WT/DS264/RW 
 Page A-1 
 
 
  
ANNEX A 
 
 
FIRST SUBMISSION BY THE PARTIES 
 
 
Contents Page 
A-1 First Written Submission of Canada A-2 
A-2 Executive Summary of First Written Submission of the United States A-10 
 WT/DS264/RW 
Page A-2  
 
  
ANNEX A-1 
 
FIRST WRITTEN SUBMISSION OF CANADA 
 
22 June 2005 
 
 
TABLE OF CONTENTS 
 
Page   
I. INTRODUCTION ................................................................................................................ ....4 
II. FACTUAL BACKGROUND...................................................................................................4 
A. P
ROCEDURAL HISTORY ...............................................................................................................4 
B. T HE US PRACTICE OF ZEROING IN THE FINAL DETERMINATION ................................................5 
C. T HE US PRACTICE OF ZEROING IN THE SECTION 129 DETERMINATION .....................................6 
III. ISSUE..................................................................................................................... ....................6 
IV. LEGAL ANALYSIS ............................................................................................................. ....7 
A. T HE DETERMINATION OF THE EXISTENCE OF DUMPING BY DOC  USING A 
METHODOLOGY THAT INCORPORATES THE PRACTICE OF ZEROING IS INCONSISTENT 
WITH ARTICLE 2.4.2  OF THE ANTI-DUMPING AGREEMENT ..........................................................7 
B. T HE DETERMINATION OF THE EXISTENCE OF DUMPING BY DOC  USING A 
METHODOLOGY THAT INCORPORATES THE PRACTICE OF ZEROING IS INCONSISTENT 
WITH ARTICLE 2.4 OF THE ANTI-DUMPING AGREEMENT .............................................................8 
V. REQUEST FOR FINDINGS AND RECOMMENDATIONS ..............................................9 
  WT/DS264/RW 
 Page A-3 
 
 
TABLE OF CASES CITED IN THIS SUBMISSION 
 
 
Appellate Body Report United States – Final Dumping Determination on Softwood Lumber 
from Canada , Report of the Appellate Body, WT/DS264/AB/R, 
adopted 31 August 2004. 
Panel Report United States – Final Dumping Determination on Softwood Lumber 
from Canada , Report of the Panel, WT/DS264/R, adopted 
31 August 2004. 
Canada – Aircraft (Article 21.5 – 
Brazil)  Canada – Measures Affecting the Export of Civilian Aircraft: 
Recourse by Brazil to Article 21.5 of the DSU , Report of the Appellate 
Body, WT/DS70/AB/RW, adopted 4 August 2000. 
EC – Bed Linen European Communities – Anti-Dumping Duties on Imports of Cotton-
Type Bed Linen from India , Appellate Body Report, 
WT/DS141/AB/R, adopted 12 March 2001.  
EC – Bed Linen (Article 21.5 – 
India)  European Communities – Anti-Dumping Duties on Imports of Cotton-
Type Bed Linen from India: Recourse to Article 21.5 of the DSU by 
India , Report of the Appellate Body, WT/DS141/AB/RW, adopted 
24 April 2003. 
US – Corrosion-Resistant Steel Sunset Review United States – Sunset Review of Anti-Dumping Duties on Corrosion-
Resistant Carbon Steel Flat Products from Japan , Report of the 
Appellate Body, WT/DS244/AB/R, adopted 9 January 2004.  
 WT/DS264/RW 
Page A-4  
 
I. INTRODUCTION 
 
1. In United States – Final Dumping Determination on Softwood Lumber From Canada , the 
Appellate Body upheld the Panel’s finding that  the United States acted inconsistently with 
Article 2.4.2 of the Agreement on Implementation of Article VI of the General Agreement on Tariffs 
and Trade 1994  (Anti-Dumping Agreement ) in determining the existence of dumping on the basis of a 
methodology incorporating the practice of zeroing.
1  The Panel and Appellate Body reports were 
subsequently adopted by the Dispute Settlement Body (DSB).  2. Rather than eliminate zeroing in res ponse to these recommendations and rulings, the 
United States Department of Commerce (DOC) h as issued a revised determination in which it 
continued to apply the practice of zeroing under a different methodology.  3. The only difference in the US approach is th at instead of zeroing in a weighted-average-to-
weighted-average methodology, it now has zeroed in a transaction-to-transaction methodology.  The 
Appellate Body found the practice of zeroing in a weighted-average-to-weighted-average 
methodology inconsistent with US oblig ations under Article 2.4.2 of the Anti-Dumping Agreement .  
This reasoning applies equally to the practice of ze roing in a transaction-to-transaction methodology.  
Indeed, the original Panel indicated that: "the u se of zeroing when determining a margin of dumping 
based on the transaction-to-transaction methodology woul d not be in conformity with Article 2.4.2 of 
the AD Agreement ".
2  
 
4. The Appellate Body has held that the "inherent bias" of zeroing is that it inflates and distorts dumping margins.
3  Proper implementation of the DSB’s r ecommendations and rulings in this case 
would have resulted in a reduction of the margins of  dumping for all of the investigated exporters and 
of the "all others rate".  Instead, the United Stat es has put forward as implementation in this case new 
margins of dumping that are higher th an the ones originally determined.4   
 5. Accordingly, the United States has failed to comply with the DSB’s recommendations and 
rulings to bring its measures into conformity with  its obligations under Articles 2.4.2 and 2.4 of the 
Anti-Dumping Agreement . 
 II. FACTUAL BACKGROUND  
A. PROCEDURAL HISTORY 
 
6. On 22 March 2002, DOC announced a final a ffirmative determinati on of dumping against 
imports of certain softwood lumber pro ducts from Canada (Fin al Determination).5  The original panel 
that reviewed the Final Determination found th at the United States acted inconsistently with 
Article 2.4.2 of the Anti-Dumping Agreement  in determining the existence of margins of dumping on 
the basis of a methodology incorporating the practice of "zeroing".6  The Appellate Body upheld the 
Panel’s finding and recommended that the DSB request  the "United States to bring its measure into 
                                                      
