WORLD TRADE  
ORGANIZATION  WT/DS257/AB/RW 
5 December 2005 
 (05-5764) 
 Original:   English 
  
 
     
 
    
 
    
 
UNITED STATES – FINAL COUNTERVAI LING DUTY DETERMINATION WITH 
RESPECT TO CERTAIN SOFTWOOD LUMBER FROM CANADA 
 
RECOURSE BY CANADA TO AR TICLE 21.5 OF THE DSU 
   
AB-2005-8 
   
 
     
 
  
Report of the Appellate Body  WT/DS257/AB/RW 
 Page i 
 
 
 
I. Introduction................................................................................................................... ..............1  
II. Arguments of the Participants and the Third Participants ..........................................................6  
A. Claims of Error by the United States – Appellant ......................................................... 6 
B. Arguments of Canada – Appellee ................................................................................ 12 
C. Arguments of the Third Participants............................................................................ 16 
1. China...............................................................................................................16  
2. European Communities...................................................................................17  
III. Issues Raised in this Appeal ................................................................................................... ..19 
IV. Scope of Article 21.5 of the DSU .............................................................................................20  
A. Background and Procedural History........................................................................... 20 
B. Introduction to the Principal Issue on Appeal............................................................. 24 
C. The Scope of Proceedings under Article 21.5 of the DSU ........................................... 26 
1. Text, Context, Object and Purpose .................................................................26  
2. Examination of Previous Cases ......................................................................30  
3. Summary.........................................................................................................32  
4. Review of the Panel's Approach .....................................................................33  
D. The Panel's Application of Article 21.5 in this Case ................................................... 34 
E. Disposition of the Remaining Issues on Appeal........................................................... 39 
V. Findings and Conclusions....................................................................................................... ..40 
 
Annex I  Notification of an Appeal by the United States under Article 16.4 and  
Article 17 of the DSU, and under Rule 20(1) of the  Working Procedures  
for Appellate Review  
 WT/DS257/AB/RW 
Page ii  
 
TABLE OF CASES CITED IN THIS REPORT 
 
Short Title Full Case Title and Citation 
Australia – Automotive 
Leather II (Article 21.5 – US)  Panel Report, Australia – Subsidies Provided to Producers and Exporters of 
Automotive Leather – Recourse to Article 21.5 of the DSU by the United States , 
WT/DS126/RW and Corr.1, adopted 11 February 2000, DSR 2000:III, 1189 
Australia – Salmon 
(Article 21.5 – Canada) Panel Report, Australia – Measures Affecting Importation of Salmon – Recourse 
to Article 21.5 of the DSU by Canada , WT/DS18/RW, adopted 20 March 2000, 
DSR 2000:IV, 2031 
Canada – Aircraft  
(Article 21.5 – Brazil) Appellate Body Report, Canada – Measures Affecting the Export of Civilian 
Aircraft – Recourse by Brazil to Article 21.5 of the DSU , WT/DS70/AB/RW, 
adopted 4 August 2000, DSR 2000:IX, 4299 
EC – Bed Linen  
(Article 21.5 – India) Appellate Body Report, European Communities – Anti-Dumping Duties on 
Imports of Cotton-Type Bed Linen from India – Recourse to Article 21.5 of the 
DSU by India , WT/DS141/AB/RW, adopted 24 April 2003 
EC – Bed Linen  
(Article 21.5 – India)  Panel Report, European Communities – Anti-Dumping Duties on Imports of 
Cotton-Type Bed Linen from India – Recourse to Article 21.5 of the DSU by 
India , WT/DS141/RW, adopted 24 April 2003, as modified by Appellate Body 
Report, WT/DS141/AB/RW 
Mexico – Corn Syrup  (Article 21.5 – US)  Appellate Body Report, Mexico – Anti-Dumping Investigation of High Fructose 
Corn Syrup (HFCS) from the United States – Recourse to Article 21.5 of the 
DSU by the United States , WT/DS132/AB/RW, adopted 21 November 2001, 
DSR 2001:XIII, 6675 
US – Shrimp  (Article 21.5 – Malaysia) Appellate Body Report, United States – Import Prohibition of Certain Shrimp 
and Shrimp Products – Recourse to Article 21.5 of the DSU by Malaysia , 
WT/DS58/AB/RW, adopted 21 November 2001, DSR 2001:XIII, 6481 
US – Softwood Lumber IV Appellate Body Report, United States – Final Countervailing Duty 
Determination with Respect to Certain Softwood Lumber from Canada , 
WT/DS257/AB/R, adopted 17 February 2004 
US – Softwood Lumber IV Panel Report, United States – Final Countervailing Duty Determination with 
Respect to Certain Softwood Lumber from Canada , WT/DS257/R and Corr.1, 
adopted 17 February 2004, as modified by Appellate Body Report, 
WT/DS257/AB/R 
US – Softwood Lumber IV 
(Article 21.5 – Canada) Panel Report, United States – Final Countervailing Duty Determination with 
Respect to Certain Softwood Lumber from Canada, Recourse by Canada to Article 21.5 , WT/DS257/RW, 1 August 2005  
  WT/DS257/AB/RW 
 Page iii 
 
 
TABLE OF ABBREVIATIONS USED IN THIS REPORT 
 
Abbreviation Description 
DSB Dispute Sett lement Body 
DSU Understanding on Rules and Procedures Governing the Settlement of 
Disputes  
Final Countervailing Duty 
Determination "Notice of Final Affirmative Count ervailing Duty Determination and 
Final Negative Critical Circumstances Determination: Certain Softwood Lumber Products from Canada", United States Federal Register , Vol. 67, 
No. 63 (2 April 2002), p. 15545, as amended, Vol. 67, No. 99 (22 May 
2002), p. 36070 (Exhibit US-1 submitted by the United States to the 
Panel) 
First Assessment Review "Notice of Final Results of Countervailing Duty Administrative Review 
and Rescission of Certain Company-Specific Reviews: Certain Softwood Lumber Products from Canada", United States Federal Register , Vol. 69, 
No. 243 (20 December 2004), p. 75917 (Exhibit CDA-8 submitted by Canada to the Panel) 
GATT 1994  General Agreement on Tariffs and Trade 1994   
Original Appellate Body 
Report Report of the Appellate Body in the original  US – Softwood Lumber IV   
proceedings 
Original panel Panel in the original  US – Softwood Lumber IV   proceedings 
Original panel report Report of the Panel in the original  US – Softwood Lumber IV   proceedings 
Panel Panel in these  US – Softwood Lumber IV (Article 21.5 – Canada)  
proceedings  
Panel Report Report of the Panel in these  US – Softwood Lumber IV (Article 21.5 – 
Canada)  proceedings  
SAA "Statement of Administrative Action" in  Message from the President of 
the United States Transmitting the Uruguay Round Trade Agreements, 
Texts of Agreements Implementing Bill, Statement of Administrative 
Action and Required Supporting Statements , H.R. Doc. No. 103-316, 
Vol. 1, p. 656 (Exhibit CDA-1 submitted by Canada to the Panel) 
SCM Agreement Agreement on Subsid ies and Countervailing Measures 
Section 129 Section 129 of the Uruguay Round Agreements Act, Pub. L. No. 103-465, 
§ 129, 108 Stat. 4838, codified at 19 USC § 3538 (2000) pp. 720-721 
(Exhibit CDA-2 submitted by  Canada to the Panel) 
Section 129 
Determination "Notice of Implementation Under Section 129 of the Uruguay Round 
Agreements Act; Countervailing Measu res Concerning Certain Softwood 
Lumber Products from Canada", United States Federal Register , Vol. 69, 
No. 241 (16 December 2004), p. 75305 (Exhibit CDA-7 submitted by Canada to the Panel) 
USDOC United States Department of Commerce 
Working Procedures Working Procedures for Appellate Review , WT/AB/WP/5, 4 January 2005 
WTO World Trade Organization 
  WT/DS257/AB/RW 
 Page 1 
 
 
WORLD TRADE ORGANIZATION  
APPELLATE BODY 
 
 
United States – Final Countervailing Duty 
Determination with Respect to Certain Softwood Lumber from Canada 
Recourse by Canada to Article 21.5 of the DSU
 
 
United States, Appellant  
Canada, Appellee  
 China, Third Participant  
European Communities, Third Participant   AB-2005-8 
  Present:  
 Janow, Presiding Member 
 Baptista, Member  Sacerdoti, Member  
  
I. Introduction 
1. The United States appeals certain issues of law and legal interpretations developed in the 
Panel Report, United States – Final Countervailing Duty Determination with Respect to Certain 
Softwood Lumber from Canada, Reco urse by Canada to Article 21.5 (the "Panel Report").
1  The Panel 
was established to consider a complaint by Cana da with respect to the consistency with the  
Agreement on Subsidies and Countervailing Measures (the " SCM Agreement ") and the General 
Agreement on Tariffs and Trade 1994  (the "GATT 1994") of measures claimed by Canada to have 
been taken by the United States to comply with the recommendations and rulings of the Dispute 
Settlement Body (the "DSB") in the  US – Softwood Lumber IV   proceedings.2  
2. In the proceedings before the original panel,  Canada challenged a number of aspects of the 
final determination by the United States Department of Commerce (the "USDOC") that led to the 
imposition of countervailing duties on softwood lumber  from Canada (the "Final Countervailing Duty 
Determination").3  The original panel found that the failu re of the USDOC to conduct a pass-through 
                                                      
1WT/DS257/RW, 1 August 2005.  
2The recommendations and rulings of the DSB resulted from the adoption on 17 February 2004, by the 
DSB, of the Original Appellate Body Report, WT/DS2 57/AB/R, and the Original Panel Report, WT/DS257/R 
and Corr.1, in US – Softwood Lumber IV .  
3"Notice of Final Affirmative Countervailing Du ty Determination and Final Negative Critical 
Circumstances Determination: Certain Softwood Lumber Products from Canada", United States Federal 
Register , Vol. 67, No. 63 (2 April 2002), p. 15545, as amended, Vol. 67, No. 99 (22 May 2002), p. 36070 
(Exhibit US-1 submitted by the United States to the Panel). WT/DS257/AB/RW 
Page 2  
 
analysis
4 in respect of certain categories of log and lumber sales was inconsistent with Articles 10 
and 32.1 of the  SCM Agreement  and Article VI:3 of the GATT 1994.5  With regard to the pass-
through issue, the Appellate Body upheld the origin al panel's finding that the "USDOC's failure to 
conduct a pass-through analysis in respect of arm's length sales of  logs  by tenured 
harvesters/sawmills to unrelated sawmills is in consistent with Articles 10 and 32.1 of the 
SCM Agreement  and Article VI:3 of the GATT 1994", and reversed the original panel's finding that 
the "USDOC's failure to conduct a pass-through an alysis in respect of arm's length sales of  lumber  
by tenured harvesters/sawmills to unrelated remanuf acturers is inconsistent with Articles 10 and 32.1 
of the  SCM Agreement  and Article VI:3 of the GATT 1994."6  
3. On 17 February 2004, the DSB adopted the Appellate Body Report and the original 
panel report, as modified by the Appellate Body Report.7  The parties to the dispute agreed that the 
United States would have until 17 December 2004 to implement the recommendations and rulings of 
the DSB.8  On 16 December 2004, the USDOC published a determination pursuant to Section 129 of 
the Uruguay Round Agreements Act ("Section 129").9  In the determination made pursuant to 
                                                      
4The claims made by Canada included claims that th e United States had acted inconsistently with its 
obligations under the  SCM Agreement   because "the USDOC erred in not conducting a pass-through analysis in 
determining subsidization of softwood lumber in the case of certain upstream tr ansactions for inputs." 
(Original Panel Report, US – Softwood Lumber IV , para. 7.66)  In general, a "pass-through" analysis involves an 
examination of whether subsidies paid to the producers of primary or upstream products (that do not fall within 
the scope of a countervailing duty investigation) "pass through" the production chain to downstream products 
(that are covered by the countervailing duty investigation).  In this dispute, Canada claimed that the USDOC was required to conduct an analysis of the degree to which subsidies paid on the production of the input 
products, such as logs or primary lumber, passed through the production process to the downstream softwood 
lumber products covered by the inve stigation and the Final Countervailing Du ty Determination (that is, to the 
products upon which countervailing duties were imposed).  See  infra , paras. 49-50.  
5Original Panel Report, US – Softwood Lumber IV , para. 8.1(c).  The original panel also addressed 
claims by Canada in respect of the USDOC's determination regarding the existence of a "financial contribution", the existence and amount of a "benefit", and the existence of "specific" subsidies. 
6Original Appellate Body Report, US – Softwood Lumber IV , para. 167. (original emphasis)  In addition 
to its findings with respect to the pass-through issue, the Appellate Body:  upheld the original panel's finding that the USDOC's determination regarding the existence of  a "financial contribution" was not inconsistent with 
Article 1.1(a)(1 )(iii) of the  SCM Agreement ;  reversed the panel's finding with respect to the interpretation of 
Article 14 of the  SCM Agreement , as well as the panel's consequential finding that the United States acted 
inconsistently with Articles 10 , 14, 14(d), and 32.1 of the  SCM Agreement  in its determination of the existence 
and amount of benefit in the underlying countervailing duty investigation;  but found, however, that there were 
insufficient facts for it to complete the legal analysis with respect to Canada's claims regarding the calculation of 
the benefit. ( Ibid.) 
7WT/DS257/11.  
8WT/DS257/13.  
9Pub. L. No. 103-465, § 129, 108 Stat. 4838, codified at 19 USC § 3538 (2000) pp. 720-721 (Exhibit 
CDA-2 submitted by Canada to the Panel).  Section 129 is entitled "Administrative action following WTO panel reports" and establishes a procedure that, amongst other things, allows the USDOC to issue a revised 
determination in a countervailing duty proceeding following relevant recommendations and rulings by the DSB.  
Excerpts from the text of Section 129 are set out  infra , footnotes 79 and 82.  WT/DS257/AB/RW 
 Page 3 
 
