canada's  suggestion, slightly modified the language 
of the footnote.  
2.7  Paragraph 7.24  
2.32.   The United  States requests that the Panel make certain revisions to this paragraph to better 
reflect the United  States'  argument. In particular, the United  States requests that the Panel delete 
the words " anywhere in" from the first sentence of this paragraph contending that the Panel's  own 
emphasis on the word " anywhere  in the country of provision" does not reflect the 
United  States'  argument.59  
2.33.   Canada asks the Panel to reject the United  States'  request, considering that the Panel has 
accurately summarized the United  States'  argumen ts in paragraph 7.24.60 
2.34.   We decline the United  States'  request to delete the words " anywhere in" from the first 
sentence of this paragraph, considering that in response to the Panel's  question regarding whether 
a market -determined benchmark selected  from anywhere  in the country of provision would satisfy 
the requirements of Article  14(d), the United  States itself replied in the affirmative.61, 62 However, in 
 
53 Canada's  comments on the United  States'  request for interim review,  p. 10. 
54 Canada's  comments on the United  States'  request for interim review,  pp. 10-11. 
55 United  States'  request for interim review, paras.  33-34. 
56 Canada's  comments on the United  States'  request for interim review,  p. 11. 
57 Canada's  comments on the United  States'  request for interim review,  p. 11. 
58 Canada's  comments on the United  States'  request for interim review,  p. 11. 
59 United  States'  request for interim review, para. 35. (emphasis added by the United States)  
60 Canada's  comments on the United  States'  request for interim review,  p. 11. 
61 United  States'  response to Panel question No. 154, para. 11. 
62 The United  States further goes on to state in response to the same question from the Panel that " the 
fact that a price is found within the country of provision does not speak to other aspects of comparabilit y, WT/DS533/R/Add.1  
BCI deleted, as indicated [[***]]  
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  light of the United  States'  request, we have added language to the sentence in question ind icating 
that the United  States makes that argument in response to a question from the Panel, and we have 
added the appropriate reference.  
2.35.   The United  States further asks the Panel to add to this paragraph of the Report certain 
language provided at p aragraph 12 of the United  States'  response to Panel question No. 154. The 
United  States asserts that it explained at the substantive meetings that the particular location within 
the country of provision is not the determinative factor, but rather that the comparability of the good 
in question (including the prevailing market conditions)  determines whether an appropriate 
comparison can be made.63  
2.36.   Canada contends that the United  States'  proposed addition is unnecessary. Canada submits 
that in paragra ph 7.24 of the Interim Report, the Panel does not suggest that the United  States has 
argued that the particular location within the country of provision is the determinative factor for 
benchmark selection. Canada submits that, to the contrary, the Panel po ints to conditions – "as long 
as" – that reflect what the United  States suggests the Panel add to this paragraph.64  
2.37.   We find that the language that the United  States asks us to add bears no specific reference 
to comparability of the good in questio n "including the prevailing market conditions " as the 
United  States suggests in its request.65 Insofar as the language that the United  States asks us to 
add refers to "aspects of comparability", such as whether the potential benchmark is a price for the 
good in question, or whether the potential benchmark is a market -determined price, paragraph 7.24 
of the Report already reflects those aspects in its description of the United  States'  argument. We 
therefore do not consider it necessary to include the langua ge the United  States asks us to add and 
accordingly decline the United  States'  request.  
2.8  Paragraphs 7.28 and 7.30  
2.38.   The United  States requests that paragraphs 7.28 and 7.30 be modified to remove references 
to "the preferred way" or "the preferred  approach" to the benchmark comparison under 
Article  14(d)  of the SCM  Agreement. The United  States contends that the text of Article  14 provides 
no basis for making statements in the abstract and without attribution that refer to "the preferred 
way".66  
2.39.  Canada proposes that the Panel reject the United  States'  request, as an overly broad request 
for review of the Panel's  legal reasoning that falls outside the proper scope of interim review.67 
Canada argues that in referring to "the preferred way" or  "the preferred approach" under 
Article  14(d), the Panel simply indicates that an analysis determining the adequacy of remuneration 
should be carried out by considering in -market prices first before using external benchmarks. Canada 
asks the Panel to rejec t the United  States'  request for the same reasons Canada provided in its 
comments concerning paragraphs 5 to 12 of the United  States'  request for interim review.68 
2.40.   We consider that paragraphs 7.21 -7.30 of our Report set out adequate reasoning to su pport 
the legal interpretation with which the United  States takes issue. We therefore decline the 
United  States'  request.  
2.9  Paragraph 7.33 and footnote 76 (footnote 78 of the Final Report)  
2.41.   The United  States asserts that the Panel has incorrectly characterized the 
United  States'  position in paragraph 7.33 and footnote 76, and requests that the Panel remove that 
characterization from the Final Report.69 The United  States contends, in particular, that this 
paragraph and footnote incorrec tly suggest that the United  States considered Canada's  allegedly 
 
e.g., whether the potential benchmark is a price for the good in question or, e.g., whether the potential 
benchmark is a market determined price". (United  States'  response to Panel question No. 154, para. 12). 
63 United  States'  request for interim revie w, para. 35. 
64 Canada's  comments on the United  States'  request for interim review,  p. 12. 
65 United  States'  request for interim review, para. 35. 
66 United  States'  request for interim review, para. 36. 
67 Canada's  comments on the United  States'  request for interim review,  p. 3. 
68 Canada's  comments on the United  States'  request for interim review,  p. 8. 
69 United  States'  request for interim review, para. 38. WT/DS533/R/Add.1  
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  "erroneous" characterizations of Articles  19.3 and 19.4 of the SCM  Agreement "unobjectionable", 
when, in fact, the United  States expressed its objection at great length.70 The United  States also 
contends that the quotation of "unobjectionable" appears to be pulled from an unrelated section of 
the United  States'  first written submission.71  
2.42.   Canada asks the Panel to reject the United  States'  request. Canada contends that footnote  76 
of the Interim Report explains that the United  States has indicated that it agrees with the 
overarching principle that an investigating authority's  determination of the amount of a subsidy 
should be accurate.72 Canada submits that the United  States acknowled ged this principle with 
respect to Canada's  arguments concerning whether the setting to zero of certain comparisons during 
the benefit calculation was inconsistent with Articles  19.3 and 19.4 of the SCM  Agreement and 
Article  VI:3 of the GATT.73 Canada suggests, however, that if the Panel were inclined to address the 
United  States'  comments, the Panel could revise the footnote to indicate that:  "the United  States 
noted  has acknowledged in the context of another argument  that Canada's  view that '[ t]he 
SCM Agreement requires that an investigating authority accurately determine the amount of a 
subsidy' is 'unobjectionable'".74 
2.43.   We find the United  States'  request unpersuasive. We note that at paragraph 495 of its first 
written submission the Un ited States clearly states that Canada's  view that "[t]he SCM  Agreement 
requires that an investigating authority accurately determine the amount of a subsidy" is 
"unobjectionable".75 The paragraphs of its first written submission to which the United  State s refers 
when it argues that it expressed its objection to Canada's  characterization of Articles  19.3 and 19.4 
of the SCM  Agreement "at great length", do not pertain specifically to Canada's  view that "[t]he 
SCM Agreement requires that an investigating aut hority accurately determine the amount of a 
subsidy". Instead, they pertain to the question of whether Articles  19.3 and 19.4 of the 
SCM Agreement impose an obligation on Members to conduct an aggregate analysis or require 
Members to provide credit in the benefit calculation when a government provides goods for adequate 
remuneration.76 In particular, through these paragraphs of its first written submission, the 
United  States objects specifically to the view that "the USDOC was obligated to apply a particul ar 
approach to the benefit calculation … namely aggregating comparison results across different 
financial contributions and, in reality, providing 'credits' where certain financial contributions were 
found not to confer a benefit".77 For the foregoing rea sons, we decline the United  States'  request. 
However, in light of Canada's  suggestion, we have slightly modified the language of the footnote in 
question.  
2.10  Paragraphs 7.38 and 7.39  
2.44.   The United  States notes that several sentences in these paragr aphs give no indication that 
the Panel is summarizing Canada's  view, rather than expressing the Panel's  own assessment. The 
United  States suggests that the Panel add the phrase "Canada argues that ..." in the relevant 
sentences in these paragraphs for the Final Report.78 Canada asks the Panel to reject the 
United  States'  request. For Canada, the United  States'  request seeks to mischaracterize the 
Panel's  review of the record evidence as arguments submitted by Canada.79  
2.45.   We have addressed the United  States'  request by modifying certain sentences in these 
paragraphs, and have also added a footnote to paragraph 7.38, for further clarity. This footnote 
appears as footnote 88 in the Final Report.  
 
70 United  States'  request for interim review, para. 37. 
71 United  States'  request for interim review, para. 37. 
72 Canada's  comments on the United  States'  request for interim review,  pp. 12-13. 
73 Canada's  comments on the United  States'  request for interim review,  p. 13. 
74 Canada's  comments on the United States'  request for interim review,  p. 13. (emphasis added 
by Canada)  
75 United  States'  first written submission, para.  495. 
76 United  States'  first written submission, paras.  16-18 and 496-503. 
77 United  States'  first written submission, para.  495. 
78 United  States'  request for interim review, para. 39. 
79 Canada's  comments on the United  States'  request for interim review,  p. 13. WT/DS533/R/Add.1  
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  2.11  Paragraphs 7.109 (and footnote 231 (footnote 230 of the Final Report))  and 7.256 
(and footnote 540)  
2.46.   The United  States asks the Panel to add the words "in certain circumstances" to these 
two footnotes which use identical language and summarize the USDOC's  regulatory hierarchy for 
selecting benchmarks.80 In particular, the United  States requests that, in order to present the facts 
more accurately, the Panel modify the footnotes to indicate that the preferred benchmark in the 
hierarchy, the tier -one benchmark price, is an observed market price from actu al transactions, such 
as prices from private parties or, in certain circumstances , government -run auctions, within the 
country under investigation.81  
2.47.   Canada does not comment on the United  States'  request.  
2.48.   We have accepted the United  States'  request by making the modifications suggested by the 
United  States to these footnotes.  
2.12  Paragraph 7.123  
2.49.   The United  States requests the Pa nel to change the last sentence of this paragraph to the 
following:  "[o]n such grounds, the USDOC determined BCTS auction prices were not market 
determined" .82 Canada does not comment on this request.  
2.50.   We have accepted the United  States'  request.  
2.13  Paragraph 7.201  
2.51.   The United  States requests the Panel to modify the first sentence of paragraph 7.201 to 
indicate that the inability of sawmills to process certain logs is not the exclusive reason why sawmills 
in Quebec transfer allocations of Crown timber.83 The United  States proposes the following changes 
to the first sentence of paragraph 7.201:  "[w]e further consider that the USDOC did not explain how 
the transfer of sawmills'  allocation of Crown timber to other sawmills specifically becaus e in instances 
when  they cannot process certain logs  would reduce those sawmills'  total need to acquire timber 
from the auction or non Crown sources" .84  
2.52.   Canada does not  object to the United  States'  request.  
2.53.   We have decided to accommodate th e United  States'  request by making the modifications 
suggested by the United  States to this paragraph.  
2.14  Paragraph 7.371  
2.54.   The United  States requests the Panel to designate certain information in the third and 
fourth  sentences of this paragraph as BCI. The United  States also requests the Panel to make a 
citation correction in footnote  759 (footnote 759 of the Final Report).85 Canada does not comment 
on these requests.  
2.55.   We have accepted the United  States'  request regarding BCI designation. However, we have 
rejected the United  States'  request regarding the citation correction, as we consider that no such 
correction is needed.  
 
80 United  States'  request for interim review, para. 40. 
81 United  States' request for interim review, para. 40. 
82 United  States'  request for interim review, para.  42. 
83 United  States'  request for interim review, para. 43. 
84 United  States'  request for interim review, para. 43. (emphasis added by the United States)  
85 United States'  request for interim review, paras.  45-46. WT/DS533/R/Add.1  
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  2.15  Paragraph 7.558  
2.56.   The United  States requests that the term "country of origin" at the end of the first sentence 
of the paragraph be changed to "country of provision" to reflect the language in Article  14(d)  of the 
SCM Agreement.86 Canada does not comment on this request.  
2.57.   We have accepted the United  States'  request.  
2.16  Paragraph 7.572  
2.58.   The United States asserts that this paragraph does not reflect the United States' response to 
one of Canada's arguments that the paragraph summarizes. The United States requests the Pa nel 
to include the United States' response in this paragraph.87 Based on its view that the Panel's  analysis 
does not engage with the relevant United  States'  argument, the United  States also requests the 
Panel to re consider its conclusion and to provide ad ditional explanation of the underlying logic in 
light of that argument.88 Canada asserts that the Panel ought to reject the United  States'  request, 
as the Panel explicitly rejected a basic assumption underlying the relevant argument of the 
United  States i n paragraph 7.571 of the Report. Canada also asserts that paragraph 7.573 of the 
Report addressed and rejected the United  States'  argument.89 
2.59.   We reject the United States' request as we consider that the argument referred to by the 
United States is not relevant to our resolution of Canada's claim. As noted in paragraph 1.1  b above, 
the descriptions of the arguments of the parties in our Report are not meant to, and do not reflect, 
the entirety of the parties'  arguments, but only to highlight the prin cipal points of those arguments. 
We further note that the United  States'  argument at issue does not address the reason due to which 
we upheld Canada's  argument in paragraph 7.573 of the Report, i.e. "by setting -to-zero negative 
comparison results, the USDO C calculated a benefit amount that included price differences that arise 
solely due to the asymmetry between average geographic conditions of various private transactions 
based on which the benchmark price was calculated on the one hand, and the specific g eographic 
conditions relating to the individual transactions that were priced less than the benchmark price on 
the other". In our view, nothing in the argument referred to by the United States countervails our 
reasoning quoted above. We therefore do not co nsider it necessary to modify any aspect of our 
Report on account of this argument of the United  States.  
2.17  Paragraph 7.615  
2.60.   The United  States requests the Panel to modify the second sentence of this paragraph to 
accurately reflect the partial cu tting requirements.90 Canada responds to the United  States'  request 
with a request to the Panel to make another modification to the sentence so as to indicate the partial 
cut prescription is mandated by Québec.91 
2.61.   We have accepted the modifications  to the second sentence requested by the United  States 
as well as Canada.  
3  CANADA'S  SPECIFIC REQUESTS FOR REVIEW  
3.1  Paragraphs 7.21 -7.22 
3.1.  Canada notes that it agrees with the Panel's  interpretation of the ordinary meaning of the 
English version o f Article  14(d)  of the SCM  Agreement. Canada invites the Panel to consider whether 
it should also refer to the Spanish and French versions of Article  14(d)  in a footnote.92 
3.2.  The United  States does not comment on Canada's  request.  
 
86 United  States'  request for interim review, para.  47. 
87 United  States'  request for interim review, para.  48. 
88 United  States'  request for interim review, para.  48. 
89 Canada's  comments on the United  States'  request for interim review, p.  14. 
90 United  States'  request for interim review, para.  49. 
91 Canada's  comments on the United  States'  request for interim review, p.  15. 
92 Canada's  request for interim review, p. 1. WT/DS533/R/Add.1  
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  3.3.  We consider t hat the Panel's  interpretation of Article  14(d)  in the relevant context of this 
dispute is sufficiently supported by reasoning set out in the Report, and do not consider it necessary 
to also refer to the Spanish and French versions of Article  14(d)  in that  regard. We therefore decline 
Canada's  request.  
3.2  Paragraph 7.27, footnote 67 (footnote 69 of the Final Report)  
3.4.  Noting  that the Panel refers in this footnote to the reasoning of a panellist in Canada Renewable 
Energy / Canada – Feed-in-Tariff Program , Canada suggests that the Panel consider adding a parallel 
citation to the Appellate  Body's  decision in the same case which , according to Canada, reaches a 
similar conclusion concerning the interpretation of Article  14(d).93 
3.5.  The United  States objects to Canada's  request, arguing that the conclusion in the 
Appellate  Body report was concerned with the application of Article  14(d)  to the provision of 
electricity – the particular good at issue in that dispute – and was not concerned with the 
interpretation of Article  14(d)  itself. Further, the United  States considers that Canada has not 
provided a justifi cation for its request.94 
3.6.  We consider that the Panel's  interpretation of Article  14(d)  in the relevant context of this 
dispute is sufficiently supported by reasoning set out in the Report, and do not consider it necessary 
to add the citation to the Appellate  Body's  decision as Canada suggests we do . We therefore decline 
Canada's  request.  
3.3  Paragraph 7.38, footnote 85 (footnote 87 of the Final Report)  
3.7.  Canada asks the Panel to consider including a parallel citation to the following source, wh ich 
for Canada, also addressed differences in prevailing market conditions between the relevant 
provinces:  "Kalt Report on Crown timber, Exhibit CAN -14, pp.  9 and 50 -54".95 
3.8.  The United  States asks the Panel to reject Canada's  request. The United  States argues that 
Canada's  proposed modification would appear only to broaden the Panel's  finding without 
justification for doing so, and Canada has not demonstrated that such a change is necessary.96 
3.9.  We consider it pertinent to include in this footnot e the citation that Canada asks us to add. We 
have therefore decided to accommodate Canada's  request with respect to this footnote and have 
modified the footnote accordingly.  
3.4  Paragraph  7.68 
3.10.   Canada suggests that the Panel consider replacing "on ly" with "simply" in the last sentence 
of this paragraph.97 
3.11.   The United  States does not comment on Canada's  request.  
3.12.   We have accepted Canada's  request and have made the linguistic change sought.  
3.5  Paragraph 7.69  
3.13.   Canada suggests replacing "only" with "simply" in the first sentence of this paragraph.98 
3.14.   The United  States does not comment on Canada's  request.  
 
93 Canada's  request for interim r eview , pp. 1-2 (referring to Appellate  Body Report s, Canada – 
Renewable Energy / Canada – Feed-in Tariff Program , para. 5.239  and fn 746 ). 
94 United  States'  comments on Canada's  request for interim review,  para. 3. 
95 Canada's  request for interim review, p. 2. 
96 United  States'  comments on Canada's  request for interim review,  para. 4. 
97 Canada's  request for interim review, p. 2. 
98 Canada's  request for interim review, p. 2. WT/DS533/R/Add.1  
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  3.15.   We have accepted Canada's  request and have made the linguistic change sought.  
3.6  Paragraph 7.73  
3.16.  For greater clarity, Canada suggests that the Panel make the following revision in the final 
sentence of this paragraph:  "… and the share of  export of  softwood lumber exports  from Ontario 
was too small to have affected the U.S. price of softwood lumber ".99 
3.17.   The United  States does not comment on Canada's  request.  
3.18.   We have decided to accommodate Canada's  request with respect to this paragraph and have 
modified the paragraph accordingly.  
3.7  Paragraph  7.117, footnote 248 (footnote 247 of the Final Report)  
3.19.   Canada requests  that the Panel include an additional citation to the final determination to this 
footnote.100 The United  States does not respond to this request.  
3.20.   We have accepted Canada's  request.  
3.8  Paragraph 7.117  
3.21.   Canada requests that the Panel add certain language to the fifth sentence of this paragraph 
to clearly indicate  that the Panel is describing the USDOC's  finding in this sentence.101 The 
United  State s does not respond to this request.  
3.22.   We have accepted Canada's  request.  
3.9  Paragraph 7.118  
3.23.   Canada requests that the Panel modify the third and fourth sentences of this paragraph to 
indicate that the Panel is describing the USDOC's  reasoning  in the final determination in these 
sentences.102 The United  States does not respond to this request.  
3.24.   We have accepted Canada's  request.  
3.10  Paragraph 7.120  
3.25.   Canada requests that the Panel modify the second sentence of this paragraph to m ore 
accurately reflect  Canada's  argument.103 The United  States does not respond to this request.  
3.26.   We have accepted Canada's  request.  
3.11  Paragraph 7.136, footnote 300 (footnote 299 of the Final Report)  
3.27.   Canada requests that the Panel obser ve in this footnote that the United  States'  argument 
described in the footnote constitutes ex post  reasoning that did not appear in the preliminary or final 
determinations.104 The United  States asserts that there is no basis for the Panel to make the 
requested modification  to footnote 300 as Canada has not offered any explanation supporting its 
request.105 
 
99 Canada's  request for interim review, p. 2. (emphasi s added by Canada)  
100 Canada's  request for interim review, p.  2. 
101 Canada's  request for interim review, p.  3. 
102 Canada's  request for interim review, p.  3. 
103 Canada's  request for interim review, p.  3. 
104 Canada's  request for interim review, p.  3. 
105 United  States'  comments on Canada's  request for interim review, para.  6. WT/DS533/R/Add.1  
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  3.28.   We have accepted Canada's  request, as Canada has explained, and the United  States does 
not contest , that the United  States'  argument described i n the footnote did not appear in the 
USDOC's  determinations.  
3.12  Paragraph 7.147, footnote 325 (footnote 324 of the Final Report)  
3.29.   Canada requests that the Panel replace the existing citation to Canada's  submission in this 
footnote with certain  alternative citations to Canada's  submissions.106 The United  States does not 
comment on this request.  
3.30.   We have accepted Canada's  request.  
3.13  Paragraph 7.158, footnote 355 (footnote 354 of the Final Report)  
3.31.   Canada requests the Panel to add ci tations to paragraphs 211 and 212 of Canada's  first written 
submission in this footnote.107 The United  States does not comment on this request.  
3.32.   We have accepted Canada's  request.  
3.14  Paragraph 7.162, footnote 364 (footnote 363 of the Final Report)  
3.33.   Canada requests that the Panel modify the citation to paragraph 44 of the Larry Gardner 
affidavit, (Exhibit CAN -31 (BCI))  in this footnote to refer more generally to paragraphs 43 to 46. 
Canada states that these paragraphs refer to harvestin g and transportation costs of logs in the 
British Columbia interior more generally.108 The United  States does not comment on 
Canada's  request.  
3.34.   We have modified the citation in footnote 364 of the Report to refer to paragraphs 43 to 45 
of the relevant exhibit, but not paragraph 46. Paragraph 46 pertains to costs associated with 
beetle -killed  timber and is outside the scope of the sentence in paragraph 7.162 of the Report to 
which the footnote in question is attached.  
3.15  Paragraphs 7.162 -7.163, footnotes 363, 364 and 369 (footnotes 362, 363, and 368 
of the Final Report); paragraph 7.173, footnote 389 (footnote 388 of the Final Report); 
and paragraphs 7.175 -7.176, footnotes 395 and 404 (footnotes 394 and 403 of the 
Final  Report)  
3.35.   Canada requests the Panel to modify the nomenclature of Exhibit CAN -16 to the "Kalt Report 
on LEPs" and of Exhibit -CAN-90 to the "Kalt Response on LEPs".109 The United  States does not 
comment on this request.  
3.36.   We have accepted Canada's  request.  
3.16  Paragraph 7.170  
3.37.   Canada requests that the Panel add a reference to "SPF" in the first sentence of this paragraph 
in the following manner:  "Canada argues that the USDOC's  reasoning was flawed, since most coastal 
species, including  Douglas -fir, balsam, ced ar, and hemlock, are not used to produce SPF softwood 
lumber".110 The United  States does not comment on this request.  
3.38.   We have accepted Canada's  request.  
 
106 Canada's  request for interim review, p.  3. 
107 Canada's  request for interim review, p.  4. 
108 Canada's  request for interim review, p.  4. 
109 Canada's  request for interim review,  p. 4. 
110 Canada's  request for interim review, p.  4. WT/DS533/R/Add.1  
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  3.17  Paragraph 7.175  
3.39.   Canada requests the Panel to revise the final sentence of this pa ragraph to accurately reflect 
the proposition  contained in the affidavit of Mr Gardner of West Fraser (Exhibit CAN -31 (BCI)).111 
The United  States did not comment on this request.  
3.40.   We have accepted Canada's  request.  
3.18  Paragraph 7.180, footnote 406 (footnote 405 of the Final Report ) 
3.41.   Canada requests the Panel to include in this footnote references to certain exhibits, which for 
Canada, demonstrate that Québec proposed that Commerce should use auction prices for Crown 
stumpage.112 
3.42.   The United  States does not comment on Canada's  request.  
3.43.   We have decided to accommodate Canada's  request and have modified this footnote, albeit 
not in the precise manner proposed by Canada.  
3.19  Paragraph 7.181, footnote 407 (footnote 406 of the Fin al Report ) 
3.44.   Canada requests the Panel to include in this footnote a reference to Québec's  initial 
questionnaire response, which describes the functioning of the auction system.113 
3.45.   The United  States does not comment on Canada's  request.  
3.46.   We have decided to accommodate Canada's  request and have modified this footnote, albeit 
not in the precise manner proposed by Canada.  
3.20  Paragraph 7.193  
3.47.   Canada requests the Panel to move the reference to "Crown" in the second sentence so that 
it applies to both non -auction and auction timber which, Canada's  asserts, are both technically forms 
of Crown timber. The revised sentence would indicate that " If the same group of consumers 
dominate the purchase of both non -auction Crown  and auction Crown timber".114 
3.48.   The United  States does not comment on Canada's  request.  
3.49.   We have decided to accommodate Canada's  request with respect to this paragraph and have  
modified the paragraph accordingly.  
3.21  Paragraph 7.194, footnote 433 (footnote 432 of the Final Report ) 
3.50.   Canada requests that the Panel revise the first sentence of footnote 433 to reflect the fact 
that sawmills can obtain no more than  75% of th eir residual mill need from TSGs, so that it is 
consistent with Canada's  arguments and the Panel's  findings elsewhere in the Interim Report.115  
3.51.   The United  States does not comment on Canada's  request.  
3.52.   We have accepted Canada's  request by in troducing the change it asks us to make, albeit with 
certain additional modifications.  
 