1 Appellate Body Report, at para. 183(a). 
2 Panel Report, at note 361. 
3 See,  for instance, US – Corrosion-Resistant Steel Sunset Review , at para. 135. 
4 The continued use of “zeroing” by DOC resulted in increases in dumping margins for the investigated 
exporters: Abitibi from 12.44% to 13.22%; Canfor from 5..96% to 9.27%; Slocan from 7.71% to 12.91%; 
Tembec from 10.21% to 12.96%; West Fraser from 2.18% to 3.92%; and Weyerhaeuser from 12.39% to 
16.35%.  The “all others” rate increased from 8.43% to 11.54%, a relative increase of 37%. 
5 Certain Softwood Lumber Products from Canada , 67 Fed. Reg. 15,539 (Dep’t Commerce 
2 April 2002) (final determination). 
6 Panel Report, at para 7.224.  WT/DS264/RW 
 Page A-5 
 
 
conformity with its obligations under the Anti-Dumping Agreement ".7  The DSB adopted the 
Appellate Body and Panel reports on 31 August 2004.8 
 7. On 27 September 2004, the United States notified the DSB of its intention to implement the DSB’s recommendations and rulings.
9  On 6 December 2004, Canada and the United States reached 
agreement pursuant to Article 21.3(b) of the Understanding on Rules and Procedures Governing the 
Settlement of Disputes (DSU) on a reasonable period of time to implement the DSB’s 
recommendations and rulings.  The United States confir med in this agreement that it would complete 
implementation no later than 15 April 2005.10  Canada and the United States subsequently agreed to 
extend the reasonable period of time until 2 May 2005.11 
 
8. On 5 November 2004, pursuant to section 129(b)(2) of the Uruguay Round Agreements Act12 
(URAA), the United States Trade Representative requ ested that DOC issue a determination that 
would render its actions in the investigation no t inconsistent with the findings of the DSB. 
 
9. On 15 April 2005, DOC released a final determination under section 129 of the URAA 
(Section 129 Determination), which purported to im plement the DSB’s recommendations and rulings.  
In the Section 129 Determination, DOC once agai n calculated dumping margins using a methodology 
that incorporated the practice of "zeroing".13  Specifically, DOC asserted that the DSB’s rulings only 
applied in a weighted-average-to- weighted-average comparison, dete rmined that it would switch to a 
transaction-to-transaction comparison, and continued to zero as part of the transaction-to-transaction 
methodology.  As a result, the margins of dumping fo r all of the investigated exporters and the "all 
others" rate increased.  10. On 19 May 2005, the United States informed  the DSB that it had complied with the DSB’s 
recommendations and rulings.  Cana da considers that the United States failed to comply with these 
recommendations and rulings.  Accordingly, on 1 Ju ne 2005, Canada requested the establishment of 
this Panel pursuant to Article 21.5 of the DSU.
14 
 
B. THE US PRACTICE OF ZEROING IN THE FINAL DETERMINATION 
 
11. The US practice of zeroing as applied by DOC in the Final Determination was described by 
both the Panel and the Appellate Body.15   
 12. First, DOC divided the product under investigation ( i.e., softwood lumber) into sub-groups of 
identical or very similar product types.  Within  each sub-group, DOC made certain adjustments to 
ensure price comparability of the transactions, a nd then calculated a weighted-average normal value 
                                                     
 
7 Appellate Body Report, at paras. 183-184. 
8 DSB, Minutes of Meeting (31 August 2004) , WT/DSB/M/175, 24 September 2004, 4(a), at para. 42. 
9 DSB, Minutes of Meeting (27 September 2004) , WT/DSB/M/176, 19 October 2004, at para. 34. 
10 United States – Final Dumping Determination on Softwood Lumber from Canada  – Agreement 
under Article 21.3(b) of the DSU , WT/DS264/12, 8 December 2004.   
11 United States – Final Dumping Determination on Softwood Lumber from Canada – Modification of 
the Agreement under Article 21.3(b) of the DSU , WT/DS264/15, 17 February 2005. 
12 Uruguay Round Agreements Act , Pub. L. No. 103-465, § 129, 108 Stat. 4838, codified at 19 U.S.C. § 
3538 (2000). 
13 Notice of Determination Under Section 129 of th e Uruguay Round Agreemen ts Act; Anti-Dumping 
Measures Concerning Certain Softwood Lumber Products From Canada , 70 Fed. Reg. 22,636 (Dep’t 
Commerce 2 May 2005) (“Section 129 Determination”) (Exhibit CDA-1). 
14 United States – Final Dumping Determination on Softwood Lumber from Canada – Recourse to 
Article 21.5 of the DSU by Canada – Request for the Establishment of a Panel , WT/DS264/16, 2 May 2005. 
15 Appellate Body Report, at paras. 64-65; and Panel Report, at para. 7.185.  See also Panel Report, 
Annex B-2, Responses of the United States to Questions Posed in the Context of the Second Substantive 
Meeting of the Panel, Question 109, at paras. 52-56. WT/DS264/RW 
Page A-6  
 
and a weighted-average export price per unit of the product type.  If the weighted-average normal 
value per unit exceeded the weighted-average export price per unit for a sub-group, the difference was 
regarded as a "dumping margin" for that comparison.   In contrast, if the weighted-average normal 
value per unit was equal to or less than the weight ed-average export price pe r unit of a sub-group, 
DOC assigned a zero value to that comparison. 
 