 
Section 129 (the "Section 129 Determination")10, the United States performed a pass-through analysis 
in respect of certain transactions.  The rate of subsidization established in the Section 129 
Determination became the estimated countervailing duty rate (referred to as a cash deposit rate) 
applicable to imports of softwood lumber from Canada entering the United States on or after 
10 December 2004.11   
4. On 20 December 2004, the USDOC published the final results of the first administrative 
review of the countervailing duties on imports of  softwood lumber from Canada that had been 
initiated in July 2003 (the "First Assessment Review").12  In that review, the USDOC adopted the 
same pass-through methodology as it had used  in the Section 129 Determination.13  However, the 
USDOC's application of this methodology in the Firs t Assessment Review did not, in the light of the 
evidence before it, result in any reducti on to its calculated rate of subsidization.14  The First 
Assessment Review established the final counterva iling duty liability for imports of softwood lumber 
that entered the United States during the period 22 May 2002 to 31 March 2003.  The results of the 
First Assessment Review also fixed the estimated countervailing duty rate (the cash deposit rate) for 
imports entering the United States on or after 20 December 2004.   
5. Additional details regarding the Section 129 De termination and the Fi rst Assessment Review 
are set out in Section IV.A of this Report. 
6. At the DSB meeting held 17 December 2004, th e United States informed the DSB that it had 
complied with its recommendations and rulings in the original  US – Softwood Lumber IV   dispute.15  
Canada was of the view that the United States ha d failed to comply with the recommendations and 
                                                      
10"Notice of Implementation Under Section 129 of the Uruguay Round Agreements Act; 
Countervailing Measures Concerning Certain Softwood Lumber Products from Canada", United States Federal 
Register , Vol. 69, No. 241 (16 December 2004), p. 75305 (Exhi bit CDA-7 submitted by Canada to the Panel).  
See also USDOC Memorandum from B. Tillman to J. Jochum, "Section 129 Determination:  Final 
Countervailing Duty Determination, Certain Softwood Lumber from Canada" (6 December 2004) (Exhibit 
CDA-5 submitted by Canada to the Panel). 
11Section 129 Determination, supra , footnote 10, p. 75306.  
12"Notice of Final Results of Countervailing Duty Administrative Review and Rescission of Certain 
Company-Specific Reviews: Certain Softwood Lumber Products from Canada", United States Federal Register , 
Vol. 69, No. 243 (20 Decembe r 2004), p. 75 917 (Exhibit CDA-8 submitted by Canada to the Panel).  See also 
USDOC Memorandum from B. Tillman to J. Jochum, "Issues and Decisions Memorandum: Final Results of Administrative Review: Certain Softwood Lumber Products from Canada" (13 December 2004) (Exhibit  
CDA-11 submitted by Canada to the Pa nel), section II.F.  In the parlance of the United States, reviews intended 
to assess final duty liability are usually referred to as "administrative reviews". (United States' additional written 
memorandum, para. 2)  In these proceedings, however, both participants, and the Panel, used the term 
"assessment review" to describe this type of review.  We adopt the same approach in this Report. 
13Panel Report, footnote 50 to para. 4.58.  See also United States' additional written memorandum, 
para. 12. 
14See  infra , footnote 86.  
15WT/DSB/M/180, paras. 22-25.  WT/DS257/AB/RW 
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rulings.  On 30 December 2004, Canada requested that  the matter of compliance be referred to a panel 
pursuant to Article 21.5 of the  Understanding on Rules and Procedures Governing the Settlement of 
Disputes   (the "DSU").
16  On 14 January 2005, the DSB referre d the matter to the original panel.17  A 
member of the original panel was unable to particip ate in the proceedings and the parties, therefore, 
on 7 February 2005, agreed on a new panelist.18  Before the Article 21.5 Panel (the "Panel"), Canada 
claimed that the United States had failed to comply  with the recommendations and rulings of the DSB 
in both the Section 129 Determination and the First Assessment Review.19  Canada claimed that the 
United States thereby continued to violate its obligations under Article VI:3 of the GATT 1994 and Articles 10 and 32.1 of the  SCM Agreement .
20   
7. In its first written submission to the Panel, the United States requested a preliminary ruling 
that the First Assessment Review fell outside of th e mandate of the Panel under Article 21.5 of the 
DSU.  The Panel instructed the parties to "assu me" in making their submissions "that the first 
assessment review does  fall within the scope of these proceed ings", but added that such assumption 
was "without prejudice to the Panel's eventual ruling on this issue".21   
8. The Panel Report was circulated to the Members of the World Trade Organization (the 
"WTO") on 1 August 2005.  The Panel rejected: 
• the US request for a preliminary ru ling that the First Assessment 
Review falls outside the scope of the present DSU Article 21.5 proceeding, insofar as the pass-through analysis is concerned[.]
22 
9. The Panel upheld Canada's claims that: 
• in the Section 129 Determination, and in the treatment of pass-
through in the First Assessment Review, the United States failed 
to properly implement the recommendations and rulings of the 
DSB in this dispute by failing to conduct a pass-through analysis in respect of sales, found by [the] USDOC not to be at arm's length, of logs by tenured timber harvesters, whether or not they also produce lumber, to unrelated lumber producers, whether or not they hold a stumpage contract;  and 
                                                     
 
16WT/DS257/15.  
17WT/DSB/M/181. 
18WT/DS257/19. 
19Canada's first written submission to the Panel, para . 35;  Panel Report, p. A-13.  See also Panel 
Report, para. 4.51.  
20Canada's first written submission to the Panel, para. 37;  Panel Report, p. A-13.  
21Statement by the Chairman of the Panel at the Substantive Meeting of the Panel with the Parties, 
21 April 2005. (original underlining) 
22Panel Report, para. 5.1.  See also para. 4.50.  WT/DS257/AB/RW 
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• in the Section 129 Determination, and in the First Assessment 
Review, the USDOC therefore included in its subsidy numerator transactions for which it had not demonstrated that the benefit of subsidized log inputs had passed through to the processed product.
23 
10. The Panel accordingly concluded that the United States remained in violation of Articles 10 
and 32.1 of the  SCM Agreement   and Article VI:3 of the GATT 1994.24  On this basis, and in the light 
of Article 3.8 of the DSU, the Panel concluded that, to the extent the United States acted inconsistently with the provisions of the  SCM Agreement   and the GATT 1994, and failed to 
implement properly the relevant recommendations a nd rulings of the DSB, it nullified or impaired 
benefits accruing to Canada under those Agreements.
25  Pursuant to Article 19.1 of the DSU, the 
Panel recommended that the United States bring its  Section 129 Determinati on and First Assessment 
Review into conformity with such provisions.26 
11. On 6 September 2005, the United States notified the DSB of its intention to appeal certain 
issues of law covered in the Panel Report and certa in legal interpretations developed by the Panel, 
pursuant to Articles 16.4 and 17 of the DSU, and filed a Notice of Appeal27, pursuant to Rule 20(1) of 
the  Working Procedures for Appellate Review  (the " Working Procedures ").  On 13 September 2005, 
the United States filed an appellant's submission.28  On 3 October 2005, Cana da filed an appellee's 
submission.29  On the same day, China and the European  Communities each filed a third participant's 
submission.30  
12. On 26 September 2005, pursuant to Rule 28(1) of the  Working Procedures , the Appellate 
Body Division hearing this appeal requested th e United States to submit an additional written 
memorandum explaining certain aspects of relevant  United States laws and procedures.  The United 
States filed an additional written memorandum on 5 October 2005.  On 10 October 2005, Canada 
                                                      
23Panel Report, para. 5.2.  The Panel rejected a claim by Canada that the USDOC improperly 
disregarded all aggregate transaction and pricing data submitted by the Canadian respondents.  The Panel also rejected Canada's claim against the benchmarks used by the USDOC in its pass-through analysis. ( Ibid., 
para. 5.1) 
24Ibid., para. 5.4.  
25Ibid., para. 5.5. 
26Ibid.  The Panel declined to make a further reco mmendation under Article 19.1 of the DSU, as 
requested by Canada, and left it to the United States to determine the modalities of the implementation of its 
recommendation. ( Ibid., para. 5.7) 
27WT/DS257/22 (attached as Annex I to this Report).  
28Pursuant to Rule 21(1) of the Working Procedures .  
29Pursuant to Rule 22(1) of the Working Procedures .  
30Pursuant to Rule 24(1) of the Working Procedures.  WT/DS257/AB/RW 
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submitted a written response to the United States' additional written memorandum.
31  The Division 
allowed the third participants additional time duri ng the presentation of their oral statements at the 
hearing to respond to these additional memoranda.32 
13. The oral hearing in this appeal was held on 12 October 2005.  The participants and third 
participants presented oral arguments and respond ed to questions posed by the Members of the 
Division hearing the appeal.  
II. Arguments of the Participants  and the Third Participants 
A. Claims of Error by the United States – Appellant 
14. The United States appeals the Panel's conclusion th at the First Assessment Review fell within 
the scope of review under Article 21.5 of the DSU.  The United States considers this conclusion to be 
based on erroneous findings on issues of law and an incorrect interpretation of Article 21.5 of the 
DSU.   
15. The United States submits that the Panel's jurisd iction under Article 21.5 is limited to those 
measures taken to comply with the recommendations  and rulings of the DSB in the original  
US – Softwood Lumber IV  proceedings.  Although the United States acknowledges that a panel has 
the authority to decide whether a measure is one "taken to comply", it em phasizes that "measures 
taken to comply" within the meaning of Article 21.5 of the DSU are limited to those that have been, 
or must be, taken to address WTO-inconsistencies identified in the recommendations and rulings of 
the DSB.  According to the Unites States, the releva nt recommendations and rulings related solely to 
the USDOC's approach to the "pass-through" issue in the Final Countervailing Duty Determination.  
This was the measure identified in Canada's request for the establishment of the original panel;  it was 
also the measure addressed in the relevant reco mmendations and rulings adopted by the DSB.  The 
United States implemented those recommendations a nd rulings by means of a revision to the Final 
Countervailing Duty Determination through the Section 129 Determination.  The relevant 
recommendations and rulings did not relate to any assessment review.  The United States was, 
therefore, under no compliance obligation in regard to the First Assessment Review.  Thus, the United 
States did not conduct the First Assessment Review with the intention of complying with the DSB's 
recommendations and rulings.  Nonetheless, "in vi ew of the original WTO findings", the USDOC 
                                                      
31Pursuant to Rule 28(2) of the Working Procedures . 
32Pursuant to Rule 28(3) of the Working Procedures.   WT/DS257/AB/RW 
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applied the same pass-through methodology in the Fi rst Assessment Review as it had applied in the 
Section 129 Determination.33 
16. The United States argues that the Panel erred in overlooking the "fundamental" and 
"qualitative" differences between countervaili ng duty investigations and assessment reviews.34  
Instead, the Panel focused solely  upon the fact that both procedures involved duties on softwood 
lumber.  According to the United States, the  SCM Agreement  distinguishes between investigations—
the purpose of which is "to determine the existence,  degree, and effect of any alleged subsidy"—and 
assessment reviews—the purpose of which is to levy the duty.  That the  SCM Agreement   recognizes 
assessment reviews—which are only used in retr ospective duty assessment systems—as well as the 
fact that such reviews are distinct from investigations  is, in the view of the United States, made clear 
by footnote 52 of the  SCM Agreement .  This footnote provides for different consequences to flow 
from a finding of no subsidies during the review period (no requirement to terminate the duty) than 
must flow from a finding of no subsidies during the pe riod of investigation (no duty may be levied).  
17. The United States explains that, under its syst em of retrospective duty assessment, even 
though liability for the payment of duties attaches at the moment the merchandise subject to a 
countervailing duty measure enters the United States, the actual amount of countervailing duties to be 
paid will not be calculated until an assessment review has been conducted, or until the time to request 
an assessment review has passed w ithout any such request.  In the course of a review, the USDOC 
determines the assessment rate based on the examin ation of previous imports;  this rate also 
establishes the estimated countervailing duty (cash deposit)  rate to be applied to future imports.  After 
concluding the review, the USDOC instructs the cust oms administration to assess the definitive rate of 
countervailing duties to be levied.  The DSB recomme ndations and rulings in the original proceedings 
encompassed only the Final Countervailing Duty Determination establishing the existence and 
amount of the subsidy under Article 18 of the  SCM Agreement .  These recommendations and rulings 
did not, asserts the United States, extend to duty assessment proceedings.  
18. The United States notes that, as part of the reasoni ng that led the Panel to refuse to exclude 
the First Assessment Review from the scope of the present Article 21.5 proceedings, the Panel 
claimed that "US law allows DSB rulings a nd recommendations to be implemented through 
administrative reviews in certain circumstances" and that this " undermines the US argument that 
assessment reviews should be excluded from the scope of DSU Article 21.5 proceedings."35  T h e  
United States submits that the Panel's reasoning in this regard is based on a misinterpretation of a 
                                                      
33United States' additional written memorandum, para. 12.   
34Unites States' appellant's submission, paras. 4 and 17, and p. 8, sub-heading II.B.1. 
35Ibid., para. 24 (quoting Panel Report, footnote 42 to para. 4.45). WT/DS257/AB/RW 
Page 8  
 
provision of the Statement of Administrative Action to the Uruguay Round Agreements Act 
(the "SAA").
36  The United States adds that the SAA is, in  any event, irrelevant in the present case 
because implementation was carried out thro ugh the Section 129 Determination and  not  through an 
administrative review.   
19. The United States argues that the timing of the initiation of the First Assessment Review—
before  the adoption of the DSB recommendations a nd rulings—underlines that it was not a measure 
taken to comply with those recommendations and rulings.  The United States argues that a "measure 
taken to comply with recommendations and ru lings" presupposes the existence of adopted 
recommendations and rulings.  The United States empha sizes that the word "' comply' when followed 
by the preposition 'with' is defined as 'accommodate  oneself to (a person, circumstances, customs, 
etc.) ... Act in accordance with or  with  a request, command, etc. ... Consent or agree to,  to do ".37  
The USDOC initiated the First Assessment Review on 1 July 2003, eight months  before  the adoption 
of the DSB recommendations and rulings on 17 Fe bruary 2004.  The First Assessment Review, 
therefore, could not have been taken in order  to comply  with those recommendations and rulings.  
20. The United States considers that the standard a pplied by the Panel to determine the scope of 
Article 21.5 proceedings is so broad as to render the jurisdictional limitations of Article 21.5 "nearly 
meaningless".38  The United States claims that the interp retation by the Panel was guided by dispute 
settlement panel reports, and not by the customary rul es of interpretation of public international law. 
For the United States, the Panel's interpretation of Ar ticle 21.5 had "no basis in the text or context of 
Article 21.5 itself, and ... is inconsistent  with the object and purpose of the DSU."39  
21. The United States emphasizes that  the Section 129 Determination serves as the basis for the 
imposition of the countervailing duty and that it still a pplies.  Contrary to Canada's arguments, "the 
'existence' and 'consistency' of the Section 129 Determination is undisturbed.  It has not been 
superseded, replaced, undone or rendered non-ex istent by the First Assessment Review."40  The Panel, 
however, concluded that the First Assessment Revi ew fell within the scope of the Article 21.5 
proceedings because it "'could have an impact on' or could 'possibly unde rmine'" the Section 129 
                                                      
