CANADA – MEASURES RELATING TO EXPORTS OF WHEAT AND TREATMENT OF IMPORTED GRAIN
Document: Reports of the Panel
Date: 6 April 2004
Document codes: WT/DS276/R
Complainant: U.S.
Respondent: Canada
Third parties: Australia, Chile, China, Taiwan, EU, Japan, Mexico
Dispute stage: Appellate Body
Agreements cited: Art. XVII:1, III:4  GATT 1994Art. 2  Trade-Related Investment Measures (TRIMs)

CANADA – MEASURES RELATING TO EXPORTS OF
WHEAT AND TREATMENT OF IMPORTED GRAIN

Reports of the Panel

I. INTRODUCTION
A. COMPLAINT OF THE UNITED STATES
1.1 On 17 December 2002, the United States requested consultations with the Government of
Canada pursuant to Article 4 of the Understanding on Rules and Procedures Governing the
Settlement of Disputes ("DSU"), Article XXII:1 of the General Agreement on Tariffs and Trade 1994
("GATT 1994 ") and Article 8 of the Agreement on Trade-Related Investment Measures ("TRIMs
Agreement"), with regard to matters concerning the e xport of wheat by the Canadian Wheat Board
and the treatment accorded by Canada to grain imported into Canada.1
1.2 On 31 January 2003, the United States and Canada held the requested consultations, but failed
to reach a mutually satisfactory resolution of the matter.
1.3 On 6 March 2003, the United States requested th e establishment of a panel to examine the
matter.2
B. ESTABLISHMENT AND COMPOSITION OF THE PANEL
1.4 At its meeting of 31 March 2003, the Disput e Settlement Body established a panel in
accordance with Article 6 of the DSU and pursuant to the request made by the United States in
document (hereinafter referred to as the "March Panel").
1.5 At that meeting, the parties to the dispute al so agreed that the Panel should have standard
terms of reference. The terms of reference are, therefore, the following:
"To examine, in the light of the relevant provisions of the covered agreements cited
by the United States in document , the matter referred to the DSB by the
United States in that document and to ma ke such findings as will assist the DSB in
making the recommendations or in giving the rulings provided for in those
agreements."
1.6 On 12 May 2003, the Director-General composed the Panel as follows:
 Chairperson: Ms Claudia Orozco

 Members: Mr Alan Matthews
 Mr Hanspeter Tschäni
1.7 On 13 May 2003 the Panel received two prelimin ary submissions from Canada requesting an
early ruling on issues relating to the Panel's jurisdiction under Article 6.2 of the DSU and the adoption
of special procedures for the protection of strictly confidential information.
1.8 At the request of Canada, the Panel held a hearing on preliminary issues on 6 June 2003. This
hearing included a special session with the third parties. On 25 June 2003, the Panel issued a
"Preliminary Ruling on the Panel's Jurisdiction unde r Article 6.2 of the DSU" finding that the
United States' request for the establishment of a panel of 6 March 2003 (WT/DS276/6) did not meet
the requirements of Article 6.2 of the DSU because it did not adequately specify the Canadian laws
and regulations addressed in the United States' claim under Article XVII of the GATT 1994.

1 WT/DS276/1.
2 WT/DS276/6.

1.9 On 30 June 2003, the United States filed a second panel request (WT/DS276/9) that
incorporated all of the measures and claims in cluded in the United States' panel request of
6 March 2003.
1.10 At its meeting of 11 July 2003, the Dispute Settlement Body established a second panel in
accordance with Article 6 of the DSU and pursuant to the 30 June 2003 request by the United States
(hereinafter referred to as the "July Panel"). The terms of reference for the Panel, as contained in
document WT/DS276/13, are:
"To examine, in the light of the relevant provisions of the covered agreements cited
by the United States in document WT/DS276/9, the matter referred to the DSB by the
United States in that document and to ma ke such findings as will assist the DSB in
making the recommendations or in giving the rulings provided for in those
agreements."
1.11 It was agreed at the 11 July 2003 DSB meeting that the panellists that composed the March
Panel would also compose the July Panel, and that the proceedings of the March Panel and July Panel
would be harmonized pursuant to Article 9.3 of the DSU.
1.12 After seeking and receiving the views of the pa rties, on 29 July 2003 the Panel notified the
parties that the Panel expected that the parti es and third parties would provide combined written
submissions in the harmonized Panel proceedings , and that the Panel would hold a single set of
meetings with respect to each step of these proceedings.
1.13 Australia, Chile, China, the European Comm unities, Japan, Mexico and Chinese Taipei
reserved their third-party rights in this dispute for both the March Panel and the July Panel.
C. P
ANEL PROCEEDINGS
1.14 The Panel met with the parties on 6 June 2003 for a hearing on preliminary issues which
included a special session with the third parties; on 8-9 September 2003 for the first substantive
meeting; and on 21 October 2003 for the second subs tantive meeting. The Panel met with third
parties on 9 September 2003.
1.15 On 22 December 2003, the Panel issued its interim reports to the parties. On
16 January 2004, the Panel received comments from th e parties. On 10 February 2004, the Panel
issued its final reports to the parties.
II. FACTUAL ASPECTS
2.1 This dispute concerns the Canadian Wh eat Board ("CWB") Export Regime, which the
United States has defined as including the legal fra mework of the CWB; Canada's provision to the
CWB of exclusive and special privileges; and the ac tions of Canada and the CWB with respect to the
CWB's purchases and sales involving wheat exports.
3
2.2 This dispute also concerns certain require ments related to Canada's bulk grain handling
system established under Section 57 of the Canada Grain Act ("CGA") and Section 56 of the Canada
Grain Regulations ("the Regulations"); Canada's rail revenue cap established under Section 150 of the
Canada Transportation Act ("CTA"); and, Canada's producer railway car allocation programme
established under Section 87 of the CGA.

3 WT/DS276/9.

III. PARTIES' REQUESTS FOR FINDINGS AND RECOMMENDATIONS
A. UNITED STATES
3.1 The United States requests the Panel to find that:
(a) the CWB Export Regime is inconsistent with the obligations of Canada under
Article XVII:1 of the GATT 1994;
(b) the Canadian grain segregation requirement s (Section 57 of the CGA and Section 56
of the Regulations as it existed at the time that the March and July Panels were
established) are inconsistent with the oblig ations of Canada under Article III:4 of the
GATT 1994 and Article 2 of the TRIMs Agreement; and
(c) the rail revenue cap and the producer car programme are inconsistent with the
obligations of Canada under Article III: 4 of the GATT 1994 and Article 2 of the
TRIMs Agreement.
B. CANADA
3.2 Canada asks that the Panel make the following findings:
(a) that the CWB, in its purchases or sales invol ving wheat exports has acted in a manner
consistent with the general principles of non-discriminatory treatment prescribed in
the GATT 1994; and therefore that the Govern ment of Canada is not in violation of
paragraph 1(a) of Article XVII of GATT 1994;
(b) that if the Panel finds that the CWB, in its purchases or sales involving wheat exports
has not acted in a manner consistent with the general principles of non-discriminatory
treatment prescribed in the GATT 1994, that any such discriminatory conduct is in
accordance with commercial considerations; and therefore that the Government of
Canada is not in violation of Article XVII:1 of GATT 1994;
(c) that the CGA and Regulations are not in violation of Article III:4 of GATT 1994 and
Article 2 of the TRIMs Agreement;
(d) that the maximum revenue entitlement of the Canada Transportation Act is not in
violation of Article III:4 of GATT 1994 and Article 2 of the TRIMs Agreement; and
(e) that Section 87 of the CGA dealing with producer car allocations is not in violation of
Article III:4 of GATT 1994 and Article 2 of the TRIMs Agreement.
IV. ARGUMENTS OF THE PARTIES
4.1 The arguments of the parties are set forth in th eir written and oral submissions to the Panel,
and in their answers to questions. The parties' arguments as presented in their submissions are
summarized in this section. The summaries ar e based on the executive summaries submitted by the
parties. The parties' written answers to questions ar e set forth in the Annexes to this report (see list of
annexes, page viii, supra).

A. P
RELIMINARY WRITTEN SUBMISSION OF CANADA ON THE PANEL'S JURISDICTION UNDER
ARTICLE 6.2 OF THE DSU
4.2 Detailed below are Canada's arguments in its first preliminary written submission on the
Panel's jurisdiction under Article 6.2 of the DSU.
4.3 In its Request for the Establishment of a Panel in this dispute ("Request") 4, the United States
has failed to comply with the requirements of Article 6.2 of the DSU.
4.4 The Request does not identify the precise nature and scope of the measures at issue in relation
to the regulation and practices of the CWB and the treatment of imported grain. It also lacks the
requisite brief summary of the legal basis of the United States' complaints sufficient to present the
problem clearly.
4.5 A WTO panel has both the right and the obligation to determine whether the claims raised by
a party fall within its jurisdiction. Where, as in this case, a complaining party has not set out its
claims in accordance with Article 6.2, those claims fall outside the jurisdiction of the Panel. The
Panel may not assume jurisdiction over claims that do not comply with the requirements of
Article 6.2.
1. The Panel has the right and the obligation to refuse to assume jurisdiction in respect of
claims that do not comply with the requirements of the DSU
4.6 A panel has both the right and the duty to dete rmine whether the request for the establishment
of a panel by a complaining party complies with the requirements of the DSU. As found by the
Appellate Body in EC - Bananas III:
"As a panel request is normally not subject to detailed scrutiny by the DSB, it is
incumbent upon a panel to examine the re quest for the establishment of the panel
very carefully to ensure its compliance with both the letter and the spirit of Article 6.2
of the DSU."
5
4.7 The Appellate Body has "stressed, on more than one occasion, the fundamental importance of
a panel's terms of reference." 6 It found in India – Patent Protection for Pharmaceutical and
Agricultural Products, that "[a] panel cannot assume jurisdiction that it does not have".7

4 WT/DS276/6.
5 Appellate Body Report, European Communities – Regime for the Importation, Sale and Distribution of
Bananas ("EC – Bananas III "), WT/DS27/AB/R, adopted 25 September 1997, DSR 1997:II, 591, para. 142. This
was re-affirmed by the Appellate Body in Korea - Definitive Safeguard Measure on Imports of Certain Dairy
Products, Appellate Body Report, Korea – Definitive Safeguard Measure on Imports of Certain Dairy Products
("Korea – Dairy "), WT/DS98/AB/R, adopted 12 January 2000, DSR 2000:I, 3, para. 122.; Appellate Body Report,
Thailand – Anti-Dumping Duties on Angles, Shapes and Sect ions of Iron or Non-Alloy Steel and H-Beams from
Poland ("Thailand – H-Beams "), WT/DS122/AB/R, adopted 5 April 2001, para. 86; Panel Report, United States –
Countervailing Duties on Certain Corrosion-Resistant Carbon Steel Flat Products from Germany ("US – Carbon
Steel "), WT/DS213/R and Corr.1, adopted 19 December 2002, as modified by the Appellate Body Report,
WT/DS213/AB/R, para 8.5; and Panel Report, European Communities – Anti-Dumping Duties on Malleable Cast
Iron Tube or Pipe Fittings from Brazil ("EC – Tube or Pipe Fittings "), WT/DS219/R, adopted 18 August 2003, as
modified by the Appellate Body Report, WT/DS219/AB/R.), para. 7.18.
6 Appellate Body Report, India – Patent Protection for Pharmaceutical and Agricultural Chemical
Products ("India – Patents (US) "), WT/DS50/AB/R, adopted 16 January 1998, DSR 1998:I, 9, para. 87).
7 Id., para. 92.

4.8 The Request does not satisfy the requirements of Article 6.2. The claims advanced by the
United States fail to meet the letter and the spirit of that Article. Because this deficient Request also
establishes the terms of reference for this Panel, the Panel should refuse to assume jurisdiction in
respect of claims not properly set out in the Request.
2. The requirements of Article 6.2 of the DSU
(a) The text and context of Article 6.2
4.9 Requests for the establishment of a panel must co mply with the requirements of Article 6.2,
which provides:
"The request for the establishment of a panel ... shall indicate whether consultations
were held, identify the specific measures at issue and provide a brief summary of the
legal basis of the complaint sufficient to present the problem clearly."
4.10 The Appellate Body has stressed the need to adhere to all of the requirements of Article 6.2:
"It is important that a panel request be sufficiently precise for two reasons: first, it
often forms the basis for the terms of refere nce of the panel pursuant to Article 7 of
the DSU; and, second, it informs the defending party and the third parties of the legal
basis of the complaint."8
4.11 In Korea – Dairy, the Appellate Body found:
"When parsed into its constituent parts, Article 6.2 may be seen to impose the
following requirements. The request must: (i) be in writing; (ii) indicate whether
consultations were held; (iii) identify the sp ecific measures at issue; and (iv) provide
a brief summary of the legal basis of the complaint sufficient to present the problem
clearly. In its fourth requirement, Article 6.2 demands only a summary - and it may
be a brief one - of the legal basis of the complaint; but the summary must, in any
event, be one that is "suffi cient to present the problem clearly". It is not enough, in
other words, that "the legal basis of th e complaint" is summarily identified; the
identification must "present the problem clearly"."
9
4.12 Whether a request for the establishment of a panel meets the requirements of Article 6.2 must
be decided on a case-by-case basis.10 As the Appellate Body further found in Korea – Dairy:
"Identification of the treaty provisions claimed to have been violated by the
respondent is always necessary both for purposes of defining the terms of reference of
a panel and for informing the respondent and the third parties of the claims made by
the complainant; such identification is a minimum prerequisite if the legal basis of the
complaint is to be presented at all. But it may not always be enough … there may
also be situations in which the circumstan ces are such that the mere listing of treaty
articles would not satisfy the standard of Article 6.2. This may be the case, for
instance, where the articles listed establish not one single, distinct obligation, but

8 Appellate Body Report, EC - Bananas III , para. 142; Appellate Body Report, Korea – Dairy ,
9 Appellate Body Report, Korea – Dairy, para. 120.
10 Appellate Body Report, Korea – Dairy , para. 127; Appellate Body Report, Thailand – H-Beams,
para. 87.

rather multiple obligations. In such a situation, the listing of articles of an agreement,
in and of itself, may fall short of the standard of Article 6.2."
11
(b) Object and purpose of Article 6.2
4.13 According to the Appellate Body, "a defending pa rty is always entitled to its full measure of
due process in the course of WTO dispute settlement." 12 The express requirements of Article 6.2
crystallize the due process rights of a party in respect of the jurisdiction of a panel.
4.14 The fundamental fairness of the proceedings are undermined where the complaining party
fails to comply with the requirements of Article 6. 2, more specifically, the obligation to "provide a
brief summary of the legal basis of the complain t sufficient to present the problem clearly." In
Thailand – H-Beams, the Appellate Body stated:
"Article 6.2 of the DSU calls for sufficient clarity with respect to the legal basis of the
complaint, that is, with respect to the "claims" that are being asserted by the
complaining party. A defending party is entitled to know what case it has to answer,
and what violations have been alleged so t hat it can begin preparing its defence.
Likewise, those Members of the WTO who intend to participate as third parties in
panel proceedings must be informed of the legal basis of the complaint. This

11 Appellate Body Report, Korea – Dairy , para. 124; Appellate Body Report, Thailand – H-Beams,
para. 87. See also Panel Report, Mexico – Anti-Dumping Investigation of High Fructose Corn Syrup (HFCS) from
the United States ("Mexico – Corn Syrup "), WT/DS132/R and Corr.1, adopted 24 February 2000,
DSR 2000:III, 1345, para. 7.13.

The Panel in the EC - Bed Linen case rejected certain claims made by India under Article 6 of the Anti-
Dumping Agreement because India had failed to set forth su ch claims in its request for the establishment of the
panel. The panel recalled that in the Korea – Dairy dispute, the Appellate Body had found that there might be
situations where a "mere listing" of treaty Articles would not satisfy the st andards of Article 6.2. It then went
on to state that:

the treaty Articles alleged to be violated are not even listed in the request for establishment -
Article 6 of the AD Agreement does [not] appear on the face of the docume nt at all. In this
circumstance, we consider that the legal basis of a complaint with respect to that Article has
not been presented at all. ... In our view, a failu re to state a claim in even the most minimal
sense, by listing the treaty Articles alleged to be violated, cannot be cured by reference to
subsequent submissions. ... Thus, the fact that India may have fully elucidated its position
with respect to alleged violations of Artic le 6 of the AD Agreement in its first written
submission to the Panel avails it nothing as a legal matter. Failure to even mention in the
request for establishment the treaty Article alleged to have been violated in our view
constitutes failure to state a claim at all.

Panel Report, European Communities – Anti-Dumping Duties on Imports of Cotton-Type Bed Linen from
India ("EC – Bed Linen
 "), WT/DS141/R, adopted 12 March 2001, as modified by the Appellate Body Report,
WT/DS141/AB/R, DSR 2001:VI, 2319, paras. 6.13 and 6.15.
12 Panel Report, Thailand – Anti-Dumping Duties on Angles, Shapes and Sections of Iron or Non-Alloy
Steel and H-Beams from Poland ("Thailand – H-Beams "), WT/DS122/R, adopted 5 April 2001, as modified by the
Appellate Body Report, WT/DS122/AB/R, para. 7.24. See also the Panel Report, Turkey – Restrictions on
Imports of Textile and Clothing Products ("Turkey – Textiles "), WT/DS34/R, adopted 19 November 1999, as
modified by the Appellate Body Report, WT/DS34/AB/R, DSR 1999:VI, 2363, para. 9.3, and more recently the
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 ("Mexico – Corn Syrup (Article 21.5 –
US) "), WT/DS132/AB/RW, adopted 21 November 2001, para. 36.

requirement of due process is fundamental to ensuring a fair and orderly conduct of
dispute settlement proceedings."13 [emphasis added]
(c) Deficiency in a panel request may not be "cured"
4.15 The requirements of Article 6.2 must be met in the request for establishment of a panel. Any
deficiencies in the panel request may not be "cur ed" by the submissions of the complainant. The
Appellate Body in EC - Bananas III held that:
"We do not agree with the Panel that even if there was some uncertainty whether the
panel request had met the requirements of Ar ticle 6.2, the first written submissions of
the Complainants 'cured' that uncertainty because their submissions were sufficiently
detailed to present all the factual and lega l issues clearly. Article 6.2 of the DSU
requires that the claims, but not the arguments, must all be specified sufficiently in
the request for the establishment of a panel in order to allow the defending party and
any third parties to know the legal basis of the complaint. If a claim is not specified
in the request for the establishment of a panel, then a faulty request cannot be
subsequently "cured" by a complaining pa rty's argumentation in its first written
submission to the panel or in any other su bmission or statement made later in the
panel proceeding."14
4.16 The Appellate Body has reinforced this point, stating that "a claim must be included in the
request for establishment of a panel in order to come within a panel's terms of reference in a given
case."15
4.17 It is for the complaining party in a given dispute to establish clearly the grounds upon which it
founds its case. This obligation flows directly from Article 6.2. Failure to satisfy the obligation
creates a prejudice to the interests of the defe nding party. The sole remedy for breach of the
fundamental safeguards set out in Article 6.2 is for a panel to refuse to assume jurisdiction with
respect to the deficient claims. This remedy is key to ensuring the due process rights of disputing
parties under the DSU.

13 Thailand – H-Beams, Appellate Body Report, para. 88. Similarly, in Brazil - Measures Affecting
Desiccated Coconut, the Appellate Body noted that:

A panel's terms of reference are important for two reasons. First, terms of reference fulfil an
important due process objective - they give the parties and third parties sufficient information
concerning the claims at issue in the dispute in order to allow them an opportunity to respond
to the complainant's case. Second, they establish the jurisdiction of the panel by defining the
precise claims at issue in the dispute. [emphasis added]

Panel Report, Brazil – Measures Affecting Desiccated Coconut ("Brazil – Desiccated Coconut
 "),
WT/DS22/R, adopted 20 March 1997, as upheld by the Appellate Body Report, WT/DS22/AB/R,
DSR 1997:I, 189, p. 22.
14 Appellate Body Report, EC - Bananas III , para. 143. See also Report of the Appellate Body,
European Communities - Customs Classification of Certain Computer Equipment , WT/DS62/AB/R,
WT/DS67/AB/R, WT/DS68/AB/R, adopted 22 June 1998, para. 72, footnote 49; and Panel Report, EC - Bed
Linen, para. 6.15. In addition, the Panel in the Argentina - Footwear dispute noted that: "Clearly, due process
and adequate notice would not be served if a complaining party were free to add new measures or new claims to
its original complaint as reflected in its panel request at a later stage of a panel proceeding." (Panel Report,
Argentina – Safeguard Measures on Imports of Footwear ("Argentina – Footwear "), WT/DS121/R, adopted
12 January 2000, as modified by the Appellate Body Report, WT/DS121/AB/R, DSR 2000:II, 575, para. 8.45.)
15 Appellate Body Report, India - Patents (US) , para. 89 [emphasis in original]. See also Appellate
Body Report, Brazil - Coconut, p. 22.