13. DOC then aggregated the results of the pos itive sub-group comparisons where it considered 
there was a "dumping margin".
16  Finally, DOC divided the result of this aggregation by the value of 
all export transactions of the produc t under investigation (including t hose to which it had attributed a 
zero value).  In this way, DOC obtained an " overall margin of dumping", for each investigated 
exporter, for the product under investigation.17 
 
C. THE US PRACTICE OF ZEROING IN THE SECTION 129 DETERMINATION 
 
14. In its Section 129 Determination, rather than  eliminating zeroing from its weighted- average-
to-weighted-average calculati on methodology and recalculating the margins of dumping for each 
investigated exporter and the "all others" rate, DOC used a different methodology (transaction-to-
transaction) to determine dumping, and continued to "zero" results  of negative comparisons.  DOC 
claimed that it was allowed to continue to zero d espite the decision of the Appellate Body because the 
decision was limited to the weighted-a verage-to-weighted-average methodology.18 
 
15. Under the transaction-to-transaction met hodology, the DOC compared or matched each 
export transaction for which it had data  with a normal value transaction ( i.e., a transaction in the 
Canadian home market).  In seeking to determin e which specific home-market transaction would be 
the most suitable match for a given export tr ansaction, DOC used the same model-match 
characteristics used in the Final Determination.19 
 16. If a particular comparison between an export sale and a home market sale yielded a negative result ( i.e., the home market price was lower than the e xport price), DOC treated that result as zero.  
In the Section 129 Determination, DOC stated that  it did not apply "the offset for non-dumped sales in 
[its] transaction-to-transaction comparison."
20  In other words, DOC assigned a zero value to all 
results of comparisons where the export price exceede d the normal value, rather than using the actual 
difference.  As in the Final Determination, DOC  then added only the positive results together, and 
divided the sum by the value of all export transacti ons to produce a final margin of dumping for each 
investigated exporter.21 
 III. ISSUE 
 
17. The issue before this Panel is whether the practice of zeroing in the transaction-to-transaction 
methodology as applied by DOC in the Section 129 Dete rmination is inconsistent  with US obligations 
under Articles 2.4.2 and 2.4 of the Anti-Dumping Agreement . 
 
                                                     
 
16 Appellate Body Report, at para. 64; and Panel Report, at para. 7.185. 
17 Appellate Body Report, at para. 64; and Panel Report, at para. 7.185. 
18 Section 129 Determination, 70 Fed. Reg. at 22,639 (Exhibit CDA-1). 
19 Ibid., at 22,637. 
20 Ibid., at 22,639. 
21 DOC accomplished zeroing in the Section 129 Determ ination, as it did in the Final Determination, 
through just a few computer instruc tions that assign a zero to each comp arison with a negative value.  See 
Tembec Margin Programme for US Sales Administrative Duty (Exhibit CDA-2).  WT/DS264/RW 
 Page A-7 
 
 
IV. LEGAL ANALYSIS 
 
18. The Appellate Body found the practice of zeroing in the weighted-average-to-weighted-
average methodology inconsistent with US  obligations under Article 2.4.2 of the Anti-Dumping 
Agreement .  As the original Panel concluded, "the use of zeroing when determining a margin of 
dumping based on the transaction-to-transaction me thodology would not be in conformity with 
Article 2.4.2 of the AD Agreement ".22  The Section 129 Determination is exactly contrary to this 
conclusion.  19. It is no defence that DOC used zeroing in a transaction-to-transaction methodology in the 
Section 129 Determination instead of a weighted-a verage-to-weighted-average methodology.  This 
change in methodology does not render DOC’s actions  consistent with US obligations under the Anti-
Dumping Agreement .  
 20. It is also well-established that the mandate  of Article 21.5 panels is to examine the 
consistency of measures taken to comply with the recommendations and rulings of the DSB with 
obligations under the covered agre ements.  An Article 21.5 panel is not confined to examining the 
measures taken to comply from the perspective of the claims, arguments, and factual circumstances 
relating to the measure that was the subject of the original proceeding.
23 
 
A. THE DETERMINATION OF THE EXISTENCE OF DUMPING BY DOC USING A 
METHODOLOGY THAT INCORPORATES THE PRACTICE OF ZEROING IS INCONSISTENT 
WITH ARTICLE 2.4.2 OF THE ANTI-DUMPING AGREEMENT   
 
21. Article 2.4.2 of the Anti-Dumping Agreement  provides, in relevant part, as follows: 
 the existence of margins of dumping during the i nvestigation phase shall normally be established on 
the basis of a comparison of a weighted average norma l value with a weighted average of prices of all 
comparable export transactions or by a comparison of normal value and export prices on a 
transaction-to-transaction basis.  
 22. The Appellate Body held, consistent with th e definition of dumping contained in Article 2.1, 
that, pursuant to Article 2.4.2: "‘margins of  dumping’ can be found only for the product under 
investigation as a whole, and cannot be found to exis t for a product type, model, or category of that 
product."
24  The Appellate Body further held that: 
 
… the results of the multiple comparisons at the sub-group level are … not "margins of dumping" within the meaning of Article 2.4.2.  Rather, those results reflect only 
intermediate calculations made by an i nvestigating authority in the context of 
establishing margins of dumping for the product under investigation.  Thus, it is only 
on the basis of aggregating all these "intermediate values" that an investigating 
authority can establish margins of dumping for the product under investigation as a whole.
25 
 
                                                      
22 Panel Report, at note 361. 
23 See e.g., EC – Bed Linen (Article 21.5 – India) , at para. 79 and  Canada – Aircraft (Article 21.5 – 
Brazil) , at para. 41. 
24 Appellate Body Report, at para. 96. 
25 Ibid., at para. 97 [emphasis in original]. WT/DS264/RW 
Page A-8  
 
23. The Appellate Body also stated:   
We fail to see how an investigating author ity could properly establish margins of 
dumping for the product under investiga tion as a whole without aggregating all of the 
"results" of the multiple comparisons for all product types.  There is no textual basis 
under Article 2.4.2 that would justify taking into account the "results" of only some 
multiple comparisons in the process of calculating margins of dumping, while disregarding other "results".  If an investigating authority has chosen to undertake multiple comparisons, the investigating aut hority necessarily has to take into account 
the results of all those comparisons in order to establish margins of dumping for the 
product as a whole under Article 2.4.2.
26 
24. Accordingly, the Appellate Body agreed with the Panel that the United States acted 
inconsistently with Article 2.4.2 of the Anti-Dumping Agreement  when DOC determined the existence 
of margins of dumping on the basis of a metho dology that zeroed the results of all negative 
intermediate comparisons. 
 