36"Statement of Administrative Action" in Message from the President of the United States 
Transmitting the Uruguay Round Trade Agreements, Text s of Agreements Implementing Bill, Statement of 
Administrative Action and Required Supporting Statements , H.R. Doc. No. 103-316, Vol. 1, p. 656 (Exhibit 
CDA-1 submitted by Canada to the Panel). 
37United States' appellant's submission, para. 30 (quoting The New Shorter Oxford English Dictionary , 
L. Brown (ed.) (Clarendon Press, 1993), Vol. 1, p. 461 (original italics)).  
38Ibid., paras. 5 and 32. 
39Ibid., para. 5. 
40United States' statement at the oral hearing.  WT/DS257/AB/RW 
 Page 9 
 
 
Determination.41  The United States contests this conc lusion.  The Section 129 Determination 
confirmed the existence of a subsidy that justifie d the imposition of countervailing duties.  The First 
Assessment Review did not have, nor could it have  had, any impact on that determination.  The 
United States also emphasizes th at the Section 129 Determination (and the Final Countervailing Duty 
Determination that it revised) considered the existe nce and amount of subsidization in the original 
period of investigation;  the First Assessment Revi ew, by contrast, was concerned with the amount of 
subsidization in a different period of review. 
22. The United States argues that Section 129 pro ceedings and assessment reviews have different 
legal consequences and "wholly different" administrative records.42  They are neither "inextricably 
linked" nor "clearly connected" proceedings.43  Indeed, the Panel's erroneous finding to the contrary 
hinges on two aspects of an ancillary relati onship between the Final Countervailing Duty 
Determination, the Section 129 Determ ination, and the First Assessment Review.  The first is the fact 
that some imports, which were subject to the cash deposit rate determined in the Final Countervailing 
Duty Determination and revised in the Section 129 De termination, were also subject to final assessed 
duties determined in the First A ssessment Review.  The second aspect is that the cash deposit rate set 
in the Final Countervailing Duty Determination an d amended by the Section 129 Determination was 
also affected, prospectively, by the First Assessm ent Review.  On these bases, the Panel concluded 
that there was "considerable overlap in  the effect of these various measures".44   
23. Furthermore, according to the United States, the "effects" of a measure cannot be the 
appropriate standard to determine the scope of juri sdiction in Article 21.5 proceedings.  This standard 
has no basis in the text of Article 21.5:  the "e ffect" of a measure does not indicate whether that 
measure was "taken to comply".45  Indeed, the United States argues, any alleged "overlap" in the 
effect of the three distinct measures was simply a "natural consequence" of the United States' system 
of retrospective duty assessment.  That some imports initially subject to a cash deposit rate set by the 
Final Countervailing Duty Determination were later assessed based on the First Assessment Review is 
simply the logical consequence of having two separat e sets of proceedings.  Similarly, with respect to 
the fact that the cash deposit rate set by the Final Countervailing Duty Determination was also affected (prospectively) by the Fi rst Assessment Review, the United St ates submits that changes to the 
cash deposit rate are a natural result of taking into  account information pertaining to a more recent 
period in an assessment proceeding.  The United Stat es underlines that the cash deposit rate is always  
                                                     
 
41United States' appellant's submission, paras. 32-33 (quoting Panel Report, para. 4.41). 
42Ibid., para. 6.  
43Ibid., para. 34 (referring to Panel Report, para. 4.41). 
44Ibid., para. 36 (quoting Panel Report, para. 4.41). 
45Ibid., para. 40.  WT/DS257/AB/RW 
Page 10  
 
subject to change for subsequent imports if an a ssessment review is requested, irrespective of any 
WTO or Section 129 proceedings.  
24. The United States claims that the Panel's interpretation of Article 21.5 treats WTO Members 
with a retrospective duty assessment system diffe rently from Members with a prospective duty 
assessment system.  The overlap in effect identified by the Panel simply would not exist in a prospective duty assessment system.  Nevertheless, th e Panel itself stated that "interpretation and 
application of Article 21.5 must accommodate both prospective and retrospective duty assessment 
systems."
46  
25. The United States submits that the Panel's only re ference to customary rules of interpretation 
was its reference to the object and purpose of the DSU.  The Panel asserted that a decision declining 
to examine the First Assessment Review in Article 21.5 proceedings would fa il to ensure the "prompt 
settlement" of the dispute.  Yet, the objective of promptly settling disputes does not, in itself, "justify 
sweeping into the limited expedited Article 21.5 pr ocedures measures that are not 'taken to comply'"47 
with recommendations and rulings of the DSB.  If a Member has a complaint regarding the  
assessment   of countervailing duties in an assessment  review, the regular dispute settlement 
procedures are available to address the dispute, consis tent with the object and purpose of the DSU.  In 
this context, the United States argues that the Pane l's reference to the Appellate Body Report in  EC – 
Bed Linen (Article 21.5 – India)  was misplaced because, in that cas e, the Appellate Body used the 
notion of prompt settlement as an argument  against  including a new claim in Article 21.5 
proceedings.  
26. According to the United States, the Panel not only unduly relied on the reports by previous 
panels that dealt with Article 21.5 of the DSU, it also misapplied those panel reports.  The United 
States considers that the situation before the panel in  Australia – Automotive Leather II 
(Article 21.5 – US)  can be distinguished from the present case.  In that dispute, the repayment of a 
WTO-inconsistent subsidy and th e payment of a new non-commercial loan were announced on the 
same day, with the loan being contingent upon re payment of the subsidy.  The loan was therefore 
clearly within the scope of Article 21.5 as a "measure taken to comply".  In this case, by contrast, the 
two proceedings at issue are separate and distinct bot h in timing and in nature.  The United States also 
considers that the panel in Australia – Salmon (Article 21.5 – Canada) dealt with a matter quite 
distinct from that in the present dispute.  The panel in that dispute used a "clearly connected" standard 
to include in the Article 21.5 proceedings a ban on salmon imports by the Australian state of Tasmania that had been implemented shortly afte r the removal of a ban on salmon imports by the 
                                                     
 
46United States' appellant's submission, para. 39 (quoting Panel Report, para. 4.49). 
47Ibid., para. 42.   WT/DS257/AB/RW 
 Page 11 
 
 
Australian federal government.  The United States subm its that the Tasmanian ban in that proceeding 
was, by its timing and its nature, an "obvious" and "specific" response to the removal of the ban by 
the Australian federal government.48  By contrast, an assessment review is a procedure that occurs 
upon request of a party regardless of any co mpliance obligation resulting from WTO dispute 
settlement.  The United States emphasizes that, in the present case, the First Assessment Review was 
requested eight months before the adoption of the US –  Softwood Lumber IV  original panel and 
Appellate Body reports.   
27. Although the Panel in the present case made a di stinction between the facts in this case and 
those in  EC – Bed Linen (Article 21.5 – India) , the United States argues that there are obvious 
parallels between the facts in both cases, such that there should be a similar outcome in both disputes.  
In  EC – Bed Linen (Article 21.5 – India) , the panel found that its jurisdiction did not extend to a 
measure that, according to the United States, was fa r more closely related to the measure taken to 
comply with the relevant recommendations and rulings  of the DSB in that case than was the First 
Assessment Review to the measure taken to comply in this case.  The United States adds that, like the 
measure considered in EC – Bed Linen (Article 21.5 – India) , the First Assessment Review was a 
result of "events subsequent to"49 the Final Countervailing Duty Determination, namely, the request 
by Canada and others for a review of the sal es and subsidies in a subsequent period.   
28. Finally, although it admits that this argument is  not relevant to the legal analysis, the United 
States considers the Panel's inclusion of the First Assessment Review in these Article 21.5 
proceedings to be "unfairly prejudicial".50  After having implemented the recommendations and 
rulings of the DSB, the United States considers it shou ld not have been expected to defend its actions 
in a separate assessment proceedi ng for the first time under the expedited time-frames of Article 21.5 
proceedings.  
29. In addition to its appeal of the Panel's refusal of its request for a preliminary ruling excluding 
the First Assessment Review from the Article 21.5 proceedings, the United States requests the 
Appellate Body to reverse all of th e Panel's consequential findings of inconsistency with respect to the 
First Assessment Review on the grounds that th e First Assessment Review was not within the 
jurisdiction of the Panel under Article 21.5 of the DSU.51   
                                                      
48United States' appellant's submission, para. 52. 
49Ibid., para. 59. 
50Ibid., para. 6. 
51United States' Notice of Appeal, WT /DS257/22 (attached as Annex I to this Report), paras. 2-5. WT/DS257/AB/RW 
Page 12  
 
B. Arguments of Canada – Appellee 
30. Canada requests the Appellate Body to reject  the United States' appeal and uphold the 
relevant findings and conc lusions of the Panel with respect to the First Assessment Review.  Canada 
observes that the US DOC, in its Section 129 Determinati on, completed a limited pass-through 
analysis but "refused to examine the vast majority  of [the] transactions" between unrelated parties, 
"claiming they were not 'a rm's length' transactions".
52  Canada alleges that, in the First Assessment 
Review, the USDOC completed no pass-through analysis  and, therefore, no adjustment was made to 
the countervailing duty rate, notwithstanding the re commendations and rulings of the DSB and the 
limited pass-through analysis in the Section 129 De termination issued one week earlier.  Canada 
emphasizes that the final countervailing duty rate estab lished in the First Assessment Review applied  
retrospectively  to import entries that were initially subject to the original countervailing duty rate 
established in the Final Countervailing Duty Determina tion.  At the same time, the rate resulting from 
the First Assessment Review replaced  prospectively  the duty rate that had been revised by the 
Section 129 Determination.  The First Assessment  Review thus established a countervailing duty rate 
in the form of a cash deposit rate that reflected  no pass-through analysis, but which superseded and 
replaced the rate determined in the Section 129 De termination. In this way, the First Assessment 
Review "effectively undid" any compliance pu rportedly achieved through the Section 129 
Determination.53  
31. Canada agrees with the Panel's interpretation a nd application of Article 21.5 of the DSU.  In 
Canada's view, an Article 21.5 panel has jurisdic tion to examine all measures that a WTO Member 
declares to be "measures taken to comply", but a dds that this jurisdiction also extends to other 
measures taken by the Member that affect its compliance with the recommendations and rulings of  
the DSB.  Measures affect compliance—and are, therefore, "measures taken to comply" under  
Article 21.5 of the DSU—if they affect the "existence" or "consistency" of measures that are declared to be taken to comply, that is, if they undermine or nullify the purported compliance.  Canada asserts that an Article 21.5 panel cannot properly assess the effect of measures that are declared to be 
"measures taken to comply" unless it also reviews ot her measures that affect those expressly taken to 
comply.  Canada submits that accepting the United Stat es' arguments in this appeal would mean that 
in examining compliance under Article 21.5 of th e DSU, the Panel could have reviewed only a 
measure that no longer applies—the Section 129 De termination—but could not have considered the 
First Assessment Review, which replaced and effec tively undid the measure that had been taken to 
comply.   
                                                     
 
52Canada's appellee's submission, para. 17. 
53Ibid., para. 2.  WT/DS257/AB/RW 
 Page 13 
 
 
32. According to Canada, an Article 21.5 panel must  examine fully the application and effect of 
all relevant measures, including the legal and factual setting in which they operate, in order to make 
findings on the "existence" of a measure taken to comply, or its "consistency with a covered 
agreement".  This interpretation is  consistent with the context in which the term "measures taken to 
comply" is used.  Furthermore, the object and purpo se of the DSU, as reflected in Articles 3.3, 3.7, 
and 21.1 of that Agreement, may be achieved only through a comprehensive review of measures that 
affect the "existence" or "consistency" of measures declared to be taken to comply. 
33. Canada argues that the United States' appeal i gnores the overlapping effects of its measures. 
Canada asserts that the First Assessment Review affects the "existence" and "consistency" of the Section 129 Determination for two reasons:  first, because the subject-matter of the dispute—that is, 
the obligation to examine "pass-through" of alle ged stumpage subsidies—arises in both the 
Section 129 Determination and th e First Assessment Review;  and, secondly, because the Final 
Countervailing Duty Determination, the Section 129 Determination, an d the First Assessment Review 
have significantly overlapping effects, particularly  in respect of the cash deposit rate.  Canada 
emphasizes that the application and the effect of the First Assessment Review undid any compliance 
that might have resulted from the Section 129 De termination.  Thus, after a limited pass-through 
analysis, the Section 129 Determination replaced the cash deposit rate under the Final Countervailing 
Duty Determination, which was based on no pass-through analysis at all.  However, this revised cash 
deposit rate of the Section 129 Determination was then  replaced, a mere ten days later, by the results 
of the First Assessment Review, which—like the original measure—contained no pass-through 
analysis at all. 
34. Canada supports the Panel's finding that the Firs t Assessment Review "was 'clearly connected 
to the panel and Appellate Body reports concerning the Final [Count ervailing Duty] Determination' 
and 'inextricably linked to the treatment of p ass-through in the Section 129 Determination.'"
54  In this 
context, Canada believes that the Panel relied on and correctly applied earlier jurisprudence on 
Article 21.5 of the DSU.  Both the  Australia – Salmon (Article 21.5 – Canada)  and the  EC – Bed 
Linen (Article 21.5 – India)  panels found that barring an Article  21.5 panel from examining measures 
that have a clear connection to the original pa nel and Appellate Body reports would lead to 
"unreasonable or absurd results".55  Furthermore, Canada unders tands the Appellate Body in 
Canada – Aircraft (Article 21.5 – Brazil)   to have  emphasized that an Article 21.5 panel may examine 
                                                      
54Canada's appellee's submission, para. 38 (quoting Panel Report, para. 4.41).  
55Ibid., para. 26. WT/DS257/AB/RW 
Page 14  
 
not only how the measures of a Member purport to achieve compliance, but also how they " ought to 
have achieved   compliance".
56 
35. According to Canada, much of the United Stat es' argument hinges on the distinction it draws 
between original investigations and assessment revi ews within the United States' retrospective duty 
assessment system.  However, the United States' description of its regime omits important points.  In the view of the United States, an original determin ation establishes the basis for a countervailing duty, 
and an assessment review establishes the actual amount  of duties to be levied.  Canada points out, 
however, that the final results of an assessment re view both replace the estimated duties collected for 
entries that occurred during the review period and establish the new estimated countervailing duty rate 
in the form of cash deposits.  Furthermore, both th e original investigation and the assessment review 
entail a substantive and "essentially the same"
57 analysis to determine whether, and to what extent, the 
imports were subsidized.  This includes at each stag e the legal obligation to examine whether a benefit 
was passed through.  Canada notes that it is "routin e practice" for the USDOC to incorporate into the 
administrative record of an assessment review "much, and sometimes all", of the record of the original 
investigation in the same proceedings.58 
36. Canada dismisses as irrelevant the United St ates' argument that the recommendations and 
rulings of the DSB did not require the United States to conduct an assessment review because, had the 
First Assessment Review not been conducted, the Section 129 Determ ination would still be in effect 
and duties would be collected at the rate established in that determination.  Canada further supports 
the finding of the Panel that it is not the timing of the  initiation   of an assessment review that is 
important, but, rather, the application and effects of the  results  of this review.  The results of the 
First Assessment Review in the present case were i ssued about ten months after the adoption of the 
recommendations and rulings of the DSB.   
37. Canada also considers "disingenuous" the United St ates' arguments with r espect to the Panel's 
"misinterpretation" of the SAA.59  As evidence of the linkage between assessment reviews and 
original countervailing duty investigations, th e Panel noted that United States law allows DSB 
recommendations and rulings to be implemen ted through assessment reviews in certain 
circumstances.  That the circumstances descri bed in the SAA may be limited to cases where a 
USDOC methodology is at issue, rather than  where the basis for the underlying definitive 
                                                      