3. Certain claims in the United States' request for the establishment of a Panel fail to meet
the requirements of Article 6.2
4.18 The United States makes two broad allegations against the Government of Canada and the
CWB. The first is in respect of paragraphs 1( a) and (b) of Article XVII of GATT 1994. The second
concerns Article III:4 of GATT 1994 and Article 2 of the TRIMs Agreement . Neither allegation
satisfies the express requirements of Article 6.2 of the DSU. Both fail to identify the specific
measures in issue and to identify clearly (or at all) the legal basis for the complaint.
4.19 The specific inconsistencies of each claim with the requirements of Article 6.2 are set out
below.
(a) Claim under Article XVII of GATT 1994
4.20 The United States alleges that:
"The Government of Canada has establis hed the [CWB] and has granted to this
enterprise exclusive and special privileges ... The laws, regulations and actions of the
Government of Canada and the CWB appear to be inconsistent with the obligations of
the Government of Canada under Article XV II of the GATT 1994. In particular, the
laws, regulations and actions of the Govern ment of Canada and the CWB related to
exports of wheat appear to be:
- inconsistent with paragraph 1(a) of Article XVII of the
GATT 1994, pursuant to which the Government of Canada
has undertaken that the CWB, in its purchases or sales
involving wheat exports, shall act in a manner consistent
with the general principles of non-discriminatory treatment
prescribed in the GATT 1994; and
- inconsistent with paragraph 1( b) of Article XVII of the
GATT 1994, pursuant to which the Government of Canada
has undertaken that the CWB shall make such purchases or
sales solely in accordance with commercial considerations
and shall afford the enterprises of other WTO Members
adequate opportunity, in accordance with customary business
practice, to compete for such purchases."
4.21 As part of its claim, the United States also alleges that "the appare nt inconsistency with
Canada's obligations under Article XVII of the GA TT 1994 includes the failure of the Government of
Canada to ensure that the CWB makes such pur chases or sales in accordance with the requirements
set forth in paragraphs 1(a) and 1(b) of Article XVII."
4.22 The foundation for the United States' claim is in various "laws, regulations and actions" that
are nowhere described. Any number of laws, regulati ons and actions may be re lated to the export of
wheat but have no relevance to the instant claim.
16 Even assuming a finite universe of potentially

 16 On this issue, it is useful to consider the thoughts of the panel in Japan - Film:

In considering whether these ... measures were adequately identified in the panel request, we
note that in contrast to the Premiums Law, which has a relatively narrow focus (i.e.,
premiums), the Antimonopoly Law has a very broad scope and deals with a broad range of
issues. As such, we would have some hesitation in saying that a reference to the

relevant "laws and regulations," the United States mu st identify the laws, regulations and actions that
it alleges violate the WTO Agre ement. As was the case in Japan – Film, the complaining party must
identify both the law and how it applies. Without greater detail, the case to meet is simply too vast.
There are at least three ways in which this claim violates the requirements of Article 6.2.
4.23 First, the United States has alleged that vari ous "actions" by Canada and the CWB violate
Canada's Article XVII obligations. The term "acti on" implies some specific conduct or instance, but
the United States identifies neither conduct nor a speci fic instance to support claims of inconsistency
with Article XVII obligations.
4.24 Second, the United States refers to violation by Canada of Article XVII:1(b) as a result of
these undefined "laws, regulations and actions". However, Article XVII:1(b) contains two
obligations. The first obligation relates to the operations of STEs generally; the other imposes an
obligation on a Member to afford to the ente rprises of other WTO Members the opportunity to
compete for the business of STEs. The Request does not make it clear which laws, regulations or
actions result in the violation of which obligation.
4.25 Third, the United States fails to identify the nature of its claim in respect of Article XVII:1(b).
Article XVII does not contain an express defin ition for either of the terms "commercial
considerations" or "customary business practice", in paragraph 1(b) of Article XVII. As the Appellate
Body set out in Korea – Dairy , a complaining party is required, at a minimum, to set out a brief
summary of the legal case sufficien t to describe the problem clearly. 17 Nothing in the United States'
claim establishes the legal basis of allegations by the United States that the CWB does not follow
customary business practice or does not take into account commercial considerations in its conduct, or
that Canada is in violation of its Article XVII obligations because it has failed to "ensure" such
conduct. Such practice and considerations are to be viewed through the prism of the offending "laws,
regulations and actions", which are not cited in the Un ited States' request. That is, there is no context
within which to evaluate the United States' claim under Article XVII:1(b).
4.26 For these reasons, the United States' claim under Article XVII fails to satisfy the requirements
of Article 6.2 and so the Panel should refuse to assume jurisdiction over this claim.
(b) Claim under Article III:4 of GATT 1994
4.27 The United States' claim under Artic le III:4 begins: "[w]ith regard to the treatment of grain
that is imported into Canada, Cana dian measures discriminate agains t imported grain, including grain
that is the product of the United States." The clai m proceeds to allege a violation of Article III:4 in
respect of rail car allocation.
4.28 As the Appellate Body found in Korea – Dairy , a complainant's identification of the legal
basis for the complaint is necessary but not suffici ent: that identification must present the problem
clearly. The United States alleges that, in allocati ng railcars used for transport of grain, Canada
provides a preference for domestic grain over impor ted grain. However, this element of the
United States' claim fails to give any indication of the specific measures with which it takes issue. It

Antimonopoly Law alone would be sufficient to bring all measures taken by Japan under that
Law within the scope of the panel request.

Ultimately, it was not necessary for the Japan - Film panel to decide this issue. (Panel Report, Japan –
Measures Affecting Consumer Photographic Film and Paper (" Japan – Film
 "), WT/DS44/R, adopted
22 April 1998, DSR 1998:IV, 1179, para. 10.16.)
17 Appellate Body Report, Korea – Dairy, para. 120.

is not possible for Canada to prepare a defenc e against this claim without being alerted in some detail
to the provisions that are alleged to violate Article III:4.
4.29 It is insufficient under Article 6.2 of the DSU to raise generally the issue of rail car allocation
without providing details as to the measure at issue. The obligation of the United States is to identify
the measures that allegedly accord United States ' grain less-favourable treatment through such
allocation. It has failed to do so. Because the United States' claim in respect of car allocation fails to
satisfy the requirements of Article 6.2, the Panel should refuse to assume jurisdiction over this claim.
(c) Claim under Article 2 of the TRIMs Agreement
4.30 The claims of the United States against Canada in respect of Article 2 of the TRIMs
Agreement are based upon the allegations it makes concerning its claims under Article III:4. The
United States alleges violations of Article 2 in r espect of rail transportation, rail car allocation and
grain segregation under the Canada Grain Act and associated regulations.
4.31 In alleging a violation of the TRIMs Agreement, the United States appears to rely solely on the
relationship between Article 2 and Article III:4. The United States fails, however, to provide any
indication as to the nature of the investment measur e that it alleges is inconsistent with Canada's
obligations under the TRIMs Agreement. The United States' allegation does not refer, for example, to
any measures of the type identified in the illustr ative list under Article 2(2). As noted above,
Article 6.2 requires complainants to identify the measure at issue. The prejudice to Canada is
abundantly clear; Canada can but speculate as to the unstated measures and legal basis for the
allegation of breach of Article 2 of the TRIMs Agreement. Because the United States' claim against
Canada for breach of obligations under the TRIMs Agreement fails to satisfy the requirements of
Article 6.2, the Panel should refuse to assume jurisdiction over this claim.
(d) Efforts at clarification
4.32 A deficient request may not be cured throug h subsequent submissions. Canada nonetheless
made a good-faith effort to clarify the grounds for th e Request. On 7 April 2003, Canada wrote to the
United States seeking the following clarifications:
18
"The United States' request, dated 6 March 2003, does not meet the requirements of
Article 6(2). Specifically, it does not 'identify the specific measures at issue', as it
refers generally to 'the laws, regulations and actions of the Government of Canada

18 Previous cases suggest that the defending party may seek clarifications from the complaining party
about the claims that have been made. As the Appellate Body stated in Thailand – H-Beams:

In view of the importance of the request for the establishment of a panel, we encourage
complaining parties to be precise in identifying the legal basis of the complaint. We also note
that nothing in the DSU prevents a defending party from requesting further clarification on the
claims raised in a panel request from the complaining party, even before the filing of the first
written submission. In this regard, we point to Article 3.10 of the DSU that enjoins Members
of the WTO, if a dispute arises, to engage in dispute settlement procedures “in good faith in an
effort to resolve the dispute”. As we have previously stated, the “procedural rules of WTO
dispute settlement are designed to promote, not the development of litigation techniques, but
simply the fair, prompt and effective resolution of trade disputes.”

This point was also emphasized in the Panel Report, United States – Safeguard Measures on Imports of
Fresh, Chilled or Frozen Lamb Meat from New Zealand and Australia ("US – Lamb
 "), WT/DS177/R,
WT/DS178/R, adopted 16 May 2001, as modified by the Appellate Body Report, WT/DS177/AB/R,
WT/DS178/AB/R, at paras. 5.44-5.45.

and the CWB related to exports of wheat' and 'measures concerning rail
transportation'. As well, the United States ' request makes certain allegations but does
not set out the legal basis of its complaints.
We ask the United States' to promptly id entify the specific me asures at issue and
provide a brief summary of the legal basis for its complaint."
4.33 Canada received no reply from the United States. Canada thus has no information that would
clarify the grounds upon which the United States founds its claims.
4. Request for preliminary rulings
4.34 The United States has denied Canada the due process protections afforded by Article 6.2.
Certain claims in the Request fail to satisfy th e express requirements of Article 6.2. The legal
prejudice to Canada is obvious; Ca nada is invited to engage in conjecture and speculation as to the
case it must meet. Article 6.2 ensures against this fundamental departure from due process; it requires
more of complaining parties than mere allegati ons founded in generalities. And it establishes the
basis for this Panel's authority to reject tho se elements of the Request that do not meet the
requirements of Article 6.2.
4.35 Canada respectfully requests that the Panel find that the Request does not meet the
requirements of Article 6.2 and that, as a result, th e Panel should not assume jurisdiction in respect of
the following:
• the claim under Article XVII of the GATT 1994;
• the claim under Article III:4 of the GATT 1994 concerning rail car allocation; and
• the claim under Article 2 of the TRIMs Agreement concerning rail car allocation
and grain segregation.

4.36 Canada makes this submission at the earliest juncture in the Panel process to permit the Panel
to make a decision on this fundamental procedural question before the Parties' first substantive
submissions are due. If the Panel deems it necessary, Canada would be willing to meet with the Panel
and the United States to discuss Canada's procedural objections.
B. P
RELIMINARY WRITTEN SUBMISSION OF CANADA ON PROCEDURES FOR THE PROTECTION OF
STRICTLY CONFIDENTIAL INFORMATION
4.37 Set out hereunder are Canada's arguments in its first preliminary written submission on
procedures for the protection of strictly confidential information.
4.38 Canada seeks a preliminary ruling by the Pane l establishing a procedure for the protection of
proprietary or commercially sensitive informati on (referred to in this submission as "strictly
confidential information" or "SCI") that may be submitted to the Panel in the course of these
proceedings.
4.39 In a separate submission, Canada requests that the Panel issue a preliminary ruling that
certain allegations contained in the Request for the Establishment of a Panel (the "Request"),
submitted by the United States on 6 March 2003, do not meet the requirements of Article 6.2 of the
DSU. In that submission Canada asks the Panel to find that these allegations are not within the scope
of the Panel's jurisdiction.
4.40 Because of the deficiencies of the Request, it is difficult for Canada to specifically identify
the types of SCI it will need to submit. However, if the Panel finds that any of the allegations in the

Request fall within the Panel's jurisdiction, and if the United States meets its prima facie burden with
respect to these allegations, Canada may well be re quired, in its defence, to submit evidence to the
Panel that contains SCI. For example, the Unite d States makes certain allegations with respect to
whether the CWB makes purchases and sales solely in accordance with commercial considerations.
To the extent that these allegations are clarified and substantiated, Canada may well have to adduce
evidence on the commercial practices of the CWB, in cluding its sales and pricing policies as well as
on specific commercial transactions. Such evidence will necessarily contain SCI.
4.41 In this respect, Canada notes that although the CWB has been notified as a state trading
enterprise, it is not under the control or influence of the Government of Cana da. Nor is Canada in
possession of information regarding the CWB's commerc ial negotiations and contracts with suppliers,
service providers or customers on the prices, terms a nd other conditions of wheat sales. Canada will
be able to obtain, assess and provide such SCI to the Panel, only where it can give the CWB and its
customers adequate assurance of confidentiality of th eir commercially sensitive information. For this
reason, we ask the Panel to put in place procedures, to govern handling of that information and the
access thereto in the course of these proceedings.
1. Analysis
4.42 Effective dispute settlement pursuant to the DS U is premised on an objective assessment by a
dispute settlement panel of the matters in dispute, including an objective assessment of the facts of the
case. The receipt and provision of factual information is a central feature of the process. Members
must be able to disclose and receive the eviden ce necessary to defend or challenge the measure at
issue. In order to do so, assuranc es that the confidentiality of the information will be maintained are
critical.
4.43 The current DSU rules acknowledge the need to provide protection for confidential
information in the context of dispute settlement. Article 18.2 of the DSU provides, inter alia, that
"Members shall treat as confidential information s ubmitted by another Member to the panel or the
Appellate Body which that Member has designated as confidential." Similar provisions are found in
the panel Working Procedures (Appe ndix 3, paragraph 3) and the Rules of Conduct for the
Understanding on Rules and Procedures Go verning the Settlement of Disputes (Article VII:1).
However, these provisions offer insufficient procedural protection for SCI.
4.44 This is not a theoretical problem. In United States – Definitive Safeguard Measures on
Imports of Wheat Gluten from the European Communities
19, the Appellate Body noted its "strong
agreement with the Panel that a 'serious systemic is sue' is raised by the question of the procedures
which should govern the protection of information requested by a panel under Article 13.1 of the DSU
and which is alleged by a Member to be confidential." 20 The absence of clear and effective rules to
protect SCI can be detrimental to a Member's ability to advance or defend a challenge and thereby to
the effectiveness of the dispute settlement system.
4.45 In addressing the issue of SCI, the Panel must balance two competing interests, both deeply
rooted in fairness and due process, neither in itself having a claim to better protection than the other:
First, additional procedural safeguards are nece ssary to provide privat e business interests with
adequate protection for their proprietary business information when a disputing party deems it
necessary to present such evidence in support of its case; second reasonable access to such
information, when introduced into evidence, must be provided to the Panel and the other disputing

19 Appellate Body Report, United States – Definitive Safeguard Measures on Imports of Wheat Gluten
from the European Communities ("US – Wheat Gluten "), WT/DS166/AB/R, adopted 19 January 2001,
DSR 2001:II, 717.
20 United States' – Wheat Gluten at para. 170.

parties. Previous panels have recognized the need to balance these interests and have adopted special
procedures for handling SCI.21
4.46 In this light, Canada proposes a procedure gove rning SCI, set out as an Annex to this
submission. Canada submits that this pro cedure achieves a reasonable balance between the
competing interests identified above.
2. Request for a preliminary ruling
4.47 Canada requests that the Panel adopt the procedures proposed as part of its working
procedures, pursuant to Article 12.1 of the DSU. Canada further requests th at the Panel make this
decision prior to the deadline for the first written submission of the United States.
4.48 Canada makes this submission at the earliest j uncture possible in the Panel process to provide
the United States with sufficient notice of this reque st and to permit the Panel to make a decision on
this procedural issue before the Parties' first s ubstantive submissions are due. If the Panel deems it
necessary, Canada would be willing to meet with the Panel and the United States to discuss this
proposal at greater length.
C. PRELIMINARY WRITTEN SUBMISSION OF THE UNITED STATES ON THE PANEL'S JURISDICTION
UNDER ARTICLE 6.2 OF THE DSU
4.49 The United States' arguments in its first preliminary written submission on the Panel's
jurisdiction under Article 6.2 of the DSU are described below.
4.50 Canada provides no legitimate basis for its request for a preliminary ruling that certain claims
set forth in the United States' panel request fail to m eet the requirements of Article 6.2 of the DSU.
To the contrary, as required by Article 6.2, each of the United States' claims properly "identif[ies] the
specific measures at issue and provide[s] a brief summary of the legal basis of the complaint sufficient
to present the problem clearly."
4.51 Rather than relying on the text of Article 6.2 of the DSU and Appellate Body analyses of that
provision, Canada instead asks this Panel to find that the United States' panel request must go beyond
the requirements of Article 6.2 to summarize the legal arguments to be presented in the first
United States' submission. The Appellate Body in EC – Bananas III 22 has already rejected the
suggestion that a complaining party must summarize it s legal arguments in the panel request, and this
Panel should do so as well.
1. Statement of facts
4.52 The United States presented its consultation request to Canada in this dispute on
17 December 2002.23 Canada agreed to hold consultations , and indicated no concerns with the
specificity of the matters raised in the United States request.

21 For example, see Panel Report, Brazil – Export Financing Programme for Aircraft ("Brazil –
Aircraft "), WT/DS46/R, adopted 20 August 1999, as modified by the Appellate Body Report, WT/DS46/AB/R,
DSR 1999:III, 1221; Article 22.6 Arbitration Decision, European Communities – Regime for the Importation,
Sale and Distribution of Bananas (WT/DS27/ABR); Panel Report, United States – Definitive Safeguard
Measures on Imports of Wheat Gluten from the European Communities ("US – Wheat Gluten "), WT/DS166/R,
adopted 19 January 2001, as modified by the Appellate Body Report, WT/DS166/AB/R, DSR 2001:III, 779.
22 Appellate Body Report, EC - Bananas III.
23 WT/DS276/1.