25. As with the weighted-average-to-weight ed-average methodology, the transaction-to-
transaction methodology involves multiple comparison s.  Every comparison made by DOC under this 
methodology represents an intermediate calculation in  the context of establishing margins of dumping 
for the product under investigation.  Thus, DOC mu st aggregate all these "intermediate values" in 
establishing the margins of dumping for the product under investigation as a whole. 
 
26. There is no textual basis under Article 2.4.2 th at could justify taking into account the "results" 
of only some multiple comparisons in the process of calculating margins of dumping based on either 
the weighted-average-to-weighted-average or the transaction-to-transaction methodology, while 
disregarding other "results".  Both methodologies involve multiple comparisons.  The Appellate Body 
has held that an investigating authority, incl uding DOC, necessarily has to take into account the 
results of all those comparisons in order to est ablish margins of dumping for the product as a whole 
under Article 2.4.2.  27. The reasoning of the Appellate Body applies to the transaction-to-transaction methodology.  
By failing to take into account the results of all multiple comparisons in order to establish the margin 
of dumping for the product under investigation as a w hole, DOC continues to act inconsistently with 
US obligations under Article 2.4.2 of the Anti-Dumping Agreement . 
 
B. THE DETERMINATION OF THE EXISTENCE OF DUMPING BY DOC USING A 
METHODOLOGY THAT INCORPORATES THE PRACTICE OF ZEROING IS INCONSISTENT 
WITH ARTICLE 2.4 OF THE ANTI-DUMPING AGREEMENT   
 
28. Article 2.4 of the Anti-Dumping Agreement  sets forth a general obligation to make a "fair 
comparison" between export price and normal value.  In EC – Bed Linen , the Appellate Body held 
that by not taking into account all comparisons, the practice of "zeroing" does not provide a fair 
comparison between the export price and the normal value and is, therefore, inconsistent with 
Article 2.4 of the Anti-Dumping Agreement .  The Appellate Body stated as follows: 
 
[W]e are also of the view that a comparison between export price and normal value 
that does not take fully into account the prices of all comparable export transactions – 
such as the practice of "zeroing" at issue in this dispute – is not a "fair comparison" 
                                                      
26 Ibid., at para. 98 [emphasis in original].  WT/DS264/RW 
 Page A-9 
 
 
between export price and normal value, as required by Article 2.4 and by Article 2.4.2.
27 
29. Likewise, as the Appellate Body explained in U.S. – Corrosion-Resistant Steel Sunset Review , 
zeroing introduces an "inherent bias" that "may di stort not only the magnitude of a dumping margin, 
but also a finding of the very existence of dumping."28 Accordingly, not only is the practice of zeroing 
in applying the transaction-to-transaction methodol ogy inconsistent with Article 2.4.2 of the Anti-
Dumping Agreement , it is also inconsistent with Article 2.4. 
 
V. REQUEST FOR FINDINGS AND RECOMMENDATIONS 
 30. For these reasons, Canada asks the Panel to find that the United States failed to implement the 
DSB’s recommendations and rulings and rule that it  has acted inconsistently with Articles 2.4 and 
2.4.2 of the Anti-Dumping Agreement  by continuing to determine dumping on the basis of a 
methodology that incorporates the practice of zeroing.  
31. Canada also requests that the Panel recomme nd pursuant to Article 19.1 of the DSU that the 
United States bring its measures into conformity w ith its obligations under Articles 2.4 and 2.4.2 of 
the Anti-Dumping Agreement  by recalculating dumping margins for all investigated exporters and the 
"all others rate" on the basis of a methodology that does not incorporate the practice of zeroing and that it return all anti-dumping cash deposits collected as a result of its failure to eliminate the practice 
of zeroing. 
                                                     
 
27 EC – Bed Linen , at para. 55 [emphasis in original]. 
28 US – Corrosion-Resistant Steel Sunset Review , at para. 135. WT/DS264/RW 
Page A-10  
 
  
ANNEX A-2  
 
EXECUTIVE SUMMARY OF FIR ST WRITTEN SUBMISSION 
OF THE UNITED STATES 
 
14 July 2005 
  
Introduction  
 
1. It is a fundamental tenet of WTO dispute settlement that "[r]ecommendations and rulings of 
the DSB cannot add to or diminish the rights and obligations provided in the covered agreements".
1  
Nevertheless, adding to the obligations of the Un ited States is precisely what Canada seeks to do 
through the present dispute settlement proceeding.  Sp ecifically, it asks the Panel to find an obligation 
on the US Department of Commerc e ("Commerce") in establishing the existence of margins of 
dumping using the transaction-to-transaction methodolog y, though such an obligation has no basis in 
any article of the Agreement on Implementation of  Article VI of the General Agreement on Tariffs 
and Trade 1994 (" AD Agreement ").  
 