56Canada's appellee's submission, para. 28 (original emphasis) (referring to Appellate Body Report, 
Canada – Aircraft (Article 21.5 – Brazil) , para. 36). 
57Comments of Canada on United States' additional written memorandum, para. 3. 
58Ibid., para. 5. 
59Canada's appellee's submission, para. 51.   WT/DS257/AB/RW 
 Page 15 
 
 
countervailing duty order is at issue, does not mean  that implementation in an assessment review is 
restricted to cases not involving investigation fina l determinations, as the United States suggests.  Nor 
does the Panel's observation mean, as the United St ates intimates, that all DSB recommendations and 
rulings arising from final counterva iling duty determinati ons could be implemented in an assessment 
review.  Indeed, the SAA makes clear that, DSB recommendations and rulings that can only be implemented by revocation of the order would ha ve to be implemented through a Section 129 
determination rather than an assessment review.  Accordingly, none of the United States' arguments 
discounts the Panel's observations with respect to the SAA.  
38. Canada rejects the United States' argument that  the overlapping effects identified by the Panel 
"are nothing more than the natural consequence of  the U.S. system of retrospective assessment".
60  
Canada believes that such overlapping effects can also occur in prospective duty systems because a 
Member's compliance obligations must be factored into subsequent proceedings affecting the 
countervailing duties (such as reviews or duty refund procedures) when such proceedings come within 
the scope of Article 21.5 of the DSU.  In any ev ent, a potential distinction between a retrospective 
duty assessment system and a prospective duty system is  irrelevant to the United States' obligation to 
comply with the recommendations and rulings of the DSB. 
39. Canada disagrees with the United States regard ing the significance of qualitative differences 
between final determinations and assessment review s.  Such differences do not require the exclusion 
of the First Assessment Review from the mandate of th e Panel in this dispute.  Canada maintains that 
the United States ignores the fact that a final countervailing duty determination involves both the 
"imposition" and the "levying" of definitive duties.  The United States does not deny that the "collection" of definitive countervailing duties in cludes the collection of cash deposits following a 
final countervailing duty determinati on.  However, the United States mischaracterizes the meaning of 
"levy" under the relevant provisions of the GATT 1994 and the  SCM Agreement .  According to 
Canada, footnote 51 to Article 19 of the  SCM Agreement   confirms that the term "levy" encompasses 
both the assessment and the "collection" of count ervailing duties.  Furthermore, Article 10 and 
footnote 36 thereto of the  SCM Agreement  define the term "countervailing duty" to mean "a special 
duty  levied  for the purpose of offsetting any subsidy". (em phasis added)  Canada asserts that even if 
the United States is correct in arguing that the "levyi ng" of definitive duties occurs only pursuant to an 
assessment review, this would not mean that the First Assessment Review would be excluded from the Article 21.5 proceedings in this case.  Canada adds that the assessment of definitive duties is a 
"specific action" contemplated under Article 32.1 of the SCM Agreement  and, therefore, is 
                                                     
 
60Canada's appellee's submission, para. 44 (quoting United States' appellant's submission, para. 37). WT/DS257/AB/RW 
Page 16  
 
encompassed by the recommendations and rulings of  the DSB that apply to "specific actions" under 
Article 32.1 of that Agreement.  
40. Finally, Canada submits that the United States' position as to the scope of Article 21.5 
proceedings is inconsistent with the object and pur pose of the DSU—that is, the prompt settlement of 
disputes.  Canada argues that, if the United States ' position in the appeal were upheld, Canada would 
be forced to initiate new proceedings in respect  of each annual assessment review and could never 
secure compliance with the recommendations and ruli ngs of the DSB before the measure at issue 
would be superseded by the results of a new assessment review.  To avoid these "absurd consequences"
61, the jurisdiction of an Article 21.5 pane l must be interpreted to allow for a 
comprehensive review of all measures affecting the "existence" or "consistency" of measures declared 
to be taken to comply. 
C. Arguments of the Third Participants 
1. China  
41. China supports the position of the Panel that the First Assessment Review fell within the 
scope of review under Article 21.5 of the DSU.  China submits that the word "existence" in 
Article 21.5 suggests that a "measure taken to comply" must remain in place and in effect, and must not be nullified, invalidated, or rendered non-existent  by other measures.  Existence requires a lasting 
effect of the measure in place, which is more than the simple adoption of a single measure.  In China's 
view, the adoption of additional measures, where these could invalidate the first measure, must be 
taken into account by an Article 21.5 panel in de termining the existence of "measures taken to 
comply".  On this basis, China believes that the Panel had jurisdiction to examine the First 
Assessment Review, which effectively invalidate d the Section 129 Determination by establishing a 
new cash deposit rate.  China asserts that acceptan ce of the United States' view—according to which a 
new case would have to be brought against ne w measures, because such measures may not be 
included in Article 21.5 proceedings —would run counter to the object and purpose of the DSU, which 
is the prompt settlement of disputes.  If Members were allowed to replace, at their discretion and 
convenience, measures taken to comply, the object and purpose of the DSU could not be achieved.  
42. Like the Panel, China believes that the First As sessment Review is "clearly connected" to the 
recommendations and rulings of the DSB and is "inext ricably linked" to, and has an important effect 
on, the "existence" of the "measure taken to comply"—that is, the Section 129 Determination.
62  
                                                      
61Canada's statement at the oral hearing. 
62China's third participant' s submission, para. 12.  WT/DS257/AB/RW 
 Page 17 
 
 
Unlike the United States, China does not see " qualitative differences" between the original 
investigation and the First Assessment Review:  both proceedings calculated the amount of the 
subsidy that, in turn, was the basis for fixing th e amount of the countervailing duties to be levied.63  
China also supports the Panel's findings with regard  to the "considerable overlap" in the prospective 
effects of the Section 129 Determination and the First Assessment Review regarding the 
determination of the cash deposit rate for future imports.  
43. China does not support the argument of the United States that the First Assessment Review 
cannot be a "measure taken to comply" because it was initiated before the recommendations and 
rulings of the DSB.  China asserts that what should be taken into c onsideration is the time when the 
First Assessment Review came into effect, not when  it was initiated.  China also disagrees with the 
view of the United States that the present situation may be distinguished from  Australia – Automotive 
Leather II (Article 21.5 – US)  on the grounds that, in that c ase, the loan was contingent upon 
repayment of the subsidy identified in the original proceedings.  The test in that case was not one of 
"contingency";  rather, the panel considered whether the measures were "inextricably linked".   In this 
case, the Panel was correct to find an "inextricable  link" between the Section 129 Determination and 
the First Assessment Review.  Nor does China suppor t the United States' view that the facts outlined 
in the panel report in  EC – Bed Linen (Article 21.5 – India)   are parallel to the present case, because 
the First Assessment Review was not a result of ev ents subsequent to the adoption of a compliance 
measure, as was the case in that dispute.  
2. European Communities  
44. Although the European Communities supports gene rally the conclusions of the Panel, it 
"regrets" the limited reasoning of the Panel.64  The European Communities requests the Appellate 
Body to dismiss the United States' appeal, and also  to modify the Panel's reasoning, taking account of 
the following observations made by the European Communities.   
45. The European Communities asserts that the Un ited States' arguments in this appeal are 
"entirely misconceived" and that "(if accepted) [the y] would not only be cont rary to Article 21.5 of 
the DSU, but also turn the US system of count ervailing duty assessment into a moving target that 
escapes the WTO disciplines."65  In the view of the European Comm unities, the role of an Article 21.5 
panel is different from the role of an original panel.  Whilst the task of an original panel is to solve a 
dispute relating to a particular specified measure, an Article 21.5 panel has the task of assessing 
                                                      
63China's third participant's submission, paras. 21-22. 
64European Communities' third participant's submission, para. 8. 
65Ibid.  WT/DS257/AB/RW 
Page 18  
 
whether or not the original disput e has been resolved.  For that reason, an Article 21.5 panel has a 
broad mandate to determine whether a WTO Me mber has implemented fully its compliance 
obligations.  These compliance obligations e ndure until full compliance is achieved.   
46. The European Communities argues that Article 21. 5 panels, in principle, have jurisdiction 
with respect to all factual and legal matters relating to the resolution of the original dispute.  Measures 
initiated before the recommendati ons and rulings of the DSB do not necessarily fall outside the 
jurisdiction of the Article 21.5 panel.  Indeed, the ma ndate of an Article 21.5 panel is not confined to 
the examination of only those measures that explic itly or deliberately relate to the measures found to 
be WTO-inconsistent in the original proceedings.  A broad mandate to determine whether a Member 
has fully implemented its compliance obligations is consistent with the special rules for Article 21.5 
proceedings, notably, recourse in most cases to the or iginal panel as well as  expedited time-frames.  
The purpose of Article 21.5 proceedings is to deal with  any further dispute that relates to the original 
dispute with a view to delivering "swift justice".
66  This view is further corroborated by the terms 
"existence" of "measures taken to comply" in Article  21.5 of the DSU, which imply that situations of 
a complete failure of compliance also fall w ithin the mandate of an Article 21.5 panel.  
47. The European Communities argues that the existence of the requisite relationship between 
original measures and measures taken to comply mu st be decided on a substantive, rather than a 
formal, basis.  The European Comm unities argues that the United States errs in its view regarding the 
delineation of measures challenged in countervailing dut y cases.  The measure to be reviewed by this 
Article 21.5 Panel is not a discrete determinati on, but, rather, the "continued application of a 
countervailing duty  on the basis of the administrative re view (superseding both the original 
determination and the Section 129 review)".67  This is because it is the duty itself that interferes with 
trade and is the measure of concern.  It is not, as the United States argues, the determination made by 
an investigating authority.  Therefore, independently  of the retrospective or prospective nature of the 
duty assessment system at issue, the question should be whether an interim or changed circumstances 
review relates to the same countervailing duty impo sed on the same product for the same purpose.  It 
must be assessed on a case-by-case basis whether a particular countervailing duty based on, or 
concerning the same product and purpose as, the origin al countervailing duty continues to exist.  If so, 
a complaining Member may have recourse to an Article 21.5 panel.  The European Communities 
argues that, otherwise, Members could escape thei r WTO obligations by formally terminating a 
measure and then re-adopting it.   
                                                      
66European Communities' third participant's submission, para. 23. 
67Ibid. para. 9. (original emphasis)  WT/DS257/AB/RW 
 Page 19 
 
 
III. Issues Raised in this Appeal 
48. The following issues are ra ised in this appeal: 
(a) whether the Panel erred in finding that the First Assessment Review falls within the 
scope of the present Article 21.5 proceedings , insofar as the pass-through analysis is 
concerned68;  and 
(b) whether, as a result of the above legal finding, the Panel also erred in making the 
following findings regarding the pass-thr ough analysis in the First Assessment 
Review69: 
(i) that, in the treatment of pass-through in the First Assessment Review, the 
United States failed to implement prope rly the recommendations and rulings 
of the Dispute Settlement Body (the  "DSB") by failing to conduct a pass-
through analysis in respect of sales, found by the United States Department of 
Commerce (the "USDOC") not to be at arm's length, of logs by tenured 
timber harvesters, whether or not they  also produce lumber, to unrelated 
timber producers, whether or not they hold a stumpage contract70; 
(ii) that, in the First Assessment Review, the United States included in its subsidy 
numerator transactions for which it had not  demonstrated that the benefit of 
subsidized log inputs had passed through to the processed product71;   
(iii) that, with respect to the First Asse ssment Review, the United States remains 
in violation of Articles 10 and 32.1 of the Agreement on Subsidies and 
Countervailing Measures  (the " SCM Agreement ") and Article VI:3 of the 
General Agreement on Tariffs and Trade 1994  (the "GATT 1994")72;  and  
                                                      
68Panel Report, paras. 4.41, 4.50 and 5.1.  
69We understand that the United States challenges all of the Panel findings identified in its Notice of 
Appeal on the same basis, namely, that the First Assessment Review could not be examined by a panel acting 
pursuant to Article 21.5 of the DSU.  (See  infra   paragraph 94) 
70Panel Report, para. 5.2. 
71Ibid. 
72Ibid., para. 5.4. WT/DS257/AB/RW 
Page 20  
 
(iv) that, with respect to the First Asse ssment Review, the United States has 
nullified or impaired benefits accruing to Canada under the  SCM Agreement  
and the GATT 1994.
73 
IV. Scope of Article 21.5 of the DSU 
A. Background and Procedural History 
49. In the original  US – Softwood Lumber IV  proceedings, Canada challenged the final 
determination by the USDOC that led to the im position of countervailing duties on softwood lumber 
from Canada (the "Final Count ervailing Duty Determination").74  Canada made a number of claims in 
respect of the USDOC's findings as to the existence and amount of the "benefit" element of the relevant subsidies, including that the USDOC had failed to conduct a "pass-through" analysis.  The 
original panel described the pass-through issue as follows: 
The heart of the pass-through issue is whether, where a subsidy is 
received by someone other than the producer or exporter of the product under investigation, the subs idy nevertheless can be said to 
have conferred benefits in  respect of that product.
75 
50. In the original proceedings, Canada argued that, because the imported softwood lumber 
products subject to investigation were not th e same as the upstream product (standing timber) in 
respect of which the alleged subsidies76 were paid, the USDOC was requi red to establish, rather than 
                                                      