111 Canada's  request for interim review, p.  5. 
112 Canada's  request for interim review, p. 5. 
113 Canada's  request for interim review, p. 5. 
114 Canada's  request for interim review, pp. 5-6. (emphasis added by Canada)  
115 Canada's  request for interim review, p. 6. WT/DS533/R/Add.1  
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  3.22  Paragraph 7.205  
3.53.   Canada requests that the Panel consider revising the final sentence in this paragraph, which 
contains a redundant reference to bids being l imited "above TSG" prices. Canada notes that this 
sentence already refers to this by indicating that it is difficult to understand why a sawmill would 
limit bids at "any price".116  
3.54.   The United  States objects to Canada's  request,  arguing that the re quested modification is 
unnecessary. The United  States submits that Canada's  proposed modification would change the 
meaning of the Panel's  statement, which draws a distinction between a scenario where bids are 
simply "above TSG" prices and a scenario where  bids are "not 'significantly’" above TSG prices.117 
The United  States suggests that the Panel make certain editorial changes to this paragraph if it 
considers that clarification is necessary.118  
3.55.   We consider that the reference to "above TSG" prices is redundant . We have therefore decided 
to accommodate Canada's  request with respect to this paragraph and have modified the paragraph 
accordingly. We have also added the word "prices" after "TSG" in accordance with the 
United  States'  suggestion and  corrected certain typographical errors that the United  States 
identifies.  
3.23  Paragraph 7.209  
3.56.   For greater clarity, Canada suggests that the Panel revise the third sentence in this paragraph 
in the following manner:  "An objective and unbiased inv estigating authority would not have reached 
that conclusion without verifying whether non -sawmills also sold to non -TSG-holding mills within 
Québec, and if so, how much the volume of such sales ".119 
3.57.   The United  States does not comment on Canada's  request.  
3.58.   We have decided to accommodate Canada's  request with respect to this paragraph and have 
modified the paragraph accordingly.  
3.24  Paragraph 7.214  
3.59.   Canada suggests that the Panel add a footnote to the end of the first sentence of this 
paragraph to provide a citation to Dr Marshall's  examination of whether TSG -holders suppress their 
bids compared to non -sawmills or sawmills without TSGs. Canada also suggests that at the end of 
the second sentence the Panel revise footnote 463 (footnote 4 63 of the Final Report) to refer to the 
relevant part of Dr Marshall's  report that concern bid reduction.120  
3.60.   The United  States does not comment on Canada's  request.  
3.61.   We have accepted Canada's  request by adding the references it asks us to include.  
3.25  Paragraphs 7.253 and 7.259  
3.62.   Canada requests the Panel to make certain "minor edits" to the first, second and 
third sentences of paragraph 7.253 to more ac curately reflect Canada's  argument that Alberta 
proposed using TDA log prices to derive  a stumpage benchmark for Alberta Crown timber.121 Canada 
requests a similar change to the first sentence of paragraph 7.259 to more accurately reflect 
Canada's  argumen t.122  
 
116 Canada's  request for interim review, p. 6. 
117 United  States'  comments on Canada's  request for interim review,  paras.  7-8. 
118 United  States'  comments on Canada's  request for in terim review,  paras.  9-10. 
119 Canada's  request for interim review, p. 6. 
120 Canada's  request for interim review, p. 6. 
121 Canada's  request for interim review, p. 7. 
122 Canada's  request for interim review, p. 7. WT/DS533/R/Add.1  
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  3.63.   The United  States does not comment on Canada's  request.  
3.64.   We have decided to accommodate Canada's  request with respect to these paragraphs and 
have modified them accordingly.  
3.26  Paragraph 7.328  
3.65.   Canada requests the Panel to r eplace the reference in the first sentence to "the preceding 
paragraph" with "the preceding paragraphs" so as to address the Brattle report's  findings referred 
to in both preceding paragraphs, that is, paragraphs 7.326 and 7.327 of the Report.123  
 
3.66.   While the United  States does not object to Canada's  request, it proposes a slight modification 
of Canada's  proposed edit to specify that the Panel is referring to the portions of the Brattle Report 
referred to in the two preceding paragraphs.124 
3.67.   We have decided to accommodate Canada's  request and have modified this paragraph albeit 
not in the precise manner proposed by Canada. In particular, in accordance with the 
United  States'  suggestion, we have specified that the Panel is alluding to the portio ns of the 
Brattle  Report referred to in the two preceding paragraphs.  
3.27  Paragraph 7.352, footnote 711 (footnote 711 of the Final Report ) 
3.68.   Canada requests the addition of a citation to Alberta, "Nova Scotia Tree Identification Guide", 
Exhibit CAN -304, p.  23 in the third sentence of this footnote.125 The United  States does not comment 
on Canada's  request.  
3.69.   We have accepted Canada's  request.  
3.28  Paragraph  7.355  
3.70.   Canada requests the Panel to add a footnote to the effect th at the USDOC separately 
recognized, in its analysis of whether it should consider British Columbia Crown stumpage prices on 
a "stand -as-a-whole" basis for the purposes of its benchmark, that the "species of a tree is an 
integral part of the value of that t ree" and therefore selected a disaggregated species -specific 
benchmark calculation.126 The United  States argues that the Panel ought to reject Canada's  request, 
as the addition that Canada seeks is not related to the issue discussed in the paragraph and w ould 
not contribute to resolving the dispute between the parties.127 
3.71.   We reject Canada's  request. We consider that Canada's  suggested addition is not 
indispensable to our analysis of the issue to which this paragraph is related. We also consider tha t 
the suggested addition is not necessary for the resolution of the dispute between the parties.  
3.29  Paragraph 7.356  
3.72.   Canada requests the Panel to modify subparagraph (a)  of this paragraph in a manner that 
would, in Canada's  view, better reflect t he argument made by Canada at paragraph 774 of its 
first written submission.128 The United  States contends that the Panel reject Canada's  request, as 
paragraph 774 of Canada's  first written submission does not clearly present the argument that 
Canada's  suggested modification seeks to incorporate.129 
 
123 Canada's  request for interim review, p. 8. 
124 United  States'  comments on Canada's  request for interim review,  para. 11. 
125 Canada's  request for interim review, p.  8. 
126 Canada's  request for interim review, p.  8. 
127 United  States'  comments on Canada's  request fo r interim review, para.  12. 
128 Canada's  request for interim review, p.  8. 
129 United  States'  comments on Canada's  request for interim review, para.  13. WT/DS533/R/Add.1  
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  3.73.   We agree with the United  States. We consider that paragraph 774 of Canada's  first written 
submission does not set out Canada's  argument in the manner that Canada represents in this 
request for modification. We therefore reject Canada's  request.  
3.30  Paragraph 7.359  
3.74.   Canada requests the Panel to modify the fifth sentence of this paragraph in a manner that 
would, in Canada's  view, better reflect the argument made by Canada at paragraph 774  of its 
first written submission.130 The United  States contends that the Panel reject Canada's  request, as 
paragraph 774 of Canada's  first written submission does not clearly present the argument that 
Canada's  suggested modification seeks to incorporate.131 
3.75.   We note that this request concerns the same issue as that addressed in Canada's  request 
concerning paragraph 7.356 of the Report. We therefore reject this request for the same reasons as 
that presented in paragraph 3.73.  above.  
3.31  Paragraph 7 .360 
3.76.   Canada requests the Panel to make two changes to this paragraph. Canada requests the Panel 
to modify the first sentence of this paragraph in a manner that would, in Canada's  view, better 
reflect the argument made by Canada at paragraph 774 of i ts first written submission.132 Canada 
also requests the Panel to modify the third sentence of this paragraph to reflect an assertion made 
by Canada in Canada's  response to Panel question No. 224, para.  260.133 The United  States contends 
that the Panel r eject Canada's  request concerning the first sentence of this paragraph, as 
paragraph  774 of Canada's  first written submission does not clearly present the argument that 
Canada's  suggested modification seeks to incorporate.134 The United  States does not co mment on 
Canada's  request concerning the third sentence of this paragraph.  
3.77.   We note that Canada's  request regarding the first sentence of this paragraph concerns the 
same issue as that addressed in Canada's  request concerning paragraph 7.356 of the Report. We 
therefore reject this request for the same reasons as those presented in paragraph 3.73.  above.  
3.78.   As regards Canada's  request concerning the third sentence of this paragraph, we note that 
Canada seeks a modification to this sentence such th at it will reflect the following italicized assertion 
made by Canada in response to a question from the Panel:   
A harvested log that is considered "pulpwood" by a Nova Scotia purchaser could come 
from the upper portion of a harvested tree (with the log har vested from lower portion 
being considered a "sawlog" or "studwood"). However, it could also come from the lower 
portion of a smaller harvested tree or from any portion of a harvested tree that exhibits 
defect that would render the wood unsuitable for lumb er production.135 
We note that Canada did not substantiate with evidence the assertion that pulpwood could also come 
from the lower portion of a smaller harvested tree, or from any portion of a defective tree. We also 
note that, while explanations and evidence that Canada provided to us indicate the existence of 
sales of pulpwood derived from trees that also produced sawlogs or studwood136, Canada has not 
pointed us to affirmative evidence on the record demonstrating the existence of s ales of pulpwood 
derived from trees that produced pulpwood alone. We further note that Canada's  unsubstantiated 
assertion reproduced in italics above is at odds with Canada's  unqualified assertion in its first written 
submission that "sawlog, studwood, and  pulpwood prices are all part of a single stumpage 
transaction".137  
 
130 Canada's  request for interim review, p.  8. 
131 United  States'  comments on Canada's  request for inte rim review, para.  13. 
132 Canada's  request for interim review, pp.  8-9. 
133 Canada's  request for interim review, pp.  8-9. 
134 United  States'  comments on Canada's  request for interim review, para.  13. 
135 Canada 's response to Panel question No. 224, para. 260. 
136 Canada's  first written submission, paras.  797-798. 
137 Canada's  first written submission, para.  786. WT/DS533/R/Add.1  
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  3.79.   Therefore, we reject Canada's  request concerning the third sentence of paragraph 7.360 of 
the Report.  
3.32  Paragraph 7.365  
3.80.   Canada requests the Panel to modify the fourth sentence of this paragraph to reflect the fact 
that the referenced Ontario measurement is an "inside -the-bark diameter" rather than a "diameter 
at breast height", which is an outside -the-bark measurement.138 The United  States does not 
comment on Canada's  request.  
3.81.   We have accepted Canada's  request.  
3.33  Paragraph 7.369  
3.82.   Canada requests the Panel to modify the fifth sentence of this paragraph to better reflect 
Canada's  submission.139 The United  States does not respond to this request by Canada. While the 
United  States comments on Canada's  request concerning paragraphs 7.369, 7.371, 7.372, 7.373, 
and 7.375 together, the comment does not pertain to the issue raised by Canada in its requ est 
concerning paragraph 7.369.140 
3.83.   We have accepted Canada's  request.  
3.34  Paragraph 7.371  
3.84.   Canada requests the Panel to designate certain information in the third and fourth sentences 
of this paragraph as BCI. Canada also requests the Pane l to modify the sixth sentence to better 
reflect Canada's  argument.141 In its common comment on modifications requested by Canada to 
paragraphs 7.369, 7.371, 7.372, 7.373, and 7.375, the United  States contends that 
Canada's  request seeks to improperly rec haracterize the composition of the Nova Scotia benchmark 
and that the Panel has already properly described the facts in these paragraphs.142  
3.85.   We note that the modification sought by Canada to the sixth sentence of paragraph 7.371 
relates to the man ner in which we have reproduced Canada's  own argument, and not to our factual 
findings concerning the composition of the Nova Scotia benchmark. Therefore, we do not see how 
the concerns raised by the United  States in its common comment on modifications req uested by 
Canada to paragraphs 7.369, 7.371, 7.372, 7.373, and 7.375 is pertinent to Canada's  request at 
issue. We have accepted Canada's  requests concerning this paragraph , including Canada's request 
concerning BCI designation. .  
3.35  Paragraph 7.372  
3.86.  Canada requests the Panel to modify the first sentence of this paragraph to better reflect what 
Canada was attempting to establish in its submissions.143 In its common comment on modifications 
requested by Canada to paragraphs 7.369, 7.371, 7.372, 7.3 73, and 7.375, the United  States 
contends that Canada's  request seeks to improperly recharacterize the composition of the Nova 
Scotia benchmark and that the Panel has already properly described the facts in these paragraphs.144 
3.87.   We note that the mod ification sought by Canada to the first sentence of paragraph 7.372 
concerns the manner in which we have reproduced Canada's  own argument, and not our factual 
findings concerning the composition of the Nova Scotia benchmark. Therefore, we do not see how 
the concerns raised by the United  States in its common comment on modifications requested by 
Canada to paragraphs 7.369, 7.371, 7.372, 7.373, and 7.375 is pertinent to Canada's  request at 
issue.  
 
138 Canada's  request for interim review, p.  9. 
139 Canada's  request for interim review, p.  9. 
140 United  States'  comments on Canada's  request for i nterim review, para.  14. 
141 Canada's  request for interim review, p.  9. 
142 United  States'  comments on Canada's  request for interim review, para.  14. 
143 Canada's  request for interim review, p.  10. 
144 United  States'  comments on Canada's  request for interi m review, para.  14. WT/DS533/R/Add.1  
BCI deleted, as indicated [[***]]  
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  3.88.   Nevertheless, we reject Canada's  request. We note that a ccepting Canada's  change would 
imply that Canada submitted before us that the Nova Scotia "benchmark price was based on the 
stumpage price allocated to a subset of logs (i.e. sawlogs and studwood)  produced upon harvesting 
timber".145 Canada's  prior submis sions in this dispute, however, indicated to us that Canada was 
arguing that the Nova Scotia benchmark price comprised log prices , and not stumpage price 
allocated to a subset of logs.146 Our phrasing of Canada's  submission on this point is in fact in kee ping 
with Canada's  own framing of what in its view the Nova Scotia survey measured – i.e. "prices paid 
for [] a subset of logs harvested from [] standing timber".147 We therefore reject Canada's  request.  
3.36  Paragraphs 7.373 and 7.375  
3.89.   Canada requ ests the Panel to modify paragraph 7.373 and the second sentence of 
paragraph  7.375 to better reflect what Canada was attempting to establish in its submissions.148 In 
its common comment on modifications requested by Canada to paragraphs 7.369, 7.371, 7.3 72, 
7.373, and 7.375, the United  States contends that Canada's  request seeks to improperly 
recharacterize the composition of the Nova Scotia benchmark and that the Panel has already properly 
described the facts in these paragraphs.149 
3.90.   We note that Canada's  request concerning these paragraphs is identical to its request 
concerning paragraph 7.372. We therefore reject Canada's  request based on the same reasoning as 
that set out in paragraph 3.88.  above.  
3.37  Paragraph 7.409, footnote 846 (footnote 84 6 of the Final Report ) 
3.91.   Canada asks the Panel to designate certain information in this footnote as BCI.150 The 
United  States does not comment on this request.  
3.92.   We have accepted Canada's  request.  
3.38  Paragraph 7.426  
3.93.   Canada asks the Panel to designate certain information in this paragraph as BCI.151 The 
United  States does not comment on this request.  
3.94.   We have accepted Canada's  request.  
3.39  Paragraph 7.428  
3.95.   Canada requests the Panel to substitute  the reference to Deloitte in the first sentence of this 
paragraph with a reference to Nova Scotia.152 The United  States does not comment on 
Canada's  request.  
3.96.   We have accepted Canada's  request.  
3.40  Paragraph 7.429  
3.97.   Canada asks the Panel t o designate certain information in this paragraph as BCI.153 The 
United  States does not comment on this request.  
3.98.   We have accepted Canada's  request.  
 
145 Canada's  request for interim review, p.  10. 
146 See e.g. Canada's  response to Panel  question No. 219, paras.  200, 206, 214, and 222 (indicating 
that the Nova Scotia survey measured logs prices).  
147 Canada's  response to Panel  questi on No. 219, para.  200. 
148 Canada's  request for interim review, p.  10. 
149 United  States'  comments on Canada's  request for interim review, para.  14. 
150 Canada's  request for interim review, p.  10. 
151 Canada's  request for interim review, pp.  10-11. 
152 Canada's  request for interim review, p.  11. 
153 Canada's  request for interim review, p.  11. WT/DS533/R/Add.1  
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  3.41  Paragraph 7.430  
3.99.   Canada asks the Panel to modify the BCI designation for certain infor mation in this 
paragraph.154 The United  States does not comment on this request.  
3.100.   We have accepted Canada's  request.  
3.42  Paragraph 7.432  
3.101.   Canada requests the Panel to specify in the first sentence of this paragraph that prices in 
Québec are transposed based on auction prices.155 The United  States does not comment on this 
request.  
3.102.   We have accepted Canada's  request.  
3.43  Paragraph 7.436  
3.103.   Canada requests the Panel to revise subparagraph (c)  of this paragraph to more fully  reflect 
the finding of the USDOC reproduced in that subparagraph.156 The United  States asks the Panel to 
reject Canada's  request as, in the United  States'  view, the subparagraph appropriately characterizes 
the relevant finding of the USDOC and Canada's  suggested modification would be an inappropriate 
characterization thereof.157 
3.104.   We note that the language used in subparagraph (c)  closely mirrors the language used by 
the USDOC in the relevant part of the final determination.158 That being the case , we do  not find it 
necessary to consider modifying the language of subparagraph (c)  in the manner suggested by 
Canada. We therefore reject Canada's  request.  
3.44  Paragraph 7.439  
3.105.   Canada requests the Panel to add a reference to "mandatory charges" after the reference to 
"mandatory in -kind costs" in the first sentence of this paragraph to reflect the full scope of the 
remuneration that the USDOC ignored.159 The United  States asks the Panel to reject 
Canada's  request, arguing that adding a r eference to "mandatory charges" would change the 
meaning of the Panel's  statement, if the Panel's  finding is intended to relate only to in -kind costs 
and not to the separate question of mandatory charges.160  
3.106.   We note that Canada's  argument examine d in this paragraph concerns the USDOC's  failure 
to consider mandatory charges, as well as mandatory in -kind costs, as part of the full remuneration 
paid by the respondent companies in exchange for the right to harvest Crown -timber.161 Further, as 
evident  from footnote 903 of the Final Report, the section of the Report in which this paragraph is 
placed seeks to examine the validity of the basis on which the USDOC refused to provide adjustments 
for, inter alia , certain mandatory charges including "annual fe es, [Forest Resource Improvement 
Association of Albert] dues, holding and protection charges". Thus, we have accepted 
Canada's  request to add a reference to "mandatory charges" in the first sentence of this paragraph. 
The reasoning we have presented in thi s paragraph applies to mandatory charges as well as 
mandatory in -kind costs, and the omission of a reference to "mandatory charges" from the 
first sentence was inadvertent.  
 
154 Canada's  request for interim review, p.  11. 
155 Canada's  request for interim review, p.  11. 
156 Canada's  request for interim review, pp.  11-12. 
157 United  States' comments on Canada's  request for interim review, para.  15. 
158 Final determination, (Exhibit CAN -10), p.  138 ("parties have provided no evidence that the stumpage 
rates set by the provincial governments are adjusted to account for the revenue from any fees or charges 
required under long -term tenure  Agreements").  
159 Canada's  request for interim review, p.  12. 
160 United  States'  comments on Canada's  request for interim review, para.  16. 
161 Canada's  first written submission, para.  869. WT/DS533/R/Add.1  
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  3.45  Paragraph 7.458  
3.107.   Canada requests us to modify this paragraph by removing part of a sentence that it considers 
to be repetitive.162 The United  States objects to the specific modifications proposed by Canada but 
suggests some minor (alternative)  changes if we consider it necessary to make modifications in light 
of Canad a's comments.163 
3.108.   We note that the sentence alluded by Canada cites statements made by the USDOC in its 
final determination. We are of the view that the changes proposed by the United  States adequately 
clarify this sentence. Therefore, we decline t o modify this paragraph in the manner proposed by 
Canada.  
3.46  Paragraphs 7.480 and 7.482  
3.109.   Canada requests certain modifications in these paragraphs to more clearly reflect some of 
its submissions.164 The United  States does not comment on Canada's  request.  
3.110.   We have modified the paragraphs in the manner proposed by Canada.  
3.47  Paragraph 7.483  
3.111.   Canada proposes a modification in this paragraph to reflect that conversion factors vary 
drastically between species, grade and conditions of logs.165 The United  States objects to 
Canada's  request by noting that this paragraph discusses what the USDOC actually did, whereas 
Canada's  request reflects what in Canada's  view the USDOC should have done.166 
3.112.   We decline Canada's  request, becaus e its proposed modifications do not add to the clarity 
of the factual descriptions contained in this paragraph.  
3.48   Paragraph 7.485  
3.113.   Canada requests certain modifications to better reflect its arguments concerning the 
BC Dual-Scale Study and the Spelter Study.167 The United  States does not comment on 
Canada's  request.  
3.114.   We have made the modifications requested by Canada.  
3.49  Paragraph 7.490  
3.115.   Canada proposes that we make certain additions in the first sentence of this paragraph or 
in a footnote.168 The United  States does not comment on Canada's  request.  
3.116.   We note that the additions requested by Canada are reflected in its first written submission 
and its exhibits, which form part of our record. In our view, the additions do no t enhance the clarity 
of our report or are otherwise necessary. Therefore, we decline to modify this paragraph in the 
manner proposed by Canada.  
3.50  Paragraph 7.501  
3.117.   Canada requests us to replace the first two sentences of this paragraph.169 Canada notes 
that the first sentence of this paragraph, as drafted, could be misinterpreted to indicate that each 
 
162 Canada 's request for interim review, p. 12. 
163 United  States'  comments on Canada's  request for interim review, para.  17. 
164 Canada 's request for interim review, p p. 12-13. 
165 Canada 's request for interim review, p. 13. 
166 United  States'  comments on Canada's  request for interim review, para.  18. 
167 Canada 's request for interim review, p. 13. 
168 Canada's request for interim review, p.  13. 
169 Canada 's request for interim review, p. 14. WT/DS533/R/Add.1  
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  species has its own distinct grading system.170 In addition, Canada suggests revising the 
third sentence of this paragraph.171 The United  States does not comment on Canada's  request.  
3.118.   We have made the modifications requested by Canada albeit using language slightly different 
than that proposed by Canada.  
3.51  Paragraphs 7.506, 7.509, and 7.524  
3.119.   Canada proposes cer tain clarifications in each of these paragraphs.172 The United  States does 
not comment on Canada's  proposal.  
3.120.   We have for the most part made the changes proposed by Canada albeit using language 
slightly different than that proposed by Canada.  
3.52  Paragraphs 7.560 -7.561  
3.121.   Canada requests that the Panel remove the reference to "and provide offsets for negative 
comparisons" in the third sentence of paragraph 7.560 to more accurately describe 
Canada's  arguments.173 Canada also requests the remo val of the phrase "and thus provide offsets 
for negative comparison results" in the second sentence of paragraph 7.561 for the same reasons. 
Canada asserts that it has not argued that an investigating authority may be required to "provide 
offsets" aside fr om being required to aggregate comparison results in certain circumstances. Canada 
also invites the Panel to consider whether references to similar phrases are appropriate in 
paragraphs  7.562 and 7.584.174 The United  States asserts that Canada was arguing  before the Panel 
that the USDOC was required to aggregate all the comparison results and offset the positive 
comparison results by the amount of any negative comparison results.175 The United  States also 
asserts that the fact of aggregation is not in dis pute, and the USDOC did aggregate all results, 
including those where the benefit amount was zero.176 
3.122.   We acknowledge that in its submissions, Canada explicitly indicated that it was not arguing 
that the USDOC was required to "provide offsets".177 We also note that the parts of 
Canada's  submissions that the United  States refers to in support of its assertion that Canada took 
the position that the USDOC was required to aggregate all the comparison results and offset the 
positive compari son results by the amount of any negative comparison results, do not in fact use 
the term "offset" in context of the relevant argument. We, therefore, accept Canada's  request 
regarding references to the term "offsets" in Canada's  contention in paragraphs 7 .560 and 7.561 of 
the Report.  
3.123.   We are also mindful of the United  States'  concern that a simple reference to "aggregation of 
all comparison results" in the relevant portions of these paragraphs without a reference the notion 
of offsetting, may obscu re the dispute between the parties, as comparison results in respect of which 
the USDOC determined the benefit amount to be zero could technically be considered to have already 
been "aggregated" with other comparison results by the USDOC.178 We have modif ied the relevant 
sentences in paragraphs 7.560 and 7.561 of the Report in a manner that avoids such obscurity.  
3.124.   We have also made the same modification in paras.  7.562 and 7.584 as we consider that 
these modifications do not affect the substance of  our reasoning.  
 