2. Canada asks the Panel to find that, when a ggregating the results of multiple transaction-to-
transaction comparisons, Commerce has an obligation to  offset the results of comparisons in which 
export prices are less than normal value with the results of comparisons in which export prices are 
greater than normal value.  There is no textual basi s for such an obligation.  While Canada urges the 
Panel to extend the logic that allowed the original panel and the Appellate Body to find an offset 
obligation with respect to the average-to-average methodology, the leap to an obligation under the 
transaction-to-transaction methodology has no textual support.  The key language relied upon to find 
an obligation in the first case is glaringly absent in the second.  
Procedural History  
 3. At issue in the underlying dispute was Commer ce’s Final Determination in the less than fair 
value investigation on certain softwood lumber from Canada.
2  Canada asserted numerous claims 
regarding the initiation, scope, and methodologies applie d in that investigation.  The original panel 
rejected all of those claims except one, c oncerning an aspect of Commerce’s methodology for 
establishing margins of dumping, and the Appellate Body upheld that result.3 Following the DSB’s 
adoption of its recommendations and rulings on 31 August 2004, the United States undertook to come 
into compliance with its obligations under the AD Agreement . 
                                                      
1 Understanding on Rules and Procedures  Governing the Settlement of Disputes  (“DSU”), Arts. 3.2 
and 19.2. 
2 See Notice of Final Determination of Sales at Less Than Fair Value: Certain Softwood Lumber 
Products from Canada , 67 Fed. Reg. 15,539  (2 April 2002) (“ Final Determination ”) and accompanying Issues 
and Decision Memorandum.  Following an affirmative in jury determination by the United States International 
Trade Commission, Commerce amended its final determination and published an antidumping duty order on 22 
May 2002.  See Notice of Amended Final Determination of Sales at Less Than Fair Value and Anti-Dumping 
Duty Order: Certain Softwood Lumber Products From Canada , 67 Fed. Reg. 36,068 (22 May 2002).  These 
documents were exhibits before the panel in the underlying proceeding (specifically, exhibits CDA-1, CDA-2, 
and CDA-3).  As these documents are not otherwise referred  to in this submission, they have not been attached 
as exhibits.  However, the United States would be pleased to make them available, should the Panel so request. 
3 AB Report and Panel Report, United States – Final Dumping Determination on Softwood Lumber 
from Canada , WT/DS64/AB/R and WT/DS64/R, respectively, adopted 31 August 2004 (referred to hereafter as 
“AB Report” and “Panel Report”, respectively).  WT/DS264/RW 
 Page A-11 
 
 
 
4. Commerce engaged in a process that resulted in the modification of its methodology for establishing the existence of margins of dumping for softwood lumber from Canada.
4  T h e  n e w  
methodology involved transaction-to-transaction comparisons of United States export prices, or constructed export prices, of certain softwood lumber  to identical or similar normal value transactions 
in Canada.  For comparisons for which the US sale was made at less then normal value, the results 
were aggregated and divided by the total of a ll the respondent company’s US sales to determine 
whether the dumping margin for that respondent was above the de minimis  level.
5  Commerce’s new 
determination ("Section 129 Dete rmination") was issued on 15 April 2005 and entered into force 
effective 27 April 2005.6 
 
Scope and Standard of Review  
 
5. With respect to the scope of the present proceeding, Canada states in its first written 
submission that "the mandate of Ar ticle 21.5 panels is to examine the consistency of measures taken 
to comply with the recommendations and rulings of the DSB with obligations under the covered 
agreements".7  The United States does not disagree with that  proposition.  What is curious, however, 
is the statement that follows, in which Canada urg es the Panel not to confine itself to "the perspective 
of the claims, arguments, and factual circumstances relating to the measure that was the subject of the original proceeding".
8  The United States notes, in particular, Canada’s apparent effort to distance 
itself from "arguments . . . relating to the measure that was the subject of the original proceeding".9  
While it is true, of course, that this Panel is not "confined" to examine the measure now at issue from 
the perspective of arguments made in the underlyi ng proceeding, it is not unreasonable to expect a 
modicum of consistency between a party’s arguments in the original proceeding and its arguments before a panel established pursuant to Article 21.5.  Yet, in Canada’s case, such consistency is 
noticeably lacking. 
 
6. In the underlying proceeding, both before the panel and before the A ppellate Body, Canada’s 
argument with respect to an offset requirement purporte d to be firmly grounded in  text – in particular, 
the phrase "all comparable export transactions" in Article 2.4.2 of the AD Agreement .  Thus, in its 
submission to the Appellate Body, Canada stated, "The Panel’s inte rpretation of Article 2.4.2 should 
be upheld because it is consistent with the ordinary meaning of the requirement in Article 2.4.2 that 
‘all comparable export transactions’ be included in a weighted-average to weighted-average dumping 
calculation".
10  Similarly, in its first submission to the original panel, Canada argued that "zeroing" 
                                                      
4 The process involved the application of the new methodology in a preliminary determination issued to 
the interested parties, followed by briefing on the new methodology by the interested parties, followed by the issuance of a final determination. 
5 By contrast, in the measure at issue in the un derlying proceeding, Commer ce had established margins 
of dumping by dividing the product u nder consideration into sub-groups accordin g to model, level of trade, etc., 
performing weighted-average-t o-weighted-average compar isons for each sub-group. 
6 By the time Commerce issued its Section 129 Determination, it already had completed an 
administrative review of each of the investigated exporters and producers.  Accordingly, the Section 129 Determination had no practical effect on the cash deposit rate applicable to those companies’ exports.  The “all 
others” rate established in the Section 129 Determination does currently apply to exports of companies subject 
to that rate.  See Notice of Determination Under Section 129 of the Uruguay Round Agreements Act; 
Antidumping Measures Concerning Certain Softwood Lumber Products From Canada , 70 Fed. Reg.  22,636 at 
22,645 to 22,646 (Dep’t Commerce 2 May 2005) (“Section 129 Determination”) (Exhibit CDA-1).  Canada glosses over this distinction in its recitatio n of the facts in its first written submission. 
7 Canada First Written Submission, para. 20. 
8 Canada First Written Submission, para. 20. 
9 Canada First Written Submission, para. 20. 
10 Canada Appellee’s Submission, United States – Final Dumping Determination on Softwood Lumber 
from Canada , WT/DS264, para. 22 (7 June 2004) (“Canada Appellee’s Submission”) (Exhibit US-1); see also WT/DS264/RW 
Page A-12  
 
was prohibited in the aggregation of average-to-a verage comparisons "precisely because it fails to 
take fully into account all comparable export transactions".
11  And, in its second submission to the 
original panel, Canada urged, "‘All comparable  export transactions’ requires inclusion of export 
transactions that result in positive intermediate margins as well as those that result in negative 
intermediate margins".12 
 