4.53 The United States and Canada agreed to hold c onsultations on 31 Janua ry 2003, in Ottawa,
Canada. In advance of the consultations, the Un ited States sent to Canada a list of 49 detailed
questions concerning the Canadian measures at issue in this dispute.
4.54 With regard to the United States cl aim under Article XVII of the GATT 1994, the
United States' questions first asked for copies of Ca nadian laws and regulations that establish and
govern the conduct of the CWB. The questions then presented inquires regarding the special
privileges provided by the Government of Canada to the CWB that divorce the CWB from market
considerations. For example, the questions addressed the Government of Canada's guarantees of the
financial operations of the CWB; the Canadian law requiring that all Western Canadian farmers
producing wheat for human consumption must sell their wheat to the CWB; and the payment system
adopted by the Government of Canada and the CWB, which requires Canadian farmers to accept
initial payments from the CWB at prices well below market value. The questions also probed the
procedures and policies of the CWB with regard to setting the terms of sale for wheat exports, and
inquired into whether the Government of Canada exercised any oversight of CWB sales practices.
4.55 With regard to the United States claims under GATT Article III and Article 2 of the TRIMs
Agreement regarding the treatment of imported grain, th e United States' questions requested copies of
laws or regulations of the Govern ment of Canada that relate: (i) to the segregation of Canadian-
grown grain and imported grain; and (ii) to th e rail transportation of western Canadian grain,
including rail rates and the allocation of rail cars. The questions then presented 24 separate inquiries
into the apparent differences between the treatment that Canada accords to domestic grain and that
Canada accords to imported grain.
4.56 As scheduled, the consultations were held in Ottawa on 31 January 2003. During the
consultations, the Canadian delega tion never expressed any concern that the consultation request was
insufficiently clear, and never asked the United States delegation to clarify any aspect of the
United States' consultation request.
4.57 [ ]
24
4.58 [ ]
4.59 [ ]
4.60 With respect to the rail car allocation claim – which Canada now claims it finds insufficiently
precise – the United States' delegation read a statement from a Canadian government website,
indicating differential treatment for Western Cana dian and imported wheat, and asked the Canadian
delegation for elaboration. The Canadian delegation stated that it had no knowledge of Canadian
rules on this issue, and provided no information.
4.61 At the conclusion of the consultations, the Cana dian delegation agreed to provide in writing
and at a subsequent time answers to a small fraction of the questions that it declined to answer during
the consultations.
4.62 Since the consultations failed to resolve the ma tter in dispute, the United States submitted its
first panel request on 6 March 2003.
4.63 On 12 March 2003, nearly six weeks after the consultations, and after the United States'
6 March panel request, the Governme nt of Canada finally provided r esponses to the few questions it

24 For reasons explained in Section V.B, the content of this and the two subsequent paragraphs was
redacted from the March Panel's final report.

had agreed to answer in writing. These answers, however, were limited. On the issue of railcar
allocation, for example, the response notes that the Canadian Grain Commission issues an annual
order that sets out the allocation of railcars, but the response does not provide an explanation or copy
of the order, nor does the response indicate where the order might be found.
4.64 The Dispute Settlement Body considered the firs t United States' panel request at its meeting
held on 18 March 2003. The Canadi an delegation, although not agreeing to the establishment of a
panel, expressed no difficulties in understanding the issues covered in the United States' panel request,
and did not ask for any clarifications.
4.65 The United States proceeded to make its second panel request at the DSB meeting held on
31 March 2003. Canada expressed regret that the United States was seeking to establish a panel, but
again indicated no problems in understanding any of the issues raised in the United States' request.
2. The Requirements of Article 6.2 of the DSU
4.66 Article 6.2 of the DSU requires, in relevant part, that a request for the establishment of a
panel:
"identify the specific measures at issue and provide a brief summary of the legal basis
of the complaint sufficient to present the problem clearly."
4.67 The Canadian request for a preliminary ru ling quotes at length from two Appellate Body
reports that examine this provision: Korea – Dairy
25 and EC – Bananas III . Canada's discussion of
these reports, however, is fundamentally misleading: Canada has omitted the two principles in those
reports that are most pertinent to Canada's arguments regardi ng the sufficiency of the United States'
panel request. Canada also fails to consider the emphasis of the US - FSC Appellate Body report on
the need to raise procedural objections at the earliest opportunity.26
4.68 First, Canada has omitted mention of the key distinction between the claims – which must be
included in the panel request – and the arguments in support of those claims – which need not be
included. As the Appellate Body explained in EC – Bananas III:
"In our view, there is a significant difference between the claims identified in the
request for the establishment of a panel, which establish the panel's terms of reference
under Article 7 of the DSU, and the arguments supporting those claims, which are set
out and progressively clarified in the first written submissions, the rebuttal
submissions and the first and second panel meetings with the parties."
27
4.69 Furthermore, the Appellate Body in EC – Bananas III made clear that a panel request may
adequately state a claim if the request simply cites the pertinent provision of the WTO agreement:
"We accept the Panel's view that it was sufficient for the Complaining Parties to list
the provisions of the specific agreements alleged to have been violated without
setting out detailed arguments as to which specific aspects of the measures at issue
relate to which specific provisions of those agreements."
28

25 Appellate Body Report, Korea – Dairy.
26 Appellate Body Report, United States – Tax Treatment for "Foreign Sales Corporations" ("US –
FSC "), WT/DS108/AB/R, adopted 20 March 2000, DSR 2000:III, 1619, para. 165.
27 Appellate Body Report, EC - Bananas III, para. 141.
28 Id.

4.70 In Korea – Dairy – the second report relied upon by Canada – the Appellate Body confirmed
this construction. In Korea – Dairy, the problem with the panel request was that it cited too broadly
to the Agreement on Safeguards and Article XIX of the GATT 1994, so that it was difficult to
determine which obligations in those provisions were at issue.
29 The United States' panel request, in
contrast, cites to specific provisions of the WTO ag reement at issue, and cannot be said to suffer a
similar defect.
4.71 The second principle in the Appellate Body re ports that Canada fails to note is that even if a
panel request is insufficiently detailed "to present th e problem clearly," the panel is not automatically
deprived of jurisdiction over the matter. Rather , the panel must examine, based on the "particular
circumstances of the case," whether the defect has prejudiced the ability of the responding party to
defend itself. The Appellate Body explained in Korea – Dairy:
"In assessing whether the European Communitie s' request met the requirements of
Article 6.2 of the DSU, we consider that, in view of the particular circumstances of
this case and in line with the letter and spirit of Article 6.2, the European
Communities' request should have been more detailed. However, Korea failed to
demonstrate to us that the mere listing of the articles asserted to have been violated
has prejudiced its ability to defend itself in the course of the Panel proceedings.
Korea did assert that it had sustained pr ejudice, but offered no supporting particulars
in its appellant's submission nor at the oral hearing. We, therefore, deny Korea's
appeal relating to the consistency of th e European Communities' request for the
establishment of a panel with Article 6.2 of the DSU."
30
4.72 Accordingly, the continual emphasis on the "juris dictional" nature of its Article 6.2 argument
in Canada's request for preliminary ruling is mislea ding. To be sure, if the United States were to
present a claim in its first submission based on the Agreement on Textiles and Clothing , for example,
that claim would not be within the jurisdiction of th e Panel. However, in evaluating claims regarding
whether a panel request "presents the problem clear ly," the Panel must consider the particular
circumstances of the case, including whether the defending party has been prejudiced.
4.73 Finally, Canada fails to recognize that procedur al objections must be raised at the earliest
possible opportunity, and not for the first time in a lett er sent after the establishment of the panel. In
the US – FSC dispute, the United States requested a preliminary ruling that a claim be dismissed
because of an inadequacy in the consultation re quest. The panel rejected that request, and the
Appellate Body upheld that rejection, stating:
"It seems to us that, by engaging in consultations on three separate occasions, and not
even raising objections in the DSB meetings at which the request for establishment of

29 The Appellate Body explained:

In the present case, we note that the European Communities' request for a panel, after
identifying the Korean safeguar d measure at issue, listed Articles 2, 4, 5 and 12 of the
Agreement on Safeguards and Article XIX of the GATT 1994. Article XIX of the GATT
1994 has three sections and a total of five paragraphs, each of which has at least one distinct
obligation. Articles 2, 4, 5 and 12 of the Agreement on Safeguards also have multiple
paragraphs, most of which have at least one distinct obligation. The Agreement on
Safeguards in fact addresses a complex mu lti-phased process from the initiation of an
investigation, through evaluation of a number of factors, determination of serious injury and
causation thereof, to the adoption of a definitive safeguard measure. Every phase must meet
with certain legal requirements and comply with the legal standards set out in that Agreement.
Appellate Body Report, Korea – Dairy, para. 129.
30 Id., para. 131.

a panel was on the agenda, the United States acted as if it had accepted the
establishment of the panel in this dispute, as well as the consultations preceding such
establishment. In the circumstances, the United States cannot now, in our view,
assert that the European Communities' claims … should have been dismissed."
31
4.74 Likewise, at no time prior to the establishment of this Panel did Canada so much as intimate
that it considered the panel request in any way de ficient, waiting until after the Panel was established
to offer its objection. In upholding the Panel's reject ion of the United States' request for a preliminary
ruling in US – FSC under very similar circumstances, the Appellate Body stated: "The procedural
rules of the WTO dispute settlement system are designed to promote, not the development of
litigation techniques, but simply the fair, prompt and effective resolution of trade disputes." 32 This
Panel should reject Canada's effort to avoid the fair, prompt and e ffective resolution of this dispute
through its groundless – and untimely – objections to the United States' panel request. Canada's resort
to litigation techniques must not stand in the way of consideration of the substantive issues in this
dispute.
3. The Canadian arguments
4.75 Canada's arguments regarding the sufficiency of the United States' panel request are entirely
without merit. Each claim in the United States' re quest both: (1) identifi es the specific measures at
issue; and (2) provides a brief summary of the lega l basis of the complaint sufficient to present the
problem clearly. The Canadian arguments fail to distinguish between these two elements of
Article 6.2. The responses below will address th e Canadian arguments within the context of the
apparently relevant Article 6.2 requirement.
(a) GATT Article XVII claim
4.76 The first Canadian argument regarding the GAT T Article XVII claim seems to be based on
the Article 6.2 requirement to identify the specific measures at issue. In particular, Canada argues
that:
"The foundation for the United States' claim is in various "laws, regulations and
actions" that are nowhere described."
4.77 This argument is plainly false. Any pers on reading this phrase would take note of the
immediately preceding paragraph in the United Stat es' panel request which identifies the specific
measures at issue:
"The Government of Canada has established the Canadian Wheat Board ("CWB"),
and has granted to this enterprise exclusiv e and special privileges. These exclusive
and special privileges include the exclusive right to purchase western Canadian wheat
for export and domestic human consumption at a price determined by the
Government of Canada and the CWB; the exclusive right to sell western Canadian
wheat for export and domestic human c onsumption; and government guarantees of
the CWB's financial operations, including the CWB's borrowing, the CWB's credit
sales to foreign buyers, and the CWB's initial payments to farmers."

31 Appellate Body Report, US - FSC, para. 165.
32 Id., para. 166.

4.78 Moreover, the panel request goes on to clarify th at the measures at issue include "the failure
of the Government of Canada to ensure that the CWB makes such pur chases or sales in accordance
with the requirements set forth in paragraphs 1(a) and 1(b) of Article XVII."
33
4.79 The Canadian request for a preliminary ruling s upports its argument with a statement that is
meritless. In particular, Canada argues that, "Any number of laws, regulations and actions may be
related to the export of wheat but have no relevance to the instant claim." In the context of the panel
request, however, any reader would fairly realize th at the laws, regulations, and actions referenced
here are those concerning wheat sales practices of the State-trading enterprise, CWB. Moreover,
Canada knows precisely what is at issue in this dispute: from the consultation request, from the
detailed questions that the United States presen ted in advance of the consultations, from the
discussions at the consultations, and from the United States' panel request.34
4.80 Canada next expresses concern that the panel request does not specify which of the two
obligations in Article XVII(1)(b) ar e covered in the panel request. 35 But the panel request is
completely clear on this point: the request cites both obligations because the United States submits
that the Canadian measures are inconsistent with both of these obligations.
4.81 Finally, Canada argues that the United States "must set out a brief summary of its legal case"
under Article XVII(1)(b). Although Canada cites to Korea – Dairy, the requirement suggested by
Canada differs substantially from the findings of the Appellate Body in Korea – Dairy and from the
language of Article 6.2 of the DSU. What the DSU requires is instead "a brief summary of the legal
basis of the complaint sufficient to present the proble m clearly" (emphasis added). As illustrated in
both Korea – Dairy and EC – Bananas III, a panel request may even satisfy this requirement simply
by listing the provisions of the WTO agreements wi th respect to which the measures at issue are
allegedly inconsistent. And in fact, the United States' Article XVII claim in the panel request goes
well beyond a simple listing of the pertinent provisions of the WTO agreement.
4.82 Furthermore, Canada cites no case in which a panel request was required to go beyond a
specific listing of the provisions at issue and was required instead to present a summary of the legal
argument. To the contrary, as noted above, the Appellate Body in EC – Bananas III explicitly noted
that Article 6.2 does not require a panel request to include a su mmary of the complaining party's legal
arguments:
"We accept the Panel's view that it was sufficient for the Complaining Parties to list
the provisions of the specific agreements alleged to have been violated without
setting out detailed arguments as to which specific aspects of the measures at issue
relate to which specific provisions of tho se agreements. In our view, there is a
significant difference between the claims identified in the request for the
establishment of a panel, which establis h the panel's terms of reference under

33 The Canadian request for preliminary ruling also complains that the panel request does not define the
word “action.” The request uses “actions,” in addition to “laws and regulations,” because the provisions of
GATT Article XVII(1) quoted in the request impose obliga tions with regard to purchases and sales involving
wheat exports. The terms “laws and regulations” were not sufficient to cover this aspect of conduct addressed in
the panel request and covered by Article XVII.
34 Canada also argues that “As was the case in Japan-Film, the complaining party must identify both
the law and how it applies.” What Canada means by this statement is unclear, and the proposition is not
supported by the Japan Film panel report. In any event, Canada's contention is inconsistent with the plain text
of Article 6.2 of the DSU, which provides that the panel request must simply "identify the specific measure at
issue."
35 The first obligation in Article XVII(1)(b) requires State-trading enterprises to make purchases and
sales in accordance with commercial considerations. The second obligation requires State-trading enterprises to
afford enterprises of other WTO Members an adequate opportunity to compete.

Article 7 of the DSU, and the arguments supporting those claims, which are set out
and progressively clarified in the first written submissions, the rebuttal submissions
and the first and second panel meetings with the parties."
36
4.83 In short, Canada is asking that the panel rej ect the United States' Article XVII claim solely
because, in Canada's view, the United States' panel re quest fails to meet a non-existent requirement to
summarize the legal arguments. This requirement is not contained in the text of Article 6.2, as the
Appellate Body correctly concluded. Accordingly, Canada's request must be denied.
(b) Claim regarding rail car allocation
4.84 Canada argues that the rail car allocation cl aim in the United States' panel request is
inadequate to meet the requirements of DSU Article 6.2, apparently because of an alleged failure to
"identify the specific measures at issue." This ar gument is without merit. Moreover, in light of
Canada's conduct with regard to the consultations addressed to this issue 37, Canada's argument is
disingenuous.
4.85 As explained above, during the consultations, the United States ' delegation read a statement
from the website of the Canadian Grain Commission ("CGC"), indicating that Canada had adopted a
measure providing differential treatment for West ern Canadian and imported wheat, and asked the
Canadian delegation for elaboration. The Canadian delegation stated that it had no knowledge of any
Canadian rules on this issue, and provided no information. Without confirmation of the proper
appellation or legal status of this rule, the United States' panel request reasonably addressed this issue
by noting that "in allocating railcars used for the tr ansport of grain, Canada provides a preference for
domestic grain over imported grain."
4.86 Six weeks after the consultations, and after the United States had filed its panel request,
Canada finally confirmed that it indeed does establis h rules governing the allocation of rail cars used
in the transport of grain. Canada wrote:
"The only allocation powers the CGC is exercising pertain to Section 87 of the CGA
and Section 68 of the regulations to CGA which give it the power to administer the
allocation of producer cars.
On a crop year basis, the CGC issues to the industry at large an order that sets out
how the CGC will allocate produ cer cars for the various gr ains and destinations for
the coming crop year."38
4.87 Whether or not the CGC rules do indeed discrimin ate against imported grain is an issue to be
decided on the merits in the normal course of this dispute. But, in light of these circumstances, there
can be no legitimate confusion over the rail car alloca tion measures at issue. In fact, Canada must
certainly be aware of the content of CGC grain car allocation orders, and its contention – that "it is not
possible for Canada to prepare a defence ag ainst this claim without being alerted in some detail to the
provisions that are alleged to violate Article III:4" – is simply not credible.

36 Appellate Body Report, EC - Bananas III, para. 141.
37 Indeed, as noted above, the United States finds it difficult to reconcile Canada’s conduct of these
negotiations with its obligations under Article 4.3 of the DSU.
38 As noted above, Canada still declined to provide an actual copy of these allocation rules, and
declined even to explain whether the rules in whole or in part are publicly available.

(c) Claims under Article 2 of the TRIMs Agreement
4.88 Canada argues that the United States' panel requ est fails to identify the "specific measures at
issue" with regard to the allege d violation of Article 2 of the TRIMs Agreement . This argument is
baseless. The GATT Article III:4 claims and the TR IMs claims in the panel request identify exactly
the same specific measures at issue, and – with th e exception of the rail car allocation rules discussed
above - Canada has not made, and cannot make, an argument that the measures were not specifically
identified.
4.89 The Canadian argument is thus not actually about the "specific measures at issue." Rather,
Canada is essentially arguing that the panel re quest must lay out the legal arguments why the
specifically identified measures are within the scope of the TRIMs Agreement. But, as noted above,
there is no such requirement in Article 6.2 of the DSU, nor has the Appellate Body concluded
otherwise. Canada is not en titled to have the United States' TRIMs Agreement claims rejected simply
because Canada would prefer to review the United St ates' legal arguments in advance of receiving the
first United States' submission.
4. Conclusion
4.90 For the reasons stated above, Canada's argumen ts in support of its request for a preliminary
ruling under Article 6.2 are without merit. Accordingly, the Panel should reject that request.
D. U
NITED STATES' RESPONSE ON THE ISSUE OF PROCEDURES FOR THE PROTECTION OF
STRICTLY CONFIDENTIAL INFORMATION
4.91 Set out below is the United States' response to Canada's preliminary submission on the issue
of procedures for the protection of strictly confidential information.
4.92 The United States remains surprised that this is the subject of a request for a preliminary
ruling. There is no disagreement between the parties as to the adoption of special procedures, and this
is in any event a matter of the Panel's organization. Accordingly, there is nothing on which to "rule."
Rather, the Panel simply needs to exercise its authority under Article 12 of the DSU to adopt
additional procedures in consultation with the parties. The United Stat es continues to stand ready for
such consultations and to assist the Panel in this matter.
4.93 Canada has stated in paragra ph 3 of its request that such procedures should be established
because Canada may need to submit Business Conf idential Information ("BCI") during the course of
these panel proceedings. As noted above, to the extent that Canada will be submitting such
information, the United States does not object to the Panel establishing procedures for the protection
of BCI, as nothing in the DSU precludes panels from adopting additional procedures for protecting
BCI. The United States also recalls that, at the panel organizational meeting of 21 May 2003, the
United States represented that it does not plan to rely on BCI in its presentations before the Panel.
4.94 It is important to note that this same situati on arose in a very recent dispute between Canada
and the United States. In that dispute, United States – Final Dumping Determination on Softwood
Lumber from Canada (WT/DS264), Canada and the United States were able to agree on procedures
for the treatment of BCI. There was no need for a preliminary ruling in that dispute.
4.95 The United States believes that these procedures, which both Canada and the United States
are already familiar with and are cu rrently utilizing, should simply be adopted by this Panel to protect
BCI in this dispute. Indeed, nothing in Canada's request for a preliminary ruling suggests the need for
procedures different than those attached here . And by adopting these previously agreed-to

procedures, the Panel and the parties can avoid w asting time and effort in considering and debating
the uncertain implications of Canada's newly developed proposals.
E. ORAL STATEMENT OF CANADA AT THE PRELIMINARY HEARING
4.96 The following summarizes Canada's arguments in its oral statement delivered at the
preliminary hearing:
1. Why are we here?
4.97 First, why are we – Canada – here? Why have we raised a procedural challenge?
4.98 Simply put, we have a genuine concern about pr ejudice to our interests and to our ability to
defend ourselves in this dispute because we do not know what case we have to answer. And we do
not know the case, because the United States' request fo r the establishment of this panel is deficient –
it does not meet the requirements of Article 6.2 of the DSU.
4.99 Article 6.2 requires a complaining party to be clear about the legal basis of its complaint and
to set out the claims it is asserting. This means th at the complaining party must identify, in its panel
request, the measure that is alleged to be in viol ation; the WTO provision that is alleged to be
violated; and, generally, the legal basis for alleging that the measure violates the provision.
4.100 To give you a concrete example, it is not enou gh for a complaining party to say in its panel
request that import restrictions by a Member violate Article 5 of the SPS Agreement . Rather, the
complaining party must identify which specific measures violate which specific provision of the SPS
Agreement.
4.101 This is not a trivial or merely procedural requi rement. Here is what the Appellate Body said
in Thailand – H-Beams:
"[A] defending pa rty is entitled to know what case it has to answer, and what
violations have been alleged so that it can begin preparing its defence… This
requirement of due process is fundamental to ensuring a fair and orderly conduct of
dispute settlement proceedings." [emphasis added]
4.102 Where a Member fails to meet the requirements of Article 6.2, at a minimum it causes a legal
prejudice to the interests of the responding Member in the fair and orderly conduct of dispute
settlement proceedings.
4.103 In this case, the deficiencies in the United States' panel request cause additional prejudice,
because they also significantly impede Canada's ability to identify, and respond to, the complaint
being made in these proceedings.
4.104 For example, the United States' panel request refers to "laws, regul ations and actions …
related to exports of wheat". From a prelimin ary search, we have identified dozens of "laws and
regulations" that could be the subject of the Unite d States' panel request as worded. These laws and
regulations encompass hundreds of measures that may be the subject of United States' allegations.
4.105 The United States' request also refers to "actions" of the Government of Canada and the
Wheat Board related to the export of wheat. In its submission, the European Communities reads this
as "administrative actions". But, it is not clear whether the United States also means administrative
actions by the Government of Canada, or other actions by the CWB. In this respect, we note that the
CWB is a multi-billion dollar corporation that co mpetes in a complex and competitive global wheat

market. It sources wheat from over 85,000 Western Canadian farmers and markets it on their behalf
to hundreds of customers located in scores of ma rkets around the globe. Selling, financing, sourcing
and supplying wheat involves thousands of indi vidual transactions and multiple parties from the
farmers all the way through to the customer. And yet, the United States' panel request gives no clue
whatsoever as to which of these actions is the fo cus of the United States' complaint, let alone how
those actions supposedly violate Article XVII.
4.106 In the light of this uncertainty Canada made a good-faith effort to clarify the grounds for the
United States' request. In a letter dated 7 April 2003, Canada asked the United States to identify the
measures at issue and set out the legal basis for its challenge. Canada receive d no response. We do
not consider that Article 6.2 deficiencies are legally curable; but this request for a preliminary ruling
would not have been necessary if the United States had responded appropriately to Canada's 7 April
letter.
4.107 We are here because the United States' request sen t us on a search of all laws and regulations
that affect the wheat trade, and all of the transactions of the Wheat Board, to figure out what it is that
the United States is complaining about. And we are here, in this preliminary challenge, because in its
comments, the United States still does not expressly lim it its complaint to the measures listed in the
first paragraph of claim 1 – to the exclusion of all other laws, regulations and actions related to
exports of wheat that have not been specified.
4.108 In the initial stages of the dispute settlement process, the complaining party dictates the
timetable. The complaining party files its panel re quest based in large measure on how ready it is to
present its case. The responding party has an inhere nt disadvantage: it can only prepare its defence
once the complainant files its panel request. Only then does the complain ant reveal the specific
measures at issue and the legal basis for its complain t. Where, as in this case, the panel request is
deficient, the inherent disadvantage to the respondi ng party becomes actual prejudice to its ability to
prepare its defence.
4.109 The prejudice to Canada is real and ongoing. And we are here to rectify that prejudice
2. What are the legal issues involved?
4.110 The second question is, what are the legal issues involved? And, specifically, in what way
does the United States' panel request fail to meet the requirements set out in Article 6.2?
4.111 The United States' panel request fails to identif y the specific measures at issue because there
is only a general reference to "laws, regulations and actions that relate to the export of wheat".
4.112 What is the United States' response?
4.113 The United States makes four arguments in defe nce of its request for the establishment of a
panel. None is valid.
4.114 First, it argues that the opening paragraph of claim 1, which refers to certain privileges
granted to the Wheat Board, sets out the "specifi c measures" as required by Article 6.2. This
argument, however, is an after-the-fact rationalization of a defective panel request.
4.115 For one thing, as the European Communities not ed in its submission, the second paragraph
 of
claim 1 introduces "a certain imprecision". It refers generally to " the laws, regulations, and actions …
related to the export of wheat". If the United Stat es had considered the priv ileges listed in the first
paragraph to constitute the "specific measures" requi red by Article 6.2, then the second paragraph of
claim 1 should have referred to " these measures", or "the measures listed in the foregoing paragraph".