170 Canada 's request for interim review, p. 14. 
171 Canada 's request for inter im review, p. 14. 
172 Canada 's request for interim review, p. 14. 
173 Canada's  request for interim review, p.  15. 
174 Canada's  request for interim review, p.  15. 
175 United  States'  comments on Canada's  request for interim review, para.  21 (referring to 
Canada's firstwritten  submission, paras.  935 and 940).  
176 United  States'  comments on Canada's  request for interim review, para.  22. 
177 Canada 's second written submission, para . 291; response to Panel question No. 263, paras.  370 
and 380. 
178 United  States'  comments on Canada's  request for interim review, paras.  19 and 22.  WT/DS533/R/Add.1  
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  3.53  Paragraph 7.580, footnote 1156 (footnote 1156 of the Final Report ) 
3.125.   Canada notes that footnote 1156 indicates that emphasis was added to the Panel's  quotation 
from the Report in US – Anti-Dumping and Countervailing Duties (Chi na), but it appears that the 
only emphasis is in the Panel's  introduction of the quotation.179 The United  States does not comment 
on this statement by Canada.  
3.126.   We have deleted the phrase "emphasis added" from this footnote.  
3.54  Paragraph  7.587  
3.127.   Canada requests us to replace the reference to "these export restrictions" in the last 
sentence of this paragraph to either "these export regulations" or "the LEP process" in order to be 
consistent with earlier sections of our report where we refer  to the LEP process as regulations, not 
restraints.180 The United  States opposes Canada's  request, contending that the reference to "export 
restrictions" is consistent with other references in this paragraph, and submits that the 
Panel's  findings in other parts of the report are not relevant here.181 
3.128.   We note that the parties'  comments concern the opening paragraph of our analysis 
concerning Canada's  claims under Articles  1.1(a)(1)(iv), 11.2, and 11.3 of the SCM  Agreement with 
respect to the export -permitting process for British Columbia logs. Here (al ong with 
paragraph  7.588), we were setting out a brief overview of the circumstances that give rise to 
Canada's  claims. Having considered both parties'  comments, we are of the view that the changes 
requested by Canada do not affect our factual or legal ana lysis and are consistent with references 
in other parts of our report. We have therefore made the modifications requested by Canada in the 
last sentence of this paragraph by replacing the phrase "these export restrictions" with "the 
LEP process".  
3.55  Paragraph  7.588  
3.129.   Canada requests certain modifications in this paragraph to more accurately reflect the 
manner in which Canada articulated its argument in these panel proceedings.182 The United  States 
does not comment on Canada's  request.  
3.130.   We have made the modifications requested by Canada.  
3.56  Paragraph 7.595  
3.131.   Canada requests certain additions in this paragraph to more accurately reflect the facts on 
the USDOC's  record.183 The United  States does not comment on Canada's  request.  
3.132.   We have made the modifications requested by Canada.  
3.57  Paragraph 7.600, footnote 1182 (footnote 1182 of the Final Report)  
3.133.   Canada requests us to add parallel citations to certain WTO panel and Appellate  Body reports 
in footnote 1182.184 The Un ited States does not comment on Canada's  request.  
3.134.   We note that we have cited the panel and Appellate  Body reports referred by Canada in 
other parts of the report as part of our analysis. We do not consider the additions proposed by 
Canada in this f ootnote add to the clarity of our analysis or are otherwise necessary. Therefore, we 
decline Canada's  request.  
 
179 Canada's request for interim review, p. 16.  
180 Canada's request for interim review, p. 16.  
181 United  States'  comments on Canada's  request for interim review, para.  25. 
182 Canada 's request for interim review, p. 16. 
183 Canada 's request for interim review, p. 16. 
184 Canada 's request for interim review, p. 17. WT/DS533/R/Add.1  
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  3.58  Paragraph 7.603, footnote 1190 (footnote 1190 of the Final Report)  
3.135.   Canada invites us to clarify whether in this footnote we intende d to indicate that we disagree 
with the proposition that entrustment or direction occur "only" when there is an explicit and 
affirmative delegation or command from the government to a private body.185 The United  States 
does not comment on Canada's  submiss ion in this regard.  
3.136.   We note, as observed by Canada, the word "only" was inadvertently omitted in this footnote 
and indeed in this footnote we intended to convey our disagreement with the view that entrustment 
or direction occur "only" when there is  an explicit and affirmative delegation or command from the 
government to a private body. We have made the necessary modifications in this footnote.  
3.59  Paragraph  7.605  
3.137.   Canada requests certain modifications in this paragraph to accurately reflect  its 
submissions.186 The United  States does not comment on Canada's  request.  
3.138.   We have made the modifications requested by Canada.  
3.60  Paragraph  7.607  
3.139.   Canada requests certain modifications in the fourth and sixth sentence of this paragraph.187 
The United  States does not comment on Canada's  request.  
3.140.   We have modified the sixth sentence of this paragraph in the manner proposed by Canada. 
However, we do not consider that the modifications proposed by Canada in the fourth sente nce add 
to the clarity of our report, and therefore decline to make these modifications.  
3.61  Section 7.10, subheading and paragraphs 7.620 -7.624  
3.141.   Canada requests the Panel to insert a reference to "forest management" in several places in 
these paragraphs in addition to the reference to "silviculture" to reflect the full scope of 
JDIL's  obligations pertinent to Canada's  claim examined in these paragraphs.188 The United  States 
does not generally oppose the modifications requested by Canada,  but asserts that the 
Panel's  summary and characterization of the United  States'  arguments in the first sentences of 
paragraphs 7.621, 7.622, and 7.623 are accurate and the Panel should therefore decline to make 
modifications to those sentences.189 
3.142.   We have made the modifications requested by Canada, but we do not modify the 
first sentences of paragraphs 7.621, 7.622, and 7.623 as these sentences reproduce the 
United  States'  argument, and the United  States has indicated that they do so accurately.  
3.62  Paragraph  7.725  
3.143.   Canada requests certain revisions to better reflect its view.190 The United  States does not 
comment on Canada's  request.  
3.144.   We have made the revisions requested by Canada.  
 
185 Canada 's request for interim revi ew, p. 17. 
186 Canada 's request for interim review, p. 17. 
187 Canada 's request for interim review, p. 17. 
188 Canada's  request for interim review, pp.  18-19. 
189 United  States'  comments on Canada's  request for interim review, para.  27. 
190 Canada's  reques t for interim review, p.  19. WT/DS533/R/Add.1  
BCI deleted, as indicated [[***]]  
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  3.63  Paragraph  7.729  
3.145.   Canada requests ce rtain revisions in the first sentence of this paragraph to more accurately 
reflect the USDOC's  final determination.191 The United  States does not comment on 
Canada's  request.  
3.146.   We have made the revisions requested by Canada.  
3.64  Paragraph 8.1  
3.147.  Canada observes that the Panel's  summary of its conclusions at paragraph 8.1 omits its 
conclusions at paragraph 7.630 of the Report. Canada requests that the Panel add the following 
conclusion between subparagraphs 8.1(j)  and (k):   
The USDOC acted inco nsistently with Article  1.1(a)(1)(i)  of the SCM  Agreement by 
characterizing the reimbursements provided by New Brunswick to JDIL, and by Québec 
to Resolute, as financial contributions in the form of grants. Consequently, the 
USDOC's  benefit findings in res pect of these reimbursements were inconsistent with 
Article  1.1(b)  of the SCM  Agreement.192 
The United  States does not comment on this request.  
3.148.   We have accepted Canada's  request.  
 
 
_______________  
 
 
 
191 Canada's  request for interim review, p. 20.  
192 Canada's  request for interim review, pp.  20-21. WT/DS533/R/Add.1  
BCI deleted, as indicated [[***]]  
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  ANNEX  B 
ARGUMENTS OF THE PARTIES  
Contents  Page  
Annex  B-1 Integrated executive summary of the arguments of Canada  41 
Annex  B-2 Integrated executive summary of the arguments of the United States  56 
 
 WT/DS533/R/Add.1  
BCI deleted, as indicated [[***]]  
- 41 - 
 
  ANNEX B -1 
INTEGRATED EXECUTIVE SUMMARY OF THE  
ARGUMENTS  OF CANADA  
I. THE UNITED STATES IMPROPERLY DETERMINED THE BENEFIT CONFERRED BY THE 
PROVISION OF PROVINCIAL CROWN TIMBER  
 
1. Article 14(d) requires the U.S. Department of Commerce ( "Commerce ") to assess adequacy 
of remuneration using benchmarks that reflect prevailing conditions in the market for the 
government -provided good . It did not do so in this case . Instead, Commerce improperly relied on 
benchmarks from external markets that did not, and could not, reflect prevailing conditions in the 
different regional markets where the provincial governments provided Crown timber.  
 
A. Article 14(d) Required Commerc e to Assess Adequacy of Remuneration 
Using In -Market Benchmarks  
 
2. Article 14(d) requires an investigating authority to assess whether the "provision of goods […] 
by a government " occurred for less than adequate remuneration in relation to "prevailing mar ket 
conditions " for the good "in question " in the country of provision . The good "in question " is the 
government -provided good―in this case, the right to harvest provincial Crown timber . The record 
in Commerce 's investigation is clear not only that provinc ial governments provided the good in 
question, but also that the prevailing market conditions for this provincially -provided Crown timber 
differed significantly from province -to-province . Accordingly, Article 14(d) required Commerce to 
assess adequacy of r emuneration in relation to the distinct prevailing conditions in each market for 
provincial Crown timber .  
 
3. The Spanish version of Article 14(d) confirms that the relevant prevailing market conditions 
are those that are prevailing  in the market for the government -provided good . This equally 
authoritative version of Article 14(d) indicates that adequacy of remuneration must be determined 
in relation to "las condiciones reinantes en el mercado para el bien […] de que se trate ", which is 
separated by a comm a from the reference to "en el país de suministro ". It is evident that 
Article  14(d) contemplates that there may be more than one market for the good in the country of 
provision, and that when this is the case, it requires an assessment of adequacy of remu neration in 
relation to the relevant regional market in which the government provided the good.  
 
4. The context of Article 14(d) further confirms this interpretation . The Appellate Body has found 
that Article 14 imposes the same obligation as Article 19.4  of the SCM Agreement and Article VI:3 
of the GATT 1994, which have been interpreted as requiring an investigating authority to ascertain 
the amount of subsidization as accurately as possible.1 The accuracy with which the amount of an 
alleged subsidy can be calculated in a benchmarking exercise will depend on how closely the 
benchmark reflects the prevailing conditions in the market for the government -provided good . The 
term "market " in Article 14(d) refers to "'a place … with a demand for a commodity or service '; 'a 
geographical area  of demand for commodities or services '; 'the area of economic activity  in which 
buyers and sellers come together and the forces of supply and demand affect prices '".2 
 
5. The Appellate Body recognized this in Canada – Renewable Energy / Canada – Feed-in Tariff 
Program when it found that, where there are regional markets for a good, adequacy of remuneration 
must be assessed in relation to prevailing market conditions  in the relevant "[provincial] regional 
market as opposed to other out -of-province markets, within Canada or another country ".3 
 
6. There is no national stumpage market in Canada . Instead, the relevant areas where supply 
and demand for standing timber int eract are, in the case of Alberta, Ontario, Québec, and New 
Brunswick, within each of those provinces, and in the case of British Columbia, the B.C. Interior . The 
regional nature of these markets is driven by the fact that Crown timber is an immovable good , and 
 
1 Appellate Body Report, US – Carbon Steel (India) , para. 4.152.  
2 Appellate Body Report, US – Carbon Steel (India) , para. 4.15 0. (Emphasis added)  
3 Appellate Body Reports, Canada – Renewable Energy/Canada – Feed-in Tariff Program , fn. 746 to 
para. 5.239.  WT/DS533/R/Add.1  
BCI deleted, as indicated [[***]]  
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  that the provinces are responsible under the Canadian Constitution for establishing the legal and 
regulatory framework for forestry . These realities shape the areas in which the forces of supply and 
demand interact.  
 
B. Article  14(d) Permits the Rejection of In -Market Benchmarks Only in "Very 
Limited " Circumstances  
 
7. Commerce 's decision to reject provincial in -market benchmarks is irreconcilable with the 
Appellate Body 's finding that, as a legal matter, such a rejection is only permitted in "very limited " 
circumstances, where an investigating authority explains how government intervention results in 
actual price distortion .4 The Appellate Body also explained that "[…] 'price distortion ' is not equivalent 
to any impact on prices as a result of any government intervention ", and further emphasized that 
Article  14(d) does not require a comparison to "a 'pure' market, to a market 'undistorted by 
government intervention ', or to a 'fair market value '".5 
 
8. The Appellate Body recalled, in relation to the evidentiary threshold under Article  14(d), that 
a panel must critically examine an investigating authority 's explanation, in depth, and in light of the 
evidence to ensure, amon g other things, that the investigating authority: (1) takes into account the 
arguments and evidence supplied by the interested parties, together with all other information, so 
that its determination of how prices in the specific markets at issue are actual ly distorted as a result 
of government intervention is based on positive evidence; (2) engages with and analyzes the 
methods, data, explanations, and supporting evidence, in order to ensure that its finding of price 
distortion is not contradicted by eviden ce and explanations; and (3) fully addresses the nature and 
complexities of the data and whether it appears adequate in the light of alternative methods, data, 
and explanations of that data.6 
 
9. Finally, the Appellate Body reaffirmed that a panel must find that an investigating authority 's 
explanation is not reasoned or is not adequate if an alternative explanation of the facts is plausible, 
and the investigating authority 's explanation does not seem adequate in the light of that alternative 
explanation.  
 
10. The essential deficiencies in Commerce 's reasoning in the compliance proceedings in US – 
Countervailing Measures (China) are directly analogous to the deficiencies in Commerce 's reasoning 
in the investigation at issue in this case.  
 
11. Commerce repeatedly failed to explain how the government predominance or intervention it 
identified actually resulted in price distortion in the relevant auction, private standing timber, or 
private log markets . The explanations it did offer on these issue s were superficial and not supported 
by positive evidence . In addition, Commerce failed to address the underlying auction, private 
standing timber, and log price data . Nor did it meaningfully analyze or engage with numerous expert 
reports on economic and f orestry issues . In fact, the United States admits that Commerce simply 
presumed that these reports were at risk of bias and warranted limited or no substantive 
consideration or weight . Finally, Commerce repeatedly ignored evidence that directly contradicte d 
its conclusions concerning government predominance and intervention in the relevant auction, 
private standing timber, and private log markets .  
 
12. These deficiencies render Commerce 's determination inconsistent with Article  14(d).  
 
C. Commerce Improper ly Rejected Benchmarks in Different Regional Markets 
for Provincial Crown Timber  
 
13. In the Final Determination, Commerce improperly rejected in -market benchmarks for 
determining the adequacy of remuneration for provincial Crown timber in the B.C. Interio r, Alberta, 
Ontario, Québec, and New Brunswick, despite evidence that these prices were market -determined 
and reflected the prevailing market conditions in each of the different regional markets . Contrary to 
its obligations under Article 14(d), Commerce 's decisions to reject these in -market benchmarks 
 
4 Appellate Body Report, US – Countervailing Measures (China) (Article 21.5 – China) , para.  5.155.  
5 Appellate Body Report, US – Countervailing Measures (China) (Article 21.5 – China) , paras.  5.135 
and 5.146. (Emphasis in original)  
6 Appellate Body Report, US – Countervailing Measures (China) (Article 21.5 – China) , paras.  5.155, 
5.157 and 5.164.  WT/DS533/R/Add.1  
BCI deleted, as indicated [[***]]  
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  resulted in an inaccurate determination of the existence and amount of any benefit in each of the 
relevant regional markets.  
 
1. B.C. Interior  
 
14. British Columbia sells a substantial and representative porti on of its Crown timber through 
competitive "first price, sealed bid " auctions run by BC Timber Sales ( "BCTS "). BCTS auction data 
are then used in British Columbia 's Market Pricing System ( "MPS") to determine statistically reliable, 
market -based stumpage prices for B.C. Crown timber on long -term tenures . The three respondent 
companies that operate in B.C. —Canfor, Tolko, and West Fraser —operate only in the B.C. Interior, 
a region separate from the B.C. Coast.  
 
15. Commerce improperly rejected BCTS auction prices as valid, in -market benchmarks for 
provincial Crown timber in the B.C. Interior . It claimed that BCTS auction prices were distorted —and 
thus, not market -determined —based on unreasonable, inadequately explained, and internally 
inconsistent reasoning that was not supported, and often directly contradicted, by record evidence .  
 
16. First, Commerce erroneously claimed that the B.C. stumpage market was distorted because 
the majority of the market is controlled by British Columbia . The United States claims that Commerce 
found that government predominance, combined with the alleged flaws in the BCTS auction system, 
resulted in price distortions that would generate a circular comparison . This ignores the fact that 
"government predominan ce" cannot cause price distortion in British Columbia, as the MPS uses BCTS 
auction data to establish the prices for the non -auctioned portion of the Crown harvest . By definition, 
then, the prices of the non -auctioned portion of the Crown harvest cannot af fect BCTS auction prices 
in a manner that would generate a circular comparison . Nor was there excess supply of provincial 
Crown timber that was economic to harvest .  
 
17. Second, Commerce erred in rejecting BCTS auction prices on the basis that there was 
inadequate competition as a result of market concentration, failing to recognize that the level of 
market concentration and competition among the consumers of Crown timber is a prevailing market 
condition . The United States, in response, claims that Commerc e's market concentration analysis 
was a conditional exercise contingent upon having found the market to be predominantly supplied 
by the government . Because government predominance cannot cause price distortion in British 
Columbia, the inescapable conclusi on based on the United States ' own logic that Commerce 's market 
concentration analysis likewise cannot cause price distortion.  
 
18. Third, Commerce claimed that BCTS auction prices could not be used as an in -market 
benchmark because the three -sale limit al legedly imposed an artificial barrier to participation in 
BCTS auctions . It cited no evidence to support its claim that the three -sale limit failed to encourage 
competition, and instead, simply speculated that it resulted in fewer bidders in the auctions . In 
addition, Commerce claimed at the same time that the three -sale limit had been effectively nullified 
in practice . Nowhere does the United States or Commerce explain how a limit that has been 
effectively nullified could bar participation so as to distort  auction prices, much less that auction 
prices were actually distorted as a result.  
 
19. Commerce then claimed that the three -sale limit introduced an additional source of market 
distortion in the form of "cutting rights fees ". However, the record evidence  showed that only Tolko 
paid cutting rights fees on a negligible percentage of BCTS auction transactions, and that these fees 
were immaterial to Tolko 's overall costs . In addition, Commerce 's theory that cutting rights fees 
lower winning bids for auctioned  timber defies basic economic logic . Discounting one 's bid on the 
basis of a cutting rights fee would only open the door to another bidder winning the auction with a 
higher bid.  
 
20. In reaching these conclusions, Commerce also failed to take into account the expert evidence 
of Dr. Athey, a world -renowned expert in auction design, demonstrating that BCTS auctions and the 
MPS were not only explicitly designed to generate market prices, but which were empirically verified 
to have produced competitive, market -determined prices for B.C. Crown timber.  
 
21. Finally, Commerce claimed that the log export permitting ( "LEP") process for B.C. logs 
provided a further basis for rejecting BCTS auction prices . However, its analysis did not even come 
close to establishing that the LEP process actually results  in price distortion in the BCTS auctions in 
the B.C. Interior . Indeed, Commerce 's determination that the LEP process suppresses log prices is WT/DS533/R/Add.1  
BCI deleted, as indicated [[***]]  
- 44 - 
 
  based on the f alse premise that it inhibits log exports from the B.C. Interior . But this finding failed 
to meaningfully engage with the extensive evidence showing that it is not economic to export logs 
from most of the B.C. Interior because of the geographic and economi c realities of the market, 
including the barrier of the Coast Mountains and long transportation distances that separate most of 
the Interior from export opportunities . It also failed to engage with the evidence showing that 
significant volumes of logs auth orized for export were unutilized in the B.C. Interior and the 
Tidewater, demonstrating that the LEP process does not restrain exports.  
 
22. Indeed, the evidence that Commerce relies on to support its belief that the volume of log 
exports from the Interior  is low because of the LEP process pertains to the Coast, but approximately 
30% of the Coastal harvest is still exported —significantly more than the 18% of the U.S. Pacific 
Northwest harvest that is exported . Commerce 's assertion that the LEP process inhib its log exports 
from the B.C. Interior is unsupported by positive record evidence, and does not establish that the 
LEP process actually results in price distortion in the BCTS auctions in the Interior.  
 
23. The Appellate Body has explained that, where an i nvestigating authority 's analysis is based 
on the "totality of the evidence ", a panel must "evaluat[e] […] the significance  of the different factors 
considered by [that] investigating authority ", and that "an error at an intermediate stage of 
reasoning may  invalidate the final conclusion ".7 Whether viewed independently or in its totality, each 
of Commerce 's findings has failed to reasonably and adequately explain how BCTS auction prices 
are distorted as a result of government intervention, and thus not mar ket-determined.  
 
2. Alberta  
 
24. Alberta provided Commerce with extensive evidence supporting the use of an in -market 
benchmark, derived from private arm 's-length log prices in the province, to assess the adequacy of 
remuneration for provincial Crown timbe r. Canada has explained that in -market prices for this similar 
good may only be rejected as a valid benchmark if they were distorted as the result of government 
intervention in the market . Commerce 's rejection of the proposed benchmark was WTO -inconsistent  
for three reasons.  
 
25. First, Commerce summarily rejected the proposed private log benchmark because it preferred 
to use a benchmark for the same good, i.e. standing timber . But Commerce 's regulatory preferences 
are not relevant under Article 14(d) . The United States concedes that logs are a similar good to 
standing timber . It is also uncontested that in -market log prices reflect critical prevailing market 
conditions in Alberta, such as species composition, growing conditions, and harvesting and 
transportation costs . In fact, Commerce has used log benchmarks for standing timber, including in 
the Final Determination itself, and on remand in the previous lumber investigation .  
 
26. Second, Commerce erred by finding, in the alternative, that private log prices could not be 
used as a benchmark . This finding is completely undermined by Commerce 's own admission that it 
did not even assess whether the Alberta log market or private log prices were distorted by 
government intervention . Commerce igno red expert evidence that concluded the proposed 
benchmark was derived from market -determined prices . Alberta simply does not set log prices or 
intervene in the log market in a manner that results in the distortion of private log prices . 
 
27. Third, Commerc e justified its rejection of the proposed benchmark on the basis of four flawed 
findings that purported to show that Alberta log prices were inconsistent with market principles . 
Despite U.S. attempts to sow confusion, Commerce failed to provide a reasoned and adequate 
explanation for any of these findings . The first two pertain only to so -called "salvage " transactions 
(in which sawmills purchase timber removed during oil and gas operations) and were completely 
irrelevant with respect to some 90% of the priv ate log transactions before Commerce . These findings 
were also wrong . Commerce found that salvage prices do not represent the price of mature timber 
and that some salvage transactions were "required " non-market transactions . There is no evidence 
that salva ge transactions involved immature timber, and the record evidence demonstrates that all 
log transactions occurred between willing, unpressured parties.  
 
28. Commerce also found that it would be circular to compare a log -based benchmark to provincial 
Crown  timber prices as many logs originated on Crown land . As a matter of economics, log sellers 
will not willingly pass on any benefit attaching to standing timber to a log buyer . The Appellate Body 
 
7 Appel late Body Report, Japan – DRAMs (Korea) , para. 135.  WT/DS533/R/Add.1  
BCI deleted, as indicated [[***]]  
- 45 - 
 
  has cautioned Commerce that it cannot assume any benefit "passes through " in an arm 's-length log 
sale. But Commerce did not point to any evidence of pass -through . Nor could Commerce point to 
any evidence that Crown liens on logs affected private log prices or introduced risk that would not 
arise in the open market, especially as similar liens exist in Commerce 's benchmark jurisdiction of 
Nova Scotia . Finally, Commerce found that private log prices were depressed as the result of a log 
export ban . However, the expert evidence before Commerce confirmed that there was n o ban, and 
there was no evidence that Alberta 's log export authorization process had any effect on log prices.  
 
3. Ontario  
 
29. Commerce was provided with evidence to support two viable in -market benchmarks with 
which to assess the adequacy of remuneration paid for Crown -origin timber in Ontario . Specifically, 
Commerce was presented private market coniferous standing timber prices in Ontario collected by 
MNP LLP, and arm 's-length log prices from Ontario 's robust log market based on a survey cond ucted 
by KPMG LLP . Commerce dismissed this evidence without proper analysis in a manner inconsistent 
with Article 14(d).  
 
30. Commerce rejected private stumpage prices as a benchmark on the basis that Ontario 's 
provision of provincial Crown timber had dist orted these private market prices . Commerce 's evidence 
failed to establish the link between the government 's role in the market and any price distortion . 
Instead, it simply made an impermissible per se  finding . There is no threshold above which the 
governm ent being the predominant supplier in the market alone becomes sufficient to establish price 
distortion . Ontario, meanwhile, provided the MNP Survey and the expert report of Dr. Ken Hendricks, 
which demonstrated that the private market for standing timber was not distorted by the provision 
of provincial Crown timber . In particular, Dr. Hendricks concluded that, because sawmills in Ontario 
had excess capacity, the supply of provincial Crown timber had no impact on the harvesters ' 
evaluation of private softwo od timber stands, and therefore did not distort softwood prices in the 
private timber market during the period of investigation . Commerce failed to grapple with the 
uncontroverted evidence of excess mill capacity in Ontario .  
 
31. Commerce also ignored evi dence of a valid and robust private log market in Ontario . It made 
no finding of price distortion with respect to these private arm 's-length log prices, which reflected 
prevailing market conditions for standing timber in Ontario . Instead, it claimed that, there were 
other in -country prices for standing timber, so it was unnecessary for Commerce to examine private 
log prices . In doing so, Commerce failed to meet its obligation as an investigating authority and 
acted inconsistently with Article 14(d) of the S CM Agreement.  
 
4. Québec  
 
32. Commerce erroneously rejected Québec 's auction benchmark based on speculation rather 
than actual evidence of price distortion in a manner inconsistent with Article 14(d) . Commerce also 
improperly dismissed the independent, com prehensive, and empirical analysis conducted by 
Professor Robert Marshall on the design, performance, and representativeness of the auctions, as 
well as the underlying auction data . There are several problems with Commerce 's assessment of the 
evidence and its reasoning.  
 
33. First, Commerce erroneously determined that the alleged government predominance in the 
market for standing timber resulted in price distortion . It failed to consider evidence that 
demonstrated that TSG -allocated volumes cannot fully sup ply mill needs, which rebutted 
Commerce 's allegation that there is a "strong motivation " to treat TSG -guaranteed volume as the 
primary source of supply . With only 51.75% of the market for standing timber supplied through 
TSGs, Commerce ignored the fact that Québec was only a "significant " supplier of timber . It was not 
permitted to find price distortion simply on the basis of the government 's market share as a supplier.  
 
34. Second, Commerce erred in finding that alleged market concentration demonstrated that the 
Québec auctions are not market -determined . In making this observation, Commerce ignored the 
fact that market concentration is simply a "prevailing  market condition ", and not a basis for rejecting 
a benchmark under Article 14(d).  
 