7. While the United States disagreed with Canada’s  proffered interpretation of "all comparable 
export transactions", the debate undeniably was about the meaning of that text.  By contrast, in the 
present proceeding, Canada has departed from a textua l basis for its argument all together.  It cannot 
rely on the phrase "all comparable export transac tions", because that phrase does not modify the 
provision in Article 2.4.2 that refers to the tr ansaction-to-transaction methodology.  Instead, Canada 
attempts to leverage the obligation found to exist with respect to the average-to-average methodology 
in order to identify a new obligation with respect to the transaction-to-transaction methodology.  This may be why Canada is now trying to distance itself from arguments in the underlying proceeding that 
were so closely bound to particular text. 
 
8. With respect to the standard of review, the a pplicable rule (as in the underlying proceeding) is 
set forth in Article 17.6 of the AD Agreement .  In particular, since the only issue now in dispute is a 
legal issue, the applicable rule is that set forth in  clause (ii) of Article 17.6.  As the original panel 
explained, Article 17.6(ii) contai ns "an explicit acknowledgment that the relevant provision/s of the 
AD Agreement  may admit of more than one permissible inte rpretation, and an instruction that, if this 
process of treaty interpretation leads us to the conc lusion that the interpretation of the provision in 
question put forward by the defending  party is permissible, we shall find the measure in conformity 
with the AD Agreement  if it is based on that permissible interpretation".
13 
 9. In this submission, the United States will dem onstrate that the measure taken to comply with 
the recommendations and rulings of the DSB was c onsistent with a permissible interpretation of 
Articles 2.4.2 and 2.4 and, accordingly, should be upheld. 
 
The Section 129 Determination is Consistent With Article 2.4.2 of the AD Agreement  
 
10. Article 2.4.2, first sentence reads as follows: 
 
Subject to the provisions governing fair comp arison in paragraph 4, the existence of 
margins of dumping during the investiga tion phase shall normally be established on 
the basis of a comparison of a weighted average normal value with a weighted average of prices of all comparable export transactions or by a comparison of normal 
value and export prices on a transaction-to-transaction basis. 
 The first sentence thus contemplates two alternativ e methodologies that "normally" are to be used to 
establish the existence of margins of dumping durin g the investigation phase: the average-to-average 
methodology and the transaction- to-transaction methodology. 
 
                                                                                                                                                                    
 
id., paras. 35-37 (defending original panel report based on interpretation of words “all comparable export 
transactions”). 
11 Canada First Written Submission, United States – Final Dumping Determination on Softwood 
Lumber from Canada , WT/DS264, para. 171 (11 April 2003) (“Ca nada First Written Submission (Original)”) 
(Exhibit US-2); see also  id., para. 170 (same). 
12 Canada Second Written Submission, United States – Final Dumping Determination on Softwood 
Lumber from Canada , WT/DS264, para. 141 (9 July 2003) (“Canada Second Written Submission (Original)”) 
(Exhibit US-3); see also id. , para. 144 (same). 
13 Panel Report, para. 7.11.  WT/DS264/RW 
 Page A-13 
 
 
11. Canada’s argument with respect to Article 2. 4.2, as laid out in its first submission, essentially 
relies on a generalization of the reasoning of the Appe llate Body in the underlying proceeding.  There, 
the Appellate Body found: that when applying the average-to-average comparison methodology, Commerce established and compared multiple sub- groups of the like product "softwood lumber", 
obtaining "intermediate values";  that it could estab lish margins of dumping only by aggregating those 
intermediate values; and that in doing so, Article 2. 4.2 required it to include all of the intermediate 
values obtained.  Canada extrapolates from this finding that, because the transaction-to-transaction 
methodology also allegedly yields in termediate values, an aggregati on of those values to establish a 
single margin of dumping also must include all of the intermediate values.
14   
 
12. There are two principal flaws with this line of  reasoning.  First, it does not comport with the 
textual basis for the findings by the Appellate Body  and the panel in the u nderlying proceeding.  
Second, it assumes incorrectly that an obligatio n found with respect to the average-to-average 
methodology logically must extend to the transact ion-to-transaction methodology, notwithstanding 
differences between the two methodologies and between the texts of the clauses providing for them.  
 
13. In the underlying proceeding, both the panel a nd the Appellate Body were careful to stress 
that the question before them was limited to wh ether "zeroing" is permitted under the average-to-
average methodology.15  In addressing that question, both the original panel and the Appellate Body 
engaged in a close reading of the text of Article 2.4.2 and, in pa rticular, the phrase "all comparable 
export transactions" – a phrase included in the artic le’s articulation of the average-to-average 
methodology but not in its articulation of th e other two methodologies.  Thus, found that: 
 
the United States has violated Article 2.4.2 of the AD Agreement  by not taking into 
account all comparable export transactions when DOC calculated the overall margin 
of dumping as Article 2.4.2 requires that the existence of margins of dumping has to 
be established for softwood lumber on the basis of a comparison of the weighted-
average-normal-value with the weighted average of prices of all comparable export 
transactions , that is, for all transactions involving all types of the product under 
investigation.16 
 14. In defending this finding, Ca nada urged the Appellate Body to uphold the original panel’s 
interpretation of Article 2.4.2 (as noted above) preci sely because "it is consistent with the ordinary 
meaning of the requirement in Article 2.4.2 that ‘a ll comparable export transactions’ be included in a 
weighted-average to weighted -average dumping calculation".
17 
 15. In analyzing the question on appeal, the Appe llate Body, after addressing the threshold issue 
of the permissibility of "multiple averaging" under the average-to-average methodology, observed 
correctly that the crux of the parties’ disagreemen t was "as to the proper interpretation of the terms 
‘all comparable export transactions’ and ‘margins of  dumping’ in Article 2.4.2 as they relate to 
zeroing."
18  The Appellate Body went on to "emphasize th at [the two terms] should be interpreted in 
an integrated manner."19  Accordingly, the Appellate Body’s conclusion was the result of its 
interpretation of "all comparable export transac tions" together with "margins of dumping." 
                                                      