But it does not. On its face, the scope of the second paragraph of claim 1 is far wider than the
measures allegedly specified in the first paragraph. Accordingly, because of this imprecision, claim 1
does not meet the requirements of Article 6.2.
4.116 As well, the opening paragraph of claim 1 re fers to privileges granted to CWB by the
Government of Canada. The ne xt paragraph refers, however, to "laws, regulations and actions " of
both the Government of Canada and the Canadian Wheat Board. The European Communities reads
this as "administrative actions". But this is the European Communities' interpretation. The general
reference to "actions" and the mention of the Wheat Board in the second paragraph undermine the
United States' argument that the "specific measures" required by Article 6.2 are listed in the first
paragraph of claim 1.
4.117 The submissions of Chile and the European Communities are premised on the assumption that
the United States has identified the spec ific measures in the first paragraph
 of claim 1. However, as
the European Communities also notes, the second paragr aph is far wider and less precise than the first
paragraph. The claim as a whole does not meet the requirements of Article 6.2.
4.118 If the Panel agrees with the United States that the specific measures listed in the first
paragraph meet the requirements set out in Article 6.2, then the Panel should make a finding to that
effect. That is, the Panel should rule that only the first paragraph of claim 1 meets the requirements of
Article 6.2 and limit the United States' claim to:
• the exclusive right to purchase western Ca nadian wheat for export and domestic human
consumption at a price determined by the Government of Canada and the Wheat Board;
• the exclusive right to sell western Canadi an wheat for export and domestic human
consumption; and
• government guarantees of the Wheat Board's financial obligations, including the Wheat
Board's borrowing, the Wheat Board's credits sal es to foreign buyers, and the Wheat Board's
initial payments to farmers.
4.119 With respect to rail car allocation, if the Panel agrees that Canada's responses to the
United States' questions can clarify the scope of the panel request, then it should limit the
United States' claim to:
• the allocation powers of the Canadian Grai n Commission under Section 87 of the Canada
Grain Act and under Section 68 of the Regulations to the Canada Grain Act.
4.120 With respect to the clai m under Article 2 of the TRIMs Agreement, the panel request fails to
identify the investment measure that it alleges is inconsistent with Cana da's obligations under the
TRIMs Agreement.
4.121 The second argument relied on by the United States relates to the consultations. Indeed, the
factual section of the United States' comments is taken up largely with an incomplete and inaccurate
recitation of certain bilateral discussions in the cour se of the consultations. The United States goes so
far as to suggest that, in respect of the car allocation issue, Canada's response to United States'
questions in the course of the consu ltations should determine whether the United States is meeting its
Article 6.2 obligations in respect of the panel request.
4.122 United States' arguments on this point are legally untenable for at least two reasons.

4.123 For one thing, Article 6.2 is not about th e consultations, but about the request for the
establishment of a panel. Indeed, we re call the arguments of the United States in US – Lamb. As the
panel noted:
"The United States does … seriously question the admissibility and the relevance to
panel proceedings of information from bila teral, confidential consultations – for
which usually no neutral witnesses or written records exist – when ascertaining
whether the specificity requirements stipulated by DSU Article 6.2 for panel requests
are met."
4.124 We agree with that earlier United States' position.
4.125 For another, even if consultations were so mehow relevant, their re levance would be highly
limited in respect of whether a request for a panel meets the requirements of Article 6.2. This is
because, as the Brazil – Aircraft panel found, the DSU does not require "a precise identity between
the matter with respect to which consultations were held and that with respect to which establishment
of a panel was requested." That is, the specific m easures that form the subject matter of a dispute and
that are set out in the request for the establishment of a panel could be different from those discussed
in the consultations.
4.126 And so, even if Canada knew what the United States' complaint was about in the course of the
consultations – and we do not agree with the United States ' characterization of the consultations – the
measures before the Panel are those set out in the panel request and not those that Canada might have
thought the United States was complaining about in the consultations . The panel request is the
document that forms the terms of reference of the Panel. Whatever was discussed at the
consultations, or indeed in the preceding ten years, the United States had an obligation to specify its
claims in accordance with the DSU. It has not done so. And so its claims cannot form part of the
Panel's jurisdiction.
4.127 Third, the United States objects to the timing of Canada's procedural challenge.
4.128 Both at the outset of the consultations, and at their conclusion, Canada raised serious concerns
about the vagueness of the United States' allegations and their lack of substance and merit. But of
course the issue before you is not the request for consultations and the United States' reliance on the
US – FSC case is misplaced. The issue before you is the request for the establishment of this Panel
and, more important, whether the matters objected to fall within the jurisdiction of the Panel. The real
legal issue concerning the adequacy of the request solidifies only when a panel has been established
and not before; and a proper procedural challenge may be raised only when a panel has been
composed, and not before.
4.129 Canada asked the United States for clarification a week after the establishment of the Panel.
The United States did not reply to this request. Ca nada waited more than a month, and still no reply
was forthcoming. And so, Canada sought redress from the Panel at the earliest opportunity – the day
after the panel was composed.
4.130 It is true that Canada did not raise any objections at the DSB to the adequacy of the
United States' request. But the DSB has no mandate and no procedure to rule on the adequacy, under
Article 6.2, of panel requests. In this respect , we recall the words of the Appellate Body in EC –
Bananas III:
"[W]e recognize that a panel request will usually be approved automatically at the
DSB meeting following the meeting at which the request first appears on the DSB's
agenda.[72] As a panel request is normally not su bjected to detailed scrutiny by the

DSB, it is incumbent upon a panel to examine the request for the establishment of the
panel very carefully to ensure its complian ce with both the letter and the sprit of
Article 6.2 of the DSU. It is important that a panel request be sufficiently precise for
two reasons: first, it often forms the basis for the terms of reference of the panel
pursuant to Article 7 of the DSU; and second, it informs the defending party and the
third parties of the legal basis of the complaint." [emphasis added]
4.131 We also recall the United States' argument in US – FSC that nothing in the DSU requires a
defending party to "perfect" the pleadings of the complaining party.
4.132 Canada fails to see how it could have acted any earlier, or any basis for the United States now
to contend that it was entitled to additional notice of Canada's concerns.
4.133 Finally, the United States argues that Canada is asking for the inclusion of arguments rather
than claims in the panel request. In EC – Bananas III , the Appellate Body noted that a panel request
need not include detailed arguments, but rather the request must be sufficiently precise so as to inform
the responding party of the basis for the complaint. To do so, a complaining party must identify in its
panel request the specific measures at issue and provide a brief summary of the legal basis of its
complaint.
4.134 The United States does not set out what it means by "claims" and "arguments"; and it does not
relate its assertions in this respect to its oblig ation under Article 6.2. "T he laws, regulations and
actions related to export of wheat" are not "specific measures". To ask, as Canada does and as
Article 6.2 requires, that the United States identify which laws, regulations a nd actions violate the
WTO Agreement is not to ask the United States to set out its legal arguments.
4.135 For these reasons, the United States' assertions have no merit.
3. What is the appropriate remedy in these circumstances?
4.136 The final issue to be addressed is this: wh at is the only appropriate remedy in these
circumstances?
4.137 The law is clear the requirements of Article 6.2 must be met in the request for the
establishment of a panel. Deficiencies in the docum ent that creates the Panel's jurisdiction cannot be
"cured".
4.138 Canada asks, therefore, that the Panel fi nd that the panel request does not meet the
requirements of Article 6.2 and that, as a result, the Panel not assume jurisdiction with respect to:
• the claim under Article XVII of the GATT;
• the claim under Article III:4 of the GATT concerning rail car allocation; and
• the claim under Article 2 of the TRIMs Agreement concerning rail car allocation and grain
segregation.
4.139 In the alternative, if the Panel agrees with the United States that the measures listed in the first
paragraph of claim 1 and Canada's response to the qu estions of the United States in respect of rail car
allocation constitute "specific measures" for the purpo ses of Article 6.2, then Canada requests that the
Panel rule that these measures and no other
come within the jurisdiction of the Panel.

4. Procedures for dealing with SCI
4.140 Turning to Canada's request for the adoption, by the Panel, of additional procedures
safeguarding SCI. Canada has had a chance to re view the United States' comments and we welcome
the spirit of openness and cooperation reflected in t hose comments. However, in the light of the
issues and interests at play in this case, we must ask you to consider and adopt the procedures
proposed by Canada, rather than those adopted by the panel in US – Softwood Lumber IV.
4.141 For ease of reference, we are providing you with a list of additional procedures and
safeguards that exist in the current Canadian proposal, and that were not included in the US –
Softwood Lumber IV procedures. These additional safeguards are necessary for two reasons.
4.142 First, in the US – Softwood Lumber IV case, the panel is examining sensitive commercial
information that already exists and is in the po ssession of the United States. In this case, however, it
is entirely possible that much of the information need ed for the defence will have to be generated, or
obtained from private parties not party to this dis pute. For Canada to be able to secure that
information and, more important, get permission to produce it for a panel, we need a higher level of
protection than the United States' – Softwood Lumber IV procedures provide for.
4.143 Second, unlike in the US – Softwood Lumber IV case, Canada – the party that will be
providing the confidential information in question – is the defending party. And, again unlike the US
– Softwood Lumber IV case, the commercial information that might be at issue could relate to private
parties that have no control over these proceedings: wh ether we are talking about the customers of the
Wheat Board or railway companies or grain elevators, they have not asked for this dispute and to the
extent that their sensitive commercial information might come into play, they need to be satisfied that
that information will not be disseminated beyond tho se who need the information to argue and decide
the case.
4.144 Some of the important differences between the US – Softwood Lumber IV procedures and
those proposed for this case are that, in this case, ac cess to strictly confidential information would be
limited to the disputing parties. Additi onally, the proposed procedures, unlike the US – Softwood
procedures, include specific requirements for access, storage, use and disclosure, and return or
destruction of SCI. These, and the additional safe guards included in the procedures proposed for this
case, are necessary to satisfy private parties, who ar e not party to this dispute, that commercially
sensitive information that they provide for Canada's defence will be safeguarded. Other differences
are identified in the document that Canada has given you.
4.145 We are, of course, mindful of the need to exercise sound judgement and discretion in
designating information strictly confidential. A nd so, the additional protections in the Canadian
proposal are balanced by a due restraint requirement.
4.146 In the light of these considerations, we ask you to adopt the procedures proposed by Canada.
F. ORAL STATEMENT OF THE UNITED STATES AT THE PRELIMINARY HEARING
4.147 In its oral statement at the preliminary hearing, the United States made the following
arguments:
1. Canada's request for a ruling under Article 6.2 of the DSU
4.148 The United States submits that Canada has no b asis to ask for the dismissal of any of the
United States' claims. To the contrary, each of the United States' claims meets the standard set out in

Article 6.2, which is to "identify the specific me asures at issue and provide a brief summary of the
legal basis of the complaint sufficient to present the problem clearly."
4.149 What Canada is really asking is for this Pa nel to impose a new requirement on complaining
parties: namely, for the panel request to summar ize the arguments to be presented in the first
submission. However, such a requirement is not in cluded in Article 6.2 of the DSU. Moreover, the
Appellate Body in EC – Bananas III clearly rejected this notion.
4.150 Also, the Canadian idea, if adopted, would resu lt in procedural disputes in each and every
case brought under the DSU. If the panel request has to summarize the complaining party's
arguments, every subsequent submission of the compla ining party would be subject to challenge that
one or more arguments, or sub-arguments, should be disregarded as being inadequately summarized
in the panel request. This process would not resu lt in any additional fairness or better reports.
Instead, it would just encourage preliminary motions and procedural disputes.
4.151 As noted in the United States' submission, Cana da's summarization of Appellate Body reports
leaves out many of the most pertinent findings.
4.152 First, Canada omitted mention of the key distinction between the claims – which must be
included in the panel request – and the arguments in support of those claims – which need not be
included. In fact, the Appellate Body in EC-Bananas III made clear that a panel request may
adequately state a claim if the request simply cites the pertinent provision of the WTO agreement.
4.153 The Appellate Body confirmed this construction in Korea – Dairy. The Appellate Body did
find a problem with the panel request: name ly, the request cited too broadly to the Agreement on
Safeguards and Article XIX of the GATT 1994, so that it was difficult to determine which obligations
in those provisions were at issue. But, the Appe llate Body repeated the distinction, set forth in
Bananas III, between claims and arguments. And, even though the panel request in Korea – Dairy
was insufficiently precise, the Appellate Body nonetheless did not dismiss the claims, as Canada asks
this Panel to do.
4.154 This brings me to the second principle in the Appellate Body reports that Canada fails to note.
That is, even if a panel request is insufficiently detailed "t o present the problem clearly," the panel is
not automatically deprived of jurisdiction over the matter. Rather, the panel must examine, based on
the "particular circumstances of the case," whether the defect has prejudiced the ability of the
responding party to defend itself. In Korea – Dairy, the Appellate Body found that even although the
panel request was inadequate, the responding party had failed to show prejudice, and dismissal was
not warranted.
4.155 The third principle that Canada fails to recognize is that procedural objections must be raised
at the earliest possible opportunity, and not for the first time in a letter sent after the establishment of
the panel. In the US – FSC dispute, the Appellate Body upheld th e rejection of an Article 6.2 claim,
because the responding party had failed to raise the matter during the consultations or during the DSB
meetings that established the panel.
4.156 Likewise, in this case, at no time prior to the establishment of this Panel did Canada so much
as intimate that it considered the panel request in any way deficient. Instead, Canada waited until
after the Panel was established to offer its objection.
4.157 Turning to Canada's specific arguments regarding the purported insufficiency of the United
States' panel request, the first Canadian argument regarding the GATT Article XVII claim seems to
be based on the Article 6.2 requirement to identify th e specific measures at issue. Canada argues that:
"The foundation for the United States' claim is in various ' laws, regulations and actions ' that are

nowhere described." This argument is hard to credit. Quite clearly, the phrase "laws, regulations, and
actions" in the United States' panel request refers to the Canadian measures laid out in the request.
These measures include:
• the establishment of the CWB;
• granting the CWB exclusive and special privileges; including
• the exclusive right to purchase western Canadian wheat for export and domestic
human consumption at a price determined by the Government of Canada and the
CWB;
• the exclusive right to sell western Canadian wheat for export and domestic human
consumption;
• government guarantees of the CWB's financial operations, and
• the failure of the Government of Canada to ensure that the CWB makes its purchases
or sales of wheat in accordance with the requirements of Article XVII.

4.158 In short, only by ignoring the plain language of the United States' panel request can Canada
assert a misunderstanding of the measures that are at issue in this dispute.
4.159 Canada also expresses concern that the pane l request does not specify which of the two
obligations in Article XVII(1)(b) of GATT 1994 are covered in the panel request. But the panel
request is clear on this point: the request cites both obligations because the United States submits that
the Canadian measures are inconsistent with both of these obligations.
4.160 Finally, Canada argues that the United States' Article XVII claim must be dismissed because
it does not "set out a brief summary of the [United States'] legal case." The premise of Canada's
argument, however, is simply incorrect. As I expl ained previously, the requirement under Article 6.2,
as confirmed by the Appellate Body, is to set out the claims – not a summary of the arguments.
4.161 Turning to the GATT Article III and TRIMs Agreement claims, Canada first argues that the
rail car allocation claim fails to "identify the specific measures at issue." In light of the circumstances
of this case, Canada's argument is disingenuous.
4.162 During the consultations, the United States' de legation read a statement from an official
Canadian website indicating that Canada had a dopted a measure providing differential railcar
allocations for Western Canadian and imported wheat. Obviously, Canada is aware of this measure
referred to in our panel request – even if they denied such knowledge at the consultations.
4.163 Moreover, six weeks after the consultations, a nd after the United States had filed its panel
request, Canada finally confirmed that it indeed est ablished rules governing the allocation of rail cars
used in the transport of grain. The Canadian response, attached to the United States' 27 May
submission, specifies the section numbers of the Ca nadian laws and regulations that apparently
govern this issue.
4.164 In light of these circumstances, Canada's conten tion – that "it is not possible for Canada to
prepare a defence against this claim without being alerted in some detail to the provisions that are
alleged to violate Article III:4" – is simply not credible. At the very same time that Canada was
arguing that it did not know what rail car allocation measures are at issue, Canada had already
provided the United States with the specific legal cites to these very same measures.
4.165 Finally, Canada complains that the panel request does not lay out the legal arguments why the
discriminatory measures affecting grain imports are within the scope of the TRIMs Agreement .
Again, there is no requirement in DSU Article 6.2 to summarize the complaining party's legal
arguments. Nor has the Appellate Body concluded otherwise. Canada is not entitled to have the

United States' TRIMs Agreement claims rejected simply because Canada would prefer to review the
United States' legal arguments in advance of receiving the first United States' submission.
2. Canada's request for a preliminary ruling on Business Confidential Information.
4.166 The United States remains surprised that this is the subject of a request for a preliminary
ruling. There is no disagreement between the parties as to the adoption of special procedures, and this
is in any event a matter of the Panel's organization. The Panel may simply exercise its authority under
Article 12 of the DSU to adopt additional procedures in consultation with the parties. To the extent
the Panel considers that a ruling is necessary, the Un ited States believes that the ruling should be that
panels can, as they have in the past, at their discr etion exercise such authority to adopt procedures for
handling BCI.
4.167 As for the procedures themselves, the United States stands ready to consult with the Panel and
with Canada in this regard. As noted in th e United States' 28 May submission, Canada and the
United States consulted with the panel in the recent US – Softwood Lumber IV case to reach
agreement on procedures for the treatment of BCI.
4.168 In fact, we propose that this Panel also adopt those same procedures. Both Canada and the
United States are already familiar with and are currently utilizing these procedures. Moreover,
nothing in Canada's request for a preliminary ruli ng suggests the need for procedures different than
the US – Softwood Lumber IV procedures. And, as mentioned before, by adopting these previously
agreed-to procedures, the Panel and the parties can avoid wasting time and effort in considering and
debating the uncertain implications of Canada's newly developed proposals.
G. FIRST WRITTEN SUBMISSION OF THE UNITED STATES
4.169 Described hereunder are the United States' arguments in its first written submission:
4.170 The CWB sells more wheat on world markets than any other single enterprise. The CWB is
also a state trading enterprise ("STE") under Artic le XVII of the GATT 1994. Canada provides its
STE with lavish exclusive and special privileges, including the exclusive right to purchase wheat for
human consumption produced in all of Western Cana da, the exclusive right to sell such wheat in
domestic and foreign markets, and the right to requ ire Canadian farmers to sell their wheat to the
CWB at an initial payment price well below full mark et value. Canada has adopted no processes or
procedures to ensure that the CWB complies with Article XVII standards. In these circumstances, the
United States submits that the Panel must find that Canada is not in compliance with its obligations
under Article XVII of the GATT 1994.
4.171 This dispute also addresses a series of Canadian measures that serve as a major impediment to
the sale of imported grain, including wheat, in th e domestic Canadian market. One set of measures
serves to exclude imported grain from the entire Ca nadian grain handling system. A second set of
measures favours domestic grain over imported grain in the Canadian rail transportation system.
These measures accord to imported grain less favourable treatment than that accorded to like domestic
grain. Accordingly, the United States submits that the Panel should find that Canada's treatment of
imported grain is inconsistent with Canada's obligations under Article III:4 of the GATT 1994 and
Article 2 of the TRIMs Agreement.