73Panel Report, para. 5.5. 
74"Notice of Final Affirmative Countervailing Duty Determination and Final Negative Critical 
Circumstances Determination: Certain Softwood Lumber Products from Canada", United States Federal 
Register , Vol. 67, No. 63 (2 April 2002), p. 15545, as amended, Vol. 67, No. 99 (22 May 2002), p. 36070 
(Exhibit US-1 submitted by the United States to the Pane l).  The period of investigation for purposes of this 
proceeding was 1 April 2000 to 31 March 2001. 
75Original Panel Report, para. 7.91.  See also Panel Report, para. 4.65. 
76Most notably, the so-called "stumpage" programm es.  In Canada, "stumpage contracts" are the 
mechanism through which provincial governments provide timber harvesters with the right to harvest standing 
timber on Crown land.  The original panel described certain characteristics of the various stumpage programmes 
run by the Canadian provincial governments as follows: 
[T]he provinces own the forests and the trees that grow in them. The only 
way for harvesters to obtain the trees standing on government-owned Crown 
land for harvesting and processing is by concluding stumpage agreements 
(tenures or licences) with the governme nts concerning these trees.  The only 
way for the government to provide the standing timber that it owns to the harvesters and the mills for processing is by allowing the harvesters to come 
on the land and harvest the trees.  Such legal rights and obligations are 
transferred through the stumpage agreements.  It is thus through the stumpage agreements that the governments provide the standing timber to the 
harvesters.  
(Original Panel Report, para. 7.15) (footnotes omitted)  WT/DS257/AB/RW 
 Page 21 
 
 
presume, that any benefit received by the harvesters of standing timber passed through to the 
producers of the downstream softwood lumber products  subject to investigation.  Ultimately, the 
original panel and the Appellate Body found th at the USDOC's calculation of the benefit was 
inconsistent with the United States ' obligations under the covered agreem ents, due to the failure of the 
USDOC to complete a pass-through analysis with  respect to two categories of transactions.77    
51. Following the DSB's adoption on 17 February 20 04 of the original panel and Appellate Body 
reports, the United States and Canada agreed on a reasonable period of time for implementation that 
would expire on 17 December 2004.78  In response to the DSB's recommendations and rulings, the 
United States initiated a proceeding pursuant to Section 129 of the Uruguay Round Agreements Act 
("Section 129")79 and, on 16 December 2004, the USDOC publis hed a determination pursuant to that 
provision (the "Section 129 Determination").80  In this determination, the USDOC sought to bring the 
Final Countervailing Duty Determination into confor mity with the recommendations and rulings of 
the DSB by completing a pass-through analysis in r espect of certain transactio ns.  This pass-through 
                                                      
77The first such category was where a harvester of su bsidized logs, that did not itself own a sawmill, 
sold logs to a producer of softwood lumber.  The second  was where a harvester of subsidized logs, that did own 
a sawmill, sold logs to a different producer of softwood lumber.  (See also the summary of the findings of the 
original panel and the Appellate Body at paragraph 4.59 of the Panel Report.)  
78WT/DS257/13.  
79Section 129 ( supra , footnote 9) is entitled "Administrativ e action following WTO panel reports" and 
provides, in relevant part: 
(b)   Action by Administering Authority.— 
 (1)  Consultations with Administering Authority and Congressional 
Committees— Promptly after a report by a dispute settlement panel or the 
Appellate Body is issued that contains findings that an action by the 
administering authority in a proceeding  under title VII of the Tariff Act of 
1930 is not in conformity with the obligations of the United States under the 
Antidumping Agreement or the Agreement on Subsidies and Countervailing 
Measures, the Trade Representative sh all consult with the administering 
authority and the congressional committees on the matter.  
 (2)  Determination by Administering Authority— Notwithstanding 
any provision of the Tariff Act of 1930, the administering authority shall, within 180 days after receipt of a written request from the Trade 
Representative, issue a determination in connection with the particular 
proceeding that would render the administering authority's action described in paragraph (1) not inconsistent with the findings of the panel or the 
Appellate Body. 
 (3)  Consultations before Implementation— Before the administering 
authority implements any determination under paragraph (2), the Trade 
Representative shall consult with the administering authority and the congressional committees with re spect to such determination. 
 (4)  Implementation of Determination— The Trade Representative 
may, after consulting with the administ ering authority and the congressional 
committees under paragraph (3), direct the administering authority to 
implement, in whole or in part, the determination made under paragraph (2). 
80Supra , footnote 10.  WT/DS257/AB/RW 
Page 22  
 
analysis resulted in a small reduction of the counter vailing duty rate that had been calculated in the 
Final Countervailing Duty Determination.
81  The rate of subsidization established in the Section 129 
Determination became the cash deposit rate (estimat ed duty rate) applied to softwood lumber entries 
as from 10 December 2004.82  At the DSB meeting held on 17 December 2004, the United States 
informed the DSB that it had complied with the recommendations and rulings of the DSB in the  
US – Softwood Lumber IV   dispute.83   
52. Three days later, on 20 December 2004, the USDOC published the final results of the first 
administrative review on imports of softwood lumber from Canada (the "First Assessment Review")
84, which established final countervailing duty lia bility for imports of softwood lumber that 
entered the United States during the period 22 Ma y 2002 to 31 March 2003.  In that review, the 
USDOC adopted the same pass-through methodol ogy as it had used in the Section 129 
Determination.85  However, the USDOC's application of this methodology in the First Assessment 
Review did not, in the light of the evidence before it, result in any reduction to its calculated rate of 
                                                      
81The final countervailing duty rate that resulted from the Final Countervailing Duty Determination 
was 18.79 per cent, once corrected for ministerial errors.  The Section 129 Determination reduced the rate to 
18.62 per cent. 
82Section 129(c) ( supra , footnote 9) establishes the effective date for determinations made pursuant to 
that provision as follows: 
(c)  Effects of Determinations; Notice of Implementation—  (1)  Effects of Determinations— Determinations concerning title VII 
of the Tariff Act of 1930 that are implemented under this section shall apply 
with respect to unliquidated entries of the subject merchandise (as defined in section 771 of that Act) that are ente red, or withdrawn from warehouse, for 
consumption on or after— 
... 
(B)  in the case of a determination by the administering authority 
under subsection (b)(2), the date on which the Trade Representative 
directs the administering authority under subsection (b)(4) to 
implement that determination. 
83WT/DSB/M/180, paras. 22-25.     
84Supra , footnote 12.   
85Panel Report, footnote 50 to para. 4.58.  See also United States' additional written memorandum, 
para. 12.  WT/DS257/AB/RW 
 Page 23 
 
 
subsidization.86  In addition to establishing final duty liability for imports that entered the United 
States during the period of review, the results of the First Assessment Review also fixed the estimated 
countervailing duty rate (the cash  deposit rate) for imports entering the United States as from 
20 December 2004. 
53. For ease of reference, we set out the relevant  sequence of events in the following chart: 
22 May 2002 The USDOC publishes the Final Countervailing Duty Determination in respect of 
softwood lumber from Canada.* 
17 February 2004 The DSB adopts the reports of the panel and the Appellate Body in US – Softwood 
Lumber IV . 
16 December 2004 The USDOC publishes the no tice of implementation of the Section 129 
Determination.†  The Section 129 Determination applies to softwood lumber 
entries on or after 10 December 2004.  
17 December 2004 The agreed "reasonable period of time" to implement the DSB's recommendations 
and rulings in US – Softwood Lumber IV expires. 
20 December 2004 The USDOC publishes the fi nal results of the First Assessment Review.±  T h e  
cash deposit rate that resulted from th e First Assessment Review applies to 
softwood lumber entries on or after 20 December 2004. 
* The period of investigation preceding the imposition of  countervailing duties was 1 April 2000–31 March 2001. 
† Because the Section 129 Determination revi sed the Final Countervailing Duty Determination, it examined data relating  
  to the original period of inve stigation from 1 April 2000–31 March 2001. 
± The period of review for purposes of the First  Assessment Review was 22 May 2002–31 March 2003. 
 
54. In its request for recourse to a panel under Article 21.5 of the Understanding on Rules and 
Procedures Governing the Settlement of Disputes  (the "DSU"), Canada made claims that both the 
Section 129 Determination and the First Assessment Re view were inconsistent with the United States' 
obligations under the covered agreements.87  In the proceedings before the Panel, the United States 
argued that the pass-through analysis conducted in th e Section 129 Determination was consistent with 
its obligations under the covered agreements.  The Un ited States also argued that the First Assessment 
Review was not a measure taken to comply with th e recommendations and rulings of the DSB in this 
                                                      
86The USDOC determined in the First Assessment Revi ew that the five Canadi an provinces claiming 
that it was necessary to conduct a pass-through analysis in  respect of transactions occurring during the relevant 
period of review had "each failed to substantiate its claim that logs entering sawmills during the [period of 
review] included logs purchased in arm's length transactions." (USDOC Memorandum from B. Tillman to 
J. Jochum "Issues and Decision Memorandum: Final Results of Administrative Review: Certain Softwood 
Lumber Products from Canada" (13 December 2004) (Exhibit CDA-11 submitted by Canada to the Panel), 
section II.F)  In the First Assessment Review, the USDOC calculated a rate of subsidization of 17.18 per cent  
ad valorem   based on data from the period of review of 22 May 2002 to 31 March 2003.  At the oral hearing in 
this appeal, the United States explained that this rate  was subsequently reduced to  16.37 per cent to correct 
ministerial errors. (See "Notice of Amended Final Results of Countervailing Duty Administrative Review: Certain Softwood Lumber Products from Canada", United States Federal Register , Vol. 70, No. 36 
(24 February 2005), p. 9046)   
87WT/DS257/15. WT/DS257/AB/RW 
Page 24  
 
dispute and did not, therefore, fall within the scope of the Panel's ju risdiction under Article 21.5 of the 
DSU.  The United States did not, in its arguments to the Panel, respond to Canada's claims regarding 
the consistency of the First Assessment Review;  in particular, it did not engage in a substantive 
defence of the pass-through analysis conducted by  the USDOC in the First Assessment Review.
88  
Instead, the essence of the United States' argument w as that the Panel lacked jurisdiction to consider 
those claims.  
55. The Panel found that it could examine the pass- through analysis in the First Assessment 
Review, and that, due to deficiencies in both pass-through analyses conducted by the USDOC, the 
United States had failed, in both the Section 129 De termination and the First Assessment Review, to 
demonstrate that "the benefit of subsidized log inputs had passed through to the processed product".89  
The United States does not appeal the Panel's findings with respect to the Section 129 Determination.  
Nor does the United States ask us to review the substance  of the Panel's findings with respect to the 
First Assessment Review.  Instead, as explained be low, the principal issue on appeal is whether the 
Panel had jurisdiction to review the results of the First Assessment Review in these proceedings under 
Article 21.5 of the DSU.  
B. Introduction to the Principal Issue on Appeal 
56. On 10 March 2005, the United States submitted a request for a preliminary ruling to the 
Panel, along with its first written submission.  The Un ited States claimed that the results of the First 
Assessment Review fell "outside the scope of Artic le 21.5, and this Panel lack[ed] jurisdiction to 
review them".90  Accordingly, the United States asked the Panel to make a preliminary ruling that: 
... the final results of the first assessment review of the countervailing 
duty order on softwood lumber from Ca nada, cited by Canada in its 
request for the establishment of a panel in this dispute, are not "measures taken to comply" with the recommendations and rulings of the DSB under Article 21.5 of the DSU.
91 (footnote omitted) 
57. On 16 March 2005, the Panel invited Canada to comment on this request in its second written 
submission to the Panel, due on 31 March 2005.92  In its second written submission, Canada asked the 
Panel to reject the United States' request for a prel iminary ruling, and argued that the First Assessment 
                                                      
88Panel Report, paras. 4.96, 4.105-4.106, and footnote 50 to para. 4.58.  
89Ibid., para. 5.2. 
90United States' first written submission to the Panel, para. 12;  Panel Report, p. B-4. 
91Ibid.  
92Letter from the Secretary to the Panel (on behalf of the Chairman of the Panel) to Canada, 16 March 
2005.  WT/DS257/AB/RW 
 Page 25 
 
 
Review was within the jurisdiction of the Panel under Article 21.5 of the DSU.93  At the substantive 
meeting of the parties with the Panel, held on 21 April 2005, the Chairman of the Panel informed the 
parties that, for purposes of their submissions at th at meeting, they "should assume that the first 
assessment review does  fall within the scope of these proceed ings", but added that such assumption 
was "without prejudice to the Panel's eventual ruling on this issue".94 
58. In its Report, the Panel declined to make th e ruling sought by the United States, and said as 
follows: 
[W]e reject the US request for a preliminary ruling that the First 
Assessment Review falls outside the scope of these DSU Article 21.5 
proceedings, in so far as the pass-through analysis is concerned.95 
59. The United States appeals this ruling and request s the Appellate Body to find that the Panel 
erred in concluding that the First Assessment Review  fell within the scope of its mandate, insofar as 
the pass-through analysis is concerned.  For the same reasons, the United States also requests the 
Appellate Body to reverse the Panel's findings of inconsistency with respect to the First Assessment 
Review.96 
60. The United States alleges that, in its interpre tation of Article 21.5, the Panel adopted an 
unduly broad standard that is not supported by a pr oper analysis of text, context, and object and 
purpose of Article 21.5, and that is not consistent with previous panel and Appellate Body reports.  
The United States points out that the recommendations and rulings of the DSB in the original dispute 
related solely to the USDOC's failure to anal yze pass-through in the original countervailing duty 
investigation, and that these recommendations and rulings were implemented in the Section  129 
Determination, not the First Assessment Review.  The United States points out the fundamental 
differences between investigations and assessment reviews, emphasizing that these differences, along 
with the distinct nature and purpose of assessment reviews, make clear that such reviews cannot be 
"measures taken to comply" with recommendations a nd rulings relating to an original countervailing 
duty determination.  The United States further conte nds that the Panel's ruling is "unfairly prejudicial" 
because it compelled the United States to defend its  actions in an assessment review—an "entirely 
                                                      