35. Third, Commerce engaged in speculation concerning the incentives and motivations of bidders 
in Québec 's auctions . However, in making these speculative findings, Commerc e ignored expert 
evidence explaining that TSG -holders do not suppress auction bids to prevent TSG prices from WT/DS533/R/Add.1  
BCI deleted, as indicated [[***]]  
- 46 - 
 
  increasing, and that winning bids are regularly above the estimated auction price . It also ignored 
record evidence which demonstrating that both T SG-holders and non -TSG-holders must compete in 
the auctions to meet their wood fibre needs and to operate profitably.  
 
36. Commerce further speculated that unsold auction timber, and TSG -holders ' ability to shift 
minor amounts of their TSG allocations, we re additional signs that bidders would not make 
aggressive bids . However, Commerce failed to consider uncontested evidence showing that the small 
number of unsold auction blocks was a result of the robust and careful design of the auction system . 
It also i gnored record evidence demonstrating that the ability to shift minor amounts of TSG 
allocation had no impact on the incentive to bid in auctions . The verified record evidence showed 
that the volume of timber transfers was de minimis , and would not have a m aterial impact on a 
sawmill 's need to source timber from auctions.  
 
37. Finally, Commerce failed to examine whether the existence of the log processing requirement 
in Québec had an impact on auction prices . Québec informed Commerce in its first questionnaire 
response that there is a log processing requirement in the public for est, but that logs can be exported 
with authorization, and that there was a blanket authorization in place in two regions along the 
Ontario border . Québec also submitted expert evidence that demonstrated that there was no viable 
export market for logs from  Crown land . Commerce failed to examine any of this record evidence, 
and instead, in the Final Determination, and contrary to its findings in previous investigations, found 
that the auctions could not be market -determined because of the existence of the lo g processing 
requirement .  
 
5. New Brunswick  
 
38. Commerce improperly rejected private standing timber prices in New Brunswick as a 
benchmark on the basis of price distortion, and instead, relied on private prices in Nova Scotia . The 
evidence demonstrated that reliance on private prices in Nova Scotia as a benchmark was 
inconsistent with Article 14(d), as these prices did not reflect the prevailing market conditions, or 
the commercial environment in New Brunswick.  
 
39. Commerce re lied on a number of flawed justifications to find that private market prices are 
distorted in New Brunswick . Indeed, Commerce never established a causal link showing actual 
distortion in the New Brunswick private stumpage market as a result of the governme nt's purported 
exercise of market power . As such, it should not have rejected a benchmark based on New Brunswick 
private market prices .  
 
40. Commerce claimed that New Brunswick 's market share —approximately half of the softwood 
timber market —was a factor s howing distortion in the private market . However, New Brunswick is 
not a predominant supplier of standing timber . Instead, it is only a significant supplier . In these 
circumstances, evidence pertaining to factors other than government market share was requ ired, as 
the government 's role as a significant supplier cannot, on its own, prove distortion of private prices .  
 
41. Commerce claimed that available, but unharvested, Crown timber created a significant supply 
"overhang " such that private woodlots were a supplemental source of supply, which distorted market 
prices by limiting the prices private woodlot owners could charge . This claim is in error . First, 
Commerce cited no evidence demonstrating that the unharvested Crown timber was economic to 
harvest . Second, Commerce miscalculated the amount of the "overhang " as 47% . Had Commerce 
used the correct values in its calculation, it would have determined that only 13.8% of allocated 
Crown timber in New Brunswick was unharvested during the period of investigation . The amount of 
unharvested Crown timber in New Brunswick―equivalent to approximately 8% of total mill 
needs―was insufficient for mills to avoid using timber harvested from private woodlots, which 
accounted for almost 20% of mill purchases.  
 
42. Commerce al so theorized that private mills in New Brunswick "suppressed " prices from private 
woodlots . However, Commerce 's theory of private price suppression cannot be reconciled with the 
evidence .  
 
43. First, the theory is inconsistent with the fact that mills do not participate in the vast majority 
of private stumpage transactions in New Brunswick . New Brunswick sawmills typically purchase 
delivered logs harvested from private woodlots, rather than purchase standing timber from private WT/DS533/R/Add.1  
BCI deleted, as indicated [[***]]  
- 47 - 
 
  woodlots . As a result, mills  make purchasing decisions based on the total cost of a delivered log 
rather than based on the stumpage price.  
 
44. Second, Commerce 's theory of price suppression ignored evidence that private woodlot 
owners are highly sensitive to price suppression and w ill simply choose not to sell if prices fall.  
 
45. Third, Commerce 's theory placed significant weight on a 2008 government report . Commerce 
failed to consider that the report actually indicated that the price of Crown timber used to produce 
softwood lumbe r in New Brunswick may have exceeded fair market value . Moreover, the report was 
out-of-date and the portions of the report that Commerce relied on expressed only theoretical 
concerns.  
 
46. Finally, Commerce claimed that the dominance of certain consumers of timber in the New 
Brunswick market created an "oligopsony " that made private woodlots responsive to the price -
setting behaviour of private mills . However, Commerce 's claims concerning mar ket concentration 
are not relevant to an analysis under Article 14(d) . Market concentration that arises independently 
of government intervention is simply a prevailing market condition .  
 
D. Commerce 's Out -of-Market Benchmarks Are Inconsistent with Article  14(d)  
 
47. Recourse to alternative benchmarks is limited to exceptional circumstances, and requires 
selecting the most comparable benchmark and making necessary adjustments for differences in 
prevailing market conditions . Having improperly rejected the use of valid in -market benchmarks, 
Commerce resorted to benchmarks that did not reflect the prevailing conditions of each regional 
market . For B.C. Interior, Commerce relied on an out -of-country benchmark derived from Eastern 
Washington State log prices . For Alberta, Ontario, and Québec, it improperly relied on a Nova Scotia 
survey of private prices as a benchmark . For New Brunswick, Commerce improperly relied on Irving 's 
private purchases of standing timber in Nova Scotia as a benchmark . In each instance, Commerce 's 
reliance on an out -of-market benchmark was inconsistent with Article 14(d) of the SCM Agreement.  
 
1. Commerce Improperly Used Washington State Log Prices to Derive 
a Benchmark for the B.C. Interior  
 
48. Commerce relied on Eastern Wa shington log prices from a survey published by the 
Washington  State Department of Natural Resources to derive a benchmark to assess the adequacy 
of remuneration for provincial Crown timber in the B.C. Interior . These Eastern Washington log prices 
did not r eflect the prevailing market conditions of the B.C. Interior .  
 
49. Commerce 's selection of Eastern Washington log prices as a benchmark relied on two false 
premises . First, Commerce improperly claimed that forests and growing conditions in Washington 
State and British Columbia are comparable . Commerce asserted that the species harvested by the 
B.C. respondent companies matched the species reflected in the U.S. Pacific Northwest, and that 
the forestry conditions in both regions had not changed since Commerc e's previous investigation 
into softwood lumber . However, the record showed that there are significant differences in the 
species -mix harvested in each region and that the mountain pine and spruce beetles had a 
disproportionate impact on the forestry condi tions in the B.C. Interior since the last investigation.  
 
50. Second, Commerce incorrectly assumed that log prices are constant across geographic 
regions . Under Commerce 's derived -demand benchmark methodology, this premise was necessary 
to allow Commerce to treat any difference in log prices —and, consequently, in its derived standing 
timber prices —as evidence of an alleged subsidy, rather than the result of differences in prevailing 
market conditions . However, substantial record evidence disproved  Commerce 's false premise, and 
several experts explained that, even where logs are of the same species and have similar growing 
conditions, it is unlikely that they will have the same price because of differences in prevailing market 
conditions . Commerce i mproperly rejected evidence establishing that prices differ based on 
variability in physical characteristics of the logs, differences in local market conditions, and variability 
in the contractual terms of sale.  
 
51. Commerce compounded the problems of its  out-of-country benchmark by failing to make 
critical adjustments to reflect certain key prevailing market conditions in the B.C. Interior.  
 WT/DS533/R/Add.1  
BCI deleted, as indicated [[***]]  
- 48 - 
 
  52. First, Commerce improperly rejected a set of rigorously developed, dual -scaled conversion 
factors representativ e of the species, grade, and conditions of B.C. Interior logs during the period of 
investigation, in favour of an unrepresentative, single -averaged conversion factor to a different cubic 
scale system, which reflected the prevailing conditions of logs harve sted in Eastern Washington State 
in 1998 . Commerce 's conversion factor could in no way accurately translate the volumes of B.C. 
Interior logs (a significant amount of which were beetle -killed logs) entering the B.C. respondent 
companies ' mills, which resul ted in Commerce overstating these log volumes, and artificially inflating 
its benchmark.  
 
53. Second, Commerce 's benchmark overwhelmingly reflected prices paid for high -quality green 
sawlogs . By failing to adjust for utility -grade and beetle -killed log pri ces, Commerce failed to 
accurately benchmark significant portions of lower -quality, lower -valued logs consumed by the B.C. 
respondent companies.  
 
54. Third, Commerce failed to make the necessary adjustment to account for the actual 
transaction unit by whic h standing timber is sold in British Columbia (i.e. the stand).  
 
55. Last, Commerce failed to adjust its derived -demand benchmarks to account for the higher 
costs to transport lumber from B.C. Interior mills to end -markets.  
 
56. The cumulative effect of Co mmerce 's failure to make these key adjustments is to artificially 
inflate its benefit calculation . This is contrary to Commerce 's obligation under Article 14(d) to use 
benchmarks that reflected the prevailing market conditions under which the goods are pur chased 
and sold in order to accurately assess the adequacy of remuneration . Had Commerce properly 
accounted for these factors, it would have found that no subsidy was provided to the B.C. respondent 
companies.  
 
2. Commerce Improperly Used a Nova Scotia Ben chmark to Assess 
Adequacy of Remuneration  
 
57. By relying on private prices in Nova Scotia to assess the adequacy of remuneration for 
provincial Crown timber in Alberta, Ontario, and Québec, Commerce failed to acknowledge that 
Nova Scotia has a distinct re gional market for standing timber . It also refused to acknowledge, much 
less make any adjustments based on, the prevailing market conditions in Nova Scotia, which are 
fundamentally different from the market conditions in each of the other provinces.  
 
58. Nova Scotia has a regional market for standing timber that is distinct from the regional 
markets in Alberta, Ontario, and Québec . Commerce failed to recognize that the interaction of supply 
and demand for provincial Crown timber in these provinces occu rs in geographically and 
jurisdictionally circumscribed areas of economic activity . First, the provinces maintain laws, 
regulations, and policies that influence the markets for standing timber . In particular, the provinces 
are responsible for the legal and  regulatory framework for forestry in accordance with Canada 's 
Constitution . Second, the degree to which a market is limited by geography will depend on the 
product itself and its ability to be traded across distances . The good in question, standing timber , is 
an immovable resource, and trees necessarily grow and come to market in different ways in different 
geographic regions . Nova Scotia standing timber is not sold outside of the province . There is also no 
record to support the premise that harvested logs can be economically transported long distances 
from Nova Scotia . Accordingly, the market for standing timber in Nova Scotia does not extend 
beyond this province.  
 
59. Commerce 's conclusion that its Nova Scotia benchmark was appropriate to me asure 
subsidization lacked an evidentiary basis . There was extensive evidence before Commerce 
demonstrating that its private prices from Nova Scotia do not reflect the prevailing market conditions 
in the other provincial markets . By failing to adequately a nalyze the prevailing market conditions in 
each market, Commerce failed to determine whether it was imposing a countervailing duty on the 
basis of market differences, rather than subsidization.  
 
60. First, Nova Scotia 's forest is not comparable to the fore sts of Alberta, Ontario, or Québec . The 
Nova Scotia forest is subject to different climate and growing conditions . Moreover, the Nova Scotia 
species mix differs significantly from the species mix in each of Alberta, Ontario, and Québec . These 
differences a ffect harvesting, transportation, and processing costs, and the value of standing timber.  
 WT/DS533/R/Add.1  
BCI deleted, as indicated [[***]]  
- 49 - 
 
  61. Second, despite acknowledging that tree diameter was critical to an assessment of whether 
the Nova Scotia benchmark was appropriate, Commerce lacked the record evidence required to 
conclude that the diameter of softwood standing timber included in the Nova Scotia benchmark was 
sufficiently similar to the diameter of standing timber harvested from Crown lands in Alberta, 
Ontario, and Québec . The diameter data for Nova Scotia did not measure harvested trees or those 
processed into sawtimber, while the diameter figures for Alberta and Ontario were those of harvested 
trees. In addition, Commerce failed to consider that more of the timber harvest (and thus, more 
smalle r-diameter timber) is processed in sawmills in each of Alberta, Ontario, and Québec, as 
compared to Nova Scotia.  
 
62. Third, Commerce 's Nova Scotia benchmark only included Nova Scotia "sawlogs " and 
"studwood ". While Commerce claimed that it was comparing logs used by sawmills to make lumber 
in each jurisdiction, it failed to take into account that timber with the same characteristics is used 
differently in different markets . The evidence demonstrated that timber with the same characteristics 
as the timber purchased and processed into lumber by the respondent companies in Alberta, Ontario, 
and Québec would have been classified, processed, and priced differently in Nova Scotia . These 
differences meant that Commerce compared the prices for more valuable timber  in Nova Scotia with 
the prices for less valuable timber in the other provinces.  
 
63. Fourth, Commerce failed to adequately consider the demand of the pulp and paper industry 
in Nova Scotia . The high demand from pulp mills creates an alternative source of demand for 
standing timber in the province and fuels the demand for residual chips . Both of these factors 
increase the value of sawlogs and studwood in Nova Scotia.  
 
64. Fifth, Commerce failed to adequately consider transportation costs, both from harvest to mill 
and from mill to market . Transportation costs dictate what harvesters are willing to pay for standing 
timber and are a critical market condition in standing timber markets.  
 
65. Last, Commerce failed to properly consider and account for supply limi tations in the Nova 
Scotia standing timber market.  
 
66. Commerce was obligated under Article 14(d) to properly investigate, collect evidence, and 
then support its choice of benchmark with record evidence . Instead, it improperly criticized the 
Canadian par ties for failing to provide sufficiently detailed information on the Nova Scotia market 
that quantified differences in market conditions . However, the Canadian parties presented expert 
economic evidence of differences between the Nova Scotia market and the  markets in the other 
provinces . This evidence was effectively ignored by Commerce because it was not collected in the 
ordinary course of business . Accordingly, Commerce placed an impossible burden on the Canadian 
parties to provide detailed quantitative i nformation on the Nova Scotia market that neither the 
respondent companies, nor the provinces, prepare or collect in the ordinary course of business.  
 
67. Commerce 's reliance on this benchmark was also inconsistent with its obligations under 
Articles 14 an d 19.4 of the SCM Agreement and Article VI:3 of the GATT 1994 because it failed to 
meet the basic requirements of a benchmark used to measure the amount of subsidy: reliability, 
accuracy, transparency, and adequate explanation .  
 
68. Commerce had an obligation to solicit information regarding its chosen benchmark . Instead, 
Commerce simply accepted Nova Scotia 's survey [[ ***]]. It chose to ignore that the survey had 
methodological flaws and was missing key information.  
 
69. First, there was no indicati on that the Nova Scotia survey was representative of the private 
market in Nova Scotia.  
 
70. Second, the Nova Scotia survey appears to have included multiple types of transactions, 
including lump -sum transactions and transactions including non -stumpage cos ts.  
 
71. Third, the survey excluded pulpwood transactions . Pulpwood was defined based on the 
"intended use " of timber, yet Commerce had no indication of how the survey respondents understood 
the vague product definitions, or whether the definitions were u niformly applied . Moreover, by 
excluding pulpwood, which is found in the same stands (and often the same trees) as sawtimber, 
Nova Scotia 's survey did not provide Commerce with the information necessary to consider the 
prevailing market conditions for soft wood standing timber in Nova Scotia .  WT/DS533/R/Add.1  
BCI deleted, as indicated [[***]]  
- 50 - 
 
   
72. Finally, the Nova Scotia survey converted responses reported in tonnes to cubic metres using 
a conversion factor that tended to understate the volumes actually purchased by survey 
respondents . This understated con version factor led Commerce to make an imprecise calculation of 
benefit.  
 
E. Commerce Failed to Consider the Full Remuneration Paid by Producers in 
Alberta, Ontario, Québec, and New Brunswick  
 
73. During the investigation, the Canadian parties demonstrated that the remuneration Alberta, 
Ontario, Québec, and New  Brunswick (the "four provinces ") received from harvesters in exchange 
for the right to harvest Crown timber included an administered price, mandatory charges, and in -
kind costs, such as forest management planning, silviculture, and road building . Commerce has 
repeatedly acknowledged this remuneration in previous softwood lumber investigations —and, in this 
investigation, with respect to B.C. —by taking mandatory charges and in -kind costs into account in 
its assessment of the adequacy of remuneration . However, Commerce ignored the evidence, 
departed from its past practice, and erroneously found that the remuneration for Crown timber in 
the four pr ovinces was limited to the administered portion of the price .  
 
74. Commerce alleged that it was justified in ignoring any component of the remuneration that 
was not also included in its Nova Scotia "pure" stumpage price benchmark . This is illogical and has 
no basis in Article 14(d) . Commerce was first required to calculate the full remuneration for Crown 
timber by taking into account all monetary and in -kind costs incurred by the respondent companies 
in exchange for the right to harvest Cro wn timber, and then to compare this full remuneration to 
any benchmark . This is because, in a benefit assessment under Article 14(d), an investigating 
authority must determine whether a recipient has been made better off by the provision of a good . 
It woul d be impossible to determine if a recipient is better off if any part of the remuneration were 
ignored . Commerce therefore erred by refusing to consider, as remuneration, mandatory charges 
and in -kind costs simply because these costs were not incurred in i ts benchmark jurisdiction .  
 
75. Commerce also asserted that it was justified in ignoring costs that were billed separately, and 
costs that governments purportedly did not take into account when setting the administered portion 
of the provincial Crown stum page prices . It is irrelevant that certain costs are included in different 
invoices or as separate line items, or whether governments expressly took into account certain 
components of the remuneration when setting the administered price . Neither Commerce n or the 
United States provided any evidence to support the contention that these distinctions are significant . 
Moreover, Commerce simply ignored record evidence that demonstrated that provinces did take 
certain mandatory charges and in -kind costs into accou nt when setting their administered prices.  
 
76. Finally, Commerce 's attempts to distinguish its past practice are unavailing . Commerce always 
took into account all costs assumed under the Crown tenure agreement and costs that are necessary 
to access the s tanding timber for harvesting . This is indeed what Commerce was required to do . But, 
in the Final Determination, in the case of the four provinces, Commerce completely turned its back 
on the evidence, its past practice, and the United States ' obligations u nder Article  14(d) of the 
SCM Agreement.  
 
F. Commerce Improperly "Set to Zero " the Results of Certain Comparisons 
Used to Calculate Benefit  
 
77. Commerce failed to assess adequacy of remuneration for New Brunswick and British Columbia 
Crown standing timbe r in relation to prevailing market conditions in a manner consistent with 
Article  14(d) when it set certain negative comparison results to zero . Consistent with the chapeau 
of Article 14 and Article 14(d), determining whether the provision of a good was ma de for less than 
adequate remuneration is an inherently fact -intensive exercise that must occur on a case -by-case 
basis. The method used to determine adequacy of remuneration in relation to prevailing market 
conditions must reflect the specific characteris tics of the good in question .  
 
78. When the good in question is heterogeneous, and transacted in a large volume of line items, 
over long periods of time (like standing timber), the assessment is likely to be more complex than 
where the good in question is  relatively homogenous . As a result, the focus should be on the "careful 
matching " that the panel in US – Anti-Dumping and Countervailing Duties (China)  explained that 
Article 14(d) requires . "Careful matching " must be understood more broadly than the United States WT/DS533/R/Add.1  
BCI deleted, as indicated [[***]]  
- 51 - 
 
  posits . Contrary to the U.S. arguments, Canada 's claim is not one for "offsets "; instead, it is a claim 
for an accurate assessment of the adequacy of remuneration for Crown standing timber in New 
Brunswick and British Columbia, which Commerce failed to carry out.  
 
79. For New Brunswick, Commerce selected a monthly average benchmark that took into account 
a range of transaction conditions . It then compared individual transactions from New Brunswick, 
which represented a specific set of transaction conditions, to the average . Commerce then removed 
the transactions that reflected the best transaction conditions through its next methodological step 
of setting those comparison results to zero . That left Comme rce with only the transactions with the 
worse -than-average -transaction conditions, the full difference of which it counted as a "benefit ". By 
removing the transactions with better -than-average -transaction conditions from its assessment, 
Commerce ensured th at it was not isolating as much as possible any difference in price caused by 
subsidization . It therefore failed to accurately assess the adequacy of remuneration for Crown timber 
in accordance with Article 14(d).  
 
80. For British Columbia, Commerce select ed an annual, species -specific average benchmark from 
Eastern Washington . British Columbia sets a single stumpage rate for each transaction that 
Commerce examined, based on the blend of species in, and other characteristics of, the stand . The 
unit of trans action in B.C. is the stand . Commerce rejected the use of actual transactions involving 
stands, and required the respondent companies to deconstruct the transaction unit and report 
invoice line -items that reflected stand -as-a-whole prices . Commerce then cl aimed that these were 
"species -specific " prices, which it compared to its individual species benchmark prices . It then 
removed the sub -parts of transactions that appeared to show a "benefit " by setting their comparison 
results to zero . But by removing the comparison results of sub -parts of the transactions, Commerce 
altered the actual price the respondent companies paid for the transaction —i.e. the stand —and 
ensured that it could not accurately assess the adequacy of remuneration for Crown timber as it is 
sold in British Columbia, in contravention of Article 14(d).  
 
81. Commerce had an obligation to determine the "precise amount " of the subsidy.8 By using 
methodologies in its investigation that set certain comparison results to zero, Commerce imposed 
countervailing duties in excess of the amount of the subsidy found to exist in a manner inconsistent 
with Article 19.4 of the SCM Agreement and Artic le VI:3 of the GATT 1994 . Inconsistent with 
Article  19.3 of the SCM Agreement, those countervailing duty amounts were not "appropriate ". As a 
result of its errors, Commerce failed to establish the existence of a benefit as required by 
Article  1.1(b).  
 
II. COMMERCE IMPROPERLY TREATED THE LOG EXPORT PERMITTING PROCESS FOR 
B.C. LOGS AS A COUNTERVAILABLE SUBSIDY  
 
82. Commerce incorrectly treated the federal and provincial LEP process for B.C. logs as a 
countervailable subsidy . Commerce 's finding that the LE P process constituted an indirect financial 
contribution to the B.C. respondent companies, and its subsequent imposition of countervailing 
duties on a measure that could not constitute a subsidy, were inconsistent with Articles 1.1(a)(1)(iii) 
and (iv), 19. 3, and 19.4 of the SCM Agreement.  
 
83. The LEP process for B.C. logs does not meet the "entrustment or direction " test set out in 
Article 1.1(a)(1)(iv) because it neither gives responsibility to, nor constitutes an exercise of authority 
over a private body  to carry out the government function of providing logs . Contrary to Commerce 's 
finding, the LEP process does not require a log seller to provide a log to anyone . Nor is the provision 
of logs a function that would normally be vested in the Governments of B ritish Columbia or Canada, 
or a practice that, in no real sense, differs from practices normally followed by governments.  
 
84. The crux of the U.S. theory of entrustment or direction is that an alleged limitation on a private 
body's ability to export a goo d is equivalent to entrustment or direction to provide that good . 
However, the panels in US – Export Restraints and US – Countervailing Measures (China)  were 
confronted with this precise argument, and both rejected it . The Appellate Body, and every other 
panel considering the issue of entrustment or direction, have agreed that entrustment or direction 
"does not cover 'the situation in which the government intervenes in the market in some way '".9 As 
 
8 Appellate Body Reports, US – Washing Machines , para. 5.279; US – Countervailing  Measures on 
Certain EC Products , para. 139; and US – Carbon Steel (India) , para. 4.152.  
9 Appellate Body Report, US – Countervailing Duty Investigation on DRAMS , para. 114.  WT/DS533/R/Add.1  
BCI deleted, as indicated [[***]]  
- 52 - 
 
  the panel in US – Export Restraints  correctly observed, under the U.S. approach, the existence of a 
financial contribution in the case of an export restraint depends entirely on the reaction of the 
producers of the restrained good and, specifically, on the extent to which they increase thei r 
domestic sales of the restrained product because of the restraint . This unacceptable effects -based 
approach is the one that Commerce took here, and one that this Panel should reject.  
 
85. Finally, Commerce erred by initiating an investigation into the LE P process without sufficient 
evidence of a financial contribution, in contravention of Articles 11.2 and 11.3 of the SCM Agreement . 
The Petition 's allegations were predicated on the mere existence of the LEP process and its alleged 
suppressing price impact  on logs in the province . As a result, there was insufficient evidence of a 
financial contribution.  
 
III. COMMERCE ERRED IN TREATING CERTAIN REIMBURSEMENTS AS 
COUNTERVAILABLE SUBSIDIES  
 
86. Québec and New Brunswick paid Resolute and Irving, respectively, f or certain silviculture and 
forest management services provided by those companies . Commerce erred by finding that these 
payments were financial contributions in the form of grants under Article 1.1(a)(1)(i) of the 
SCM Agreement.  
 
87. Commerce failed to p roperly scrutinize the design and operation of Québec 's Partial Cut 
Investment Program ( "PCIP") and New Brunswick 's license management and silviculture payments . 
The Appellate Body has found that "in the case of grants, the conveyance of funds will not inv olve a 
reciprocal obligation on the part of the recipient ".10 A purchase is the opposite: it requires the 
exchange of consideration . The evidence before Commerce showed that the payments made by 
Québec and New Brunswick involved a reciprocal obligation on the part of Resolute and Irving, and 
that those companies provided services in exchange for the payments . As purchases of services, the 
payments were not financial contributions under Article 1.1(a)(1) of the SCM Agreement.  
 