1. Statement of Facts
(a) The CWB export regime
4.172 Canada has notified the CWB as a STE within th e scope of Article XVII of the GATT 1994.
As described in the STE Notification, "The statut ory objective of the CWB is the marketing in an
orderly manner, in inter-provincial and export trade, of gr ain grown in Canada." The basic goal of
the CWB is to sell all wheat produced in Western Ca nada. As Canada itself explains, "The volume of
grain exported is primarily a f unction of the available supply less domestic use and inventory
adjustments." Under its governing statute, the CW B must sell Western Canadian wheat "for such
prices as it considers reasonable with the object of promoting the sale of grain produced in Canada in
world markets. " Nothing in the statute requires the CWB to make its sales in accordance with
commercial considerations.
4.173 The CWB does not make publicly available any in formation indicating that its sales are made
in accordance with commercial considerations. In particular, the CWB maintains the secrecy of
specific information concerning its export sales, such as price, quality, length of contract, and credit
terms. On 23 December 2002, the United St ates submitted a request to Canada under
Article XVII:4(c) of the GATT 1994 for more detailed information concerning CWB sales. Canada
has not responded to that request.
4.174 Canada has provided to the CWB three related ex clusive and special privileges that make the
CWB unlike any private grain trader: (a) monopoly rights of purchase and sale; (b) the right to set the
initial purchase price paid to producers, with any re maining income distributed in "pool" payments;
and (c) a government guarantee of the initial payment.
4.175 Another exclusive or special privilege that Canada provides to the CWB is a government
guarantee on CWB borrowings. The government guara ntee allows the CWB to borrow funds at a
favourable non-commercial rate. The CWB can use the borrowed funds to make credit sales on terms
not practicable for commercial sellers. Th e CWB also borrows to make export sales under
government-guaranteed credit programmes.
(b) Canadian treatment of imported grain
4.176 Canadian measures discriminate against imported gr ain, including grain that is the product of
the United States. Under the Canada Grain Act and Canadian Grain Regulations, imported grain must
be segregated from Canadian domestic grain th roughout the Canadian grain handling system;
imported grain may not be received into grain elev ators; and imported grain may not be mixed with
Canadian domestic grain being received into, or being discharged out of, grain elevators.
4.177 In addition, Canadian law favours domestic grain over imported grain in the rail
transportation system. Canadian law caps the ma ximum revenues that railroads may receive on the
shipment of Canadian domestic grain, but not reve nues that railroads may receive on the shipment of
imported grain. Under these rules, a railroad mu st refund, with penalties, any revenues received in
excess of the cap. Thus, Canadian railroads have a great incentive to hold their rates on Western
Canadian grain at a level that will ensure that the railroads do not exceed the revenue cap. No
comparable incentive, however, exists for setting the rates charged for the transport of imported grain.
4.178 Canadian law also favours Canadian grain over imported grain in the allocation of
government railcars. The Canada Grain Act est ablishes a programme known as "producer railway
cars." On its face, the programme appears only to apply to grain grown by a producer, meaning that
no imported grain is eligible for the producer car programme. The CGC summarizes this programme

as follows: "Producers can order rail cars from the CGC to ship their grain to market." Canada has
no comparable programme that provides rail cars for the transport of imported grain.
2. Legal arguments
(a) Canada is not in compliance with its obligations under GATT Article XVII
(i) GATT Article XVII imposes an obligation on Canada to ensure that the CWB makes
purchases or sales in accordance with the Article XVII standards
4.179 Based on the plain text and the context of the GATT 1994, Article XVII imposes an
obligation on Canada to ensure that the CW B makes purchases or sales in accordance with the
Article XVII standards. The pertinent provisions of Article XVII provide that:
"1.* (a) Each [Member] undertakes that if it establishes or maintains a State
enterprise, wherever located, or grants to any enterprise, formally or in effect,
exclusive or special privileges,* such en terprise shall, in its purchases or sales
involving either imports or exports, act in a manner consistent with the general
principles of non-discriminatory treatment prescribed in this Agreement for
governmental measures affecting imports or exports by private traders.
 (b) The provisions of sub-paragra ph (a) of this paragraph shall be
understood to require that such enterprises shall, having due regard to the other
provisions of this Agreement, make any such purchases or sales so lely in accordance
with commercial considerations,* including price, quality, availability, marketability,
transportation and other conditions of purchase or sale, and shall afford the
enterprises of the other [Members] ad equate opportunity, in accordance with
customary business practice, to compete for participation in such purchases or sales.
Ad Article XVII
The charging by a state enterprise of different prices for its sales of a product in
different markets is not precluded by the provisions of this Article, provided that such
different prices are charged for commercial reasons, to meet conditions of supply and
demand in export markets."
4.180 This obligation on Members establishes the GAT T's basic balance with regard to STEs.
Members may establish STEs that enjoy special benef its and privileges not available to free-market
enterprises. These benefits and privileges may enable the STE to engage in trade-distorting practices,
to the detriment of other Members. But Article XVII restores the balance, by imposing an obligation
on the Member establishing the STE to ensure that the STE acts in a manner consistent with the
general principles of non-discriminatory treatment, to make purchases or sales solely in accordance
with commercial considerations, and to allow th e enterprises of other Members an adequate
opportunity to compete.
4.181 The context of Article XVII confirms that the ob ligation on Canada is to ensure that the STE
it has established meets the Article XVII requirement s. With respect to STEs, a Member has an
obligation to ensure that the STE does not engage in trade-distorting conduct. Whether or not the
Member has control over the STE, Article XVII impo ses an obligation on the Member to ensure that
the STE complies with the standards set out in Article XVII:1(a) and (b).

(ii) The standards in Article XVII apply to the wheat exports of the CWB
4.182 The standards in both paragraphs 1(a) and 1(b) of Article XVII:1 apply to the wheat exports
of the CWB.
4.183 Article XVII:1(a) requires that Canada ensure that the CWB "act[s] in a manner consistent
with the general principles of non-discriminator y treatment prescribed in this Agreement for
governmental measures affecting imports or exports by private traders." The conduct prohibited by
this provision includes the CWB's use of its special benefits and privileges to target particular export
markets. This provision also prohibits the CWB from harming other Members' wheat sellers by, in
effect, shutting them out of markets, or portions of markets, that are subject to the CWB's targeting.
Such conduct by an STE would amount to discrimination in the terms of sale between export markets,
and thus would run afoul of "a general principle of non-discriminatory treatment prescribed in this
Agreement," as reflected in the most-favoured-nation obligation.
39
4.184 Article XVII:1(a) also prohibits the CWB from making use of its exclusive privileges to
discriminate in its terms of sale between export mark ets and the Canadian domestic market. In this
category of conduct, "the general principles of non-discriminatory treatment" are those reflected in the
national treatment obligation.
4.185 Subparagraph (b) of Article XVII:1 establishes tw o different, but related, obligations. First ,
Canada must ensure that the CWB makes any purch ases or sales involving wheat exports solely in
accordance with commercial considerations, includ ing price, quality, availability, marketability,
transportation and other conditions of purchase or sale. Second , and relatedly, Canada must ensure
that the CWB affords the enterprises of other Members adequate opportunity, in accordance with
customary business practice, to compete for pa rticipation in purchases or sales involving wheat
exports.
4.186 The separate obligations in subparagraphs (a) a nd (b) of Article XVII:1 are related, and each
must be read in the context of the other. In particular, the note to Article XVII:1 provides that an STE
does not violate general principles of non-discrimination if it charges different prices for its sales of a
product in different markets if "such different pr ices are charged for commercial reasons, to meet
conditions of supply and demand in export markets." This ad note provision ties into
subparagraph (b)'s requirement for STEs to ma ke sales solely in accordance with commercial
considerations. In addition, subpa ragraph (b) has an introductory clause tying back to subparagraph
(a): namely, "the provisions of sub-paragraph (a) of this paragraph shall be understood to require" that
STEs make their sales in accordance with commercial considerations and allow enterprises of other
members an adequate opportunity to compete.
4.187 The Korea – Various Measures on Beef panel explained how these separate but related
obligations should be applied:
"The list of variables that can be used to assess whether a state-trading action is based
on commercial consideration (prices, availability etc…) are to be used to facilitate the
assessment whether the state-trading enterp rise has acted in respect of the general
principles of non-discrimination. A conclusion that the principle of non-
discrimination was violated would suffice to prove a violation of Article XVII;
similarly, a conclusion that a decision to purchase or buy was not based on
'commercial considerations', would also suffice to show a violation of Article XVII."

39 See GATT 1994, Article I:1.

4.188 Whether looked at as a question of non-discrimina tion, or as a question of sales in accordance
with commercial considerations and allowing the en terprises of other Members to compete, Canada
has failed to comply with its obligations under GA TT Article XVII to ensure that the CWB does not
abuse its exclusive benefits and privileges.
(iii) Canada has not met its obligation to ensure that the CWB makes purchases or sales in
accordance with the Article XVII standards
4.189 Article XVII imposes an obligation on Members establishing STEs to ensure that those STEs
comply with the Article XVII standards. The Artic le XVII standards require that the CWB make its
purchases and sales involving wheat exports in accordance with general principles of
non-discrimination, in accordance with commercial considerations, and in a manner allowing the
enterprises of other Members to compete. Cana da, however, has completely failed to meet its
obligation of ensuring that the CWB meets these standards.
4.190 Canada has already acknowledged in this pro ceeding that it takes no measures to enforce the
Article XVII standards on the CWB. If, as Canada asserts, Canada has no c ontrol or influence over
the CWB, then Canada has not complied – and, unde r its current regulatory structure, cannot comply
– with its obligation to ensure that the CWB m eets the standards in Article XVII regarding wheat
exports. Similarly, if, as Canada asserts, it does not even collect information on the CWB's "contracts
with . . . customers on terms and other conditions of wheat sales," Canada cannot even begin to meet
its obligation to ensure that the CWB's purchases and sales involving wheat exports are made "solely
in accordance with commercial considerations, in cluding price, quality, availability, marketability,
transportation and other conditions of purchase or sale."
4.191 The provision in the CWB Act governing CWB pricing provides only that:
"Subject to the regulations, the [CWB] shall sell and dispose of grain acquired by it
pursuant to its operations under this Act for such prices as it considers reasonable
with the object of promoting the sales of grain produced in Canada in world markets."
4.192 Thus, under its organic statute, the CWB need only sell wheat at any price it considers
"reasonable." In addition, the term "reasonable" is to be construed in the context of "the object of
promoting the sales of" Canadian grain in foreign markets. The object of "sales promotion" is not the
same as, or even consistent with, the requirement s that CWB's wheat exports are in accordance with
general principles of non-discrimination, in accordance with commercial considerations, and are made
in a manner allowing the enterprises of other Members to compete.
(iv) Canada's policy of non-supervision cannot meet Ca nada's obligation to ensure that the CWB
complies with the Article XVII standards
4.193 In light of the extensive, market-distorting privileges that Canada provides to the CWB,
Canada's acknowledgment that it takes no affirmative steps to ensure that the CWB's wheat exports
meet the Article XVII standards is sufficient to est ablish that Canada has failed to comply with its
international obligations under Article XVII.
4.194 There is no basis to presume that the CWB, w ithout the adoption of any measures to ensure
compliance with Article XVII standards, will none theless make its wheat exports in accordance with
those standards. Enterprises make sales in acco rdance with commercial considerations because they
are governed by commercial considerations. The CWB, however, is not. To the contrary, the
extensive special privileges that Canada provides to the CWB detach
 the CWB from the commercial
considerations that govern the conduct of free-market enterprises.

4.195 First
, the monopoly power over Western Canadian wheat gives the CWB greater pricing
flexibility than any private actor. The CWB, unlik e any commercial actor, has a guaranteed supply of
wheat at a cost of acquisition well below the market value, as well as a reduced interest costs and an
extra income stream from investment earnings. As a result, the CWB has greater flexibility in setting
the price of its wheat. Moreover, the CWB is not even required to recoup the amount of the initial
payment. Under the initial payment guarantee, the Canadian Parliament will make up the difference if
the actual amount received in a marketing year falls below the CWB's initial payments to producers.
4.196 Second, the exclusive and special privileges en joyed by the CWB allow the CWB – as
compared to a commercial grain trader – much gr eater freedom to engage in forward contracts or
long-term contracts. In entering into a long-term or forward contract, a commercial actor has to
account for the risks associated with the possible cha nges in the market price of wheat. The CWB, in
contrast, has guaranteed access to supplies at a know n price. This privilege enhances the CWB's
ability to forward contract wheat for future deliv ery at a fixed price in a manner that a private
company could not without incurring additional costs.
4.197 Third, government guarantees of the CWB's borrowings allow the CWB to provide more
favourable credit terms than those provided by comm ercial grain traders, and government guarantees
of credit sales allow the CWB to offer credit to high-risk buyers.
4.198 These special benefits enable the CWB, if it so chooses, to make its sales not in accordance
with commercial considerations, and on such non-co mmercial terms that do not allow the enterprises
of other WTO Members an adequate opportunity to co mpete. In other words, the special benefits
provided by Canada pricing enable the CWB to engage in conduct proscribed in GATT
Article XVII:1(b).
4.199 The special benefits also enable the CWB, if it so chooses, to provide such non-commercial
terms of sale in some markets and not others. Such conduct amounts to discrimination between
markets, and thus is likewise inconsistent with the discipline set forth in GATT Article XVII:1(a).
4.200 Finally, the CWB has fundamentally different incentives and motivations than those of a
private grain trading company. The goal of commercial entities is to maximize profit , which is
revenue minus expenses (including the cost of purchasing wheat ). The CWB, on the other hand, was
created for the purpose of maximizing only revenue.
4.201 That the CWB is a revenue maximizer, rather than a profit maximizer, is established by the
CWB's governing statute. The prime objective of the CWB, as set forth in its statute, is the
"marketing in an orderly manner
, in inter-provincial and export trade, of grain grown in Canada." The
objective of the CWB is to market Western Canadian wheat, it does not have an objective, like a
private trader, of maximizing profit. Similarly, the governing statute provides that the CWB must sell
Western Canadian wheat "for such prices as it consid ers reasonable with the object of promoting the
sale of grain produced in Canada in world markets. " Again, the prime objective is to sell the wheat
produced in Western Canada, not to maximize profit.
4.202 A revenue-maximizing firm will act differently in the market than will a profit-maximizing
firm. In particular, revenue-maximizing firms will tend to produce greater volumes, and sell at lower
prices, than would profit-maximizing firms. This distinction illustrates the fundamental fallacy of any
claim that the "CWB tries to get the best prices" is equivalent to an assertion that the CWB will
conduct itself like a private grain trader. Instead, wh ere a firm is a revenue maximizer like the CWB,
the firm will tend to make sales in greater volumes, and at lower prices, than a normal, profit-
maximizing firm.

(b) Canada's treatment of imported grain is incons istent with its obligations under Article III:4 of
the GATT 1994 and Article 2 of the TRIMs Agreement
(i) Canadian grain segregation requirements
4.203 Canada's grain segregation requirements provide more favourable treatment to domestic grain
than to like imported grain, and are thus inconsiste nt with Canada's obligations under Article III:4 of
the GATT 1994 and Article 2 of the TRIMs Agreement. As the Appellate Body explained in Korea -
Various Measures on Beef, three elements must be satisfied to establish a violation of Article III:4:
"[1] that the imported and domestic products at issue are "like products"; [2] that the
measure at issue is a "law, regulation, or requirement affecting their internal sale,
offering for sale, purchase, transportation, distribution, or use"; and [3] that the
imported products are accorded "less favourab le" treatment than that accorded to like
domestic products."
4.204 Each of these three elements apply to the Canadian grain segregation requirements.
4.205 First, the imported and domestic products at i ssue – the types of grain covered by the Canada
Grain Act and Regulations – are identical, and are thus "like products" for the purpose of GATT
Article III.
4.206 Second, the measures at issue are laws and regulations affecting the transportation and
distribution of grain. Section 57 of the Canada Grain Act and Section 56 of the Canadian Grain
Regulations apply to the receipt of grain into, or di scharge of grain from, "elevators". The Canadian
Grain Act broadly defines "elevato rs" to cover all Canadian facilities used for handling and storing
grain. Thus, by placing strict limitations on forei gn grain received into or removed from "elevators,"
the Canadian measures concern the treatment of foreign grain throughout the entire Canadian system.
4.207 Third, the treatment accorded to imported grain is less favourable than that accorded to like
domestic grain. As the Appellate Body explained in Korea – Various Measures on Beef , this factor
may be analysed as follows:
"Article III obliges Members of the WTO to provide equality of competitive
conditions for imported products in relation to do mestic products. [T]he intention of
the drafters of the Agreement was clearly to treat the imported products in the same
way as the like domestic products once they had been cleared through customs.
Otherwise indirect protection could be given."
4.208 Under Section 57 of the Canada Grain Act, imported grain, just like "infested or contaminated
grain," may not be received into any grain-handling facility without special approval of the Canadian
Grain Commission. In addition, Section 57 provides no indications of the criteria that the
Commission might use in deciding whether to grant such approval. In stark contrast, Canadian
domestic grain is automatically approved for receipt into any grain-handling facility in Canada. In
these circumstances, the conditions of competition established by the Canadian measure strongly
favour domestic grain over imported gr ain. Canadian grain is provided with a special status that
assures its eligibility to be received into grain-ha ndling facilities throughout Canada. Imported grain,
however, enjoys no such assurances. Any person wishing to make use of imported grain must seek
special approval, based on unstated, nontransparent criteria.
4.209 Section 56(1) of the Canadian Grain Regulations prohibits the mixing of imported grain and
domestic grain in transfer elevators. In Korea – Various Measures on Beef , the Appellate Body
examined under Article III:4 a comp arable Korean measure that requi red the segregation in all retail

stores of imported and domestic beef: "The central consequence of the dual retail system can only be
reasonably construed, in our view, as the imposition of a drastic reduction of commercial opportunity
to reach, and hence to generate sales to, the same consumers served by the traditional retail channels
for domestic beef." The effect of the Canadian anti-mixing requirement is to cut off imported grain
from existing Canadian distribution channels, with the effect of reducing the commercial opportunity
of imported grain to reach Canadian end-users.
(ii) Differential treatment in Canadian transportation system
4.210 The rail revenue cap and the producer car programme both favour domestic grain over
imported grain, and are thus inc onsistent with Canada's obligati ons under Article III:4 of the GATT
1994. Both programmes satisfy the three elements required to establish a violation of Article III:4.
4.211 First, the imported and domestic products at i ssue are identical, and are thus "like products"
for the purpose of GATT Article III. Second, bot h of these measures directly relate to the
transportation of grain, and are thus "laws, regula tions and requirements affecting . . . transportation"
under Article III:4. Third, both of these measures accord treatment to imported grain that is less
favourable than that accorded to like products of national origin. The rail revenue cap applies to
Western Canadian grain, and no imported grain is el igible to receive the benefits of the programme.
This discriminatory treatment provides more favo urable conditions of competition for Canadian
domestic grain than for imported grain.
4.212 Similarly, the producer car programme only app lies to grain grown by Canadian producers,
and thus excludes all imported grain. Making government rail cars available for the transport of
domestic grain reduces transportation costs for any gr ain that receives this benefit. In contrast,
imported grain, which is not eligible for the progra mme, receives no such benefits. Again, the result
is a system which mandates a competitive advantage for domestic grain over imported grain.
(iii) The Canadian grain segregation requiremen ts and discriminatory rail transportation
measures are also inconsistent with Article 2 of the TRIMs Agreement
4.213 The Canadian grain segregation requirements a nd discriminatory rail transportation measures
are also inconsistent with Article 2 of the TRIMs Agreement . First, these measures fall within the
types of measures covered in the Illustrative List in the Annex to the TRIMs Agreement. Illustrative
List 1(a) provides:
"1. TRIMs that are inconsistent with the obligation of national treatment
provided for in paragraph 4 of Article III of GATT 1994 include those which are
mandatory or enforceable under domestic law or under administrative rulings, or
compliance with which is necessary to obtain an advantage, and which require:
 (a) the purchase or use by an enterprise of products of domestic origin or from
any domestic source, whether specified in terms of particular products, in
terms of volume or value of products, or in terms of a proportion of volume or
value of its local production."