93Canada's second written submission to the Pane l, paras. 3-5;  Panel Report, p. A-35. 
94Statement by the Chairman of the Panel at the Substantive Meeting of the Panel with the Parties, 
21 April 2005. (original emphasis) 
95Panel Report, para. 4.50.  See also para. 5.1. 
96See  supra , para. 48(b). WT/DS257/AB/RW 
Page 26  
 
separate" proceeding from the original countervailin g duty investigation, with a "wholly different" 
administrative record—for the first time under the expedited time-frames of an Article 21.5 review.
97  
C. The Scope of Proceedings under Article 21.5 of the DSU 
61. The principal issue in this appeal concerns th e scope of proceedings under Article 21.5 of the 
DSU.  Specifically, we must consider whether a nd to what extent a panel acting pursuant to 
Article 21.5 of the DSU may assess a measure that the implementing Member maintains is  not   
"taken to comply", when the complaining Member ne vertheless identifies that measure in its request 
for recourse to an Article 21.5 panel and raises claims against it.   
62. The United States points to the express limitati on on the category of measures that may be 
subject to review in Article 21.5 proceedings , namely "measures taken to comply with the 
recommendations and rulings of the DSB".  The Un ited States emphasizes that Article 21.5 neither 
directs nor authorizes panels to examine any "conn ected" measures that "could have an impact on", or 
"possibly undermine", the measures taken to comply.98  Canada asserts that even measures not 
declared by Members as "taken to comply" may nevertheless be reviewed by an Article 21.5 panel when they affect the "existence" or "consistency" of measures that  are  declared to be "taken to 
comply".  For Canada, such "undeclared measures ar e also 'measures taken to comply' for purposes of 
Article 21.5", in particular, when they "u ndermine or undo purported compliance with DSB 
recommendations and rulings."
99   
1. Text, Context, Object and Purpose  
63. We begin by setting out the full text of Article 21.5: 
Where there is disagreement as to th e existence or consistency with a 
covered agreement of measures taken to comply with the 
recommendations and rulings such dispute shall be decided through 
recourse to these dispute settlement procedures, including wherever 
possible resort to the original panel.  The panel shall circulate its report within 90 days after the date of referral of the matter to it.  
When the panel considers that it cannot provide its report within this time frame, it shall inform the DSB in writing of the reasons for the 
delay together with an estimate of the period within which it will 
submit its report. 
                                                     
 
97United States' appellant's submission, para. 6. 
98Ibid., para. 33 (referring to Panel Report, para. 4.41). 
99Canada's appellee's submission, para. 5.  WT/DS257/AB/RW 
 Page 27 
 
 
64. The first sentence of Article 21.5 is of most rele vance to the question before us.  It identifies 
the types of disputes ("disagreement as to the exis tence or consistency with  a covered agreement of 
measures") covered by that provision, and the procedures that are to be employed ("these dispute 
settlement procedures") in resolving them.  With  respect to the subject matter of Article 21.5 
proceedings, "the 'matter' in Article 21.5 proceed ings consists of two elements:  the specific  measures   
at issue and the legal basis of the complaint (that is, the  claims )."100  As we have stated, we are called 
upon in this appeal to consider the  measures   that may be evaluated by a panel acting pursuant to 
Article 21.5. 
65. The words of Article 21.5 themselves delimit a particular category of measures that fall 
within the scope of proceedings conducted pursuan t to that provision, as was recognized by the 
Appellate Body in  Canada – Aircraft (Article 21.5 – Brazil) : 
Proceedings under Article 21.5 do not concern just  any  measure of a 
Member of the WTO;  rather, Article 21.5 proceedings are limited to 
those "measures taken to comply   with the recommendations and 
rulings" of the DSB.101 (original emphasis) 
66. In examining the meaning of "measures taken to  comply" in Article 21.5, we begin with the 
word "taken".  There is a wide range of dictionary  meanings of the word "taken", which is the past 
participle of the verb "take".  The meanings of "t ake" include, for example, "[b]ring into a specified 
position or relation";  "[s]elect or use for a particular purpose."102  The preposition "to" is "[u]sed in 
verbs ... in the sense of 'motion, direction, or addition to', or as the mark of the infinitive."103  As the 
United States points out, the word "comply" is defined as "accommodate oneself to (a person, circumstances, customs, etc.) ...  Act in accordance with or  with  a request, command, etc."
104  The 
French and, in particular, Spanish versions of this phrase ("mesures prises pour se conformer" and 
"medidas destinadas a cumplir", respectively) also im ply that relevant measures are associated with 
the objective of complying.  On its face, therefor e, the phrase "measures taken to comply" seems to 
refer to measures taken  in the direction of ,  or  for the purpose of achieving ,  compliance.   
67. By virtue of the remainder of its first sentence,  it is also clear that the scope of Article 21.5 
encompasses any "disagreement as to the existence or consistenc y with a covered agreement of 
                                                      
100Appellate Body Report, EC – Bed Linen (Article 21.5 – India) , para. 78. (original emphasis) 
101Appellate Body Report, Canada – Aircraft (Article 21.5 – Brazil) , para. 36.  
102Shorter Oxford English Dictionary , 5th edn, W.R. Trumble, A. Stevenson (eds) (Oxford University 
Press, 2002), Vol.  2, p. 3170.  
103Ibid., Vol.  2, p. 3284.  
104United States' appellant's submission, para. 30 (quoting The New Shorter Oxford English Dictionary , 
supra , footnote 37, p. 461 (original italics) (Exhibit US-15 submitted by the United States to the Panel)). WT/DS257/AB/RW 
Page 28  
 
measures taken to comply".  Canada, as well as the third participants, assert that the words "existence 
or consistency" are key to understanding the sc ope of a panel's jurisdiction under Article 21.5.
105  In 
order to make an assessment of the "existence or consistency" of "measures taken to comply", it 
seems to us that a panel must be able to assess measures taken to comply in their full context, 
including how such measures are introduced into, and how they function within, the particular system 
of the implementing Member.  The word "existence"  suggests that measures falling within the scope 
of Article 21.5 encompass not only positive acts, but also   omissions .  It also suggests that, as part of 
its assessment of whether a measure taken to comply  exists , a panel may need to take account of facts 
and circumstances that impact or affect such existe nce.  The word "consistency" implies that panels 
acting pursuant to Article 21.5 must objectively assess whether new measures are, in fact, consistent with relevant obligations under th e covered agreements.  As the A ppellate Body has already stated, 
such an evaluation involves consideration of "that new measure in its totality " and the "fulfilment of 
this task requires that a panel consider both the measure itself and the measure's application."
106  The 
fact that Article 21.5 mandates a panel to assess "exi stence" and "consistency" tends to weigh against 
an interpretation of Article 21.5 that would confine th e scope of a panel's jurisdiction to measures that  
move in the direction of ,  or  have the objective of achieving ,  compliance.  These words also suggest 
that an examination of the effects of a measure may al so be relevant to the determination of whether it 
constitutes, or forms part of, a "measure[] taken to comply".107 
68. A further feature of the first sentence of Article 21.5 is the express link between the 
"measures taken to comply" and the recommendati ons and rulings of the DSB.  Accordingly, 
determining the scope of "measu res taken to comply" in any given case must also involve 
examination of the recommendations and rulings cont ained in the original report(s) adopted by the 
DSB.  Because such recommendations and rulings  are directed at the measures found to be 
                                                      
105Canada argues that "[o]nly through a comprehensive re view of measures that affect the 'existence' or 
'consistency' of measures declared to be taken to comply can an Article 21.5 proceeding contribute to the prompt 
settlement of disputes and fulfil the aim of the disput e settlement mechanism." (Can ada's appellee's submission, 
para. 31)  China, for its part, argues that "the existence of a measure requires the state of being or continuance in 
being of the subject measure, and to maintain such a state of being, there should not be any other measure that 
would in effect nullify or invalidate such measure." (C hina's third participant's submission, para. 7)  The 
European Communities submits that "[t]he term 'existence' envisages a situation of failure to comply with the 
DSB's rulings and recommendations" and argues that it is "of fundamental importance that Article 21.5 panels 
have a broad mandate to determine whether or not the 'situation' after the expiry of the reasonable period of time for implementation is such that the Member concerned has fully implemented its compliance obligations." 
(European Communities' third participan t's submission, paras. 18 and 20) 
106Appellate Body Report, US – Shrimp, (Article 21.5 – Malaysia) , para. 87. 
107Both participants agree that th e effects of measures taken by an implementing Member can be 
relevant to determining whether or not that measure may be examined in proceedings under Article 21.5 of the 
DSU. (Participants' responses to que stioning at the oral hearing)  WT/DS257/AB/RW 
 Page 29 
 
 
inconsistent in the original proceedings108, such an examination necessarily  involves consideration of 
those original measures.  Lastly, the end of the firs t sentence of Article 21.5 indicates that where there 
is disagreement regarding measures taken to comply , there should be recourse to the original panel 
"wherever possible", thus expressing a preference fo r dealing with these "disagreements" before the 
original panel that made the original recommendations  and rulings in the dispute, rather than starting 
over again in new proceedings before a new panel.   
69. Having thus considered the first sentence of Article 21.5, we note first that the phrase 
"measures taken to comply" does place some limits on the scope of proceedings under that provision—an issue that is not disputed.  At th e same time, in order to fulfil its mandate under 
Article 21.5, a panel must be able to take full account of the factual and legal background against 
which relevant measures are taken, so as to determin e the existence, or consistency with the covered 
agreements, of measures taken to comply.   
70. Article 21.5 is one paragraph within an Artic le entitled "Surveillance of Implementation of 
Recommendations and Rulings".  As a w hole, Article 21 deals with events  subsequent   to the DSB's 
adoption of recommendations and rulings in a par ticular dispute.  The various paragraphs of 
Article  21 make clear that following such recommendations and rulings, further relevant 
developments and disagreements are to be d ealt with through the reporting and surveillance 
modalities set out therein, and in such a way as to  achieve "prompt resolution".  Article 21 obliges an 
implementing Member to keep the DSB apprised of its intentions (paragraph 3) and ongoing efforts 
(paragraph 6) regarding implementation.  At th e same time, Article 21 sets out a number of 
mechanisms to ensure collective ove rsight of that Member's implementation.  With respect to the 
determination of the reasonable period of time, thes e are found in Article 21.3, and with respect to 
measures taken to comply, they are found in Article 21.5.  Thus, within Article 21 as a whole, the 
declarations of the implementing Member form an in tegral part of the surveillance of implementation, 
but they do not stand alone.  Rather, they are complemented by, and subject to, multilateral review 
within the World Trade Organization (the "WTO").  
71. Turning to the role played by Article 21.5 with in the broader framework of the DSU, we note 
that there are key differences between proceedings under Article 21.5 of the DSU and "regular" panel 
proceedings.  First, the composition of an Article 21.5 panel is, in principle, already determined—
wherever possible, it is the original panel.  These i ndividuals will be familiar with the contours of the 
                                                     
 
108Article 19.1 of the DSU mandates the recommendations that panels and the Appellate Body are to 
make in the event of a finding that a measure is inconsistent with a co vered agreement:  they "shall recommend 
that the Member concerned bring the measure into confor mity with that agreement. " (footnotes omitted)  Thus, 
the text of Article 19.1 confirms the link between the m easure taken to comply and the inconsistent measure that 
was the subject of the or iginal proceedings.   WT/DS257/AB/RW 
Page 30  
 
dispute, and the experience gained from the original  proceedings should enable them to deal more 
efficiently with matters arising in an Article 21. 5 proceeding "against the background of the original 
proceedings".
109  Secondly, the time-frames are shorter—an  Article 21.5 panel has, in principle, 
90 days in which to issue its report, as compared to the six to nine months afforded original panels.  
Thirdly, there are some limits on the claims th at can be raised in Article 21.5 proceedings.110  Yet, 
these limits should not allow circumvention by Me mbers by allowing them to comply through one 
measure, while, at the same time, nega ting compliance through another.    
72. Taken together, these observations underscore th e balance that Article 21.5 strikes between 
competing considerations.  On the one hand, it seeks to promote the prompt resolution of disputes, to 
avoid a complaining Member having to initiate di spute settlement proceedings afresh when an 
original measure found to be inconsistent h as not been brought into conformity with the 
recommendations and rulings of the DSB, and to ma ke efficient use of the original panel and its 
relevant experience.  On the other hand, the applicab le time-limits are shorter than those in original 
proceedings, and there are limitations on the types of claims that may be raised in Article 21.5 proceedings.  This confirms that the scope of Ar ticle 21.5 proceedings logically must be narrower 
than the scope of original dispute settlement proc eedings.  This balance s hould be borne in mind in 
interpreting Article  21.5 and, in particular, in determining the measures that may be evaluated in 
proceedings pursuant to that provision.   
2. Examination of Previous Cases
 
73. A number of previous proceedings have raised  the issue of what measures fall within the 
scope of jurisdiction of a panel acting pursuant to Ar ticle 21.5.  Panels and the Appellate Body alike 
have found that what is a "measure taken to comply " in a given case is not determined exclusively by 
the implementing Member.  A Member's designation of  a measure as one taken "to comply", or not, is 
                                                      
109Appellate Body Report, Mexico – Corn Syrup (Article 21.5 – US) , para. 121. 
110The Appellate Body has confirmed the existence of such limits in several cases.  For example, in 
US – Shrimp (Article 21.5 – Malaysia) , the Appellate Body found that the panel had committed no error in 
refusing to "re-examine, for WTO-consistency, even those aspects of a new measure that were part of a previous 
measure that was the subject of a dispute, and were found by the Appellate Body to be  WTO-consistent  … and 
that remain unchanged as part of the new measure." (Appellate Body Report, US – Shrimp (Article 21.5 – 
Malaysia) , para. 89 (original emphasis))  The Appellate Body has also found that a complaining party may not 
ask an Article 21.5 panel to re-examine certain matters ("the  particular  claim and the  specific   component of a 
measure that is the subject of  that claim") when the original panel made  findings in respect of these matters and 
those findings were not appealed. (Appellate Body Report, EC – Bed Linen (Article 21.5 – India) , para. 92-93)  
See also Appellate Body Report, Mexico – Corn Syrup (Article 21.5 – US) , paras. 121-122)  However, when the 
measure taken to comply is a new measure, different from  the measure at issue in th e original proceedings, "a 
panel is not confined to examining the 'measures taken to comply' from the perspectiv e of the claims, arguments 
and factual circumstances that related to th e original measure". (Appellate Body Report, Canada – Aircraft 
(Article 21.5 – Brazil) , para. 41)  See also the discussion in Appellate Body Report, EC – Bed Linen 
(Article 21.5 – India) , paras. 88-89.  WT/DS257/AB/RW 
 Page 31 
 
 
relevant to this inquiry, but it cannot be conclusive.111  Conversely, nor is it up to the complaining 
Member alone to determine what constitutes the meas ure taken to comply.  It is rather for the Panel 
itself to determine the ambit of its jurisdiction.112 
74. To be sure, characterizing an act by a Member  as a measure taken to comply when that 
Member maintains otherwise is not something that shoul d be done lightly by a panel.  Yet, a panel, in 
examining the factual and legal circumstances with in which the implementing Member takes action, 
may properly reach just such a finding in some cases.  We regard the cases of  Australia – Salmon 
(Article 21.5 – Canada)   and  Australia – Automotive Leather II (Article 21.5 – US)   as useful 
illustrations of when such a finding is appropria te.  In each of these cases, the panel examined a 
measure that the implementing Member maintained was not a measure taken to comply.  At issue in  Australia – Salmon (Article 21.5 – Canada)   was whether the Article 21.5 panel could examine an 
import ban on salmon that had been adopted by the Australian st ate of Tasmania shortly after the 
Australian federal government had notified a number of steps that it had taken in order to remove the inconsistencies identified by the original pane l regarding its treatment of imported salmon.
113  In 
reaching the conclusion that it could examin e this ban, the panel looked at the  timing  of the ban, in 
particular, the fact that it was introduced "subsequent to the adoption on 6 November 1998 of DSB 
recommendations and rulings in the original dispute— and within a more or le ss limited period of time 
thereafter"114;  as well as the  nature  of the ban, which was, like the measures challenged in the 
original proceedings, "a quarantine measure ... that  applies to imports of fresh chilled or frozen 
salmon from Canada".115   
                                                      
