CANADA – MEASURES AFFECTING THE IMPORTATION OF MILK AND THE EXPORTATION OF DAIRY PRODUCTS
Document: Recourse by the United States to Article 22.2 of the DSU
Date: 19 February 2001
Document codes: WT/DS103/17
Complainant: U.S.
Respondent: Canada
Third parties: Argentina, Australia, EU, Japan, Mexico
Dispute stage: Mutually Agreed Solution
Agreements cited: Art. 8, 9, 10  AgricultureArt. X, XI, XIII  GATT 1994Art. 1, 2, 3  Import LicensingArt. 3  Subsidies and Countervailing Measures (SCM)Art. 3, 4  AgricultureArt. II  GATT 1994

CANADA – MEASURES AFFECTING THE IMPORTATION OF MILK
AND THE EXPORTATION OF DAIRY PRODUCTS
Recourse by the United States to Article 22.2 of the DSU
The following communication, dated 16 February 2001, from the Permanent Mission of the
United States to the Chairman of the Dispute Settlement Body, is circulated pursuant to Article 22.2
of the DSU.
Pursuant to Article 22.2 of the Understanding on Rules and Procedures Governing the
Settlement of Disputes (DSU), the United States requests authorization from the Dispute Settlement
Body (DSB) to suspend the application to Canada of tariff concessions and related obligations under
the General Agreement on Tariffs and Trade 1994 (GATT 1994), covering trade in the amount of
US$35 million on an annual basis. This level of suspension is equivalent to the level of nullification
and impairment of benefits accruing to the United States that results from Canada's failure to bring its
export subsidy measures concerning dairy products into compliance, by 31 January 2001, with the
Agreement on Agriculture or to otherwise comply with the recommendations and rulings of the DSB
in "Canada - Measures Affecting the Importation of Milk and the Exportation of Dairy Products"
(WT/DS103).
On 25 March 1998, the DSB established a panel at the request of the United States to examine
Canada's measures concerning dairy products. Both the Panel and the Appellate Body in this dispute
found Canada's measures to constitute export subsidies and the quantity of subsidized dairy product
exports by Canada to breach the Agreement on Agriculture. On 27 October 1999, the DSB adopted
its recommendations and rulings. The DSB recommendations and rulings include, inter alia, the
recommendation that Canada bring the measures determined to be inconsistent with the Agreement on
Agriculture into conformity with its obligations under the agreement.
The United States and Canada agreed that the "reasonable period of time" for Canada to
implement the DSB recommendations and rulings would expire on 31 December 2000
(WT/DS103/10). The reasonable period was extended until 31 January 2001 by the mutual agreement
of the parties on 11 December 2000 (WT/DS103/13). In the view of the United States, Canada failed
to comply with the recommendations and rulings of the DSB with respect to its export subsidies for
dairy products by the end of the reasonable period of time. Therefore, the United States is entitled to
redress under Article 22 of the DSU.
In considering what concessions to suspend, the United States followed the principles and
procedures set forth in Article 22.3(a) of the DSU. As required by Article 22.4 of the DSU, the level
of suspension proposed is equivalent on an annual basis to the nullification or impairment of benefits
accruing to the United States resulting from Canada's failure to comply with the DSB's
recommendations and rulings.

The United States intends to implement this suspension of tariff concessions and related
obligations under the GATT 1994 by directing the US Customs Service to impose duties in excess of
the bound rates on a list of products to be drawn from the list attached to this request. The trade value
of the final list of products subject to increased duties will be equivalent, on an annual basis, to
US$35 million or, if applicable, to an amount determined through arbitration pursuant to Article 22.6
of the DSU to be equivalent to the nullification or impairment of benefits accruing to the
United States in this matter.
Based on the Understanding between Canada and the United States Regarding Procedures
Under Articles 21 and 22 of the DSU (WT/DS103/14), the United States understands that Canada will
object to the level of suspension of concessions requested and/or make a claim under Article 22.3,
thus referring the matter to an arbitrator pursuant to Article 22.6 of the DSU.

ATTACHMENT
Note: The product descriptions supplied below for the items of the Harmonized Tariff Schedule of
the United States (HTS) are for the convenience of the reader and are not intended to delimit in any
way the scope of the products that would be subject to increased duties.
Chapter 3 Fish and crustaceans, molluscs and other aquatic invertebrates
Chapter 4 Dairy produce, birds eggs; natural honey; edible products of animal origin,
not elsewhere specified or included
Chapter 5 Products of animal origin, not elsewhere specified or included
Chapter 6 Live trees and other plants; bulbs, roots and the like; cut flowers and
ornamental foliage
Chapter 7 Edible vegetables and certain roots and tubers
Chapter 8 Edible fruit and nuts; peel of citrus fruit or melons
Chapter 9 Coffee, tea, mate and spices
Chapter 10 Cereals
Chapter 11 Products of the milling industry; malt; starches; inulin; wheat gluten
Chapter 12 Oil seeds and oleaginous fruits; miscellaneous grains, seeds and fruits;
industrial or medicinal plants; straw and fodder
Chapter 13 Lac; gums, resins and other vegetable saps and extracts
Chapter 15 Animal or vegetable fats and oils and their cleavage products prepared edible
fats; animal or vegetable waxes
Chapter 16 Preparations of meat, of fish or of crustaceans, molluscs or other aquatic
invertebrates
Chapter 17 Sugars and sugar confectionery
Chapter 18 Cocoa and cocoa preparations
Chapter 19 Preparations of cereals, flour, starch or milk; bakers’ wares
Chapter 20 Preparations of vegetables, fruit, nuts or other parts of plants
Chapter 21 Miscellaneous edible preparations
Chapter 22 Beverages, spirits and vinegar
Chapter 23 Residues and waste from the food industries; prepared animal feed