14 Canada First Written Submission, paras. 22-25. 
15 See AB Report, para. 63 (“[I]n this appeal, we are not required to, and do not address, the issue of 
whether zeroing can, or cannot, be used under the other methodologies prescribed in Article 2.4.2. . . .”); id., 
paras. 77, 104, 108: Panel Report, para. 7.219 (noting that the use of the two methodologies described in Article 2.4.2 besides average-to-average are not within the terms of reference); id., paras. 7.196, 7.200, 7.213, 
7.214. 
16 Panel Report, para. 7.224 (emphases added). 
17 Canada Appellee’s Submission, para. 22 (Exhibit US-1). 
18 AB Report, para. 82. 
19 AB Report, para. 85. WT/DS264/RW 
Page A-14  
 
 16. In sum, the term "all comparable export transactions" was central to the findings in the 
underlying proceeding.  Yet, that term is absent from the provision now at issue.  The first sentence of 
Article 2.4.2 contemplates the establishment of ma rgins of dumping in one of two alternative ways: 
first, "on the basis of a comparison of a weighted av erage normal value with a weighted average of 
prices of all comparable export transaction ,," (emphasis added) or, second , "by a comparison of 
normal value and export prices on a transaction-by-tran saction basis".  As interpretation of the term 
"all comparable export transactions" was essential to  the original panel’s findings, to Canada’s 
defence of those findings, and to the Appellate Body ’s findings, this Panel should reject Canada’s 
assertion that the findings from the underlying proceed ing should extend to a provision in which that 
term is absent.   
 
17. The original panel correctly observed, "[W]e are required as treaty interpreters to assume that 
when the drafters included language in the treaty, that they intended that language to have some 
meaning".
20  The converse of that observation is also true in this dispute.  When the drafters excluded 
language from the treaty, it must be assumed that they  did so deliberately, and the absence of a term in 
one provision that is included in another provisi on must not be ignored; it must be accorded 
significance.  Here, the obligation that Canada asks the Panel to find is an obligation that has been 
found to stem from text that is absent from the portio n of Article 2.4.2 that addresses the methodology 
that Commerce used in the measure  at issue – the transaction-to-transaction methodology.  Because of 
that crucial textual difference, the Panel should reject  Canada’s claim that the measure is inconsistent 
with Article 2.4.2. 
 18. Moreover, in addition to ignoring the textual difference between the provision at issue in the 
underlying proceeding and the provision now at i ssue, Canada’s argument is flawed for a second 
reason.  Canada assumes, without explanation, th at when it comes to the aggregation of multiple 
values, there is no difference between the averag e-to-average methodology and the transaction-to-
transaction methodology.  Therefore, under Canada’s  argument, what goes for one necessarily must 
go for the other.  That assumption has no basis.   19. In the underlying proceeding, Canada pointed out that, with r espect to the average-to-average 
methodology, "zeroing fails to compare a ‘weighted average’ normal value with a ‘weighted average’ 
of prices of all comparable export transactions, as requ ired by Article 2.4.2.  Due to the conversion of 
some intermediate margins to zero, the overall ma rgin of dumping that results does not reflect an 
actual average, in violation of Article 2.4.2".
21  In other words, the problem with "zeroing" when it 
comes to aggregating the results of average-to-average  comparisons, as Canada itself argued, is that it 
causes the final result to be somethi ng other than an "actual average". 
 
20. By contrast, the clause in Article 2.4. 2 providing for the transaction-to-transaction 
methodology makes no reference to an  "average" or "averages".  In short, the average-to-average 
methodology and the transaction-to-transaction met hodology are textually distinct methodologies.  
When aggregating results under the former, accor ding to Canada’s argument, an investigating 
authority is required to obtain an "actual average", which arguably involves applying non-dumped 
results as offsets to dumped results.  The tran saction-to-transaction methodology, however, does not 
involve averages.  Therefore, the finding of an offset requirement applicable to the first methodology does not mean that an offset requirement logically must apply to the second. 
 
21. Finally, Canada seeks support for its argument on Article 2.4.2 from a footnote in the original 
panel report.
22  Its reliance on that footnote is entirely misp laced.  Canada neglects to recall that in the 
very same sentence that Canada partially quotes, the original panel acknowledged that it was "not 
                                                      
20 Panel Report, para. 7.203. 
21 Canada Second Written Submission (Original), para. 142 (Exhibit US-3). 
22 Canada First Written Submission, paras. 3 and 18 (quoting Panel Report, n.361).  WT/DS264/RW 
 Page A-15 
 
 
called upon to decide whether zeroing is allowed or disallowed under the transaction-to-transaction 
and weighted-average-normal-value to individual export transaction methodologies".23  Accordingly, 
the statement on which Canada relies is obiter dictum .  Moreover, the sentence at issue states a 
conclusion without offering any explanation.  And, of course, as the matter was outside of the original 
panel’s terms of reference, it was not the subject of  argument before the original panel (other than 
tangentially, as part of discussion of the contex t for the matter that was before the panel). 
 