4.214 The grain segregation measures require elevator operators to use domestic Canadian grain.
The discriminatory rail transportation requirements require shippers to use domestic Canadian grain in
order to obtain the advantages of the rail revenue cap or government rail cars. Thus, both types of
measures fall squarely within the Illustrative List of measures covered by the TRIMs Agreement.
4.215 Second, under Article 2 of the TRIMs Agreement, a TRIM that is inconsistent with Article III
of the GATT 1994 is also inconsistent with the TRIMs Agreement. Thus, for the same reasons that the

grain segregation requirements and discriminatory ra il transportation measures are inconsistent with
Canada's obligations under Article III:4 of the GAT T 1994, these measures are also inconsistent with
Article 2 of the TRIMs Agreement.
H. FIRST WRITTEN SUBMISSION OF CANADA
4.216 Canada's arguments as described in its first written submission are outlined below:
1. Article XVII claims of the United States
4.217 While the bulk of wheat production is consumed domestically, an average of 103 MT was
traded internationally from 1997-1998 to 2001-2002. The market for wheat is global; and yet, trade is
highly concentrated in a handful of large entities that include private sector multi-national grain
companies and state trading enterprises. Most ma jor exporters have in place government-sponsored
export credit guarantee programmes. In each market , a number of factors influence the demand for
wheat. One of the most prominent factors is the highly diverse demand in quality. As well,
competition between the few major wheat-sellers in the global market is fierce and unless they can
differentiate themselves on some basis, such as se rvice or product quality, most sellers tend to be
price-takers.
4.218 Born out of the Canadian cooperative movement of the 1920s, the CWB has been for more
than sixty-five years the vehicle through which Western Canadian farmers have marketed their
product. The CWB is a single-desk seller and has the exclusive authority to sell Western Canadian
wheat for export and for domestic human consumption. It is modelled after agricultural marketing
cooperatives, in that producers are associated with the CWB through a pooling mechanism, receive an
initial payment when they deliver their product, and once the wheat is sold, receive a balance of sales
proceeds, less operating expenses. The CWB does not have the legal authority to retain any of its
after-cost earnings, save for amounts credited to a c ontingency fund. The logic behind the CWB is
simple: farmers, acting together as one single entity, have a better bargaining position when marketing
their agricultural products than each individually. This aids in their ability to compete with the
economic strength of multi-national grain companies.
4.219 Established by legislation, the CWB is controlled by Western Canadian farmers. The mission
of the farmer-controlled Board is to market qua lity products and services in order to "maximize
returns to Western Canadian grain producers." In its marketing strategy, the CWB produces detailed
estimates of all factors relevant to achieving its objectives. This includes assessing the Canadian
supply situation and determining the set of customer s that provides the best return or the supplies
available for sale. The CWB's sales strategy evolves throughout the year as supply and demand
situations develop, and of ten is adjusted daily. Prices for wh eat are ultimately established through
negotiation between buyers and sellers, but are linked to United States' futures exchange prices. Price
differences are primarily based on the grade and protein of the wheat, as well as location and shipping
arrangements. Like any commercial entity, the CW B requires financing to carry on its operations,
having an ongoing funding require ment of approximately Can$7 b illion, of which approximately
Can$6 billion is for credit receivables.
4.220 Under Article XVII, WTO Members have the right to establish and to maintain state
enterprises, and to grant these and other enterprises exclusive or special privileges. Article XVII:1
provides that state trading ente rprises must act in accordance with the general principles of non-
discriminatory treatment set out in GATT 1994. The general principles of non-discriminatory
treatment are not violated where a state trading enterprise is acting in accordance with commercial
considerations.

4.221 Neither of the terms "state trading enterprise" or "exclusive or special privileges" are defined
in GATT 1994. For the purposes of this submission , the former term will mean a governmental or
non-governmental enterprise that has been granted exclusive or special pr ivileges. A "special
privilege" is an exceptional or out of the ordinary ri ght or advantage. An "e xclusive privilege" is a
right or advantage granted to a restricted or li mited group. Nothing in Article XVII disciplines the
nature of such rights or privileges, or the scope of the grant by a Member of such rights or privileges.
Rather, Article XVII disciplines the conduct of state trading enterprises and their use of such rights or
privileges with respect to purchases and sales in the market.
4.222 Article XVII:1(a) sets out the substantive oblig ation under Article XVII:1. In respect of
purchases and sales, state trading enterprises must act in a manner consistent with the general
principles of non-discriminatory treatment. Because any business, in making purchasing and sales
decisions, makes distinctions as between produc ts, sellers and buyers, the non-discrimination
requirement in Article XVII:1(a) is further interp reted, and tempered, by Article XVII:1(b). The
introductory language of Article XVII:1(b) provides: "[t]he provisions of subparagraph ( a) of this
paragraph shall be understood to require .…" [emphasis added]. In this way, Article XVII:1(b)
recognizes that where it does so in accordance with commercial considerations, a state trading
enterprise may discriminate in its purchases or sales. Article XVII:1(b), thus, excludes such
purchases or sales from the scope of application of Article XVII:1(a).
4.223 Jurisprudence, the negotiating history and th e writings of prominent experts support the
proposition that the term "general principles of non-discriminatory treatment" refers only to a
modified most-favoured nation obligation. If Article XVII:1(a) refers to "national treatment", this
could only be in respect of import monopolies – as export monopolies have little to do with conditions
of competition between imports and like domestic products.
4.224 The term "commercial considerations" refers to the normal business practices of private sector
enterprises. An appropriate interpretation for "commercial considerations" in the context of
Article XVII would be "considerati ons consistent with normal business practices of privately-held
enterprises in similar circumstances." Th is is supported by Article XVII:1(b), the Ad Note, and the
object and purpose of Article XVII, which is to prevent WTO Members from doing indirectly through
STEs that which they have contracted not to do di rectly in GATT 1994. To determine whether a firm
has acted in accordance with commercial considerations, the actio n must be examined in its proper
context and in comparison to what a privately-held enterprise would do in similar circumstances.
4.225 Canada is not in violation of Article XVII:1 because of an alleged failure to implement
"processes and procedures" to "ensure" that the CWB acts in accordance with the requirements of that
Article.
4.226 First, Article XVII does not require "processes and procedures". Article XVII does not
prescribe how Members must "ensure" – a term that does not appear in Article XVII – that state
trading enterprises act in the manner required by that Article. Article XVII:1 places an obligation of
results on Members that grant special or exclusive pr ivileges. If the drafters had in mind specific
mechanisms or actions for a Member to "ensure" th at its state trade enterpri ses meet the standard set
out in that Article, these would have been set out precisely.
4.227 As well, the object and purpose of Article XVII would militate against an obligation of
"mechanisms" and "actions". An obligation of m eans would result in more government interference
and involvement in the affairs of state trading enterp rises rather than less. Moreover, it would lead to
the counterintuitive situation that a Member could be found in violation of Article XVII:1(b) in
respect of the operations of a fully commercial stat e trading enterprise, because it does not impose its
own judgement upon the operations of the enterprise. It is not consonant with common sense to
suggest that the operations of a state trading en terprise are not "commercial" simply because the

government that established it does not pry into or dir ect its transactions. Rather the opposite is true:
an entity's operations are carried out on the basis of "commercial considerations" where its actions are
not directed by political considerations and under government supervision and control.
4.228 The proper interpretation is that Article XVII:1 contains an obligation "of results". Where a
complaining party fails to demonstrate that the condu ct of a state trading enterprise does not meet the
standard in Article XVII:1(a) and (b), then the de fending party must be assume d to have honoured its
undertaking. Canada is not in violation of Article XVII:1 because of an alleged failure to implement
"processes and procedures" to "ensure" that the CWB acts in accordance with the requirements of that
Article.
4.229 Even if "processes and procedures" were the standard, Canada is not in violation of
Article XVII:1. It has, in fact, put in place such processes and procedures. The Act of Parliament that
established the CWB also established a Board of Directors, the majority of whom are farmers elected
by farmers. This is the best guarantee that the Board acts in the best interests of those private interests
and, therefore, acts in accordance with commercial c onsiderations. Finally, were facts to come to the
attention of the Government of Canada that the CWB was acting in a manner inconsistent with its
obligations under Article XVII, Section 18 of the CWB Act enables the Government to undertake
corrective action.
4.230 Second, the United States seeks impermissibly to challenge the "privileges" granted to the
CWB. The United States appears to interpret "co mmercial considerations" through the lens of actions
of private enterprises that do not have the privileges that may be gr anted to state trading enterprises.
Such a comparison transforms the granting of privileges into an irrebuttable presumption that state
trading enterprises cannot, by their very nature, act commercially. Under the reasoning of the
United States, granting special or exclusive privile ges to a state trading enterprise would necessarily
lead to a conclusion that the state trading en terprise was not acting commercially, and that the
Member granting such privileges is necessarily viol ating Article XVII. Such an argument is an
unreasonable and absurd interpretation of the provisions of Article XVII.
4.231 An alternative reading of the United States' argument is that any such "presumption" is
rebuttable. But this is not sustainable either, as the United States would be proposing that the exercise
by a Member of a right under a provision of th e WTO Agreement reverses the burden of establishing
a violation under the same provision. Such presumption of violation is nowhere to be found in
Article XVII.
4.232 The United States expressly agrees that Canada has the right to grant special privileges and
that Article XVII does not place any limitations on the ty pe or scope of privilege that may be granted
to an enterprise.
4.233 Third, the complaining party has the burden of establishing the case it wishes to advance.
The United States has failed to meet this burden of proof.
4.234 The United States offers no evidence and indeed makes no allegations that the CWB engages
in conduct that is discriminatory.
4.235 Even if the Panel found that the CWB engaged in actions that were discriminatory, the United
States still must demonstrate such discrimination is not in accordance with what a privately-held
enterprise operating in similar circumstances would do.
4.236
 The United States has not established that the CWB does not act in accordance with
commercial considerations. The mere possibility that a state enterprise may act inconsistently with

commercial considerations – and this is the only allegation of the United States – does not establish
that Canada is in violation of its treaty obligations in international law.
4.237 The CWB does act commercially, similar to ag ricultural marketing cooperatives. The
United States' allegations reflect a fundamental mi sapprehension of the CWB. The CWB is modelled
on a cooperative, and not a share-capital corporatio n. The United States' reliance on the absence of
CWB "shareholders" and "profits" demonstrates a deep misunderstanding of the case.
4.238 The United States' government itself agrees that cooperatives operate differently from share-
capital corporations. Instead of striving to generate profits for itself, a cooperative exists as a way to
share risk, expenses and revenues with other producers. The artificial distinction in the United States'
submission between "revenue maximizing" and "pro fit maximizing" entities is a red-herring. The
CWB operates no differently from the entities that the United States itself considers perfectly
commercial in operation. Canada is not in violation of Article XVII:1.
2. Article III:4 claims of the United States
4.239 Unlike Canada, in the United States Governme nt involvement in terms of grain quality
assurance is not a major factor. The United St ates' government and the industry do, however,
recognize the growing importance of quality assuran ces and end-use characteristics in purchasing
decisions, as well as the threat that the absence of such assurances in the United States poses to the
United States' share of the world market. This is particularly significant in the case of wheat, where
Canada has a reputation as a producer of high qu ality, potentially offering a commercial advantage
over wheat produced in the United States.
4.240 Canada's grain quality assurance system seeks to ensure that: (a) grain meets customer' end-
use requirements; (b) only the best varieties of grai n are registered for production in Canada; (c) grain
delivered into the handling system is assembled into lots of like quality where the standards of quality
are explicitly defined; (d) this distinction is maintained as the grain moves through the handling
system and is progressively assembled into larger lo t sizes; and (e) the cleanliness and safety of the
grain is maintained throughout.
4.241 There are four cornerstones to ensuring the qualit y of Canada's grain. The first is through
variety registration. The Seeds Act requires that varieties of seed of most agricultural crops sold in
Canada be registered, but only after undergoing eval uations and field trials to ensure the agronomic
performance of the seed in Canadian growing c onditions. Because of this rigorous screening, new
grain varieties approved for commercial production are assured of meeting strict quality guidelines
and provide grain buyers with the assurance of a consistent product over time.
4.242 The second is Canada's grain grading system, wh ich is administered by the Canadian Grain
Commission. Established under the authority of the Canada Grain Act, statutory grade specifications
are set out for most grain. Imported grain may enter under the grading designation of the originating
country. The objectives of the grain grading system are to: (a) establish a method of ensuring that
quality of the product can be translated into comme rcial advantage; (b) fac ilitate grain handling by
encouraging the collective storage of bulk lots of co nsistent quality; (c) enable a buyer to rely on the
grain being of the specified quality; and, (d) separate grain into sufficient number of quality divisions
so that buyers have a choice of grades, but, at th e same time, limit the number of grades to facilitate
handling and storage in an efficient bulk-handling system.
4.243 The third aspect of ensuring the quality of Cana da's grain is uniformity and consistency.
Canadian grain has a reputation for being uniform and consistent within, and among, shipments and
from year to year. This allows processors to select a grade that best meets their requirements and that
of their customers with confidence that it will perform according to expectation. A number of factors

contribute to the uniformity and consistency of Cana dian grain. In particular, the grading system
assures consistency in physical condition and intr insic quality attributes among shipments of like
grade despite the challenges posed by shipping large quantities of grain over large distances.
Uniformity is also assured through the registratio n system, which establishes strict criteria for
registration, and the fact that only relatively smal l numbers of new varieties are introduced in the
market.
4.244 The final aspect is cleanliness and safety. End- users greatly appreciate, in particular, the
cleanliness of Canadian grain. Through CGC monito ring, customers are assured that grain shipments
meet the most stringent Canadian and internationa l tolerances for toxic chemical contaminants.
Similarly, the strict cleaning procedures, both at pr imary and export levels, ensure that buyers do not
have excessive dockage to clean out, reducing the like lihood that the grain will spoil during storage as
well as contributing to higher milling yields.
4.245 Grain handling and transportation in Canada is a bulk system. Designed for the efficient
movement of vast quantities of Western Canadian gr ain to export markets, the grain handling system
comprises privately owned handling and storage facilities, including primary, terminal and transfer
elevators. There is no legal requirement for grain to enter the bulk handling system, and, in fact, it is
seldom used when grain is destined for nearby purchasers.
4.246 There are no restrictions on where, how or to whom United States-origin grain imported into
Canada can be sold. United States' farmers and grain companies may sell United States' wheat or
other grain directly to Canadian customers, including millers, feedlots or elevators.
4.247 However, when United States-origin grain imported into Canada is destined for an elevator –
that is, when it enters the Canadian bulk grain ha ndling system – certain precautions are taken to
ensure that bulk United States-origin grain is not misrepresented as Canadian grain and that it does
not threaten the Canadian grain quality assurance system. Section 57 of the CGA requires the
authorization of the CGC for foreign grain, includi ng grain imported from the United States, to enter
into licensed Canadian grain elevators, however , except for when grain has been infested or
contaminated, there has never been an occasion when the CGC has refused entr y. In addition, the
"Wheat Access Facilitation Programme" has enabled th e CGC to provide advance consent to primary
elevator operators wishing to import United States-orig in wheat. For transfer elevators, the CGC also
provides advance consent for annual imports of United States-origin grain into the elevators.
4.248 Once United States-origin grain enters the Cana dian bulk grain handling system, it is subject
to the same mixing restrictions as apply to Canadi an and other grain in the system. Exceptions do
exist, such as under Section 56 of the Regulations, which allows mixing of different grades of Eastern
Canadian grain, most of which is not exported, and under Section 57 which permits CGC authorized
mixing of United States-origin grain and Canadian grain provided that the grain was identified as
such.
4.249 Canada's treatment of imported grain does not contravene Article III:4. Section 57 of the
CGA and Section 56 of the Regulations do not accord United States-origin grain treatment less
favourable than accorded to Canadian-origin grain. Fina lly, even if inconsistent with Article III:4, the
provisions are permitted under Article XX.
4.250 To determine whether a measure is consistent with Article III:4, it is necessary to examine
whether: (a) imported products a nd domestic products are like products ; (b) the measures constitute a
"law, regulation or requirement"; (c) the law, regul ation or requirement affects the internal sale,
offering for sale, purchase, transportation, distribut ion or use; and (d) imported products are accorded
less favourable treatment than the treatment accorded to like domestic products.