88. Furthermore, the PCIP, lice nse management, and silviculture payments could not have 
conferred a benefit on either Resolute or Irving under Article 1.1(b) of the SCM Agreement . By 
looking only at the cost to the government of the PCIP, license management, and silviculture 
payments, C ommerce failed to consider the added costs incurred by Resolute and Irving through 
the relevant transactions .  
 
89. As a result of Commerce 's mischaracterization of the PCIP, license management, and 
silviculture payments as grants, and its failure to take into account the reciprocal nature of the 
relevant transactions, it failed to levy a countervailing duty in the appropriate amount, pursuant to 
Article 19.3, and levied a countervailing duty in excess of the amount of any, unproven, subsidy, 
pursuant to Article 19.4.  
 
IV. COMMERCE INCORRECTLY DETERMINED THAT ELECTRICITY PROGRAMS 
CONFERRED A BENEFIT  
 
90. Commerce incorrectly determined that provincial Electricity Purchase Agreements ( "EPAs") in 
British Columbia and Québec, and the Large Industrial Renewable Energy Purchase Program 
("LIREPP ") in New Brunswick, conferred benefits on four respondent companies.  
 
91. For British Columbia and Québec, Commerce improperly rejected benchmarks from within the 
specific electricity markets it was ass essing, which reflected the prevailing market conditions of 
BC Hydro and Hydro -Québec 's wholesale purchases of biomass -based electricity . Commerce relied 
instead on the blended, all -sources retail rates at which BC Hydro and Hydro -Québec sell electricity 
to consumers to assess whether their purchase of electricity through the EPAs was made for more 
than adequate remuneration . The retail rates did not reflect the prevailing market conditions of the 
biomass -based electricity that the respondent companies sold  to BC Hydro and Hydro -Québec . 
Further, in British Columbia, Commerce failed to recognize that three of the four EPAs did not require 
a benchmark, since the terms and conditions of the sales were based on market principles . It also 
improperly treated the "turn-down " payments that Tolko received as grants, rather than as part of 
BC Hydro 's purchase of electricity under the Armstrong EPA . As a result, Commerce incorrectly 
 
10 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , para. 617.  WT/DS533/R/Add.1  
BCI deleted, as indicated [[***]]  
- 53 - 
 
  determined the existence and amount of a benefit in contravention of Articles 1.1(b) and  14(d) of 
the SCM Agreement.  
 
92. The Appellate Body explained in Canada – Renewable Energy / Canada – Feed-in Tariff 
Program  that the benefit analysis in the electricity context should be based on a benchmark in the 
relevant market reflecting prices that can be obtained by the generating company for the specific 
type of electricity at issue, rather than on a benchmark reflecting prices for all sources of electricity . 
The benefit comparison for a particular type of electricity, such as wind, solar, or bioma ss, must be 
made in relation to "[…] the terms and conditions that would be available under market -based 
conditions "11 for that specific type of electricity, taking the government 's chosen supply mix as a 
given . This is because the definition of a certain supply -mix by the government cannot in and of 
itself be considered as conferring a benefit because "there would not be a market if the government 
had not created it ".12 To achieve the proper result, the Appellate Body further explained that, when 
assessing whether a government has purchased electricity for more than adequate remuneration, 
the first analytical step is to define the relevant market from which to select an appropriate 
benchmark .  
 
93. In direct contradiction of the Appellate Body 's finding, Commerce failed to perform any market 
analysis at all, improperly assuming that there was only one market in each of British Columbia and 
Québec . However, the record esta blished that the retail and wholesale markets for electricity are 
distinct, and that, within the wholesale market in which BC Hydro and Hydro -Québec purchase 
electricity, there are distinct markets for biomass -based electricity that British Columbia and Qu ébec 
created based on their definition of the supply -mix. Accordingly, at the outset, Commerce ensured 
that its benchmarking analysis could not be consistent with the SCM Agreement.  
 
94. Commerce then failed at the second analytical step the Appellate Body  identified in Canada – 
Renewable Energy / Canada – Feed-in Tariff Program : to assess the conditions in the relevant market 
under which the goods would be exchanged and to establish a proper market benchmark . In 
British  Columbia, Commerce failed to examine  the terms and conditions of West Fraser 's EPAs and 
Tolko Armstrong 's EPA and compare them to those available in the market at that time . It further 
improperly rejected the prices resulting from the Bioenergy Phase I Call for Power as an appropriate 
benchm ark for the specific type of electricity at issue . Similarly, in Québec, Commerce improperly 
rejected the Merrimack benchmarking study, which assessed renewable energy prices, including 
biomass.  
 
95. For New Brunswick, Commerce improperly characterized LIR EPP as a financial contribution to 
Irving in the form of revenue foregone, rather than as a purchase of electricity under 
Article  1.1(a)(1)(iii) . Commerce failed to thoroughly scrutinize the measure "[…], both as to its 
design and operation and identify it s principal characteristics ".13 Had Commerce properly scrutinized 
the program, it would have found that there was an exchange of rights and obligations, and 
consideration within the transaction .  
 
96. No revenue was foregone by New Brunswick . NB Power paid  for the electricity it purchased 
from the Irving entities at the renewable electricity rate . No additional payment or funding was 
provided . The proof that Commerce 's analysis is fundamentally flawed is that to avoid the "revenue 
foregone " claim, NB Power could simply pay the Irving affiliates for its purchases of electricity instead 
of compensating them with a credit applied to their electricity bill, and the entire rationale for the 
revenue foregone analysis would disappear.  
 
97. Commerce 's error meant that it necessarily failed to properly assess the alleged benefit to 
Irving through the lens of an Article 14(d) adequacy of remuneration analysis.  
 
V. COMMERCE FAILED TO ASCERTAIN THE PRECISE AMOUNT OF SUBSIDIES 
ALLEGEDLY CONFERRED BY ELECT RICITY PROGRAMS  
 
98. Even if the Panel accepts that Commerce 's claims that the purchase of electricity by BC Hydro, 
Hydro -Québec, and NB Power conferred a benefit, Commerce failed to ascertain the precise amount 
of the subsidies allegedly conferred by the se provincial electricity programs that were attributable 
 
11 Appellate Body Reports, Canada – Renewable Energy/Canada – Feed-in-Tariff Program , para. 5.190.  
12 Appellate Body Reports, Canada – Renewable Energy/Canada – Feed-in-Tariff Program , para. 5.188.  
13 Appellate Body Reports, Canada – Renewable Energy/Canada – Feed-in-Tariff Program , para. 5.120.  WT/DS533/R/Add.1  
BCI deleted, as indicated [[***]]  
- 54 - 
 
  to softwood lumber products, as required by Articles 10, 19.1, 19.3, and 19.4 of the SCM Agreement 
and Article VI:3 of the GATT 1994.  
 
99. In US – Washing Machines , the Appellate Body found that Articles 10 and 19.4 of the 
SCM Agreement and Article VI:3 of the GATT 1994 require an investigating authority to ascertain as 
precisely as possible the correct amount of subsidy attributable  to the product under investigation . 
The Appellate Body explained  that a proper assessment must examine the design, structure, and 
operation of the investigated program to determine whether the  subsidy is connected to, or 
conditioned on, the production or sale of a specific product . 
 
100. For British Columbia, Commerce improperly attributed the alleged benefit conferred by 
BC Hydro 's EPAs to the production and manufacture of softwood lumber products, when they were 
attributable to the production of electricity . Record evidence demonstrated that the electricity the 
compan ies sold to BC Hydro could not be used in their softwood lumber production facilities because 
the generation facilities were either not electrically connected to the sawmills, or sold only electricity 
that was surplus to their operational needs . The eviden ce also demonstrated that the EPAs were 
expected to foster or incentivize the production and sale of electricity, in addition to being 
conditioned on, and connected to, the sale of biomass -based electricity .  
 
101. For Québec, Commerce erroneously attribut ed alleged subsidies conferred by the PAE  2011-
01 program to Resolute 's total sales, including to the production of softwood lumber . But any alleged 
subsidies could only be tied to pulp and paper production, and could not have been countervailed in 
this in vestigation . The Resolute facilities at issue do not, and cannot, produce softwood lumber.  
 
102. For New Brunswick, Commerce improperly attributed part of the alleged benefit from LIREPP 
to softwood lumber when the program was explicitly tied to the produc tion of pulp and paper . New 
Brunswick designed the program in such a way that one of its objectives was to bring the electricity 
costs of Irving 's and Irving Paper Limited 's paper facilities in line with those of pulp and paper 
producers in other Canadian provinces . The Target Reduction Percent, which serves as a cap on the 
purchases of biomass electricity by NB Power, and the Net LIREPP credit, were expressly calculated 
for this purpose . Accordingly, to the extent that a benefit was conferred, it was tied to non -subject 
merchandise, and Commerce erred in countervailing it in an investigation on softwood lumber.  
 
VI. COMMERCE INCORRECTLY FOUND THAT THE CAPITAL COST ALLOWANCE FOR 
CLASS  29 ASSETS WAS DE JURE  SPECIFIC  
 
103. Commerce erroneously found t hat the Accelerated Capital Cost Allowance for Class 29 Assets 
("Class 29 ") was de jure  specific . In doing so, Commerce misunderstood how the Class 29 deduction 
operates, and applied the wrong legal test to determine specificity under Article 2.1(a) of the  
SCM Agreement.  
 
104. Article 2.1(a) provides that a subsidy is specific where an "explicit " limitation restricts access 
to that subsidy to "certain enterprises ". Commerce failed to first show that Class 29 includes a 
limitation on access to "known and pa rticularized " enterprises or industries . Eligibility for Class 29 is 
based not on the industries or enterprises claiming the deduction, but on the activities for which 
machinery or equipment is primarily used . Any company, in any industry, is eligible to c laim the tax 
deduction when it purchases machinery or equipment used for manufacturing or processing . As a 
result, Class 29 does not contain an "explicit " limitation, and no enterprises or industries are 
excluded from accessing Class 29.  
 
105. Commerce als o erred by finding that eligibility criteria for Class 29 do not constitute "objective 
criteria " under Article 2.1(b) . It is clear that Class 29 is not limited to "certain enterprises " pursuant 
to Article 2.1(a), and is therefore not specific . It was therefore unnecessary to reach the question of 
whether eligibility for Class 29 was based on "objective criteria or conditions " under Article 2.1(b) . 
Nevertheless, the criteria governing eligibility for Class 29 are "objective ". The criteria are neu tral, 
and do not favour certain enterprises over others . Any enterprise or industry that has assets used 
for the eligible activities is eligible to depreciate those assets using Class 29 . The eligibility for this 
deduction is automatic . The criteria and co nditions for the deduction are clearly spelled out in the 
Income Tax Act , and the Canada Revenue Agency strictly adheres to these criteria and conditions.  
 
106. Commerce also erred by finding that it was not material whether the industries that could be 
considered to be associated with the activities excluded from Class 29 of the Income Tax Act  were WT/DS533/R/Add.1  
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  eligible for other tax deductions and credits under Class 29 . Commerce 's finding is inconsistent with 
Articles 2.1(a) and 2.1(b) the SCM Agreement.  
 
VII. COMMER CE'S APPLICATION OF THE "MARITIMES STUMPAGE BENCHMARK " IS 
INCONSISTENT WITH ARTICLE 14(D)  
 
107. Commerce 's Maritimes Stumpage Benchmark is a measure of "present and continued 
application " or, alternatively, ongoing conduct, that contravenes Articles 1.1(b)  and 14(d) of the 
SCM Agreement.  
 
108. This Maritimes Stumpage Benchmark measure is attributable to the United States as it relates 
to Commerce 's conduct . The precise content of the measure is that, since 2004, when presented 
with the need to assess adequa cy of remuneration for provincial Crown timber in Alberta, Ontario, 
or Québec, Commerce has consistently relied on a benchmark based on private prices in the Maritime 
provinces and treated these prices as if they were an in -market benchmark . In particular,  Commerce 
first refers to its regulations and its benchmark hierarchy, before applying its regulations to find that 
private prices from the Maritimes are a "tier-one", "in-country " benchmark . Commerce then 
concludes, irrespective of evidence to the contrar y, that its benchmark in the Maritime provinces 
reflects prevailing market conditions in Alberta, Ontario, and Québec.  
 
109. This measure currently applies and will continue to be applied in the future . The measure was 
applied in 2004, in the first administrative review in the previous softwood lumber proceedings, 
in 2005, in a second administrative review, and then in 2006 in the preliminary results of the 
third administrative  review . Although the proceedings were then terminated as a result of the 
2006 Softwood Lumber Agreement, the measure was applied again in both the current softwood 
lumber investigation and the recent Uncoated Groundwood Paper from Canada  investigation . This 
sequence leaves little doubt as to how Commerce will act in future: any time there is a relevant 
investigation or review, Commerce applies the measure.  
 
 
 
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  ANNEX B -2 
INTEGRATED EXECUTIVE SUMMARY OF THE ARGUMENTS  
OF THE UNITED STATES  
I. INTRODUCTION  
 
1. Canada challenges the determination of the U.S. Department  of Commerce ( "USDOC ") in the 
countervailing duty investigation of softwood lumber products from Canada . Canada 's claims lack 
any merit . Canada 's claims rest on flawed interpretations of the Agreement on Subsidies and 
Countervailing Measures  ("SCM Agreement ") and the General Agreement on Tariffs and Trade 1994  
("GATT 1994 "). Canada calls on the Panel to interpret the SCM Agreement and the GATT 1994 in a 
manner that does not accord with customary rules of interpretation of public international law, 
contrary to the requirements of the Understanding on Rules and Procedures Governing the 
Settlement of Disputes  ("DSU"). When subjected to scrutiny, all of Canada 's proposed interpretations 
of the SCM Agreement simply are not supported by the ordinary meanin g of the text of the 
agreement, in context, and in light of the object and purpose of the agreement.  
 
2. Canada 's arguments, to a disturbing degree, rest on misrepresentations and 
mischaracterizations of the USDOC 's determination and the voluminous amount  of evidence on which 
the USDOC relied . Contrary to Canada 's assertions, the USDOC did not "ignore " any evidence . 
Rather, as the United States has explained throughout this panel proceeding, the USDOC took into 
account all of the information it collected d uring the course of the investigation and made its 
determination based on the totality of that evidence . Through this dispute, Canada apparently seeks 
to have the Panel reweigh the evidence examined by the USDOC and make its own determination 
that Canadian  softwood lumber is not subsidized . Canada 's approach is contrary to the DSU because 
that is not the role that the DSU assigns to WTO dispute settlement panels.  
 
3. In the context of a WTO challenge to a trade remedies determination, it is well established  
that a WTO panel must not conduct a de novo evidentiary review, but instead should "bear in mind 
its role as reviewer of agency action " and not as "initial trier of fact ". The role of a panel in a dispute 
involving a Member 's application of a countervaili ng duty measure is to assess "whether the 
investigating authorities properly established the facts and evaluated them in an unbiased and 
objective manner ". Put differently, the Panel 's task in this dispute is to determine whether a 
reasonable, unbiased person, looking at the same evidentiary record as the USDOC, could have – 
not would  have – reached the same conclusions that the USDOC reached.  
 
4. When the Panel examines the USDOC 's determination, the Panel will see that it accords with 
the requirements of the SCM Agreement, properly interpreted pursuant to customary rules of 
interpretation; the USDOC provided a reasoned and adequate explanation for its determination; that 
determination  is based on ample evidence; and the USDOC 's conclusion in the investigation is one 
that an unbiased and objective investigating authority could have reached.  
 
II. THE USDOC 'S BENCHMARK DETERMINATIONS ARE NOT INCONSISTENT WITH 
ARTICLES  1.1(B) AND 14(D) OF THE SCM AGREEMENT  
 
5. Canada 's claims under Articles 1.1(b) and 14(d) of the SCM Agreement are based on a flawed 
understanding of those provisions . First, as a legal matter, Article 14(d) does not obligate Members 
to calculate the benefit amount by using p rices from certain in -country localities and not others, as 
Canada has suggested . Article 14(d) provides that the adequacy of remuneration should be 
determined "in relation to the prevailing market conditions " for the good in question "in the country 
of provision ". 
 
6. Canada 's approach is flawed because it substitutes the non -treaty terms "in-market " and 
"jurisdiction " for words that appear in the text . The language in Article 14(d) that speaks to the 
geographical scope of that provision is the phrase "in the country of provision ". This reference is 
even further attenuated by the phrase "in relation to ". This means that, even if the term "market " 
(within the phrase "prevailing market conditions ") is interpreted as relating to a particular 
geographical location, that location is the country of provision – not, as Canada suggests, the local WT/DS533/R/Add.1  
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  jurisdiction of the authority providing the subsidy . Canada 's interpretive approach – relying as it 
does on non -treaty terms – is contrary to customary rules of interpretation and cannot be accepted.  
 
7. The reference in Article 14(d) to prevailing "market conditions " refers in the first place to 
market -determined prices, not simply the geographical location of the transactions at issue . As the 
Appellate Body has found, the relevant question for an investigating authority is "whether proposed 
benchmark prices are market d etermined  such that  they can be used to determine whether 
remuneration is less than adequate ". The primary benchmark, and "therefore the starting point  of 
the analysis in determining a benchmark for the purposes of Article 14(d) of the SCM Agreement, is 
the prices at which the same or similar goods are sold by private suppliers in arm 's-length 
transactions in the country of provision ". 
 
8. Indeed, the Appellate Body has been clear that "in-country prices [that] are market 
determined ... would necessarily  have the requisite connection with the prevailing market conditions 
in the country of provision that is prescribed by the second sentence of Article 14(d) ". Where an 
investigating authority has selected as a benchmark a private, market -determined price for t he good 
in question from within the country of provision, and has provided a reasoned and adequate 
explanation for its selection, the investigating authority 's determination satisfies the terms of 
Article  14(d).  
 
Comparability of Nova Scotia Benchmark Pric es 
 
9. Canada takes the position that Nova Scotia prices cannot serve as a benchmark under 
Article  14(d) even though these are private, market -determined prices for the good in question 
within the country of provision . With respect to comparability, Canada has failed to show that the 
spruce, pine, and fir ( "SPF") timber in Nova Scotia is different or incomparable to timber in the other 
relevant provinces . As a matter of fact, the evidence of record demonstrated that SPF timber was 
treated as a single category for data collection and pricing purposes by provincial governments . In 
Alberta, Ontario, and Quebec, the provincial governments charge a single, basket price for Crown -
origin standing timber that falls within the SPF  species category . And for New Brunswick, of course, 
Canada does not dispute that the stumpage market in Nova Scotia reflects prevailing market 
conditions in New Brunswick.  
 
10. In all four provinces and in Nova Scotia, the forests are dominated by species  in the same SPF 
basket, which grows in Nova Scotia and was "the primary and most commercially significant species 
reported in the species groupings " for Alberta, Ontario, and Quebec . The USDOC found that the SPF 
species ' share of the Crown -origin standing  timber harvest volume was 99 percent in Alberta, 
94 percent in New Brunswick, 67 percent in Ontario, and 81 percent in Quebec , and also was "by 
far the predominant group of trees harvested in Nova Scotia ". And when the USDOC verified the 
company responden ts, the companies ' transaction data demonstrated that SPF species "continue to 
be the dominant species that grow in all [three] provinces ". The decision to treat SPF species as a 
basket cannot be grounds for a finding of inconsistency when it mirrors  the treatment by provincial 
governments of those species (and products made from those species) as being interchangeable.  
 
11. In addition to (and consistent with) this evidence, the USDOC found that Nova Scotia 
stumpage prices reflected prevailing market cond itions in Alberta, Ontario, and Quebec because the 
average diameter at breast height ( "DBH") of the SPF standing timber in Nova Scotia and New 
Brunswick was comparable to the same measurement in Alberta, Ontario, and Quebec.  
 
12. An objective and unbiased investigating authority could have found on this basis – as the 
USDOC did here – that Nova Scotia timber was comparable to timber in the relevant provinces, and 
that the Nova Scotia stumpage market reflected the prevailing market conditions in Canada, 
inclusive of these provinces . Likewise, an unbiased and objective investigating authority could have 
considered, as the USDOC did, that in -country, market -determined Nova Scotia benchmark prices 
have the requisite connection with the prevailing market conditio ns in the country of provision to 
which the second sentence of Article 14(d) refers.  
 
13. Canada 's argument about regional markets is not supported by the text of Article 14(d), and 
the United States has demonstrated why Canada 's contention is unavailing . Canada argues that the 
relevant market conditions "vary significantly " across even the smallest distances, e.g., "even at the 
level of individual mills located within the same state, owned by the same company, and within an 
hour and a half haul of each other ". Canada has offered a litany of even more minute considerations WT/DS533/R/Add.1  
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  that, in its view, make for different conditions on a tree -by-tree basis . But Canada 's proposition 
implies that there may be no appropriate basis upon which to delineate between conditi ons in one 
region and another . If one accepts Canada 's proposition, then the only remaining basis for 
designating each province as its own "market " is that each provincial government sets different 
pricing policies within its jurisdiction . And ultimately, the provincial stumpage pricing policies do not 
constitute "prevailing market conditions " within the meaning of Article 14(d).  
 
14. The analysis under Article 14(d) serves to illustrate the difference – if any – between the price 
the recipient paid to the government and the price it would have paid under market conditions to 
another supplier . Where proposed benchmark prices are distorted, they cannot serve as a 
meaningful basis of comparison – particularly where they incorporate the same government behavior  
that gave rise to the subsidies in the first place . Prior reports have therefore found that the sort of 
circularity in the comparison that Canada wants here would defeat the intended objective of 
Article  14(d).  
 
15. Moreover, accepting Canada 's position w ould amount to allowing the government to both 
provide the subsidy and determine for itself whether it received adequate remuneration . But the 
Appellate Body rejected this argument when Canada took a similar position in Canada – Aircraft  with 
respect to Ar ticle 1.1(b) . It is not for the provider of the subsidy but rather for the market to 
determine what the value of the input is . And here, the private, market -determined prices from 
Nova Scotia served as an appropriate in -country basis for that comparison . The Panel should reject 
Canada 's claim on this basis alone.  
 
16. With respect to the reliability of the private stumpage survey prices, Canada has failed to 
demonstrate that the Nova Scotia data is unreliable . Canada has also failed to demonstrate that any 
adjustments were necessary for the Nova Scotia benchmark . What Canada is really arguing is that 
the selected benchmarks are not comparable to the input at issue . But Canada 's arguments on 
comparability fail because the USDOC relied on benchmarks that are, in fact, comparable to the 
input at issue . Canada 's argument reflects Canada 's misunderstanding of the relevant inquiry under 
Article 14(d) of the SCM Agreement . In essence, Canada argues that a proper benchmark price 
should be establi shed based on consideration of the purchaser 's "willingness to pay " (i.e., taking 
into account the subsidy recipient 's full range of financial or economic circumstances) – rather than 
based on observed actual transaction prices that other producers paid to  obtain the good in question 
on the market, as opposed to obtaining the good from the government . Nothing in the text of 
Article  14(d) of the SCM Agreement supports the approach for which Canada argues.  
 
Province -Specific Arguments  
 
17. Canada argues that the USDOC should have used in -province prices as benchmarks to 
measure the benefit of stumpage provided by Alberta, Ontario, New Brunswick, and Quebec, 
notwithstanding the distortion of prices caused by the provincial governments ' overwhelming 
predominance  as suppliers of the good in question . What Canada describes as "prevailing market 
conditions " are really the legal and policy conditions prescribed by governmental authorities to 
restrict interprovincial trade and administer prices on a provincial basis . At the same time, the 
government is essentially the sole supplier in each province as well . Where these two circumstances 
are combined (restrictive policy and pricing conditions plus predominant ownership), relying on 
prices in those provinces as benchmark s under Article 14(d) would result in a circular comparison . 
Importantly, prices for the remaining sliver of privately owned timber in those provinces are not 
independent of the government 's influence on those conditions and prices (and private suppliers a re 
not oblivious to the sheer scale of supply held by the government) . As the United States has 
demonstrated for each province, Canada is wrong that the government prices are market -
determined prices . Canada 's arguments in this regard lack merit.  
 
18. Government -owned timber makes up the majority of the softwood timber harvest in each of 
the five provinces at issue, accounting for 90 percent or more of the harvest in most of these 
provinces . But the mere fact of predominance, even at levels as high as 90 pe rcent or more – was 
not the sole basis for the USDOC 's determinations . It is uncontested that these provincial 
governments play a predominant role as suppliers of stumpage rights, providing the majority of the 
SPF timber in each province . But in addition, the USDOC identified and evaluated a number of 
additional factors that serve to bring about the distortion of potential benchmarks, such that those 
prices cannot be considered market -determined prices for the purposes of the comparison under 
Article 14(d).  WT/DS533/R/Add.1  
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  19. Canada argues that the USDOC 's determination to use private prices from Nova Scotia is 
inconsistent with Article 14(d) of the SCM Agreement because, according to Canada, the USDOC did 
not meet the standard the Appellate Body has applied for out -of-country benchmarks . Canada 's 
argument is based on the wrong legal standard . That standard does not apply here and, as a result, 
Canada cannot demonstrate any inconsistency with Article 14(d) on this basis . This is reason alone 
for the Pa nel to reject this claim by Canada in relation to Article 14(d), and the Panel need not 
continue to evaluate it further .  
 
20. Even aside from this flaw in Canada 's argument, Canada 's claim would fail for the additional 
reason that the USDOC 's explanation in fact addressed each of the considerations with regard to the 
distortion analysis in each province for which the USDOC used the Nova Scotia benchmark . The 
USDOC conducted a thorough investigation, provided a reasoned explanation for its findings with 
respect to all four provinces, and in each case reached a conclusion that any objective and unbiased 
investigating authority could have reached.  
 