111In response to questioning at the oral hearing, both parties agreed that a Member's designation of the 
relevant measure taken to comply is relevant, but it is not dispositive of the issue of what measures may be 
considered by a panel acting pursuant to Article 21.5 of the DSU.  If this were otherwise, an implementing 
Member would be able to avoid proceedings under Article 21.5 simply by deciding what  measures to notify, or 
not to notify, to the DSB. (See Panel Report, Australia – Automotive Leather II (Article 21.5 – US) , para. 6.4) 
112Appellate Body Report, EC – Bed Linen (Article 21.5 – India) , para. 78.  See also Panel Report, 
Australia – Automotive Leather II (Article 21.5 – US) , para. 6.4;  and Panel Report, Australia – Salmon 
(Article 21.5 – Canada) , para. 7.10, sub-para. 22. 
113That panel observed that it could not merely allow an implementing Member to identify the relevant 
measure to be assessed in Article 21.5 proceedings because: 
... an implementing Member could simp ly avoid any scrutiny of certain 
measures by a compliance panel, ev en where such measures would be 
so clearly connected   to the panel and Appellate Body reports concerned, 
both in time and in respect of the subject-matter, that any impartial observer 
would consider them to be measures "taken to comply".   
(Panel Report, Australia – Salmon (Article 21.5 – Canada) , para. 7.10, sub-para. 22) (emphasis added) 
114Ibid.  
115Ibid.  WT/DS257/AB/RW 
Page 32  
 
75. In  Australia – Automotive Leather II (Article 21.5 – US) , Australia withdrew from a company 
a grant that had been found to be a prohibited subsid y.  At the same time, Australia granted a loan on 
non-commercial terms to a related company.  The loan was specifically conditioned on repayment of 
the original subsidy.  Although Australia argued that the loan was "not part of the implementation of 
the DSB's ruling and recommendation" and did not, ther efore, fall within the scope of the Article 21.5 
proceedings
116, the panel disagreed.  It found that the lo an fell within the scope of its terms of 
reference because, inter alia , the loan at issue was "inextricably linked" to the measure that Australia 
itself stated it had taken to comply, "in view of both its timing and its nature".117   
76. The panel in  Australia – Automotive Leat her II (Article 21.5 – US)   also explained that, to have 
excluded the new loan offered by Australia from its mandate, would have "severely limit[ed its] 
ability to judge, on the basis of the United States ' request, whether Australia ha[d] taken measures to 
comply with the DSB's ruling."118  Finally, we recall that, in  EC – Bed Linen (Article 21.5 – India) , the 
Appellate Body upheld the panel's fi nding that certain parts of a measur e may fall within the scope of 
Article 21.5 proceedings when other, separate elements of the same measure do not, and recognized that 
the ways in which distinct elements of a measure inte ract with and affect each other may be relevant to 
the determination of which of them falls w ithin the scope of Article 21.5 proceedings.119 
3. Summary  
77. Taking account of all of the above , our interpretation of Article 21.5 of the DSU confirms that 
a panel's mandate under Article 21.5 of the DSU is not necessarily limited to an examination of an 
implementing Member's measure declared to be "taken  to comply".  Such a declaration will always be 
relevant, but there are additional criteria, identif ied above, that should be applied by a panel to 
determine whether or not it may also examine other measures.  Some measures with a particularly 
close relationship to the declared "measure taken to  comply", and to the recommendations and rulings 
of the DSB, may also be susceptible to review by a panel acting under Article 21.5.  Determining 
whether this is the case requires a panel to scru tinize these relationships, which may, depending on the 
particular facts, call for an examination of the tim ing, nature, and effects of  the various measures.  
This also requires an Article 21.5 panel to examin e the factual and legal background against which a 
declared "measure taken to comply" is adopted.  Only then is a panel in a position to take a view as to 
whether there are sufficiently close links for it to ch aracterize such an other measure as one "taken to 
                                                      
116Panel Report, Australia – Automotive Leather II (Article 21.5 – US) , para. 6.1. 
117Ibid., para. 6.5. 
118Ibid. 
119Appellate Body Report, EC – Bed Linen (Article 21.5 – India) , para. 86.  WT/DS257/AB/RW 
 Page 33 
 
 
comply" and, consequently, to assess its consistency with the covered agreements in an Article 21.5 
proceeding.    
4. Review of the Panel's Approach  
78. Turning to examine the legal standard articulat ed by the Article 21.5 Panel in this case, we 
note that the Panel stated, first, that it would be  "guided by dispute settlement decisions regarding 
the  scope of DSU Article 21.5".120  The Panel observed that "Article 21.5 proceedings are not 
restricted to measures formally, or explicitly, taken by Members to implement DSB rulings and 
recommendations."121  The Panel then went on to examine the panel reports in  Australia – Salmon 
(Article 21.5 – Canada) and  Australia – Automotive Leather II (Article 21.5 – US) .  The Panel 
observed that, in this case, there was no dispute that the Section 129 Determination fell within the 
scope of the Article 21.5 proceedings.122  With respect to the First Assessment Review, the Panel's 
reasoning reveals that it employed the following two tests: 
[Whether] the USDOC's treatment  of pass-through in the First 
Assessment Review is also covered by these proceedings, because it 
is  clearly connected   to the panel and Appellate Body reports 
concerning the Final [Countervailing Duty] Determination, and because it is  inextricably linked  to the treatment of pass-through in 
the Section 129 Determination.
123 (emphasis added) 
and 
[Whether there was] sufficient overlap in the timing, or temporal 
effect, and nature of the Final [Countervailing Duty] Determination, 
Section 129 Determination and Fi rst Assessment Review for the 
latter to fall within the scope of the present DSU Article 21.5 proceedings.
124 
79. Accordingly, it is clear from the previous pane l reports the Panel cited, and from the language 
it used ("clearly connected" and "inextricably linked" ), that the Panel employed a nexus-based test 
similar to the ones articulated in  Australia – Automotive Leather II (Article 21.5 – US)   and  Australia 
– Salmon (Article 21.5 – Canada)   to determine whether the First Assessment Review fell within the 
scope of its jurisdiction.  We see no error in the Panel's adoption of such a standard, which accords with our own interpretation of Article 21.5.  Accordi ngly, in the next section, we consider whether the 
Panel erred in its  application   of this legal standard. 
                                                     
 
120Panel Report, para. 4.38. 
121Ibid. 
122Ibid., para. 4.41. 
123Ibid. 
124Ibid., para. 4.42. WT/DS257/AB/RW 
Page 34  
 
D. The Panel's Application of Article 21.5 in this Case 
80. In examining whether the Panel erred in find ing that it had authorit y to review the pass-
through analysis in the First Assessment Review, we recall the United States' arguments that the DSB 
recommendations and rulings were implemente d in the Section  129 Determination,  not  the First 
Assessment Review, and that there are fundame ntal differences between investigations and 
assessment reviews.  Further, the United States stresses that the First Assessment Review was 
initiated eight months before the recommendations  and rulings of the DSB in this case and was 
governed by statutory provisions, timelines, and pr ocedures that have nothing to do with those 
recommendations and rulings.  Hence, according to th e United States, the Pane l erred in finding the 
First Assessment Review to be a "measure taken to comply" with the DSB recommendations and rulings in this dispute.  
81. Turning to the Panel's application of Article 21.5 to the facts of this case, we observe, first, 
that the United States appears to cast the Panel's re fusal to grant its request for a preliminary ruling as 
a finding that the First Assessment Review  per se   is a "measure taken to comply" within the meaning 
of Article 21.5 of the DSU.  Our examination of the Panel's reasoning, however, indicates that the 
Panel took a more nuanced approach .  The Panel determined that th e Section 129 Determination was a 
"measure taken to comply".  At  the same time, it found that  the pass-through analysis   in the First 
Assessment Review was so "inextricably linked" and "clearly connected" to both the Section 129 
Determination and the Final Countervailing Duty De termination as to fall within the scope of the 
Panel's authority under Article 21.5.
125  We understand the Panel, ther efore, to have found that a 
specific component of the First Assessment Review—r ather than the First Ass essment Review in its 
entirety—fell within the scope of its jurisdiction un der Article 21.5.  Indeed, the Panel itself expressly 
so stated, albeit in a footnote: 
[W]e are only finding that part of the First Assessment Review (i.e., 
the pass-through analysis) is covered by these DSU Article 21.5 proceedings.  We are not finding that the entirety of the First 
Assessment Review is covered by these proceedings.
126 
82. We also observe that the United States emphasizes the separate nature of original 
countervailing duty investigations and duty assessment proceedings, and cites, inter alia , to its 
domestic law in this regard.  A lthough such references may be useful, the Appellate Body has already 
observed that municipal law classifications are not determinative of issues raised in WTO dispute 
                                                      
125Panel Report, para. 4.41. 
126Ibid., footnote 42 to para. 4.45.  WT/DS257/AB/RW 
 Page 35 
 
 
settlement proceedings.127  We also note the argument of the United States that the  SCM Agreement   
recognizes that original countervailing duty inves tigations are proceedings distinct from duty 
assessment reviews.128  This does not, in our view, answer the question of whether the Panel was 
entitled, in these proceedings under Article 21.5 of  the DSU, to examine the pass-through analysis 
conducted by the USDOC in the First Assessment Review. 
83. To answer that question, we turn to the specif ic circumstances of this case and examine them 
in the light of our interpretation of Article 21.5.129  As regards  subject matter , we note that the 
Final Countervailing Duty Determination, the Sec tion 129 Determination, and the First Assessment 
Review are all countervailing duty proceedings th at were conducted by the USDOC.  Each of these 
proceedings involved a determination of the rate of  subsidization of softwood lumber from Canada.  
Moreover, in each of these proceedings, the USDO C calculated the rate of subsidization of  softwood 
lumber   based on financial contributions made to, and benefit received by,  timber harvesters .  In 
other words, the product that was subject to the three countervailing duty proceedings was the same, 
and in each proceeding the issue of whether the s ubsidy had "passed through" was raised by Canadian 
interested parties and considered by the US DOC.  Moreover, the "pass-through" methodology 
adopted by the USDOC was the same in the Se ction 129 Determination and the First Assessment 
Review.130  Looking to the scope of coverage of the three relevant measures, we note that the 
Section 129 Determination revised the Final Countervailing Duty De termination and confirmed the 
continued existence of the conditions for the impositi on of a countervailing duty.  To the extent that 
the Section 129 Determination revised or replaced the Final Countervailing Duty Determination, and 
thereby became the basis for the continued imposition of countervailing duties, then the Section 129 Determination must be deemed to have the same relationship to the First Assessment Review that 
the  Final Countervailing Duty Determination has with the First Assessme nt Review.  In this 
connection, we observe that the softwood lumber imports that entered during the period 22 May 2002 
to 31 March 2003 were, upon entr y, subjected to the cash deposit rate determined in the Final 
                                                     
 
127Appellate Body Report, US – Softwood Lumber IV , para. 56.   
128United States' appellant's submission, para. 20.  The United States refers in footnotes 22 and 23 to 
Article 11.1 and footnote 52 of the  SCM Agreement . 
129Supra , para. 77.  
130The Panel also noted that "the USDOC adopted th e same approach to pass-through in the First 
Assessment Review as in the Section 129 Determination." (Panel Report, footnote 50 to para. 4.58)   WT/DS257/AB/RW 
Page 36  
 
Countervailing Duty Determination, and, subsequently, to the final duty liability determined in the 
First Assessment Review.
131   
84. An additional link between the Section 129 Dete rmination and the First Assessment Review 
relates to  timing .  The publication and effective dates of both proceedings coincided in time, with 
each also corresponding closely to the time of the expiration of the reasonable period of time for implementation.  In fact, the First Assessment Revi ew took effect a mere 10 days after the effective 
date of the Section 129 Determination.  Althou gh, as regards timing, the United States emphasizes 
that the First Assessment Review was initiated ei ght months before the DSB's recommendations and 
rulings, we do not consider the date of initiation to be determinative in this case for two reasons.  
First, the results of the First Assessment Revi ew were published 10 months after adoption of the 
recommendations and rulings of the DSB.  Secondly, in acknowledging that the pass-through 
methodology used by the USDOC in the First A ssessment Review was adopted "in view of"
132 the 
recommendations and rulings of the DSB in  US – Softwood Lumber IV , the United States appears 
also to acknowledge that the USDOC had time to take account of those recommendations and rulings. 
85. The First Assessment Review also directly a ffected the Section 129 Determination because 
the cash deposit rate resulting from the Section 129 De termination (which reflected a small reduction 
due to pass-through analysis c ontained therein) was "updated"133, or "superseded"134, by the cash 
deposit rate resulting from the First Assessment Revi ew (which reflected no reduction from the pass-
                                                      