4.251 A like product determination is done on a case-by-case basis. All grains are not "like". For
example, soybean and wheat, while both grains, are clearly different products. Wheat itself has
different qualities and end-uses. The United States has failed to specify which imported grains are
like which domestic grains and why.
4.252 The scope of Article III is limited to measures affecting the internal sale, offering for sale,
purchase, transportation, distribution or use of imported products. Where a measure primarily affects
exports, and incidentally the internal sale of the product, only the impact of the measure on the
internal sales may be examined in the context of Artic le III. Different obligations set out in Article V
of GATT 1994 apply to foreign products in-t ransit through a Member country, which the
United States does not allege.
4.253 A portion of United States-origin grain that enters the Canadian bulk grain handling system is
destined for re-export to third countries. To the exte nt the authorization requirement of Section 57 of
the CGA and the mixing conditions of Section 56 of the Regulations affect United States-origin grain
in transit through Canada, they are outside the sco pe of Article III:4 and of the Panel's terms of
reference. The compliance of these provisions with Article III:4 only requires an examination of the
effect of the measure on United States-origin grain imported for sale in Canada.
4.254 Mixing restrictions on grain in the bulk grain handling system do not amount to less
favourable treatment of imported grain. In any ev ent, the CGC has discretion to authorize mixing of
foreign grain.
4.255 WTO Members are required to provide effective equality of competitive opportunities
between "like" domestic goods and imported goods. This means that mere formal differences in
treatment between imported and like domestic products do not establish a violation. In Korea –
Various Measures on Beef , the Appellate Body found that a "formal difference of treatment between
imported and like domestic products is thus neither necessary, nor sufficient, to show a violation of
Article III:4."
4.256 Similarly, the Appellate Body in US – Section 211 stated that "the mere fact that imported
products are subject… to legal provisions that ar e different from those applying to products of
national origin is in itself not conclusive in est ablishing the inconsistency with Article III:4." The
different treatment also has to be less favourable treatment.
4.257 As set out in EC – Asbestos , the Appellate Body recognized that a Member does not violate
Article III:4 simply because a product (which is both imported and produced domestically) is treated
differently from another product in the group of "lik e" products. Article III:4 is also not violated by
virtue of drawing distinctions between "like" products within domestic regulations.
4.258 The United States claims that tw o measures are inconsistent w ith Canada's obligations under
Article III:4. Section 57 of the CGA and Section 56 of the Regulations relate to the delivery of certain
grain to elevators and to the mixing of grain within the Canadian bulk grain handling system.
4.259 United States-origin grain has unfettered access to Canadian end-users. As well, the CGC
routinely allows imported grain to enter Canadian elev ators. Authorization is typically granted within
a day or two. In addition, various programmes have been put in place to allow routine or even annual
orders permitting receipt of foreign grain. The Wheat Access Facilitation Programme between
Canada and the United States is one of these programmes.
4.260 A measure may be challenged as such before a WTO panel only where it is mandatory in
nature and requires the violation of the Agreement. Section 57 of the CGA is not a mandatory
provision. The CGC has the discretion to always au thorize foreign grain to enter elevators, and does

so routinely and regularly. The advance annual aut horization to transfer elevators and to primary
elevators under the WAFP further confirms the practice of the CGC to authorize entry of foreign grain
into Canadian elevators. And the CGC has neve r refused entry of foreign grain into Canadian
elevators.
4.261 The United States adduces no evidence to the contra ry. In fact, other than vague allegations
concerning the practices of the CGC, the United St ates has not presented any credible evidence in
support of its contention that Section 57 in an y way affects the conditions of competition of
United States-origin grain. Its challenge must fail.
4.262 Finally, Section 56 of the Regulations does not result in treatment less favourable for
United States-origin grain. The principal object and effect of the various regulations at issue is to
ensure that United States-origin grain is not mi srepresented as "Canadian" grain when it enters
Canadian elevators. The precautions that have been put in place reflect the fact that the Canadian
grain handling system is geared toward bulk m ovement of goods for export. Contrary to
United States' assertions, nothing in Article III:4 re quires a Member to allow mixing of bulk grain
from different origins and of different quality, or to permit foreign grain to be misrepresented as
domestic grain.
4.263 And the United States fundamentally misundersta nds the purpose and effect of Section 56 of
the Regulations. A significant portion of United States-orig in grain exported to Canada is shipped
directly to end-users, by-passing elevators to wh ich Section 56 would appl y. End-users may mix
grain they purchase from different sources, as Canada does not impose any mixing restrictions outside
the bulk grain handling system. As well, mixing restrictions in the bulk handling system apply to both
domestic and imported grain. Mixing restrictions in the bulk handling system do not amount to less
favourable treatment as there are no greater costs impos ed on United States' -origin grain as a result.
Finally, mixing of Canadian and foreign gr ain may be allowed. Section 56 of the Regulations does
not violate Article III:4.
4.264 Even if Section 57 of the CGA and Section 56 of the Regulations are found to be inconsistent
with Article III:4, they are justified under Article XX(d) of GATT 1994.
4.265 These measures are necessary in order to secure compliance with the grading provisions of
the CGA, the CWB Act and the misrepresentations and consum er protection provisions of Canada's
competition laws, laws that are not inconsistent w ith the provisions of the General Agreement. These
measures are not applied in a manner that cons titutes a means of arbitrary or unjustifiable
discrimination between countries where the same cond itions prevail, or a disguised restriction on
international trade.
3. Maximum Grain Revenue Entitlement is Consistent with Article III:4
4.266 The provision at issue caps the revenue of two railways, the Canadian National Railway (CN)
and the Canadian Pacific Railway (CP), on certain m ovements of grain within Canada in a given crop
year. The revenue cap only applies to movements or iginating in Western Canada and destined to: (a)
a port in British Columbia ( that is, Vancouver or Prince Rupert) for export, except for exports to the
United States for consumption in the United States; (b) Churchill, Manitoba for export; or (c) Thunder
Bay or Armstrong, Ontario for domestic consumption or export.
4.267 Since the introduction of the revenue cap, railway revenues have been below, and during the
most recent crop year (2001-02) were significantly below, those permitted under the revenue cap.
4.268 Article III:4 does not apply to laws affecting th e transportation of goods in-transit; Article V
of GATT 1994 does. Article V:1 deems to be "in-transit" goods passing across the territory of a

contracting state when such passage is only a portion of a complete journey beginning and terminating
beyond the frontier of the contracting party across whose territory the traffic passes. Therefore,
because of the geographic and other limitations of the revenue cap, the only portion that affects
transportation of United States-origin grain for dome stic use in Canada are those movements destined
for either Thunder Bay or Armstrong. However, there are virtually no such movements of
United States-origin grain to Thunder Bay or Armstr ong for domestic sale in Canada because there is
no natural market for eastbound movements of Unit ed States-origin grain through Canada: it is far
easier for United States-origin grain to move eastbound through the United States, south of the Great
Lakes, and then north into Canada.
4.269 Furthermore, United States-origin grain is not accorded less favourable treatment. Railway
rates are set on a commercial basis. In addition, th e revenue cap has not been met and is unlikely to
be met in the future.
4.270 Railway rates are set on a commercial basis as the revenue cap does not actually regulate rates
for shipping in any way. The revenue cap onl y regulates the revenues earned by the prescribed
railways, on the prescribed parts of certain movements. The revenue cap does not specify or limit
individual freight rates and the discretionary setting of rates is left entirely to them.
4.271 For movements that include a "non-revenue cap" portion, only the rates for the full movement
are relevant and the railways have the discretion to charge what the market will bear, regardless of
what the rate may be for the revenue cap portion of the movement. It is generally accepted that
railways in North America practice differential pricing. This practice consists of charging prices that
the market will bear by examining a shipper's transp ortation alternatives, including alternative costs,
for the full movement, that is from the origin to destination. Because of the railways' differential
pricing practices, the revenue cap clearly does no t confer treatment that is less favourable for
movements of United States-origin grain. Accord ingly, the revenue cap does not accord treatment
that is less favourable for movements of United States-origin grain.
4.272 The revenue cap has never been met and is unlikely to be met in the future. Since the
introduction of the revenue cap, railw ay revenues have been below, and during the most recent crop
year were significantly below, those permitted under th e revenue cap. This is, in part, because the
revenue cap baseline already provides an adequate leve l of returns to the railways. Further, revenue
caps are not adjusted downward for productivity gains.
4.273 Actual revenues earned by the railways are significantly below the maximum entitlement.
The railways had the option to charge higher rates and still meet the requirements of the CTA, but
chose not to. This supports the presumption that as profit-maximizing enterprises, the railways were
simply charging the rates the market would bear. In addition, the formula used to calculate the
revenue cap allows for upward adjustments for inflation but no corresponding reduction for gains in
productivity. As a result, it is expected that over time there will be an increase in the gap between
grain revenues and the revenue caps.
4. Producer Car Allocation is consistent with Article III:4
4.274 Since 1 August 2000, there has been no government intervention or formal mechanism for the
allocation of rail cars, with the exception of a mino r role played by the CGC. The railways alone
determine how rail car supply will be allocated, based on commercial considerations. The CWB and
grain companies obtain rail cars from the railways. Farmers can also access rail cars themselves in
order to load their own grain directly for shipment to a terminal elevator or other destination. These
rail cars are known as "producer cars" and provide farmers with the opportunity to by-pass the
primary elevator and save on elevation charges.

4.275 Farmers apply to the CGC for producer cars. The CGC only allocates those rail cars that the
railways make available; and it is the railways th at determine the number of rail cars that will be
provided to its various customers, based on commerc ial considerations. The CGC allocates the rail
cars on a first come-first served basis, under conditions set out in the CGC's annual "Producer Car
Order".
4.276 Producer cars are allocated on a non-discriminatory basis. The term "producer" is not defined
in the CGA and, contrary to the United States' assertion, there is no indication in the CGA (or, for that
matter, in the description of the producer car pr ogramme prepared by the CGC and upon which the
United States relies), the Regulations or the practice of the CGC that Section 87 of the CGA only
applies to producers of Canadian grain.
4.277 A United States' producer requesting a producer car for United States-origin grain in Canada
would be treated as a Canadian producer requestin g a producer car for his Canadian grain. An
application received by the CGC from a United States ' producer would have to comply with the same
conditions as an application from a Canadian pr oducer. Therefore, the CGC does not accord less
favourable treatment to United States' -origin grain.
4.278 Canada's conclusion with respect to Article III: 4 is that United States' assertions are founded
neither in law nor fact.
5. Claims under Article 2 of the TRIMS Agreement
4.279 First, the United States' request does not identif y any trade-related investment measure. The
CGA and the CTA are not trade-related investment measures. Therefore, the TRIMs Agreement does
not apply. Second, the measures being challenged by the United States are not covered by Item 1(a)
of the Illustrative List and are not local content re quirements. Third, the United States allegation that
the "grain segregation measures" require elevator op erators to "use" domestic Canadian grain has no
foundation in fact or law.
4.280 As a threshold matter, it is not at all clear that the term "use" in the context of the TRIMs
Agreement refers to handling, transportation or storage of products. Moreover, Section 56 of the
Regulations does not require elevators to "use" domest ic grains over imports, nor does it condition
any advantage on the purchase or use of Canadian gr ain. This provision simply allows mixing of
Eastern Canadian grain. As well, mixing restri ctions have nothing to do with local content
requirements. Section 56 provides that elevators that handle grain, be it Canadian or foreign grain,
may have to respect certain mixing restrictions. Fi nally, the United States' allegation that shippers are
required to "use" domestic grain "in order to ob tain the advantages of the rail revenue cap or
government rail cars" is also unsupported by fact and law. With respect to the revenue cap, the
United States has not established that the rail revenue cap confers any advantage, or that it is the type
of advantage contemplated by Item 1(a) of the I llustrative List. With respect to "government rail
cars" it is unclear what this refers to. Canada assu mes that the United States refers to Section 87 of
the CGA, which is the rail car allocation provision it refers to under its Artic le III challenge. This
provision does not require use of Canadian grain in order to obtain a producer car.
4.281 The United States' assertions that Canada has vi olated its obligations under Article 2 of the
TRIMs Agreement are founded neither in law nor fact and should be dismissed
I. FIRST ORAL STATEMENT OF THE UNITED STATES
4.282 In its first oral statement, the United States made the following arguments:

1. GATT Article XVII Claims
4.283 The GATT 1994 does not prohibit Members from establishing and maintaining a STE and
granting to that STE special benefits and privileg es not available to private sector enterprises.
However, in recognition of the fact that these benefits and privileges may enable the STE to engage in
trade-distorting practices to the detriment of ot her Members, Article XVII imposes obligations on
Members that choose to establish an STE.
4.284 In particular, in order to ensure that such trade-distorting practices do not occur, Article XVII
imposes an obligation on the Member establishing th e STE to ensure that the STE acts in a manner
consistent with general principles of non-discrimin atory treatment, to make purchases or sales solely
in accordance with commercial considerations, a nd to allow the enterprises of other Members an
adequate opportunity to compete. As made clear by the Korea - Various Measures on Beef panel, a
violation of any of these obligations constitutes a violation of Article XVII. These obligations are
inter-related and should be read together as a consistent regime designed to discipline STEs that might
otherwise engage in trade-distorting practices.
4.285 Canada seems to argue differently in its writte n submission with regard to the relationship
between Article XVII:1(a) and 1(b). But it certainly agreed with this interpretation earlier in these
proceedings. In particular, in its Article 6.2 subm ission last spring, one of Canada's arguments for
dismissing the United States' panel request was prem ised on the notion that Article XVII:1(a) and (b)
had distinct obligations.
4.286 Canada, like all Members who establish STEs and gr ant them special benefits and privileges,
must fulfil its obligations under Article XVII and ensure that the CWB does not engage in trade-
distorting conduct. Canada has not met this obligation.
4.287 Canada has provided the CWB with exclusive and special privileges, including: (1) monopoly
rights of purchase and sale of all Western Canadian wheat for export and domestic human
consumption; (2) the right to set the price paid to Canadian producers for wheat; (3) government
guarantee of initial payments made to producers; and (4) government guara ntee of CWB financial
operations, including CWB borrowings at levels far exceeding the amount required to finance CWB
sales operations and CWB credit sales to foreign buyers.
4.288 The CWB does not sell grain as a private-sector actor according to commercial considerations
and therefore violates Article XVII. The CWB is an undisciplined state enterprise with special
privileges neither enjoyed by a cooperative or a la rge private-sector corporation. Unlike the CWB,
producers' cooperatives are voluntary, private associations. The CWB, on the other hand, requires all
Western Canadian farmers who wish to sell their wheat for human consumption or export to do so
through the CWB. Farmers in a true cooperative have the option, not the obligation, to join in a joint
enterprise. Also, unlike a cooperative, the CWB is not required to sell the wheat grown by Western
Canadian farmers. It has strong incentives to do so, but it is not required to do so. In short, the CWB
is a sales organization, but a very unusual one.
4.289 Canada's analogy to corporations such as Ca rgill is similarly off the mark. The CWB does
not act as a private sector grain exporter according to commercial considerations. First, a private
exporter who wishes to export wheat must first purch ase that wheat on the domestic market, with the
market establishing the price, not the exporter. In contrast, the CWB has a guaranteed supply of
wheat at a cost of acquisition well below market value. Canada acknowledges that it sets the initial
payment price, and that this price is below estimated market value. Canada tries to argue that it has
no guaranteed supply because farmers are not forced to grow wheat under Canadian law. However,
many farmers do in fact grow wheat, and these farm ers are obligated to have the CWB export that

wheat. Many Canadian farmers do not want to se ll their wheat for domestic human consumption and
export to the CWB, but they are forced to do so by operation of Canadian law.
4.290 Second, if a private exporter misjudges the price of wheat, it has to absorb the loss. The
CWB, however, is shielded from these market forces . The CWB is not required to recoup the total
amount of its initial payments to farmers. Instead , under the Government of Canada's initial payment
guarantee, the Canadian Parliament bails out the CWB if the amount the CWB receives for sales in a
given marketing year falls below the CWB's total initial payments to producers.
4.291 Third, the CWB's guaranteed access to supply at a known price enhances the CWB's ability to
forward contract wheat for future delivery at a fixe d price, in a manner that a private exporter could
not accomplish without assuming considerable financial risk and added handling costs.
4.292 Fourth, the CWB is given more favourable cr edit terms than a commercial exporter would
receive. The Government of Canada also guara ntees the CWB's borrowings, thereby giving the CWB
an opportunity to offer favourable credit terms to high-risk buyers.
4.293 The CWB's legislative mandate to maximize revenue s, not profits, also leads to a violation of
Article XVII. By statute the CWB is required to sell Western Canadian wheat "for prices as it
considers reasonable with the object of promoting the sale of grain produced in Canada in world
markets." Thus, the CWB has a fundamentally diff erent objective than profit-maximizing, private
export companies. That objective – to maximi ze revenues – means that the CWB has strong
incentives to act inconsistently with commercial considerations.
4.294 In light of these extensive, market-d istorting business practices and Canada's
acknowledgment that it has not taken any steps to ensure that these non-commercial practices do not
lead to serious obstacles to trade, one can only co nclude that Canada has failed to comply with
Article XVII.
4.295 Canada spends much of its submission knocking down the straw man concerning "obligations
of process" and "obligations of result." Canada seems to justify this straw man argument based on the
fact that the United States' submission uses phrases such as "Canada must ensure that the CWB meets
the Article XVII disciplines." However, our use of this phrase is simply a shorthand for the
obligations of Canada as set out in Article XVII. We do not see Canada as disagreeing that it has such
obligations. Use of the word "ensure" to summa rize the obligations under Article XVII is entirely
appropriate. We would recall Article XVI:4 of the Marrakech Agreement Establishing the World
Trade Organization. That article, which applies to the GATT 1994, provides: "Each Member shall
ensure the conformity of its laws, regulations, and ad ministrative procedures with its obligations as
provided in the annexed Agreements."
4.296 The United States' submission does not, as Canada claims, argue that Article XVII contains
"obligations of process." The reason that the Un ited States' submission emphasizes the lack of any
Canadian controls over the CWB is that without such controls, the CWB will not act, and has not
acted, in accordance with commercial considerations . It is not for the United States to say how
Canada should meet its obligations. However, wh ere Canada establishes an STE such as the CWB,
with a guaranteed supply of wheat at below market prices and all of its other advantages, and without
any statutory or other mechanism to require compliance with the Article XVII disciplines, Canada has
not met its obligations.
4.297 The United States has not, as Canada has claimed, asked the Panel to reverse the burden of
proof. To the contrary, the entire first United States' submission is dedicated to meeting the
United States' burden of proof. It does this by se tting forth the privileges enjoyed by the CWB, its

statutory structure and mandate, all of which combine to show that the CWB acts in a non-commercial
manner.
4.298 Canada seems to argue that the United States must submit actual sales data to meet its burden
of proof. It is this Canadian argument, not the United States' submission, that departs from
jurisprudence under the DSU. Certainly nothing in GATT Article XVII, or under the DSU, specifies
the types of information that a complainant must use to meet its initial burden. Why did the
United States decide to present its case in this wa y? First, the structure and advantages of the CWB
are publicly available, and we believe that they ar e more than sufficient to meet the United States'
burden of establishing an Article XVII violation. S econd, and in contrast, specific data on CWB sales
practices are not publicly available. The United St ates has asked Canada for such information under
the procedures set forth in Article XVII [ ]
 40. Canada has chosen not to provide it. We therefore
chose to present our case based on the information ava ilable to us, and not on the basis of information
held primarily by the Government of Canada under a veil of secrecy.
2. GATT Article III:4 and TRIMs Article 2 Claims
4.299 The United States is also challenging Canada's di scriminatory treatment of imported grain.
Canada's grain segregation requirements, its rail revenue cap, and its producer car programme all
discriminate against grain imports in violation of Canada's national tr eatment obligation under
Article III:4 of the GATT 1994 and Article 2 of the TRIMs Agreement.
4.300 The United States is challenging Canada's gr ain segregation requirements under the Canada
Grain Act and Canada Grain Regulations, as well as the regulation of the bulk grain handling system
and grain transport system. Under these regulations imported grain is being treated less favourably
than like Canadian grain – a violation of Canada's obligations under Article III:4 of the GATT 1994.
4.301 Canada's violation of Article III:4 could not be clearer. First, there is no question that
imported and domestic grains are "like products" for purposes of Article III:4. Canada's argument
that the imported grain at issue may not be a "like product" with respect to domestic grain is
disingenuous, especially since some imported United States' grain is the same variety as Canadian
grown grain, the only difference being that the Unite d States' grain is grown south of the Canadian
border.
4.302 There is also no question that the grain segregation regulations at issue affect the internal sale,
offering for sale, purchase, transportation and distri bution of grains, since the overwhelming majority
of grain in Canada travels though the bulk grain system.
4.303 Finally, the treatment accorded to imported grai n is less favourable than that accorded to like
domestic grain. As explained by the Appellate Body in Korea - Various Measures on Beef ,
"Article III obliges Members of the WTO to provide equality of competitive conditions for imported
goods in relation to domestic products."
4.304 Canada responds that in certain cases the CG C has allowed imported grain to enter into
Canadian elevators. However, what is critical for purposes of the Article III:4 analysis is the fact that
under Canadian law and regulations, Canadian grain is automatically allowed entry into Canadian
elevators. Imported grain, however, requires speci al permission, under conditions specified nowhere
in Canadian law. Furthermore, as Canada refe rences in its own submission, approvals are often
subject to certain burdensome and costly sealing and labelling requirements that are not imposed on
like domestic grain.