New Brunswick  
 
21. With respect to New Brunswick, the USDOC found that Crown timber accounted for the 
majority of  the market, and approximately 55 percent of the provincial harvest during the relevant 
period . Among other things, the USDOC took into account several reports by a New Brunswick forest 
task force and the provincial Auditor General, in which these official s reported that consumption of 
Crown -origin standing timber by sawmills is concentrated among a small number of corporations 
and that those same corporations also dominate consumption of standing timber harvested from 
private lands . The leverage of these p rivate mills as dominant consumers, according to the official 
reports, suppresses prices from private woodlots, and in turn those suppressed private prices lead 
to an artificially low price for Crown stumpage, which is set by the province based on private 
stumpage prices . The Auditor General concluded – and the USDOC took note – that "the [stumpage] 
market is not truly an open market, " and that "it is not possible to be confident that the prices paid 
in the market are in fact fair market value ". For all of the reasons the United States has given, an 
unbiased and objective investigating authority could have reached the conclusion – as the USDOC 
did – that there were no market -determined private prices for stumpage in New Brunswick that 
could be used for bench marking purposes . 
 
Ontario  
 
22. With respect to Ontario, the USDOC found that Crown timber accounted for more than 
96 percent of the harvest volume in the province during the relevant period . The USDOC found that 
Ontario administratively set prices based o n three components, only one of which considered market 
conditions (namely, the relatively minor estimated forest renewal charge) . More than 96 percent of 
the harvest volume in Ontario is subject to this pricing mechanism . In addition to this price -setting 
mechanism, the USDOC determined that "the five largest tenure -holding corporations accounted for 
[more than 92] percent of the allocated Crown -origin standing timber in FY 2015 -2016", and that 
these five organizations were  also the dominant purchasers of private -origin standing timber . These 
companies attained substantial market power over sellers of non -Crown -origin standing timber by 
virtue of these circumstances . The USDOC concluded that these circumstances, in conjuncti on with 
the ability of these tenure -holding corporations to purchase Crown -origin standing timber 
irrespective of their allocated volume, and to transfer allocated timber between sawmills or to third 
parties, served to suppress prices of private timber in the province, yielding private timber prices 
that were not market -determined.  
 
23. Canada argues that, alternatively, the USDOC should have used an Ontario log price 
benchmark rather than the Nova Scotia stumpage benchmark . However, the log prices proposed  as 
a benchmark by the Canadian parties are not prices for the good in question – that is, stumpage . 
As such, the log price benchmark is not a market -determined price for the good in question 
(stumpage) and, given the availability of a stumpage benchmark w ithin Canada, using an alternative 
approach is not called for in this instance . Having determined that the Nova Scotia stumpage prices 
served as a suitable benchmark, the USDOC was not obligated to determine the suitability of lesser 
alternatives such as c onstructing a benchmark from private log prices in Ontario . For all of the 
reasons the United States has given, an unbiased and objective investigating authority could have 
reached the conclusion – as the USDOC did – that there were no market -determined pr ivate prices 
in Ontario that could be used for benchmarking purposes.  
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  Quebec  
 
24. With respect to Quebec, the USDOC concluded that Crown timber accounted for 73 percent of 
the stumpage harvest during the relevant period . Of this 73 percent, 51 percent was  provided 
directly by the province to producers via timber supply guarantees ( "TSGs"), and the remaining 
22 percent was provided by the government to producers via auctions of Crown timber . The USDOC 
found that using timber supply guarantees, "a sawmill ca n source up to 75 percent of its supply need 
at a government -set price ", and that 94 percent of TSG -holders did so . The USDOC determined that 
"there is strong motivation for a sawmill to treat its TSG -guaranteed volume as its primary source 
of supply and i ts auction volume as an additional or residual supply source ". The ramifications of 
this arrangement were further amplified by other aspects of the provincial timber policies . These 
circumstances, the USDOC found, reduced the need of TSG -holding corporatio ns to source from non -
allocated sources, such as the provincial auction or from private parties and, because a few major 
players accounted for the majority of purchase and consumption volumes (for both TSG -allocated 
timber and auctioned timber), the predom inant buyers had both of these provincial timber 
mechanisms available to influence the auction prices .  
 
25. The USDOC considered whether Quebec 's auction system yielded competitive, market -
determined prices . The USDOC was concerned with whether the refere nce price mechanism operated 
independently of the administered market . The USDOC observed that the record demonstrated that 
auction prices remained at or marginally above TSG prices and did not demonstrate independence . 
The USDOC ultimately concluded that Quebec 's timber market was distorted, and that its auction 
mechanism was not "based solely on an open, market -based competitive process " that could yield 
market -determined benchmark prices suitable for the benchmark comparison . For all of the reasons 
the United States has given, an unbiased and objective investigating authority could have reached 
the conclusion – as the USDOC did – that th ere were no market -determined private prices for 
stumpage in Quebec that could be used for benchmarking purposes . 
 
Alberta  
 
26. With respect to Alberta, the USDOC found that more than 98 percent of the harvest volume 
in Alberta was Crown -origin timber prov ided by the government to lumber producers . The USDOC 
determined that this evidence reflected "near complete Crown dominance of the market for standing 
timber in Alberta ", and that under these circumstances, "the market ... is so dominated by the 
presence of the government, the remaining private prices in the country in question cannot be 
considered to be independent of the government price ". Canada argues that the USDOC was 
unjustified in rejecting derived log -price benchmarks in Alberta . Canada 's argument s lack merit . The 
USDOC provided a detailed explanation of the reasons for its determinations with respect to the log 
prices Canada put on the record . The USDOC addressed all relevant issues raised by Canada and 
the respondents in this regard . And the USDO C found that the balance of evidence in this 
investigation supported its determination to reject the log prices because market -determined, in -
country private stumpage prices from Nova Scotia were available in this case and the log prices were 
not consisten t with market principles . For all of the reasons the United States has given, an unbiased 
and objective investigating authority could have reached the conclusion – as the USDOC did – that 
there were no market -determined private prices in Alberta that could  be used for benchmarking 
purposes . 
 
British Columbia – Distortion  
 
27. Regarding the USDOC 's determination to use an out -of-country benchmark for British 
Columbia stumpage, Canada has failed to establish that the USDOC erred in determining that prices 
in British Columbia are not market -determined prices . The USDOC 's distortion finding is not 
inconsistent with Article 14(d) of the SCM Agreement . In this case, the provincial government of 
British Columbia owns over 94 percent of the land, and 90 percent of the timber harvested during 
the period of investigation came from provincial Crown land . As a result of its investigation, the 
USDOC determined that it could not use British Columbia prices as a benchmark because the 
provincial government 's pred ominance in the market, combined with the flaws in its auction system, 
resulted in price distortions that would generate a circular comparison and, therefore, could not 
serve as a meaningful benchmark . This is the prototypical scenario the Appellate Body d escribed 
when it discussed the consequences of such predominant government ownership of nearly all the 
supply of the good in the country of provision . Therefore, BC prices could not serve as a meaningful 
benchmark . An objective and unbiased investigating a uthority could have determined – as the WT/DS533/R/Add.1  
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  USDOC did – that there were no market -determined in -country private prices for British Columbia 
stumpage that could be used for benchmarking purposes.  
 
28. The USDOC explained that British Columbia Timber Sales  ("BCTS") auction prices, which were 
the only benchmark proposed by the Canadian respondent interested parties, would present a viable 
benchmark if the auction mechanism is open and competitive, and thus "actually functions as a 
market price, and functions indep endently of the government -set price ". The USDOC sought to 
analyze whether the BCTS auction prices were competitive and open and independent, such that 
they could provide a benchmark market price for BC stumpage that was not distorted by the 
government 's ownership of the vast majority of harvestable forest land . The USDOC concluded that 
BCTS auction prices were not competitive, open, and independent because the same dominant firms 
consumed auctioned timber and purchased the comparatively much larger share o f their Crown 
stumpage inputs under their long -term tenures at prices set by the results of those same auctions . 
Thus, the USDOC explained that, although the participants in BCTS auctions are primarily 
independent loggers, the prices paid by these loggers key off prices that the dominant tenure -holding 
sawmills are willing to pay . Accordingly, BCTS prices are effectively limited by what those tenure 
holders pay for timber harvested from their tenures.  
 
29. The USDOC determined that BCTS auction prices were not a suitable benchmark because 
(1) BCTS prices were not independent of prices for timber on the administered portion of GBC -owned 
land, because the tenure -holding sawmills were also the predominant purchasers of BCTS -harvested 
timber; (2) BCTS price s were not set by competitive bid procedures, because the three -sale limit on 
Timber Supply Licenses inhibits competition and suppresses prices; and (3) the GBC 's and GOC 's 
restraints on the exportation of BC -origin logs contribute to an overabundant suppl y of logs and 
suppresses standing timber prices . The USDOC 's distortion finding was not based on mere 
government presence, but rather on three distinct grounds: auction prices were limited by the Crown 
stumpage prices paid by dominant tenure -holding firms;  a three -sale limit on Timber Supply Licenses 
that artificially limited the number of bidders in British Columbia 's government auctions and created 
other, additional distortions; and provincial and federal log export restraints suppressed log prices, 
which  impacted stumpage prices . Canada 's argument ignores each of these findings that the USDOC 
made.  
 
30. The selected benchmark – a stumpage benchmark constructed from private log prices in the 
U.S. state of Washington – is not inconsistent with Article 14(d)  of the SCM Agreement because 
these U.S. log prices reflected private prices for comparable goods consistent with market principles 
and were properly adjusted to ensure the prices relate to prevailing market conditions for 
British  Columbia stumpage . 
 
31. As the Appellate Body found in US – Softwood Lumber IV , the Article 14(d) "guideline does 
not require the use of private prices in the market of the country of provision in every situation ". 
Rather, "that guideline requires that the method selected for calculating the benefit must relate or 
refer to, or be connected with, the prevailing market conditions in the country of provision ". Although  
an investigating authority should first consider proposed in -country prices for the good in question, 
it would no t be appropriate to rely on such prices if they are not market -determined as a result of 
governmental intervention in the market . As these findings indicate, absent from Article 14(d) is any 
requirement that in -country prices must be used in all situations . Indeed, in many situations, 
imposing such a requirement would be incompatible with the purpose of Article 14(d), that is, to 
calculate a benefit in terms of how much better off a recipient is compared to what the recipient 
would have paid to obtain the g ood under market conditions.  
 
32. Canada errs in describing the extent to which the use of out -of-country benchmarks is 
"limited " under the proper legal approach . Prior reports have reasoned that, consistent with 
Article  14(d), an investigating authority m ay rely on an out -of-country benchmark when it finds that 
prices are distorted in the country of provision . As explained, where  the government plays a 
predominant role as a supplier in the market, it is "likely" that private prices for the good in question  
will be distorted . Although there is no market share threshold above which an investigating authority 
may conclude per se  that price distortion exists, the more predominant a government 's role in the 
market, the more likely that role results in distortion  of private prices . The circumstances of the 
underlying investigation present precisely the scenario in which reference to out -of-country 
benchmarks is contemplated under Article 14(d).  
 WT/DS533/R/Add.1  
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  33. The USDOC 's analysis is consistent with the type of analysis that  has been recognized as 
appropriate in prior panel and Appellate Body reports . Because of the distortion in the 
British  Columbia stumpage market, the USDOC could not use internal prices to the province to 
measure the adequacy of remuneration . Furthermore, the USDOC found, and Canada does not 
dispute, that other timber prices within Canada would not have provided the appropriate benchmark 
because timber in British Columbia is significantly larger and of greater value for sawmilling than 
that of other provinc es. 
 
British Columbia – Washington Log Prices  
 
34. With respect to the USDOC 's determination to rely on a stumpage benchmark derived from 
Washington log prices,  the USDOC 's reliance on Washington log prices satisfies the terms of 
Article  14(d) of the SCM Agreement because those prices reflect private transactions for comparable 
goods, and the USDOC made necessary adjustments to the log prices to ensure that the resulting 
stumpage comparison related to prevailing market conditions in British Columbia fo r stumpage . The 
USDOC explained that eastern Washington is contiguous with the interior of British Columbia, where 
three of the mandatory respondents based their operations, and features comparable timber species 
and growing conditions . Further, the Washin gton prices reflected private transactions between log 
sellers and buyers for logs harvested from private lands, and were contemporaneous with the period 
of investigation, publicly available, species -specific, and prepared in the ordinary course of busines s 
by an independent government source . The USDOC derived the benchmark it used in a manner that 
accounted for the prevailing market conditions in British Columbia by deducting the British Columbia 
respondents ' reported costs for accessing, harvesting, and transporting timber to their sawmills, and 
other costs obligated under their tenures.  
 
35. The USDOC 's reliance on Washington log prices satisfies the terms of Article 14(d) because 
those prices reflect private transactions for comparable goods, and the US DOC made necessary 
adjustments to these log prices to ensure that the resulting stumpage comparison related to 
prevailing market conditions in British Columbia for stumpage . Canada has failed to demonstrate 
that the USDOC erred in deriving a benchmark from  Washington log price data . The selected 
benchmark derived from private log prices is not inconsistent with Article 14(d) of the 
SCM Agreement .  
 
36. Canada 's arguments regarding conversion factors, dead logs or beetle -killed logs, and utility 
grade logs a re also unpersuasive . Canada argues that the USDOC did not act objectively when 
rejecting volumetric factors in the BC Dual Scale Study, but the USDOC selected a conversion factor 
after an examination of the evidence and provided a reasoned explanation for  its choice, including 
the reasons why the USDOC preferred to use data prepared by an impartial government agency in 
the ordinary course of business rather than data from a study commissioned for the purpose of 
opposing the USDOC 's benchmark calculation . In reviewing the available conversion factors, the 
USDOC determined that the BC Dual Scale Study was not useable because the authors failed to 
explain their methodology for selecting the limited number of scaling sites included in the study . The 
absence of such methodology was of particular concern, because the BC Dual Scale Study was 
commissioned specifically for use in this investigation . Instead, the USDOC relied upon the only 
viable conversion factor study on the record, the U.S. Forestry Service study, which was prepared 
by an impartial government agency in the ordinary course of business.  
 
37. The USDOC closely evaluated the underpinnings of the BC Dual Scale Study, and made an 
objective and unbiased determination that the study was not reliable . Specif ically, the BC Dual Scale 
Study failed to identify any methodology for its site selection . The USDOC did not suggest that only 
a single, particular methodology was acceptable, but rather that there be some  widely -accepted 
methodology – e.g., random, stratified, or composite sampling – and not simply the authors ' 
unfettered discretion . The study 's assertion that the sites were selected on the basis of personal 
"historical knowledge " of the trees at those sites does not sufficiently demonstrate that the  selected 
sites are representative or based on any statistically valid sampling methodology . As the USDOC 
explained, "[t]he structure of a sampling methodology is a key decision point of any sound sampling 
methodology because how a sample is conducted can minimize bias, maximize the 
representativeness of the sample result, and inform the statistical relevance to the population ". 
 
38. The United States also underscores that Canada has repeatedly changed its characterization 
of the study 's purported methodolo gy. In its first written submission, Canada asserted for the first 
time that the Dual Scale Study utilized "stratified random sampling ". This explanation is absent from WT/DS533/R/Add.1  
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  the study and was not provided to the USDOC during the investigation . Then, in its resp onses to the 
first set of panel questions, when confronted with a direct question regarding the study 's use of 
stratified random sampling, Canada changed its response and claimed that the study was based on 
"purposive sampling of scaling sites ". If the stu dy did, indeed, clearly identify the sampling 
methodology, Canada would not need to resort to the type of shifting post hoc characterizations of 
the sampling methodology Canada has presented to the Panel.  
 
39. With respect to adjustments for utility grade logs, the USDOC determined there was no record 
evidence that would allow it to make a grade adjustment to the Washington Department of Natural 
Resources ( "WDNR ") benchmark, because the record did not provide a reliable means of converting 
between Washingto n State and British Columbia grades . Canada 's contention that the WDNR data 
did not include beetle -killed prices is not merely speculative, but contrary to the relevant evidence . 
Undisputed record evidence establishes that beetle infestation exists in the U.S. Pacific Northwest 
among the same species as in British Columbia, although those species are less prevalent, and 
Canada 's own consultants obtained price quotes for beetle -killed logs from several mills in the 
United  States . Beetle -killed condition, lik e other quality issues, relates to log grade, and the WDNR 
benchmark did distinguish between three Washington State grades.  
 
40. An examination of the record demonstrates that the USDOC took into account Canada 's 
arguments on each of these points and provi ded an explanation for rejecting each one, consistent 
with the information available on the record . Canada invites the Panel to reweigh these 
considerations, but Canada has failed to demonstrate that the USDOC reached a conclusion that an 
objective and unb iased investigating authority could not have reached on the basis of these facts.  
 
The USDOC Conducted a Diligent Investigation  
 
41. Canada 's repeated assertion that the USDOC ignored or rejected relevant information is 
unfounded, as can be demonstrated by looking at the explanations the USDOC itself provided in the 
preliminary and final determinations and the decision memoranda . The USDOC conducted a thorough 
investigation and adequately addressed the evidence on the administrative record . Canada 's 
argument (and its chart of reports) relies on gross mischaracterization of how the USDOC addressed 
the various documents and reports that Canada has identified . The record of the investigation 
demonstrates that the USDOC considered and addressed th e full range of relevant issues raised by 
the parties . Canada has failed to show – and cannot show – that the USDOC 's investigation was 
deficient . The investigative process and analysis that the USDOC undertook for each province 
confirms  that the USDOC con ducted a diligent investigation and solicited relevant facts consistent 
with its role as an investigating authority . Canada therefore has failed – for this additional reason – 
to demonstrate that the USDOC 's determinations are inconsistent with Articles 1. 1(b) or 14(d) of 
the SCM Agreement.  
 
III. THE USDOC 'S DECISION NOT TO PROVIDE OFFSETS FOR NON -SUBSIDIZED 
TRANSACTIONS IN THE BENEFIT CALCULATION IS NOT INCONSISTENT WITH 
ARTICLES 1.1(B), 14(D), 19.3, AND 19.4 OF THE SCM AGREEMENT AND ARTICLE  VI:3 
OF THE GA TT 1994  
 
42. Canada claims that the USDOC "used benefit calculation methodologies that improperly 'set 
to zero ' transaction -to-benchmark comparisons where the purchase price for standing timber was 
higher than the benchmark price " when, Canada contends, "a reasonable and objective investigating 
authority would not have used a benefit calculation methodology that set certain comparison results 
to zero ". Canada 's claims lack merit . Nothing in the covered agreements requires an investigating 
authority, when determining the amount of the benefit conferred by a financial contribution, to 
provide offsets or credits for instances in which other financial contributions do not confer a benefit . 
Per the terms of Article 1 of the SCM Agreement, each t ime there is a financial contribution and a 
benefit is conferred, a subsidy is deemed to exist .  
 
43. The very arguments Canada makes in this dispute were rejected previously by the panel in 
US – Anti-Dumping and Countervailing Duties (China) . That panel r eport, and other prior panel and 
Appellate Body reports, confirm that Article 14 of the SCM Agreement, through its guidelines, gives 
Members ' investigating authorities discretion to develop appropriate methodologies to calculate the 
benefit of a subsidy . In particular, nothing in Article 14(d) of the SCM Agreement imposes an 
obligation on Members to conduct an aggregate analysis, nor does Article 14(d) require Members to WT/DS533/R/Add.1  
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  provide offsets or credits in the benefit calculation when a government provides goods for adequate 
remuneration.  
 
44. Likewise, no such obligation is imposed by Articles 1.1(b), 19.3, or 19.4 of the 
SCM Agreement, nor by Article VI:3 of the GATT 1994 . Canada asserts, but never explains, how a 
breach of Articles 14(d), 19.3 and/or 19.4 would  result in a consequential violation of Article 1.1(b) . 
Such unsupported assertion is wholly insufficient to establish Canada 's claim of a breach under 
Article  1.1(b) . Ultimately, it may be prudent for the Panel to exercise judicial economy with respect 
to Canada 's claim under Article 1.1(b), as has been done in prior reports.  
 
45. Canada 's arguments concerning Articles 19.3 and 19.4 of the SCM Agreement, and Article  VI:3 
of the GATT 1994, fail because Canada 's proposed interpretation of those provisions wo uld override 
the text of Article 14 of the SCM Agreement with obligations in other provisions of the 
SCM Agreement and the GATT 1994 that have no textual connection to the "benefit to the recipient " 
guidelines set forth in Article 14, and would instead imp ose a specific and far -reaching obligation 
when calculating the amount of a subsidy.  
 
46. In addition to having no support in the text of the covered agreements, Canada 's proposed 
interpretation has troubling implications . Because Canada attempts to locate  the purported 
obligation to provide offsets/credits for "negative comparison results " in Articles 19.3 and 19.4 of 
the SCM Agreement, and Article VI:3 of the GATT 1994, such an obligation, if it were found to exist, 
would necessarily apply to all of Artic le 14, and would require that offsets/credits be provided 
whenever an investigating authority found that any financial contribution did not provide a benefit . 
Thus, Members would be required to provide offsets/credits across different types of input produc ts 
and even across different types of subsidies . Canada has not identified any limiting principle that 
would confine the purported aggregation/offset obligation to particular input subsidies or prevent 
the obligation, if it were found to exist, from applyi ng across different types of subsidies . As the 
United States has demonstrated, and as the panel in US – Anti-Dumping and Countervailing Duties 
(China) agreed, there simply is no support in the terms of the covered agreements or in logic for 
the obligation that Canada asks the Panel to invent.  
 
47. Rather, each time British Columbia and New Brunswick provided standing timber to one of the 
respondents for less than adequate remuneration, a benefit was conferred, a subsidy was deemed 
to exist, and, because the  subsidized imports were found to be causing injury, the United States had 
the right to impose a countervailing duty equal to the amount of the benefit conferred . The fact that, 
at other times, Canadian provinces may have provided standing timber to these firms for adequate 
remuneration, and therefore no subsidy existed in those instances, is irrelevant . Those non -subsidies 
could neither eliminate nor diminish the benefits conferred when Canadian provinces provided 
stumpage for less than adequate remunerati on. 
 
48. Canada 's arguments that the USDOC was required to provide offsets/credits because of the 
particular factual circumstances in New Brunswick and British Columbia also fail because Canada 's 
arguments lack any foundation in logic . In reality, the USDOC undertook precisely the kind of "careful 
matching " of transactions for which Canada argues . Additionally, if the transactions and benchmarks 
were mismatched, then the solution would be to match them correctly; not require that an 
investigating authority provide offsets in the aggregation process . If there truly were a mismatch 
problem, there would still be a mismatch problem if all the results of the mismatched comparisons 
were just aggregated and averaged . Any such aggregation and ave raging and offsetting certainly 
would not result in the "careful matching " that Canada insists is required . And if the transactions 
and benchmarks were matched correctly, then certainly it would not be appropriate to provide 
offsets/credits across differen t subsidies, as Canada agrees.  
 
49. Late in the panel proceeding, Canada attempted to shift its argument significantly, raising 
concerns with how the USDOC identified or grouped the transactions under examination in the 
underlying countervailing duty inves tigation at issue in this dispute (or "the manner in which the 
financial contribution is defined "). While a failure by an investigating authority to correctly identify 
or group the transactions under examination when assessing whether a benefit was conferr ed 
(i.e., how the investigating authority defined the financial contribution) could, itself, potentially form 
the basis for a claim under Article 14(d) of the SCM Agreement, Canada did not make a claim in this 
dispute about the USDOC 's identification or gr ouping of transactions or its definition of the financial 
contribution . The new claim that Canada introduced late in the panel proceeding  is inconsistent with WT/DS533/R/Add.1  
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  Article 6.2 of the DSU because Canada did not raise this claim in its panel request, and thus any  
such claim is outside the Panel 's terms of reference . 
 
50. Ultimately, Canada 's claims are based on a misreading of the SCM Agreement and the 
GATT  1994, a misunderstanding of prior panel and Appellate Body reports, and factual arguments 
that lack any foun dation in logic . Accordingly, there simply is no basis to find that the USDOC 's 
determination of the benefit of government -provided stumpage in New Brunswick and 
British  Columbia is inconsistent with Articles 1.1(b), 14(d), 19.3, and 19.4 of the SCM Agreem ent, 
and Article VI:3 of the GATT 1994 .  
 
IV. THE USDOC 'S DETERMINATION CONCERNING BRITISH COLUMBIA 'S AND CANADA 'S 
LOG EXPORT RESTRAINTS IS NOT INCONSISTENT WITH ARTICLE  1.1(A)(1)(IV) OF 
THE SCM AGREEMENT  
 
51. Canada claims that the USDOC improperly investigated and countervailed British Columbia 's 
and Canada 's log export restraints . Canada 's arguments are based on a misunderstanding of the 
SCM Agreement and misrepresentation of the USDOC 's determination.  
 
52. The USDOC found that official government action compels British Columbia log suppliers to 
provide a good – logs – to British Columbia consumers, including mill operators . In other words, as 
contemplated by Article 1.1(a)(1)(iv) of the SCM Agreement, the USDOC found that the Government 
of British Columbia and the Government of Canada entrusted or directed private bodies to engage 
in conduct that is described in Article 1.1(a)(1)(iii) of the SCM Agreement (providing goods), and 
further found that such conduct would normally be vested in t he Governments of British Columbia 
and Canada, and the practice, in no real sense, differs from practices normally followed by 
governments.  
 
53. Canada asks the Panel to make a categorical determination that, as a legal matter, export 
restraints simply cannot constitute entrustment or direction . There is no support in the 
SCM Agreement for Canada 's argument . Article 1.1(a)(1) of the SCM Agreement, when properly 
interpreted, establishes that the concept of entrustment or direction encompasses a ran ge of 
government actions, including the imposition by the Governments of British Columbia and Canada 
of log export restraints as a means by which to entrust or direct private log suppliers to carry out 
the function of providing logs to BC consumers, includ ing mill operators .  
 