131Having made a similar observation, the Panel added that: 
[i]mport entries subject to the Section 129 Determination cash deposit 
would be assessed pursuant to a subsequent assessment review, if requested.  We do not attach importance to the f act that import entries subject to the 
Section 129 Determination cash deposit were not formally subject to the 
First Assessment Review, since the Section 129 Determination amended and replaced the Final Determination, such that there is no need to distinguish 
between the coverage of these two measures for present purposes. 
(Panel Report, footnote 38 to para. 4.41)   
132United States' additional written memorandum, para. 12.  
133In response to questioning at th e oral hearing, the United Stat es explained that one of the 
consequences of an assessment review is that it updates the amount of the deposits that are required from importers. 
134Canada's appellee's submission, para. 19.  WT/DS257/AB/RW 
 Page 37 
 
 
through analysis contained therein).135  Even if, as the United States argues, modification of the cash 
deposit rate was not the  purpose   of the First Assessment Review136, it was undeniably  an effect .   
86. Turning to the evaluation by the Panel of th e various links between these measures, we note 
that the Panel observed that the pass-through analys is in the First Assessment Review was "clearly 
connected to the panel and Appellate Body re ports concerning the Final [Countervailing Duty] 
Determination".137  The Panel also characterized the pass- through analysis in the First Assessment 
Review as "inextricably linked to the treatment of  pass-through in the Section 129 Determination".138  
The Panel made these observations based on the following explanation:   
[C]ertain import entries subject to the prospective effect of the Final 
Determination are also subject to th e retrospective effect of the First 
Assessment Review.  Thus, while the First Assessment Review 
resulted in an assessment rate for import entries during the period 
22 May 2002–31 March 2003, those entries had initially been subject to the cash deposit rate determined in the Final Determination.  Furthermore, the prospective effect  of the Section 129 Determination 
was superseded by the prospective effect of the First Assessment Review, in the sense that import entries that would have been subject 
to the cash deposit rate fixed by the Section 129 Determination 
became subject to the cash deposit rate fixed by the First Assessment Review, once the latter took effect .  Thus, ... there is in fact 
considerable overlap in the effect of these various measures.
139 
(footnote omitted) 
87. In the sentence immediately following this ex cerpt, the Panel added that "[s]ince the pass-
through analysis in the First Assessment Review c ould, therefore, have an impact on, and possibly 
undermine" implementation by the Section 129 Dete rmination with respect to pass-through, "we 
consider that the pass-through analysis in the Firs t Assessment Review should also fall within the 
scope of these DSU Article 21.5 proceedings."140  The United States takes issue with this statement, 
and argues that the Panel's finding must be reversed  because the "universe of measures that have some 
connection with measures taken to comply and that  'could have an impact on' or could 'possibly 
                                                      
135From the date of imposition of the countervailing du ties until 10 December 2004 (the effective date 
of the Section 129 Determination), softwood lumber imports from Canada were subject to the cash deposit rate 
established as a result of the Final Countervailing Duty Determination;  from 10 December 2004 to 
19 December 2004, such lumber imports were subject to  the cash deposit rate established as a result of the 
Section 129 Determination;  and as from 20 December 2004, softwood lumb er imports were subject to the cash 
deposit rate established as a result of the First Assessment Review.   
136The United States submitted that "the purpose of an assessment review ... is to levy the duty, i.e., to 
determine the definitive or final legal assessment of duties." (United States' appellant's submission, para. 20) 
(footnote omitted) 
137Panel Report, para. 4.41. 
138Ibid. 
139Ibid. 
140Ibid. (footnote omitted) WT/DS257/AB/RW 
Page 38  
 
undermine' those measures is so broad as to render meaningless the strict requirement of the text of 
Article 21.5".
141  We do not read this statement by the Panel as a separate or independent test of when 
measures may be considered in Article 21.5 proceedi ngs, or even as the primary reason for the Panel's 
finding.  The statement is, rather, an additional r eason, which follows the Pa nel's detailed review of 
the multiple points of convergence, both in terms of subject matter and time, that exist among the 
relevant measures.  We do not, therefore, understa nd the Panel to have found, as the United States 
argues142, that  every   measure that has "some connection" with  and that "could have an impact on" or 
could "possibly undermine" a meas ure taken to comply may be scrutinized in proceedings under 
Article 21.5 of the DSU.  Indeed, such an approach would be too sweeping.143 
88. We recognize that the First Assessment Review wa s not initiated in order to comply with the 
recommendations and rulings of the DSB, and that it operated under its own timelines and procedures, 
which were independent of the Section 129 Determina tion.  Nevertheless, these considerations are not 
sufficient to overcome the multiple and specifi c links between the Final Countervailing Duty 
Determination, the Section 129 Determination, and the pass-through analysis in the First Assessment 
Review.   
89. Lastly, we note that the United States refers to the "prejudice" that it suffered by virtue of the 
fact that the Panel's failure to grant the request for a preliminary ruling meant that it was forced to 
defend its actions in an assessment review—an "e ntirely separate" proceeding, with a "wholly 
different" administrative record—for the first time under the expedited time-frames of an Article 21.5 
proceeding.144  We observe, in this connection, that the measure at issue in proceedings under 
Article 21.5 will, in principle, be a different me asure than the measure at  issue in the original 
proceedings.145  Thus, a Member cannot be said to suffer prejudice solely by virtue of the fact that it 
must defend a  new  or  different   measure in Article 21.5 proceedings.  Moreover, the arguments 
made by the United States do not identify any prejudice suffered to the conduct of its  defence   in 
these Article 21.5 proceedings.  The United States w as invited by the Panel to submit arguments in 
defence of the pass-through analysis in the First Asse ssment Review as an alternative argument, in the 
event that the Panel did not grant its request for a preliminary ruling, but it elected not to do so.  For 
                                                      
141United States' appellant's submission, para. 33 (referring to Panel Report, para. 4.41). 
142Ibid. 
143Furthermore, we observe that, in these proceedin gs, Canada did not challenge the First Assessment 
Review  per se .  Rather, in raising claims against the pass-th rough analysis, Canada challenged a single element 
among the many different issues presented to, and analyzed by, the USDOC in the context of the First 
Assessment Review.  The pass-through analysis that was th e subject of Canada's clai ms was, for purposes of 
these Article 21.5 proceedings, a discrete component of the First Assessment Review, and could be assessed as such.   
144United States' appellant's submission, para. 6.  See also para. 43. 
145Appellate Body Report, Canada – Aircraft (Article 21.5 – Brazil) , para. 36.  WT/DS257/AB/RW 
 Page 39 
 
 
these reasons, the United States has not established that it suffered any prejudice by virtue of the fact 
that the Panel's approach forced it to defend the p ass-through analysis in the First Assessment Review 
in Article 21.5 proceedings. 
90. In view of the above, we conclude that the Panel properly included the pass-through analysis 
in the First Assessment Review in its examination of the "measures taken to comply" because of the 
close connection that the Panel found to exist betw een that pass-through analysis and both the Final 
Countervailing Duty Determination and the Section 129 Determination.  
91. We therefore see no error on the facts of this case in the Panel's finding that: 
... there is sufficient overlap in th e timing, or temporal effect, and 
nature of the Final Determinati on, Section 129 Determination and 
First Assessment Review for the latte r to fall within the scope of the 
present DSU Article 21.5 proceedings.146 
92. Accordingly, we  uphold   the Panel's finding, in paragraphs 4.41, 4.50, and 5.1 of the Panel 
Report, that the First Assessment Review fall s within the scope of the present Article 21.5 
proceedings, insofar as the pass-through analysis is concerned.147 
93. In upholding the Panel's finding with respect to the scope of Article 21.5, we wish to make 
clear that the Panel's approach is not, in our view, so "broad [as] to render the jurisdictional limits of 
Article 21.5 nearly meaningless"148, as the United States contends.  In particular, the Panel's 
reasoning—which we have upheld—should not be read to mean that every assessment review will 
necessarily fall within the jurisdiction of an Article 21.5 panel.149   
E. Disposition of the Remaining Issues on Appeal  
94. We understand, and the United States confirmed at th e oral hearing, that the sole basis for its 
appeal of the remaining Panel findings identified in it s Notice of Appeal is the same as the basis for its 
principal ground of appeal:  that the First Assessmen t Review could not be examined by the Panel in 
these Article 21.5 proceedings.  Because we have uphe ld the Panel's finding that it could examine the 
pass-through analysis in the First Assessment Revi ew, and because the United States did not appeal 
                                                      
146Panel Report, para. 4.42. 
147Ibid., paras. 4.50 and 5.1. 
148United States' appellant's submission, para. 32.  
149This dispute does not raise the issue of whether or to what extent the obligations that apply in the 
context of an assessment review are the same as the oblig ations that apply in an original countervailing duty 
investigation.  The United States did not argue before the Panel, or before us, that it had no obligation, under the 
covered agreements, to conduct the same pass-through analys is in an assessment review as it must conduct in an 
original countervailing duty investigation.   WT/DS257/AB/RW 
Page 40  
 
the substance of the remaining findings that the Pa nel made with respect to the pass-through analysis 
in the First Assessment Review, we have no b asis for disturbing those remaining findings.
150  
V. Findings and Conclusions 
95. For the reasons set forth in this Report, the Appellate Body upholds  the Panel's finding, in 
paragraphs 4.41, 4.50, and 5.1 of the Panel Report, that the First Assessment Review falls within the 
scope of the present Article 21.5 proceedings, inso far as the pass-through analysis is concerned. 
96. Having so held, and in the absence of a requ est by the United States that we review the 
Panel's examination of the substance of the p ass-through analysis in the First Assessment Review151, 
the Appellate Body finds  that the Panel acted within the scope of its authority in reaching the 
following legal conclusions: 
(a) in paragraph 5.2 of the Panel Report, that the United States failed, in the treatment of 
pass-through in the First Assessment Review, to implement properly the 
recommendations and rulings of the DSB by not conducting a pass-through analysis 
with respect to sales, found not to be at arm's length, of logs by tenured timber 
harvesters, whether or not they also pr oduce lumber, to unrelated timber producers, 
whether or not they hold a stumpage contract; 
(b) in paragraph 5.2 of the Panel Report, that, in the First Assessment Review, the United 
States included in its subsidy numerato r transactions for which it had not 
demonstrated that the benefit of subsid ized log inputs had passed through to the 
processed product;   
(c) in paragraph 5.4 of the Panel Report, that , with respect to the First Assessment 
Review, the United States remains in violation of Articles 10 and 32.1 of the  SCM 
Agreement   and Article VI:3 of the GATT 1994;  and  
(d) in paragraph 5.5 of the Panel Report, that , with respect to the First Assessment 
Review, the United States has nullified or impaired benefits accruing to Canada under 
the  SCM Agreement   and the GATT 1994. 
                                                      
150United States' Notice of Appeal, WT/DS257/22 (attach ed as Annex I to this Report), paras. 2-5 
(referring to Panel Report, paras. 5.2 and 5.4-5.5).  
151Supra , para. 94.  WT/DS257/AB/RW 
 Page 41 
 
 
97. The Panel recommended, in paragraph 5.5 of the Panel Report, that the United States bring its 
measures, found to be inconsistent with the  SCM Agreement   and the GATT 1994, into conformity 
with its obligations under those Ag reements.  Having found that the Panel acted within the scope of 
its jurisdiction in making such findings of incons istency, it is not for us  to make any additional 
recommendation, under Article 19.1 of the DSU. 
 
Signed in the original in Geneva this 17th day of November 2005 by:  
 
 
 
  
_________________________ 
Merit E. Janow 
Presiding Member 
 
 
  
 _________________________ _________________________ 
 Luiz Olavo Baptista Giorgio Sacerdoti 
 Member Member 
 
 WT/DS257/AB/RW 
Page 42  
 
 Annex I
 
 
 WORLD TRADE  
ORGANIZATION  WT/DS257/22 
12 September 2005 
 (05-3950) 
 Original:   English 
 
 
UNITED STATES – FINAL COUNTERVAILING DUTY DETERMINATION WITH 
RESPECT TO CERTAIN SOFTWOOD LUMBER FROM CANADA 
 
Recourse by Canada to Article 21.5 of the DSU  
 
Notification of an Appeal by the United States  
under Article 16.4 and Article 17 of the Understanding on Rules  
and Procedures Governing the Settlement of Disputes (DSU),  
and under Rule 20(1) of the Working Procedures for Appellate Review  
   The following notification, dated 6 September 2005, from the Delegation of the United States, 
is being circulated to Members.  
_______________ 
 
  Pursuant to Article 16 of the Understanding on Rules and Procedures Governing the 
Settlement of Disputes ("DSU") and Rule 20 of the Working Procedures for Appellate Review, the 
United States hereby notifies its decision to appeal  to the Appellate Body certain issues of law 
covered in the Report of the Panel on United States – Final Countervailing Duty Determination with 
Respect to Certain Softwood Lumber from Canada: Recourse to Article 21.5  of the DSU by Canada  
(WT/DS257/RW) ("Panel Report") and certain legal in terpretations developed by the Panel in this 
dispute.  
1.  The United States seeks review by the Appellate  Body of the Panel's legal conclusion that the 
First Assessment Review does not fall outside the scope of the present DSU Article 21.5 proceeding, 
insofar as the pass-through analysis is concerned.
1 This conclusion is in  error and is based on 
erroneous findings on issues of law and relate d legal interpretations of DSU Article 21.5. 
 
2. The United States seeks review by the Appellate  Body of the Panel's legal conclusion that the 
United States failed, in the treatment of pass-th rough in the First Assessment Review, to properly 
implement the recommendations and rulings of th e Dispute Settlement Body by not conducting a 
pass-through analysis with respect to sales, found not to be at arm's length, of logs by tenured timber 
harvesters, whether or not they also produce lumber , to unrelated timber producers, whether or not 
they hold a stumpage contract.2  This erroneous conclusion is b ased on the Panel's erroneous legal 
conclusion, described in paragraph 1, above, that  the First Assessment Review does not fall outside 
the scope of the DSU Article 21.5 proceeding. 
                                                      
 1  Panel Report, paras. 4.36-4.50, and 5.1, first subparagraph. 
 2  Panel Report, paras. 4.58-4.82, 4.104-4.106, and 5.2, first subparagraph.  WT/DS257/AB/RW 
 Page 43 
 
 
  
3. The United States seeks review by the Appellate Body of the Panel's legal conclusion that, in 
the First Assessment Review, the United States in cluded in its subsidy numerator transactions for 
which it had not demonstrated that  the benefit of subsidized log inputs had passed through to the 
processed product.3  This erroneous conclusion is based on the Panel's erroneous legal conclusion, 
described in paragraph 1, above, that the First A ssessment Review does not fall outside the scope of 
the DSU Article 21.5 proceeding.  4. The United States seeks review by the Appella te Body of the Panel's legal conclusion that, 
with respect to the First Assessment Review, the Un ited States remains in violation of Articles 10  
and 32.1 of the Agreement on Subsidies and Countervailing Measures  ("SCM Agreement") and 
Article VI:3 of the General Agreement on Tariffs and Trade 1994  ("GATT 1994").
4  This erroneous 
conclusion is based on the Panel's erroneous legal conclusion, describ ed in paragraph 1, above, that 
the First Assessment Review does not fall outside the scope of the DSU Article 21.5 proceeding.  
5. The United States seeks review by the Appella te Body of the Panel's legal conclusion that, 
with respect to the First Assess ment Review, the United States has nullified or impaired benefits 
accruing to Canada under the SCM Agreement and the GATT 1994.
5  This erroneous conclusion is 
based on the Panel's erroneous legal conclusion, d escribed in paragraph 1, above, that the First 
Assessment Review does not fall outside th e scope of the DSU Article 21.5 proceeding.  
 
__________ 
 
 
                                                      
 3  Panel Report, paras. 4.114-4.115, and 5.2, second subparagraph. 
 4  Panel Report, paras. 4.114-4.115 and 5.4. 
 5  Panel Report, para. 5.5.