The Section 129 Determination is Consistent  With Article 2.4 of the AD Agreement  
 
22. Regarding Canada’s argument with respect to Article 2.4, the United States notes, first, that 
Canada incorrectly asserts, at paragraph 5 of its  first written submission, that the DSB made 
recommendations and rulings with respect to  US obligations under Article 2.4 of the AD Agreement .24  
Of course, neither the original panel nor the Appe llate Body ever reached the question of compliance 
of the underlying measure with Article 2.4.  Therefore, that provision was not the subject of any recommendation or ruling of the DSB.  Nevertheless , the United States recognizes that it is Canada’s 
prerogative to raise in this proceeding the questi on of the implementing measure’s consistency with 
Article 2.4.  23. Like its argument with respect  to Article 2.4.2, Canada’s argum ent with respect to Article 2.4 
amounts to a conclusory statement based on an over-ge neralization of statements in certain Appellate 
Body reports.  In fact, Canada offers no analysis of its own with respect to the interpretation of 
Article 2.4.  It simply quotes two fragmen ts from the Appellate Body reports in EC – Bed Linen  and 
US – Corrosion-Resistant Steel Sunset Review  and says, in effect, " Quid est demonstratum ".
25 
 24. The fragments on which Canada relies are comp letely irrelevant to the question of whether 
Commerce’s aggregation of the results of transacti on-to-transaction comparisons in the present case is 
consistent with Ar ticle 2.4 of the AD Agreement .  In fact, Article 2.4 was not even at issue in the EC – 
Bed Linen  dispute.  That dispute concerned, in releva nt part, whether the EC’s application of the 
average-to-average methodology was cons istent with Article 2.4.2 of the AD Agreement .
26  T h e  
fragment that Canada quotes regarding Article 2.4, therefore, was obiter dictum  and, accordingly, 
should not be relied on as providing any pe rsuasive value in the present dispute.27  
 
25. Canada’s reliance on a fragment from US – Corrosion-Resistant Steel Sunset Review  is 
similarly misplaced.  While the question of whethe r a measure was consistent with Article 2.4 was 
before the Appellate Body in Corrosion-Resistant Steel Sunset Review , it came up in the context of 
completing the panel’s analysis after finding lega l error, and the Appellate Body ultimately was 
unable to reach a conclusion on whether the measure was consistent with Article 2.4.28  Given that 
fact, and the fact that the methodology at issue in that dispute was an  average-to-transaction 
comparison methodology used in an assessment pro ceeding, which differs from the transaction-to-
transaction comparison methodology at issue here, the fra gment quoted by Canada is of no relevance.   
 26. As Canada makes no argument to support its Article 2.4 claim other than quoting the two 
irrelevant fragments noted above , Canada has failed to make a prima facie  case that the Section 129 
                                                     
 
23 Panel Report, para. 7.219, n.361. 
24 Canada First Written Submission, para. 5. 
25 Canada First Written Submission, paras. 28-29. 
26 See AB Report, European Communities – Anti-Dumping Duties on Imports of Cotton-Type Bed 
Linen from India,  WT/DS141/AB/RW, adopted 12 March 2001, para. 45(a). 
27 See Panel Report, Dissenting Opinion, para. 9.23 (noting that the Appellate Body’s statement 
regarding Article 2.4 in Bed Linen  report “is obiter dictum , as Article 2.4 was not part of a claim before the 
Appellate Body”). 
28 AB Report, United States – Sunset Review of Anti-Dumping Duties on Corrosion-Resistant Carbon 
Steel Flat Products from Japan , WT/DS244/AB/R, adopted 9 January 2004, para. 138. WT/DS264/RW 
Page A-16  
 
Determination was in consistent with Article 2.4 of the AD Agreement .  As was correctly observed in 
the original panel report, "[I]n WTO dispute proceedi ngs, the burden of proof rests with the party that 
asserts the affirmative of a particular claim or defence".
29  Here, Canada has done nothing more than 
assert a claim followed by two fragments from Appe llate Body reports that are not on point.  
Accordingly, the Panel should find that Canada has failed to make a prima facie  case that the Section 
129 Determination is inconsis tent with Article 2.4. 
 27. Finally, the United States notes Canada’s ob servation that "[p]roper implementation of the 
DSB’s recommendations and rulings in this case would have resulted in a reduction of the margins of 
dumping for all of the investigated expor ters and of the ‘all others rate’".
30  Canada seems to be 
suggesting that the complaining party (or its stakeholders) must  fare better under the measure 
implementing the DSB’s recommendations and ruli ngs than it did under the original measure 
complained of.  There is no such standard under the DSU.  
Conclusion  
 
28. For the reasons stated above, Canada’s clai ms against the US implementation of the DSB’s 
recommendations and rulings in this dispute are gr oundless.  The United States therefore requests that 
the Panel reject Canada’s claims in their entiret y and find that the United States properly implemented 
the recommendations and rulings of the DSB in this dispute.
31 
 
 
 
                                                      
29 Panel Report, para. 7.13. 
30 Canada First Written Submission, para. 4. 
31 As in the underlying proceeding, Canada asks the Panel to “recommend”, pursuant to Article 19.1 of 
the DSU, that the United States “bring its measures into conformity with its obligations under Article 2.4 and 
2.4.2 of the Anti-Dumping Agreement ” in a particular manner.  Canada Fi rst Written Submission, para. 31.  We 
understand Canada to be asking for a “suggestion” under Article 19.1 of the DSU.  For the reasons set forth in 
the present submission, there should be no need for su ch a suggestion, as the United States has come into 
compliance with its WTO obligations.  However, in the event the Panel were  to accept Canada’s arguments, it 
nevertheless should decline Canada’s requested “recomme nd[ation]” as inappropriate,  as was the case in the 
original panel and Appellate Body reports.  See Panel Report, para. 8.6; AB Report, paras. 37, 183(a)-184 
(noting Canada’s request but declining to grant it); see also  Panel Report, United States–Anti-Dumping 
Measures on Certain Hot-Rolled Steel Products from Japan , WT/DS184/R, adopted 23 August 2001, paras. 8.5-
8.14.  In any event, Canada’s request goes beyond anything relevant to implementing a recommendation and 
again seeks to impose an obligation – “return [of] all anti-dumping cash deposits collected as a result of 
[Commerce’s] failure to eliminate the practice of zeroing” – nowhere called for under the WTO agreements.