54. Canada 's legal arguments are flawed, rest on false premises, and rely on prior reports that 
are inapposite . The implication of Canada 's argument is that, in the absence of an explicit command 
to sell the particular good to a parti cular purchaser at a particular price, there can never be a finding 
of entrustment or direction under Article 1.1(a)(1)(iv) of the SCM Agreement . Canada 's position is 
contrary to the correct interpretation of the term "entrusts or directs " that follows fro m a proper 
application of customary rules of interpretation, and Canada 's contention has already been rejected 
in numerous prior panel and Appellate Body reports .  
 
55. Canada 's reliance on the panel reports in US – Export Restraints  and US – Countervailin g 
Measures (China) is misplaced . The statements in the US – Export Restraints panel report to which 
Canada refers are obiter dicta  concerning a hypothetical measure . The legal reasoning underlying 
that panel 's statements has been thoroughly repudiated by o ther panel and Appellate Body reports . 
And that panel 's interpretation of Article 1.1(a)(1)(iv) is contrary to customary rules of 
interpretation . The US – Countervailing Measures (China)  panel expressly limited its findings to the 
facts before it, and thos e facts differ from the facts in the underlying investigation . So, those panel 
reports simply provide no support for Canada 's arguments.  
 
56. The ample record evidence that was before the USDOC supports the USDOC 's determination 
of entrustment or direction and supports the USDOC 's determination that providing logs is a type of 
function that would normally be vested in the Governments of British Columbia and Canada . After 
examining the record evidence, the USDOC found that the log export restraints require  in-province 
processing of wood fiber, subject to exemption only if British Columbian timber processing facilities 
do not need or cannot economically use the input material, or if the material would otherwise be 
wasted . On this basis, the USDOC foun d that official government action compels  suppliers of BC logs 
to supply to BC customers .  
 WT/DS533/R/Add.1  
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  57. This is not a case where the government 's intent to assist downstream industries is hidden or 
implicit, and discoverable only upon studying the effects of the p olicies . Rather, the express purpose 
of Canada 's and British Columbia 's laws is that private log suppliers will provide to in -province mill 
operators all the input material that mills need and/or can economically use . Specifically, the laws 
single out "timber processing facilities in British Columbia ", and prioritize their supply, to the 
exclusion of consumers in export markets . Therefore, the USDOC correctly concluded that log 
harvesters are required to "to divert to mill operators some volume of logs that  could otherwise be 
exported ". 
 
58. The USDOC did not take an effects -based approach to its analysis of British Columbia 's log 
export restraints, as Canada falsely asserts . Canadian interested parties introduced effects -based 
arguments by asserting that th e log export restraints have no effect . The USDOC examined evidence 
on the administrative record and determined that the assertions of the Canadian interested parties 
lacked foundation or otherwise were insufficient to change the conclusion that the USDOC drew from 
its examination of the laws and regulations that govern the provision of logs within British Columbia .  
 
59. The USDOC also found that logs are harvested from standing timber in forests, and the 
province of British Columbia controls over 94 perce nt of all forest land within its boundaries, which 
demonstrates its near total control over the timber supply . Where the government owns a resource, 
such as standing timber, the exploitation of that resource necessarily is, for that government, a 
function that would be vested in that government.  
 
60. The USDOC 's decision memoranda speak for themselves, so the Panel does not need to rely 
on characterizations of those documents made by Canada, or even those made by the United States . 
It is clear from a review  of those memoranda that the USDOC 's explanation of its determination is 
"reasoned and adequate ", the USDOC 's determination, which is based on the totality of information 
on the administrative record, is supported by ample evidence, and an unbiased and obj ective 
investigating authority, examining the same evidence, could reach the same conclusions that the 
USDOC reached .  
 
61. Finally, Canada 's flawed claims regarding the USDOC 's initiation of a countervailing duty 
investigation of the log export restraints  likewise lack any foundation, because they simply refer to 
and depend upon Canada 's flawed arguments that the log export restraints do not result in a financial 
contribution as a matter of law or fact .  
 
V. THE USDOC 'S DETERMINATIONS REGARDING GRANTS PROVIDED FOR 
SILVICULTURE AND FOREST MANAGEMENT ARE NOT INCONSISTENT WITH 
ARTICLES 1.1(A)(1)(I), 1.1(B), 14(D), 19.3, AND 19.4 OF THE SCM AGREEMENT  
 
62. Canada alleges that silviculture and forest management payments to JDIL and Resolute 
provided by  New Brunswick and Quebec constitute "purchases of services " and thus cannot be 
considered a "financial contribution " under Article 1.1(a)(1) of the SCM Agreement . Canada also 
argues that no benefit could have been conferred as a result of the payments . Canada's arguments 
lack merit.  
 
63. Governments generally establish through laws and regulations a host of obligations that 
businesses must comply with as part of their operational costs of doing business . The performance 
of such an obligation by a business normally cannot be considered voluntary or reciprocal, because 
business operations conducted in the absence of this performance would likely violate the law or 
regulation that established the obligation.  
 
64. JDIL and Resolute both chose to harvest trees f rom Crown lands . Both JDIL and Resolute were 
legally obligated to satisfy certain silviculture requirements as a condition for access to Crown 
stumpage . Both companies received payments from the government – financial contributions in the 
form of a direct transfer of funds – that alleviated some of the costs associated with these silviculture 
and forest management requirements.  
 
65. JDIL and Resolute had no choice about whether to enter into these transactions or not . 
Therefore, these transactions did not involve the action or an act of buying silviculture and forest 
management or buying the use of a partial cutting technique . The companies ' performance of these 
legally -required obligations also cannot be considered voluntary or recipro cal, because they would WT/DS533/R/Add.1  
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  have violated the law (or the terms of a forest management agreement) if they had harvested timber 
without performing these obligations .  
 
66. Finally, it is indisputable that JDIL and Resolute were "better off " than they otherwise would 
have been absent the provincial silviculture and forest management payments . As the panel in EC – 
Large Civil Aircraft  reasoned, "where a subsidy takes the form of a grant, the amount of the financial 
contribution and the amount of the benefit are th e same ". The silviculture and forest management 
payments thus conferred a benefit in the full amount of the payments  because the payments 
intrinsically made JDIL and Resolute better off than they would otherwise have been absent the 
payments .  
 
67. The USD OC's conclusion that the payments for silviculture constituted financial contributions 
in the form of grants is one an unbiased and objective investigating authority could have reached in 
light of the facts and arguments before it . Given that these payments were financial contributions in 
the form of grants, the USDOC also correctly determined  that the amount of the benefit conferred 
equaled the full amount of the grants provided . None of Canada 's arguments show that the USDOC 's 
determinations involv ing these grants were inconsistent with Articles 1.1(a)(1)(i), 1.1(b), 14, 19.3, 
and 19.4 of the SCM Agreement.  
 
VI. THE USDOC 'S DETERMINATIONS REGARDING PROVINCIAL ELECTRICITY SUBSIDIES 
ARE NOT INCONSISTENT WITH ARTICLES 1.1(A)(1)(II), 1.1(B), 10, 14(D), 19.1, 
19.3, AND 19.4 OF THE SCM AGREEMENT  
 
Benefit to Producers of Electricity Purchased by BC Hydro and Hydro -Quebec  
 
68. Canada argues that the United States acted inconsistently with Articles 1.1(b) and 14(d) of 
the SCM Agreement because the benchmarks selected by the USDOC to measure the subsidies 
associated with the purchases of electricity by BC Hydro and Hydro -Quebec did not reflect prevailing 
market conditions for the sale of the relevant type of electricity . Canada 's arguments lack merit.  
 
69. The USDOC defined the relevant marketplace in this investigation as the market where 
BC Hydro both bought electricity from Tolko and West Fraser and sold electricity to Tolko and West 
Fraser . In doing so, the USDOC rejected the notion that the relevant market should be limited just 
to the side of the market where BC Hydro bought electricity from Tolko and West Fraser . Contrary 
to Canada 's assertions, every comparison under Article 14(d) requires a comparison source ( i.e., a 
benchmark) that is separate and indep endent from the financial contribution being examined to 
ascertain whether an artificial advantage results from that financial contribution . As the USDOC 
observed, "[t]he adequacy of remuneration does not exist in a vacuum; to determine whether 
remuneratio n is 'adequate, ' a comparison source is needed ".  
 
70. The USDOC similarly confirmed that, "[i]n this investigation, Resolute is not merely selling 
electricity to Hydro -Québec; Resolute also purchases electricity from Hydro -Québec ". The USDOC 
determined th at, for this type of government purchase, "where the government is acting on both 
sides of the transaction —i.e., both selling a good to, and purchasing the good back from, a 
respondent —the benefit to the respondent is the difference between the price at wh ich the 
government is selling the good to the company, and the price at which the government is purchasing 
the good back from the company ". In doing so, the USDOC rejected the notion that the relevant 
market should be limited just to the side of the market  where Hydro -Quebec bought electricity from 
Resolute.  
 
71. Based on the Appellate Body report in Canada – Renewable Energy / Canada – Feed-in Tariff 
Program , Canada argues that "the government mandates that direct BC Hydro and Hydro -Quebec 
to include biomass -based electricity in their supply mixes mean that this type of electricity is not 
substitutable with other kinds of electricity in these provinces at the wholesale level, or critically with 
electricity in the retail markets ". 
 
72. Canada ig nores critical elements of the Appellate Body 's reasoning in Canada – Renewable 
Energy / Canada – Feed-in Tariff Program . The Appellate Body 's reasoning in that dispute was built 
entirely upon Ontario 's efforts to reduce reliance on fossil fuels . Also, the  Appellate Body, in analyzing 
such interventions, stated that it is important to draw "a distinction … between, on the one hand, 
government interventions that create markets that would otherwise not exist and, on the other WT/DS533/R/Add.1  
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  hand, other types of government i nterventions in support of certain players in markets that already 
exist, or to correct market distortions therein ". 
 
73. There is absolutely no support for Canada 's proposition that the USDOC should have inferred 
that British Columbia and Quebec created m arkets for renewable electricity that otherwise would 
not have existed but for certain subsidy programs . The evidence before the USDOC during the 
investigation demonstrated that:  
 
 the renewable energy markets in British Columbia and Quebec were not new ( in 
fact, they were well established);  
 the pertinent subsidy programs promoted the purchase of electricity mostly from 
the existing renewable energy markets and mostly from renewable energy 
facilities already in existence; and  
 British Columbia and Quebec did not intervene through subsidy programs to 
reduce reliance on fossil energy resources, or to create uniquely biomass -based 
electricity markets, but intervened generally to support existing players in the 
well-established rene wable energy market.  
 
74. The USDOC also was under no obligation to demonstrate as part of its determination that 
British Columbia and Quebec had not intervened in the marketplace to create new markets that 
otherwise would have not existed  but for the sub sidies at issue . The Appellate Body 's reasoning in 
Canada – Renewable Energy / Canada – Feed-in Tariff Program  does not suggest that an 
investigating authority is required under the SCM Agreement to determine in every countervailing 
duty proceeding whether  the market for a good came into existence because of government 
intervention . Indeed, the Appellate Body cautioned that "[t]o do so would mean to read an exception 
into Article 1.1(b) based on the rationale of the subsidy that has no textual basis in the 
[SCM]  Agreement ". And no other panel or Appellate Body report has ever mentioned this so -called 
"requirement " as a critical element that must guide the assessment of the adequacy of remuneration 
for a government -provided or government -purchased good .  
 
Benefit of the New Brunswick LIREPP  
 
75. Canada separately argues that the United States acted inconsistently with 
Articles  1.1(a)(1)(ii), 1.1(b), and 14(d) of the SCM Agreement because the USDOC should have 
analyzed the New Br unswick Large Industrial Renewable Energy Purchase Program ( "LIREPP ") as 
the purchase of a good by NB Power rather than as a form of revenue foregone.  
 
76. The USDOC properly determined that the LIREPP constitutes a financial contribution to JDIL 
in the fo rm of revenue foregone . NB Power calculates a credit, which is applied to each participant 's 
electricity bill, equivalent to "the amount of renewable energy that NB Power will purchase from the 
LIREPP participant … and the amount of electricity that NB Pow er will sell to the LIREPP participant ". 
This credit is separate and apart from any purchases of renewable energy from the participants and 
simply reduces the participant 's electricity payment to NB Power . The USDOC found that, "[u]nder 
the LIREPP program,  NB Power first determines the credit it wants to give the large industrial 
customers, such as JDIL; NB Power then works backwards to build up to that credit through a series 
of renewable energy power purchases and sales and additional credits ". The LIREPP  credit thus was 
the cash that participating Irving companies did not spend on the electricity bill they received from 
NB Power, decreased the amount of NB Power 's revenue as a Crown corporation, and was properly 
considered by the USDOC under Article 1.1(a )(1)(ii) in the form of government revenue foregone .  
 
Attribution of Electricity Subsidies to Producers of Softwood Lumber  
 
77. Finally, Canada argues that the USDOC acted inconsistently with Articles 10, 19.1, 19.3, 
and 19.4 of the SCM Agreement and Arti cle VI:3 of the GATT 1994 when it attributed the provincial 
electricity subsidies to the producers under investigation.  
 
78. The GATT 1994 and the SCM Agreement both contemplate the application of countervailing 
duties for subsidies that may benefit more t han the product under investigation . Nothing in the 
GATT  1994 or SCM Agreement suggests an investigating authority need attempt to trace subsidy 
benefits from receipt to the moment of actual use . As the Appellate Body has observed, "the 
appropriate inquiry  into the existence of a product -specific tie requires a scrutiny of the design, 
structure, and operation of the subsidy at issue, aimed at ascertaining whether the bestowal of that WT/DS533/R/Add.1  
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  subsidy is connected to, or conditioned on, the production or sale of a sp ecific product ". In this 
regard, panels and the Appellate Body have long recognized that a Member may offset 
countervailable subsidies received by a producer with respect to inputs used in the production of a 
product processed from such inputs.  
 
79. The US DOC considered the design, structure, and operation of the electricity subsidies at issue 
and determined that each provincial subsidy was not connected to, or conditioned on, the production 
or sale of a specific product at the point of bestowal . Electricity is an input utilized in every aspect 
of the manufacturing operations of the recipient companies, including the production of softwood 
lumber . The evidence of record before the USDOC demonstrated that the provincial electricity 
subsidies did not  require or induce the recipients to engage in any activities connected to the 
production or sale of a processed product other than softwood lumber . This evidence also 
demonstrated that these subsidies provided a benefit to every aspect of the recipients ' 
manufacturing operations.  
 
80. The USDOC 's determination that the provincial electricity subsidies were provided to the 
overall operations of the recipients – and thus attributable to the sales of all products produced by 
the recipients, including softwood  lumber – is one an unbiased and objective investigating authority 
could have reached in light of the facts and arguments that were before it . None of Canada 's 
arguments otherwise establish that the United States acted inconsistently with its obligations u nder 
Article VI:3 of the GATT 1994 and Articles 10, 19.1, 19.3, and 19.4 of the SCM Agreement.  
 
VII. THE USDOC 'S DETERMINATION TO TREAT THE ACCELERATED CAPITAL COST 
ALLOWANCE TAX PROGRAM AS DE JURE  SPECIFIC IS NOT INCONSISTENT WITH 
ARTICLES 2.1(A) AND 2.1( B) OF THE SCM AGREEMENT  
 
81. Canada argues that the Accelerated Capital Cost Allowance tax program for Class 29 assets 
("ACCA Class 29 assets program ") cannot be de jure  specific because the explicit limitation set out 
in this program supposedly relates on ly to machinery and equipment and the activities for which 
such machinery or equipment is primarily used . Canada 's arguments lack merit.  
 
82. A subsidy can be de jure  specific without explicitly identifying eligible industries and 
enterprises by name . A subsidy is de jure  specific "[w]here the granting authority, or the legislation 
pursuant to which the granting authority operates, explicitly limits access to a subsidy to certain 
enterprises ". The de jure  specificity analysis "focuses … on whether access  to [a] subsidy has been 
explicitly limited " and "situates the analysis for assessing any limitations on eligibility  in the particular 
legal instrument or government conduct effecting such limitations ". 
 
83. According to the Appellate Body, "the inquiry under Article 2 hinges on limitations on 'eligibility  
for a subsidy ' in respect of certain recipients [and therefore] [e]ligibility may be limited in 'many 
different ways ', e.g. by virtue of the type of activities conducted by the recipients  or the region 
where the recipients run those activities ". Therefore, a ctivity -based exclusions are one way in which 
access to and eligibility for a subsidy may be explicitly limited to certain enterprises, thereby 
satisfying the de jure  specificity criteria under Article 2.1(a).  
 
84. The record before the USDOC showed that the ACCA Clas s 29 assets program is explicitly 
limited to "manufacturing and processing " activities and that the Income Tax Act  and Income Tax 
Regulations  exclude numerous activities from the definition of "manufacturing and processing ". 
Enterprises and industries enga ged exclusively in the activities excluded from the definition of 
"manufacturing and processing " are ineligible to receive the tax benefits as a matter of law . For this 
reason, the USDOC found the program to be de jure  specific.  
 
85. The existence of other  tax deductions and exemptions under Canada 's Income Tax Act  does 
not otherwise render this program non -specific . The other tax provisions that Canada identified 
provide for different financial contributions, different benefit amounts, and different criter ia for 
eligibility . None of these other tax provisions provide the same  subsidy to those enterprises and 
industries precluded from access to the deductions from taxable income for the capital cost of 
property that is provided under the ACCA Class 29 assets  program .  
 
86. Canada has failed to demonstrate that an unbiased and objective investigating authority could 
not have concluded that the ACCA Class 29 assets program is de jure  specific . Therefore, Canada 
has failed to demonstrate an inconsistency with Ar ticles 2.1(a) and 2.1(b) of the SCM Agreement.  WT/DS533/R/Add.1  
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  VIII.  CANADA 'S "MARITIMES STUMPAGE BENCHMARK CLAIM " HAS NO BASIS IN THE 
SCM AGREEMENT OR THE DSU  
 
87. Canada claims that something it calls the "Maritimes Stumpage Benchmark " is inconsistent 
with Articles 1.1(b) and 14(d) of the SCM Agreement . Canada 's claim fails for a number of reasons . 
First, the so -called "Maritimes Stumpage Benchmark " is not susceptible to WTO dispute settlement 
as a measure of "present and continued appl ication ". Second, the so -called "Maritimes Stumpage 
Benchmark " cannot be challenged as "ongoing conduct ". Third, even if the "Maritimes Stumpage 
Benchmark " were susceptible to WTO dispute settlement, Canada has not demonstrated that it would 
necessarily re sult in an inconsistency with Articles 1.1(b) or 14(d) of the SCM Agreement.  
 
88. Canada has not established that any measure exists, so it cannot be attributable to the 
United  States . Neither Article 14(d) of the SCM Agreement nor the USDOC 's determinatio ns 
contemplate this concept of an "in-market " benchmark as Canada conceives it . The United States 
does not accept Canada 's premise of "an in-market benchmark ". Canada has also failed to establish 
the precise content of the alleged measure because Canada us es inconsistent descriptions of the 
content of the measure at different times and repeatedly qualifies its allegation with the phrase: 
"when faced with the relevant factual circumstances ". These allegations are insufficient to establish 
the precise content  of the alleged measure . Finally, Canada does not establish present and continued 
application of the alleged measure . The USDOC has, on some occasions, decided to rely on evidence 
of stumpage prices from Nova Scotia or New Brunswick as a benchmark for stum page provided by 
the government in countervailing duty proceedings involving stumpage in Canada . That is entirely 
appropriate given that the "starting point " of the analysis under Article 14(d) is private prices in the 
country of provision.  
 
89. Canada 's alternative claim fails because "ongoing conduct " is not a measure subject to dispute 
settlement and, even if it were, Canada has not demonstrated that "ongoing conduct " – as that 
concept has been elaborated in prior Appellate Body reports – exists in this situation . Ultimately, 
Canada 's claim fails because Canada has not identified any inconsistency with Articles 1.1(b) 
or 14(d) of the SCM Agreement that would necessaril y result from the so -called measure.  
 
IX. CONCLUSION  
 
90. For the reasons given throughout this panel proceeding, the United States respectfully 
requests that the Panel reject Canada 's claims in their entirety.  
 
 
_______________  
 
 WT/DS533/R/Add.1  
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  ANNEX  C 
ARGUMENTS OF THE THIRD PARTIES  
Contents  Page  
Annex  C-1 Integrated executive summary of the arguments of Brazil  72 
Annex  C-2 Integrated executive summary of the arguments of the European Union  75 
Annex  C-3 Integrated executive summary of the arguments of Japan  78 
 
 
 WT/DS533/R/Add.1  
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  ANNEX C -1 
INTEGRATED EXECUTIVE SUMMARY OF THE  
ARGUMENTS OF BRAZIL  
I. THE PROPER SELECTION OF BENCHMARKS UNDER ARTICLE 14(d) OF THE 
SCM AGREEMENT  
 
1. The fact that a government is a significant provider of goods or services or purchaser of goods 
does not necessarily mean that the prices of those goods and services are not market -driven and 
thus distorted for the calculation of the amount of the benefit.  The text of Article 14(d) indicates 
that there must be no presumption of price distortion on the sole grounds of a government being a 
relevant participant in a certain market. Article 14(d) reads: "the provision of goods or services or 
purchase of goods b y a government shall not be considered  as conferring a benefit unless  (…)". 
 
2. Brazil notes that the analysis of market distortion must be carried out on a case -by-case basis, 
in accordance to the "predominance test ".1 Under this test, an investigating authority would be 
allowed to reject in -country benchmarks only when the  "governm ent's role in providing the financial 
contribution is so predominant that it effectively determines the price at which private suppliers sell 
the same or similar goods ".2 Furthermore, the predominance refers to the degree of power 
governments dispose to i nfluence internal prices, not merely governments ' share in the market .3 
 
3. It is also important to note that price distortion is in direct proportion to government influence, 
in the sense that the less the influence that a government has in a market, the  smaller the possibility 
of price distortion. In light of these circumstances, there would seem to be a higher evidentiary 
threshold to demonstrate that private prices are distorted in cases where government is a significant 
supplier than in cases where th e government is a predominant supplier. The panel in US – Coated 
Paper (Indonesia)4 concluded that "other evidence would carry limited weight " when the position of 
the government in the market is closer to that of a sole supplier. Conversely, when the government 
is only a significant supplier, evidence would carry more weight.  
 
4. According to Article 14(d), the choice of a benchmark must reflec t "prevailing market 
conditions for the good or service in question in the country of provision ". The first option to be 
considered by an investigating authority, therefore, "is the prices at which the same or similar goods 
are sold by private suppliers in  arm's length transactions in the country of provision ".5 If the 
investigating authority concludes that prices in arm 's length transactions are distorted by 
governmental action, it can have recourse to out -of-market benchmarks. The selection of out -of-
market benchmarks must not be arbitrary or unjustified. Preference should be given to benchmark 
prices resulting from the same or similar prevailing market conditions. In order to proceed to an 
accurate comparison, investigating authorities should make necess ary adjustments regarding, for 
instance, "price, quality, availability, marketability and transportation of purchase or sale ". 
 
5. Brazil coincides with the Appellate Body 's conclusion that "it would be difficult, from a practical 
point of view, for invest igating authorities to replicate reliably market conditions prevailing in one 
country on the basis of market conditions prevailing in another country ".6 In this sense, Brazil 
believes that investigating authorities should take into account possible differ ences in comparative 
advantages between the countries.  
 
6. As regards to USDOC 's method of comparing individual transactions to average benchmarks, 
Brazil agrees with the panel 's conclusion, in a report raised by both Canada and the United States, 
that "the language of Article 14(d) suggests more a disaggregated than an aggregate approach, 
both temporally and in respect of a 'good' in the sense of that provision (…) ".7 
 
1 See US – Softwood Lumber IV ; US – Anti-Dumping and Countervailing Duties (China) . 
2 Appellate Body Report,  US – Softwood Lumber IV , para. 100.  
3 Appellate Body Report, US – Anti-dumping and Countervailing Duties (China) , para. 444.  
4 Panel Report. US – Coated Paper (Indonesia) , para. 7.61.  
5 Appellate Body Report, US – Softwood Lumber IV , para. 90.  
6 Appellate Body Report, US – Softwood Lumber IV , para. 108.  
7 Panel Report, US – Antidumping and Countervailing Duties (China) , para. 11.56.  WT/DS533/R/Add.1  
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  II. THE POSSIBILITY OF SETTING TO ZERO THE RESULTS OF CERTAIN COMPARISONS 
USED TO ASSE SS ADEQUACY OF REMUNERATION  
 
7. Brazil agrees that Article 14 leaves "significant scope for an investigating authority to seek the 
appropriate methodology to measure benefit ".8 However, the guidelines contained in the paragraphs 
of Article 14 are binding limits to such "significant scope ". According to the chapeau of Article 14, 
"any such method shall be consistent with the following guidelines  (…)". The term "any method " is 
restrained by the listed guidelines, including the obligation to select an appropriate benchmark for 
assessing the adequacy of the remuneration received for the provision of a good or service or the 
purchase of a good.  
 
8. Furthermore, Article VI:3 of the GATT 1994 proscribes the possibility of countervailing duties 
being "levied on any product of the territory of any contracting party imported into the territory of 
another contracting party in excess of an amount equal  to the estimated bounty or subsidy 
determined to have been granted (…) ". Article 19.3 of the SCM Agreement establishes that 
countervailing duties shall be levied "in the appropriate amounts  in each case ". 
 
9. Assuming that the investigating authority has selec ted a benchmark in accordance with 
Article  14(d) of the SCM Agreement, i.e. a benchmark that reflects the prevailing market conditions 
existing in the market of provision of the good, it can proceed to compare each transaction price to 
the chosen benchmark . In instances in which the transaction price is higher than the benchmark 
price, the negative result (benchmark price minus transaction price) means that no benefit was 
conferred; in instances in which the transaction price is lower than the benchmark pri ce, the positive 
result (benchmark price minus transaction price) means that a benefit was indeed conferred.  
 
10. The total monetary benefit conferred by the government equals the sum of individual positive 
results (expressed in prices per unit of the prod uct) multiplied by the volume of the good provided 
in each transaction. The fact that in some instances the transaction price is higher than the 
benchmark price simply says that the government conferred no benefit to the purchaser of the good. 
A negative r esult does not mean that the government derives some benefit or takes a financial 
contribution away from the purchaser of the good. The fact that benefits are not conferred in certain 
transactions does not mean that subsidies associated with the transactio ns where a benefit was 
conferred are somehow offset or eliminated. Consequently, negative results either will not be added 
to the equation for the finding of the total benefit or they will be set to zero in order not to alter the 
final result.  
 
11. In Bra zil's view, one way to properly calculate the countervailing duty on the basis of a given 
set of transactions could be the use of a weighted average, as indicated by the following equation:  
 
B = (P B – PT) x V 
 
In this equation, B is the benefit in a determined transaction; PB represents the benchmark price 
per unit, PT indicates the transaction price per unit; V is the volume of goods involved in the 
transaction. For each transaction, the benefit conferred by the government equals  the multiplication 
of the volume of goods sold by the government by the difference between the benchmark and the 
transaction price.  Adding the amount of the benefit for the given set of transactions yields:  
 
BT = B 1 + 0 + B 3 + B 4 + 0 + … + B N 
 
The zeroes were added to the equation to emphasize that transactions where no subsidy is found 
should not be considered.  
 
12. The next step is to determine the countervailing duty to be levied on imported goods. 
Article  19.4 of the SCM Agreement establishes th at "no countervailing duty shall be levied on any 
imported product in excess of the amount of the subsidy found to exist, calculated in terms of 
subsidization per unit of the subsidized and exported product ". Since the importing country cannot 
levy duties in excess of the total subsidy granted by the exporting country, the investigating 
authority should estimate how much of the total subsidy is attributable to each good in the total set 
of goods under investigation. In order to do so, the investigating auth ority needs to construct a 
weighted average composed (i) by the total amount of benefit in the numerator of the equation and 
 
8 United States ' First Written Submission, para. 504.  WT/DS533/R/Add.1  
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  (ii) the total amount of goods provided by the government in the denominator of the equation, 
including those goods for which the g overnment received adequate remuneration:  
 
CVD per unit of imported good=B1 + 0+ B 3+ B 4+ … + B N
V1 + V2 + V3 + V4 + … + VN 
 
 WT/DS533/R/Add.1  
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  ANNEX C -2 
INTEGRATED EXECUTIVE SUMMARY OF THE  
ARGUMENTS OF THE EUROPEAN UNION  
I. CANADA 'S CLAIMS  UNDER  ARTICLE  14(D)  
 
A. The existence of regional markets and benchmarks  
 
1. The EU does not agree with the US argument that any in -country benchmark is per se  
consistent with Article 14(d). There may be several different markets (e.g. regional) within the same 
country with differing market conditions. The use of any "in-country " price is therefore not a 
benchmark that is automatically consistent under Article 1 4(d) for other regions in the same country 
on the sole basis that it originates from the country of provision . This also reflects the position of 
the Appellate Body in Canada – FIT.1 Ignoring the differences between regions would risk 
miscalculating the b enefit amount and hence run counter the objective of Article 14, which is to 
calculate the appropriate amount of benefit. The existence of regional markets was also 
acknowledged by the Appellate Body under Article 6.3.  
 
2. It may be that prices in regiona l markets are distorted so that, e.g. out -of-country benchmarks 
may have to be used instead. Price distortion may result, inter alia , from the predominant or 
significant position of the government as provider of the good in question. The evidentiary thresh olds 
for these two scenarios are not identical. The case law always requires evidence other than market 
share in case of a "significant " market position (not for predominance) and also requires more of 
such additional evidence. The EU considers that market  shares above 90% may be indicative of 
predominance .  
 
B. Market concentration as element of price distortion  
 
3. The EU takes the view that the high concentration of a market normally forms part of the 
prevailing market conditions in the country of provis ion and does not constitute an element market 
distortion. Article 14(d) does not call for perfectly competitive markets and perfectly competitive 
markets (and the perfect number of competitors) rarely exist in real life. Markets may be more 
fragmented or m ore concentrated, depending e.g. on the characteristics of the market concerned. 
However, an investigation authority may have to adjust an out -of-country benchmark (or a different 
regional benchmark) with a view to differing levels of market concentration,  depending on the 
circumstances. There is no presumption that a concentrated private market is more susceptible to 
price alignment with government prices than a fragmented private market.  
 
C. The relevance of competitive auctions for the assessment of pric e distortion  
 
4. Canada argues that prices in certain provinces are not distorted, despite the fact that the 
government controls a very high market share, because a considerable amount of standing timber 
is sold through competitive auctions. The EU conside rs that, provided that the auction system does 
ensure competitive prices, the respective auction volume may be attributed to the competitive and 
hence "non-distorted " part of the market. A government cannot pursue its own pricing strategy or 
set prices if prices are set through competitive auctions and, to that extent, the government also 
cannot affect private prices.  
 
D. The need for adjustments when determining the existence of benefit  
 
5. The EU recalls that the Appellate Body acknowledged that adjustmen ts to an out -of-country 
benchmark may be necessary in order to make it comparable to the prevailing market conditions in 
the country of provision.2 The EU considers that the need for - and the extent of - adjustments will 
have to be determined in light of  the specific circumstances of the case. Not every difference between 
two markets requires an adjustment and adjustments must not be made with respect to the 
 
1 Appellate Body Report, Canada – Renewable Energy / Canada – Feed-in Tariff Program , footnote 746.  
2 Appellate Body Report, US – Softwood Lumber IV , paras. 108 -109, 116.  WT/DS533/R/Add.1  
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  subsidized/distorted elements in the country of provision. Adjustments may also have to be made 
when "in-country " regional benchmarks are used, depending on the circumstances .  
 
6. The issue of adjustments is separate from the issue of the selection of a proper benchmark. 
Markets may be so different from the markets investigated, that the prices in those markets cannot 
constitute – even with adjustments – a suitable benchmark.  
 
E. Setting to zero certain comparison results  
 
7. Regarding the issue of "setting to zero " by the US of certain comparisons in the benefit 
analysis, the EU considers that what  matters, as confirmed by the Appellate Body, is that the 
selection of the appropriate benchmark should ensure a "meaningful comparison for the 
determination of benefit ". The selection of the appropriate benchmark may depend on the 
circumstances of the cas e. In comparing a particular price with a benchmark under the 
SCM Agreement, in order for the result of the comparison to be meaningful, the guiding principle is 
that like must be compared with like, including possible adjustments. Accordingly, the terms a nd 
conditions of the price should in principle be comparable to those of the benchmark . The EU agrees 
with the United States that there is no general requirement under the SCM Agreement to provide 
"credits " for those transactions in which no benefit is con ferred. This was also the position of a 
previous panel.3  
 
II. ENTRUSTMENT  OR DIRECTION  UNDER  ARTICLE  1.1(A)(1)(IV)  OF THE  
SCM AGREEMENT  
 
8. Mere acts of encouragement by the government, or an effect on prices that is merely co -
incidental or a by-product of legitimate governmental regulation, do not suffice for entrustment or 
direction under Article 1.1(a)(1)(iv). The United States is correct that a range of measures could 
amount to entrustment or direction. Explicit delegation or command is not  required . However, the 
fact that there may be different methods of entrusting or directing does not mean that Members 
should be allowed to apply countervailing measures "whenever a government is merely exercising 
its general regulatory powers ".4 The EU d isagrees with the arguments of the United States to the 
extent that they suggest that a government entrusts or directs private entities whenever it "regulates 
the course of its conduct ".5  
 
9. Entrustment or direction cannot be presumed, and it cannot be found to exist on the sole basis 
that a governmental measure has an incidental effect on prices or other conditions of competition. 
Whatever the effects of a measure may be in the marketplace, entrustment or direction requires 
either that the government gi ves responsibility to a private body, or exercises its authority over a 
private body, in order to effectuate a financial contribution.6 It should however be kept in mind that 
entrustment or direction frequently takes place in ways that are informal or eve n covert.  
 
10. A measure involving an export restraint could constitute entrustment or direction depending 
on the relevant facts and evidence, taking the measure as a whole and possibly in combination with 
other relevant measures or pronouncements by the g overnment. The EU does not take a position 
on whether such elements were shown to exist in this case. However, we note that the United States 
does not consider USDOC 's findings to be based purely on the effects of the export restraint.  
 
11. Regarding the d istinction between the references to "the government " and "governments " in 
Article 1.1(a)(1)(iv), the EU considers that "the government " refers to the government that is said 
to be entrusting or directing the private body, whereas "governments " refers to g overnments in 
general, i.e. neither to the specific government allegedly entrusting or directing, nor to any other 
particular government.  
 
III. DIRECT  TRANSFERS  OF FUNDS  AND  PURCHASES  OF SERVICES  
 
12. The EU agrees with the United States that there may be circumstances in which a transaction 
could be described as a grant even though it reimburses the costs of an activity performed by the 
alleged recipient of the subsidy. Thus, governmental transfers of funds should not be automatically 
 
3 Panel Report, US – Anti-Dumping and Countervailing Duties (China) , para. 11.50.  
4 Appellate Body Report, US – Countervailing Duty Investigation on DRAMs , para. 115.  
5 United States ' first written submission, para. 553.  
6 Appellate Body Report, US – Countervailing Duty Investigation on DRAMs , para. 113.  WT/DS533/R/Add.1  
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  excluded from Article  1.1(a)(1)(a) just because they are said to have occurred as reimbursement 
for the provision of a service.7 
 
13. There is no Appellate Body finding, and no upheld panel finding, that purchases of services 
are excluded from the coverage of Article 1.1(a)(1)(a). On a proper reading of Article 1.1(a)(1)(a), 
an alleged purchase of services could give rise to a financial contribution, such as a direct transfer 
of funds. Completely excluding purchases of services would frustrate the object and purpose of  the 
SCM Agreement by creating a massive loophole in the Agreement 's coverage.  
 
IV. THE  DETERMINATION  OF BENEFIT  WITH  RESPECT  TO PROVINCIAL  ELECTRICITY  
PROGRAMMES  
 
14. The main issue in dispute between the parties is whether or not the relevant market is o nly 
that for the type of electricity from renewable sources (biomass) purchased by Canada, or for all 
types of electricity. The panel should therefore consider whether there are pertinent reasons to 
distinguish this case from the circumstances in Canada  – FIT, such that the Appellate Body 's 
reasoning would not apply. The Panel should consider any relevant differences that have been 
alleged.  
 
15. The EU agrees that the fact that a benchmark is tailored to the circumstances of the same 
companies said to be receiving a subsidy may be relevant in deciding whether that benchmark is 
appropriate. However, the Appellate Body 's guidance in Canada – FIT focused on the costs and 
characteristics of renewable energy and the importance of the government 's definition of the energy 
supply -mix, as opposed to, for example, the views of various market participants on the 
substitutability of electricity, or whether or not the same companies happened to both buy and sell 
electricity.  
 
16. Even if the panel were to agree with Ca nada on the issue of the relevant market, this would 
not be the end of the enquiry. A benefit would still exist if the electricity purchase prices did not 
reflect a hypothetical market outcome. An appropriate benchmark for biomass electricity generation 
would thus normally need to be found, for example by considering price -discovery mechanisms. 
However, the relevance of price discovery mechanisms for the existence of benefit will depend on 
the circumstances.  
 
V. ACTIVITY -BASED  EXCLUSIONS  AND  DE JURE  SPECIFI CITY  UNDER  ARTICLE  2.1(A)  OF 
THE  SCM AGREEMENT  
 
17. The SCM Agreement does not define an "industry ", or list "industries ", for the purposes of 
Article 2.1. Whether a measure that limits access to certain activities can also be said to limit access 
to certa in industries will depend on the nature of the activities at issue. For example, certain activities 
could even, for all practical purposes, amount to industries.  
 
 
 
 
7 United States ' first written sub mission, paras. 634. ( "The governments each reimbursed the relevant 
companies for performing tasks  that they had legally required the companies to perform. ") 636 
("New Brunswick held JDIL legally responsible for performing certain silviculture and forest m anagement, then 
separately reimbursed JDIL for the costs associated with its performance of those activities ."); emphasis 
added.  WT/DS533/R/Add.1  
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  ANNEX C -3 
INTEGRATED EXECUTIVE SUMMARY OF THE  
ARGUMENTS OF JAPAN  
I. USE OF OUT -OF-COUNTRY  BENCHMARKS IN RELATION TO STANDING TIMBER – 
ARTICLE 14(D) OF THE SCM AGREEMENT  
 
1. Japan notes that the four paragraphs of Article 14 of the Agreement on Subsidies and 
Countervailing Measures ("SCM Agreement ") provide guidelines with respect to particular types of 
financial contributions that must be consistently followed in the methods for the calculation for a 
benefit conferred to the recipient. These  methods must be prescribed in the national legislation or 
implementing regulations concerning countervailing duties . The guideline set forth in Article 14(d) 
of the SCM Agreement is that t he provision of goods by a government shall not be considered as 
conferring a benefit unless the provision is made for less than adequate remuneration. It further 
provides that the adequacy of remuneration shall be determined in relation to prevailing mark et 
conditions for the good in question in the country of provision (including price, quality, availability, 
marketability, transportation and other conditions of purchase or sale).  
 
2. The Appellate Body in US – Softwood Lumber IV  found that, in cases wher e the private prices 
of the goods in question in the country of provision are distorted because of the predominant role of 
the government in the market as a provider of the same or similar goods, despite the guidelines set 
forth in Article 14(d), it is pos sible to resort to an out -of-country benchmark or to constructed 
benchmark, provided that the necessary adjustments are made to reflect conditions in the market 
of purchase.1 The "very purpose " of resorting to an out -of-country benchmark is to replicate 
competitive market conditions that are absent in the country of purchase .2 
 
3. Price distortion must be established on a case -by-case basis and investigating authorities must 
consider evidence relating to factors other than government market share.3 In conducting the 
analysis for selecting a proper benchmark, the Appellate Body in US – Carbon Steel (India)  stated 
that "what an investigating authority must do […] will vary depending upon the circumstances of the 
case, the characteristics of the market  being examined, and the nature, quantity, and quality of the 
information supplied by petitioners and respondents, including such additional information an 
investigating authority seeks so that it may base its determination on positive evidence on the 
record".4 
 
4. Contrary to Canada 's suggestion,5 in Japan 's view, an investigating authority is not required 
to establish "a clear causal link " between the government intervention in the market and "an alleged 
substantial distortion of in -market prices ". While in -country prices may deviate from a market -
determined price "as a result of governmental interventions in the market "6 and an investigating 
authority should demonstrate that government interventions distort the conditions of competition in 
the re levant market, neither the Appellate Body nor prior panels have required an investigating 
authority to establish such a "clear ca usal link ". Indeed, such a requirement is inconsistent with the 
Appellate Body 's recognition that price distortion is likely wh ere the government has a predominant 
 
1 Appellate Body Report, US – Softwood Lumber IV , paras. 90 and 119. In US – Anti-Dumping and 
Countervailing Duties (China) , the Appellate Body applied a similar reasoning in the context of Article 14(b) of 
the SCM Agreement, stating that there is "no inherent limitations in Article 14(b) that would prevent an 
investigating authority from using as benchmarks interest rates on loan s denominated in currencies other than 
the currency of the investigated loan, or from using proxies instead of observed interest rates, in situations 
where the interest rates on loans in the currency of the investigated loan are distorted and thus cannot b e 
used as benchmarks ". (Appellate Body Report, US – Anti-Dumping and Countervailing Duties (China) , 
paras.  484-489). 
2 See, Appellate Body Reports, Canada – Renewable Energy / Canada – Feed-in Tariff Program , 
para. 5.184 . 
3 Appellate Body Report, US – Anti-Dumping and Countervailing Duties (China) , para. 446.  
4 Appellate Body Report,  US – Carbon Steel (India) , para. 4.157.  
5 Canada 's first written submission, para. 54.  
6 Appellate Body Report, US – Carbon Steel (India) , para.  4.155.  WT/DS533/R/Add.1  
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  role as a provider of goods and that in such circumstances other evidence carries only limited 
weight.7  
 
5. Furthermore, the panel in US – Countervailing Measures (China) (Article 21.5 – China)  
rejected the argument t hat an investigating authority may resort to an out -of-country benchmark 
only when it has established that in -country prices are effectively determined by the government, 
either de jure  or de facto .8 
 
6. Japan agrees that the investigati ng authority shoul d be allowed to use an out -of-country 
benchmark in case where there is price distortion in the relevant market. Nonetheless, Japan 
believes that government measures or interventions in a market do not always distort prices.  The 
Appellate Body has cautioned  that while a government 's predominant role as a supplier in the market 
makes it "likely" that private prices will be distorted, the distortion of private prices must be 
established on a case -by-case basis, according to the particular facts underlying each  countervailing 
duty investigation.9 As the Appellate Body also clarified in US – Anti-Dumping and Countervailing 
Duties (China) , the fact that the government is a significant supplier cannot alone justify a finding 
that prices are distorted.10 
 
7. Provid ed that an investigating authority reasonably and adequately explains the basis for its 
conclusions in determining a proper benchmark , the complainant bears the burden to present a 
prima facie  case that  the investigating authority 's determination is inconsistent with Article 14(d). 
This include s the burden of explaining any deficiencies in the investigating authority 's finding that 
prices in the relevant markets do not reflect market conditions (i.e., ar e distorted). Having said that, 
Japan notes that, in the underlying investigation in this case, Canada submitted extensive evidence 
to show that the relevant market is not distorted. An investigating authority may not determine price 
distortion without tak ing into full consideration the evidence and arguments submitted by interested 
parties, including the government of the targeted country, in the course of the underlying 
investigation. The Appellate Body has emphasized in this regard that "an investigating  authority 
should always consider all evidence regarding other factors on the record, but the extent to which 
such evidence carries weight depends on how predominant the government 's role is and on the 
relevance of other factors ".11 
 
8. With regard to spec ific elements to consider in finding "price distortion ", the Appellate Body 
has stated that "an investigating authority may be called upon to examine various aspects of the 
relevant market ".12 And "[t]his examination may involve an assessment of the struct ure of the 
relevant market, including the type of entities operating in that market, their respective market 
share, as well as any entry barriers ".13 
 
9. Japan submits that it is necessary to distinguish between the "circular situation " and market 
concentr ation. In a "circular situation " where the government determines the price for the good 
provided by the government, the price must not be relied on regardless of the level of concentration. 
In other situations, the level of concentration may be relevant an d determination of the proper 
benchmark should be made on a case -by-case basis taking into account factors such as enforcement 
of competition policies and regulations as well as business and contractual relationships.  
 
10. Furthermore, Japan considers that  whether the price in the market is formed through arm 's 
length transactions based on commercial considerations of the respective market actors can be 
relevant for the determination of price distortion. Unlike government authorities , including local 
author ities, whose actions are not based on commercial considerations, independent market actors 
should in principle act solely in accordance with commercial considerations. Evidence that actors do 
not act based on commercial considerations under certain governm ent interventions would provide 
a strong indication that prices determined through interactions of such actors are distorted.  
 
7 Appellate Body Report, US – Anti-Dumping and Countervailing Duties (China) , para. 446.  
8 Panel Report, US – Countervailing Measures (China) (Article 21.5 – China) , paras. 7.162, 7.174.  
9 Appellate Body Report,  US – Carbon Steel (India) , para. 4.1 56; Appellate Body Report, US – Anti-
Dumping and Countervailing Duties (China) , para. 453; Appellate Body Report, US – Softwood Lumber IV , 
para. 102.  
10 Appellate Body Report, US – Anti-Dumping and Countervailing Duties (China) , para. 441.  
11 Appellate Body Report, US – Anti-Dumping and Countervailing Duties (China) , para. 453.  
12 Appellate Body Report, US – Carbon Steel (India) , para.  4.157.  
13 Appellate Body Report, US – Carbon Steel (India) , footnote 754 to para.  4.157 . WT/DS533/R/Add.1  
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  11. The auction systems that Canada claims are in place in B.C. and Québec may be one of the 
factors that could suggest that the r elevant actors, i.e. buyers and sellers, operate based on 
commercial considerations, but it requires careful examination and should be assessed on a case -
by-case basis.14 
 
12. Japan considers that it is important for the government to ensure that transactions under  
mechanisms for purchase or sale of goods and services are conducted by relevant actors on the 
basis of commercial considerations, even where such mechanisms involve s ome form of government 
interventions (such as procurement and/or government provision of goods or services).  
 
II. EXPORT RESTRAINTS AS SUBSIDIES IN RELATION TO LEP – ARTICLE 1.1 OF THE 
SCM AGREEMENT  
 
13. The panel in US – Export Restraints found that the requirement of a financial contribution 
under Article 1.1(a)(1) of the SCM Agreement from the outset was intended to ensure that not all 
government measures that confer a benefit should be considered as subsidies.15 The Appellate Body 
in Canada – Renewable Energy  further clarified that a panel should scrutinize the measure both as 
to its design and operation and identify its principal characteristics.16 
 
14. Japan agrees that Article 1.1(a)(1) of the SCM Agreement limit s the scope of government and 
private conduct that may constitute financial contributions and therefore subsidies within the 
meaning of the SCM Agreement.17 In this sense, Article 1.1(a)(1) limits the scope of application of 
the SCM Agreement by defining t he government conduct that constitutes a subsidy. The structure, 
design and operation of export restraint measures must be examined carefully before a 
determination can be made that such measures constitute a covered financial contribution.  
 
III. AMOUNT OF  BENEFIT CALCULATED BASED ON PRICE OF ELECTRICITY  
 
15. In Canada – Renewable Energy/ Canada – Feed-in Tariff Program , the Appellate Body held , in 
the context of addressing serious prejudice claim rather than examining the WTO -consistency of 
countervailing duties,  that the benefit comparison for a particular type of electricity, such as wind, 
solar or biomass, must be made in relation to the terms and conditions that would be available under 
market -based comparisons for that specific type of electricity and "should not be conducted within 
the competitive wholesale electricity market as a whole, but within competitive markets for wind - 
and solar PV -generated electricity, which are created by the government definition of the energy 
supply -mix"18 as there are se parate markets for different types of electricity.  
 
16. Japan agrees with the Appellate Body on the need to analyze supply -side factors in the 
definition of the relevant market. However, Japan considers that in determining the proper market 
benchmark for e lectricity in particular, the investigating authority is required to first determine 
whether there are "separate markets for different types of electricity " or is a single market for 
electricity as a whole in the relevant economy because both biomass and c onventional electricity , 
which are physically alike,  may simply compete in the same market in terms of pricing, and therefore 
there is no need to distinguish between such "types " of electricity. Japan emphasizes that unless it 
is proven that electricity is  not treated as a commodity and not substitutable in the country at issue , 
it should be presumed that there are no such separate markets. Provided  that consumers do not 
differentiate between the types of electricity generated19 and are willing to pay a sin gle price for 
electricity regardless of the production technologies, there should be no rationale to suppose that 
 
14 In Canada – Renewable  Energy / Canada – Feed-in Tariff Program , the Appellate Body observed that 
a benchmark may be found in price -discovery mechanisms such as competitive bidding, which ensure that the 
price paid by the government is the lowest possible price offered by a wil ling supply contractor. This statement 
was made in the context of government purchases of goods, but would seem applicable also where a 
government provides goods and competitive bidding ensures that the government obtains the highest  price 
offered by willi ng buyer. (Appellate Body Reports, Canada – Renewable Energy / Canada – Feed-in Tariff 
Program , para. 5.228) . 
15 Panel Report, US – Export Restraints , para. 8.65. See also Appellate Body Report , US – Softwood 
Lumber IV , footnote 35 to para. 52.  
16 Appellate Body Reports, Canada – Renewable Energy  / Canada – Feed-in Tariff Program , para. 5.120.  
17 As the Appellate Body noted in US – Large Civil Aircraft (2nd complaint) , "[s]ubparagraphs (i) -(iv) 
exhaust the types of government conduct deemed to constitute a financial contribution. 
(Appellate  Body Report, US – Large Civil Aircraft (2nd complaint) , para. 614) . 
18 Appellate Body Reports, Canada – Renewable Energy / Canada – Feed-in Tariff Program , para. 5.178.  
19 United States ' first written submissio n, para.  696. WT/DS533/R/Add.1  
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  there are such separate markets. The U.S. Department of Commerce used a wholesale price in the 
general electricity market as a benchmark for b enefit calculation . Japan requests that the Panel take 
the foregoing into consideration in examining whether or not this finding is reasonable.  
 
17. In addition, Japan understands that, under the current procedures set forth in the 
SCM Agreement, the investigating authority is not required to examine the purpose of the subsidies 
in determining whether to impose countervailing measures. However, Japan  considers it important 
to assess the nature, design, and operation of the subsidy at iss ue in examining its  legality under 
the SCM Agreement.  Japan recalls that the Appellate Body in US – Upland Cotton  emphasized the 
important role that the 'nature ' of a subsidy plays in evaluating whether the subsidy has caused 
'serious prejudice ' to the int erest of another WTO Member.20 Japan believes that  where certain 
subsidies have positive effects not only on the recipients, but also on any private entity in the 
relevant industry (for example, subsidies to promote research and development), such subsidie s 
may be found not to cause serious prejudice depending on factual circumstances including their  
"nature ", while those  subsidies can be subject to countervailing duty measures.  
 
 
__________  
 
20 Appellate Body Report, US – Upland Cotton, para. 450. Furthermore, the Appellate Body in EC and 
certain member States – Large Civil Aircraft , noted that the appropriateness of a particular methodology for 
the establishment of causation must  depend on factors such as "the nature, design, and operation of the 
subsidies at issue ". (Appellate Body Report, EC and certain member States – Large Civil Aircraft, para. 1376 ).