40 For reasons explained in Section V.B, the content of this sentence was redacted from the July Panel's
final report.

4.305 The Canadian Grain Regulations promulgated under the Canadian Grain Act provide further
restrictions on the free flow of imported grain. Th e effect of the Canadian anti-mixing requirement is
to cut off imported grain from existing Canadian dist ribution channels, with the effect of reducing the
commercial opportunities of imported grain to r each Canadian end-users. As in the case of Korea -
Various Measures on Beef , this segregation "can only be reasonably construed, in our view, as the
imposition of a drastic reduction of commercial opportunity to reach, and hence to general sales to,
the same consumers served by the traditional . . . channels."
4.306 Canada's argument that United States' exporters can sell grain directly to Canadian end users
does not address the discrimination inherent in the bulk grain handling system. Article III:4 protects
conditions of competition, not trade flows per se. The United States is not required to demonstrate
any trade effects of Canada's measures in order to establish a violation of Article III:4.
4.307 Canada's reference to the Wheat Access Facilitation Programme ("WAFP") does not counter
the argument that imported grain is subject to discriminatory treatment. Under the WAFP, grain
elevators that receive United States' wheat must satisfy numerous onerous regulatory requirements
and seek CGC approval. In fact, no United Stat es' wheat has ever been shipped under the WAFP
because of these onerous requirements.
4.308 Canada also makes a half-hearted attempt to invoke an Article XX(d) defence in an attempt to
justify its discrimination against im ported grain. However, Canada has the burden of establishing the
existence of an exception under Article XX, and the single paragraph in Canada's submission does not
meet this burden. Canada has not shown how the discriminatory measures at issue here are designed
to secure compliance with a legitimate regulat ory scheme and are necessary to secure such
compliance. Furthermore, Canada has failed to de monstrate that its discriminatory measures are not
applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination or a
disguised barrier to international trade.
4.309 The United States submits that the rail revenue cap and the producer car programme also
violate Article III:4 by according treatment to imported grain that is less favourable than the treatment
granted to like products of national origin. Only Western Canadian grain, not imported grain, benefits
from the rail revenue cap programme. This favours W estern Canadian grain, since railroads shipping
Western Canadian grain must choose a tariff for tr ansport so that total revenue does not exceed the
government-mandated rail re venue cap. In contrast, the railroads are free to charge higher tariffs for
non-Western Canadian grain in order to boost reve nues not subject to the revenue cap. This dual
scheme gives domestic grain a competitive advantage.
4.310 Similarly, the producer car programme only provides cars to domestic producers for the
transport of domestic grain. The provision of government rail cars only for domestic grain gives
domestic grain a special privilege and a competitiv e advantage by lowering the transportation costs
for domestic grain. Canada's submission mentions that United States' farmers can use producer cars.
However, the issue here is the treatment of grain. Since farmers must be able to use the producer cars,
and United States' farmers are not in Canada, we fail to see how United States' grain can take
advantage of the producer car programme.
4.311 Canada's grain segregation requirements and discriminatory rail transport measures also
violate Article 2 of the TRIMs Agreement . Under Article 2, TRIMs that are inconsistent with
Article III of the GATT 1994 are also inconsistent with the TRIMs Agreement
. The grain segregation
requirements and the rail transportation measures both require elevator operators and shippers,
respectively, to favour domestic over imported grain. Both of these measures also fall squarely within
Illustrative List 1(a) of TRIMs and thus violate Article 2 of that Agreement.

J. F
IRST ORAL STATEMENT OF CANADA
4.312 The following summarizes Canada's arguments in its first oral statement:
1. Article XVII
4.313 At the heart of Article XVII is both a right and an obligation. The right is to establish and
maintain state trading enterprises and to grant them exclusive and special privileges. The obligation is
that these enterprises not discriminate in their purchases and sales in the sense of GATT 1994.
Article XVII does not prescribe how this obligation is to be fulfilled. It leaves that up to each
Member to decide. It certainly does not require Members to set up "processes and procedures",
"supervisory controls" and "statutory or other mechanisms".
4.314 Article XVII:1(a) sets out the principal substantive obligation under Article XVII:1: in respect
of their purchases and sales, state trading enterprises must act in a manner consistent with the general
principles of non-discriminatory treatment in GATT 1994. This refers, at a minimum, to the most-
favoured-nation ("MFN") treatment principle set out in Article I of GATT 1994. Article I in turn
provides the advantages, favours, privileges and immun ities granted in respect of products destined to
one Member, must be extended immediately and unconditionally to products destined to other
members. In respect of export sales, therefore, the applicable principle of non-discriminatory
treatment would prohibit the selling of products at a higher price or under more stringent terms and
conditions into one market than when selling into another. The MFN principle would require the
seller to extend the more favourable of the terms and conditions to all other Members to which a
product is destined.
4.315 However, markets and market conditions differ fro m one country to another. For this reason,
private traders make distinctions as to pricing and terms of sales based on these market conditions, as
do state trading enterprises. Article XVII:1(b) interp rets Article XVII:1(a) to the effect that a state
trading enterprise may "discriminate" in its purchases or sales in the sense of Article I of GATT 1994,
so long as it does so in accordance with "commercial considerations".
(a) "Commercial considerations"
4.316 The term "commercial considerations" is nowhe re defined, but Article XVII contains ample
clues as to the most reasonable interpretation. Agai n, it should be recalled what is at issue here:
where an enterprise gives an advantage in respect of products destined to one Member, but not in
respect of products destined to another. So the question is, therefore not whether the advantage is
consistent with commercial consid erations, but rather whether the refusal to grant that advantage in
other markets is consistent with commercial considerations.
4.317 Article XVII:1(a) refers to "private trader s"; Article XVII:1(b) talks about "customary
business practice" and sets out certain market-rel ated factors. In this light, "commercial
considerations" are those considerations that a priv ate trader in similar circumstances would take into
account in making purchases or sales. In determining whether a state enterprise and a private trader
are in similar circumstances, account must be take n of the special or exclusive privileges that have
been granted. A state trading enterprise acts in accordance with commercial considerations where in
its refusal to extend an advantage granted to products destined to a Member, to products destined to
other Members, it acts consistently with the norm al business practices of private traders in similar
circumstances.

(b) "Processes or procedures" are not required
4.318 Article XVII is not an obligation of means, but of results. It requires a specific outcome, but
does not prescribe a particular means by which this out come is to be achieved. The term "undertake"
manifestly does not obligate a Member to implement any "processes or procedures" or, as the EC
suggests, "supervisory control". But even if the United States is correct and Article XVII imposes an
obligation of means, Canada has established the means to ensure that the CWB acts in a manner
consistent with Article XVII.
(c) Burden of proof
4.319 There is no evidence to demonstrate that Canada is in violation of its obligations under
Article XVII. The United States seeks to reverse the onus of proof by arguing that, because Canada
has exercised its rights under Article XVII by gr anting the CWB certain privileges, Canada is no
longer entitled to the normal presumption that it h as acted in accordance with its obligations under
GATT 1994.
4.320 The claim is not that the CWB actually does discr iminate, but rather, that it can. This is
hypothetical speculation. Whatever the CWB could do if it so chooses , does not constitute the
concrete evidence that would be necessary to begin evaluating a claim under Article XVII.
2. Article III :4
(a) Measures related to entry of grain into elevators and mixing requirements
4.321 The two measures at issue, Section 57 of the CGA and Section 56 of the Regulations, form an
integral part of the Canadian grain quality assurance system. To achieve the objectives of the system,
Canada has put in place a strict variety registration process and has established grading standards.
Grain is assembled into lots of like quality in or der to maintain the quality of grain while it moves
through the system and to markets. Grain is also subject to inspections to ensure cleanliness.
4.322 There are over a hundred thousand farmers in Canada who produce on average about 60
million tonnes of grain each year, about half of wh ich is exported. Most grain is grown far from
export points and requires approximately 20,000 rail cars and about 300,000 rail movements to
transport it over a distance of approximately 1,6 00 kilometres. In addition to distance, the large
volume of grain that transits through elevators poses further logistical challenges. Different types and
grades have to be taken into considerati on as end-users expect to get not only the type of grain they
contract for, but also the quality they order. Ad equate guarantees to preserve integrity in the bulk
handling system are necessary, and this is why the Canada Grain Act and Regulations set out certain
rules, among which are the measures that the United States is challenging.
(b) Entry authorization
4.323 United States-origin grain has never been re fused entry into Canadian elevators under
Section 57 as this provision is not a prohibition. Rather, it giv es the CGC discretion to accommodate
the delivery of foreign grain into licensed Canadian elevators, which has been faithfully and routinely
exercised to authorize such deliveries. This is fully consistent with the original object of that
provision: not to hamper trade, but simply to track th e nature, amount, and movements of imported
grain delivered to elevators in order to maintain the quality differences of grain in the handling
system.

4.324 No authorization is required for end-users or for Eastern primary elevators. Authorization is,
however, required for foreign grain to enter Western primary elevators, transfer elevators or terminal
elevators.
4.325 The CGC has the discretion to grant authoriza tion; and there is no allegation that this
discretion has ever been exercised inconsistently wi th Article III:4. Where a measure can be and is
applied consistently with WTO obligations, there is no violation.
4.326 In addition, the authorization requirement does not in and of itself amount to "less favourable
treatment". Authorization is granted routinely and consistently, within a day or two of the elevator's
request. No request for authorization has been deni ed and there is no cost associated with making a
request. Furthermore, the CGC has given, and giv es, advance consent to entry of large volumes of
United States-origin grain into certain elevators.
(c) Grain mixing restrictions
4.327 There are no mixing restrictions or segregation requirements applied when grain is sold
directly to end-users, which is in fact how most United States' farmers and grain companies sell grain
in Canada. Various mixing restrictions apply in the transfer and terminal elevator system to ensure
that only grain of like quality is mixed, subject to some exceptions set out in the Regulations or as
otherwise authorized. Both foreign and Canadian gr ain is subject to the principle that only grain of
like quality should be mixed in the bulk handling system . However, even if the products were to be
considered "like" in the sense of Article III:4, because imported grain is not subject to the same
quality assurances as is Canadian grain, and the qualit y of foreign grain is often unknown, a different
treatment in the bulk handling system may be necessary. In any event, as noted by the Section 337
panel, even if different, this treatment is not less favourable.
4.328 The treatment of grain in this situation is co mpletely different than that which arose in Korea
- Various Measures on Beef , where imported beef had to be sold in different stores from domestic
beef. United States-origin grain can and does ente r Canadian elevators, at a volume of almost 3
million tonnes each year. United States-origin grain also has unimpeded access to end-users.
(d) Article XX(d)
4.329 Even if the grain handling provisions at issue are found to be in violation of GATT
Article III:4, they are justified under Article XX(d). The grain handling provisions are necessary in
order to secure compliance with the grading provisions of the Canada Grain Act , and to ensure that
there is no misrepresentation of grain in the system, consistent with the Competition Act and other
applicable laws dealing with deceptive or misleading practices. These laws are not inconsistent with
the provisions of the General Agreement. In addition, these measures are not applied in a manner that
constitutes a means of arbitrary or unjustifiabl e discrimination between countries where the same
conditions prevail, or a disguised restriction on international trade.
(e) Measures related to the transportation of grain
4.330 Producer cars are available to all producers, re gardless of origin. There is no differential
treatment and therefore no less favourable treatment of imported grain in Canada.
4.331 The railway revenue cap has never been reached, and the railways set rates commercially and
practice differential pricing. The United States Department of Commerce recently found that the
revenue cap does not confer a benefit to domestic producers. This effective admission against interest
should be considered conclusive: if, as Commerce has found, Canadian farmers do not benefit from
the cap, there can be no treatment less favourable of non-Canadian products.

(f) TRIMs Agreement allegations
4.332 As recognized by the European Communities in its third party submission, the United States
has not established the existence of any trade-relate d investment measure, nor has it demonstrated the
existence of any local content requirement, let alone a violation of the TRIMs Agreement
K. SECOND WRITTEN SUBMISSION OF THE UNITED STATES
4.333 In its second written submission, the United States made the following arguments:
1. Canada has breached its obligations under GATT Article XVII
4.334 Article XVII sets forth clear obligations for any Member, including Canada, that chooses to
establish a STE and provide that STE with special and exclusive privileges. Under Article XVII,
Canada undertakes that if it chooses to esta blish or maintain an STE, that STE shall "act in a manner
consistent with the general principles of non-discr iminatory treatment" prescribed in the GATT 1994.
As Article XVII goes on to state, it is understood that this obligation requires that the STE make
purchases and sales "solely in accordance with commerc ial considerations." Furthermore, this
obligation requires that the STE "afford the enterprises of the other [Members] adequate opportunity .
. . to compete."
4.335 The CWB's unique legal structure, its uncheck ed exercise of its exclusive and special
privileges, its incentives to act in a non-commercial and discriminatory manner, and the lack of any
countervailing government supervision necessarily r esults in sales that are not in accordance with
Article XVII standards. Yet Canada takes no action to ensure that the CWB adheres to the behaviour
required by Canada's Article XVII obligations. Under these circumstances, the only possible
conclusion is that Canada has breached its obligations under Article XVII.
4.336 Article XVII contains several distinct oblig ations, and a violation of any of these would
sufficiently result in a violation of Articl e XVII. As stated unequivocally by the Korea - Various
Measures on Beef panel, "[a] conclusion that the principl e of non-discrimination was violated would
suffice to prove a violation of Article XVII; simila rly, a conclusion that a decision to purchase or buy
was not based on 'commercial considerations,' would also suffice to show a violation of
Article XVII."
4.337 In this case, the CWB acts inconsistently with all of the standards set forth in Article XVII:1.
The CWB takes actions that violate principles of non-discriminatory treatment found in the GATT
1994, fails to act in accordance with commercial co nsiderations, and denies the enterprises of other
Members an adequate opportunity to compete for participation in the CWB's purchases and sales.
4.338 Article XVII:1(a)'s obligation to act "acco rding to the general principles of non-
discriminatory treatment," goes beyond most-favoured -nation principles to include behaviour that
would run afoul of the general principles
 of non-discriminatory treatment in the GATT 1994. This
includes discrimination between third country mark ets, as well as discrimination between domestic
and third country markets. The CWB engages in both types of prohibited, discriminatory conduct.
4.339 Moreover, the very structure of the CWB expor t regime leads the CWB to make sales not in
accordance with commercial considerations unde r Article XVII:1(b), which also violates the
principles of non-discriminatory treatment set forth in Article XVII:1(a).
4.340 As the CWB itself observes, "The link between farmers and the federal government offers
three distinct economic advantages. Firstly, th e federal government guarantees initial payments to
farmers when they deliver their grain. Secondly, the CWB is able to compete in higher risk markets

and make sales on credit because of federal government backing. Finally, the government guarantees
our borrowing enabling us to finance our operati ons at much lower rates of interest than any
comparably-sized, private-sector company. These financial savings more than cover the CWB's
administrative costs." These special and exclusive privileges, combined with the CWB's structure and
lack of government oversight, necessarily lead to non-competitive and discriminatory practices.
4.341 In addition, the special and exclusive privileg es of the CWB give it more pricing flexibility
and less exposure to market risk than a commercia l actor. For example, while a commercial grain
trader has to pay the market price – a price that fluctuates and cannot be taken as fixed or guaranteed
for a given marketing year – for grain, the CWB, through its special and exclusive privileges, has a
fixed, guaranteed and known acquisition cost of wheat along with guaranteed supply. Similarly,
according to the CWB's own analysis, the CWB "manag es risk to an extent not available in the open
market[.]" Indeed, "[t]he average risk management costs for [non-Board grains] flax and canola were
found to be at least $5.53 per tonne higher than the cost of managing a wheat transaction through the
CWB." Such a risk structure, by artificially lowering CWB costs, clearly gives the CWB greater
pricing flexibility than a commercia l actor, because a commercial actor would have to pay to manage
risk in a way that the CWB does not.
4.342 Canada appears to admit that some discipline ov er the CWB is required if the CWB is to act
in accordance with commercial considerations, noting that "the discipline over the CWB is not from
the top but from the bottom. The farmers will ensure that the CWB acts in accordance with
commercial considerations." However, as we empha sized in our responses to the Panel's questions,
wheat farmers in Canada cannot discipline the CWB because the farmers are required, by law, to sell
all of their grain for human consumption and expor t to the CWB. Canadian wheat farmers have no
real choice. They sell to the CWB at a fixed init ial payment price that is set by the Government of
Canada and the CWB, and that is guaranteed by the Government of Canada. Due to the
disadvantageous terms of the buy back programme , a farmer who wants to sell wheat for domestic
human consumption or export has no real alternative but to sell his wheat to the CWB.
4.343 The Canadian Government's guarantee of all in itial payments for wheat, which translates into
a fixed, guaranteed, and known acquisition cost, co mbined with other aspects of the CWB export
regime, clearly enable the CWB to act non-commer cially. As the CWB itself has observed and we
noted in our first submission, Canada's guarantee of initial payments "is like a revenue insurance
policy for farmers with no premiums." There is no risk to the CWB for running pool deficits because
"the federal government makes up the difference." The CWB uses its pricing flexibility and its
reduced risk exposure to make sales on non-commerc ial terms in order to ta rget particular export
markets. This results in a violation of the general principles of non-discriminatory treatment and
deprives the enterprises of other Members an ad equate opportunity to compete according to
customary business practice.
4.344 One example of this behaviour is the CWB's de cision to pay premiums to Canadian farmers
for high quality wheat even when this acquisiti on behaviour is not justif ied by demand for high
quality wheat in third-country markets. This behaviour gets to the heart of the CWB's non-
commercial practices. The CWB gives Western Ca nadian farmers an incentive to over-produce high
quality wheat and the CWB uses this over-productio n to act non-commercially and make sales that a
commercial actor would not be able to consummate.
4.345 Specifically, and as mentioned in our first submission, Canadian high-quality wheat
production exceeded demand by 32 per cent over 1 992-1997. This occurred because the CWB was
willing to pay a premium for high quality wheat to give it flexibility when it consummates export
sales. Western Canadian wheat farmers respond to the realities of the CWB- dominated wheat market
and, with only the lower-valued f eed market as an alternative mark eting option, continue to produce

and sell wheat to the CWB of a quality and in a quantit y that is responsive to the CWB rather than to
market demand.
4.346 This excess of high quality wheat means that for certain transactions, the CWB provides a
price discount for high quality wheat to meet the pr ice competition for lower quality wheat in a given
market. This behaviour results in a protein or quality giveaway, because the CWB provides wheat at
a greater protein level or at a higher grade or quality level than the commercial terms of the contract
require. At the same time, in a second market, th e CWB charges a premium price for its high quality
wheat. When combined with the CWB's other incentives and privileges, the ability to price
discriminate in this fashion over the long run is behaviour that runs contrary to commercial
considerations, does not afford commercial enterpri ses from other Members an adequate opportunity
to compete according to customary business prac tices, and results in a violation of the non-
discriminatory treatment principles of the GATT 1994.
4.347 Canada keeps its pricing data secret, maki ng specific examples difficult to come by.
However, the CWB itself states that "[t]he CWB monopoly captures premiums because it allows price
differentiation[.]" The CWB observes that in the 1994-95 crop year, the CWB set a price for No. 2
Canada Western Red Spring (13.5% protein) wheat – a wheat of a higher quality than No. 3 Canada
Western Red Spring wheat – at prices below the price for No. 3 Canada Western Red Spring. Again,
such pricing flexibility, the result of the CWB's st ructure and incentives and its exclusive privileges,
could not be exercised by a commercial enterprise acting according to customary business practice.
4.348 One of several elements of the CWB export regi me that allows the CWB to engage in price
discrimination is its ability to benefit from borrowing at below-market rates. Government-guaranteed
borrowing at below-market rates enables the CWB to derive extra interest income from its credit sales
by extending credit at rates that are higher than the government-guaranteed rate extended to the CWB.
The spread in the two rates results in additional revenue for the CWB. In the words of the CWB,
"With the CWB's borrowing power, it is able to borrow m oney at a lower rate of interest than the rate
extended to the credit customer. As a result, the CWB benefits from the 'spread' in interest rates in the
form of excess interest revenues over interest expenses."
4.349 These "net interest earnings" go directly into the pool accounts, even though these earnings
are a benefit of the preferential borrowing rates extended to the CWB, not revenues from wheat and
barley sales. This extra income is significant a nd "virtually covers the total annual administrative
costs of operating the CWB." The CWB's exercise of its government-guaranteed borrowing
privileges, combined with the in centives of the CWB export regime more generally, give the CWB
pricing flexibility that a commercial actor would not possess, thus enabling the CWB to act in a
discriminatory manner by not providing other enterprises a adequate opportunity to compete in the
sales of the CWB.
4.350 Canada tries to argue that the CWB should only be held to the standard of affording an
adequate opportunity to compete only to enterprises with similar exclusive and special privileges like
those enjoyed by the CWB. This defies logic and is unsupported by the text of Article XVII. The
obligation under Article XVII is not to protect th e non-commercial behaviour of an STE with special
and exclusive privileges in one country from the non-commercial behaviour of an STE with special
and exclusive privileges in another. The obligatio n under Article XVII, stated in Article XVII:1(b),
focuses on the protection of commercial actors, and affording those commercial actors an adequate
opportunity to compete in the marketplace.
4.351 As stated in our response to the Panel's questions, Article XVII:1(b) requires that the CWB
act commercially, not merely as a rational economic actor. Unless the CWB acts in accordance with
commercial considerations, it cannot give the enterp rises of other Members an adequate opportunity
to compete. Canada's argument that mere "rati onal" behaviour is require d under Article XVII:1(b)

directly contradicts the plain language of the provision, which requires the CWB to act both according
to commercial considerations and afford enterprises from other Me mbers an adequate opportunity to
compete, according to customary business practice.
2. Canada provides less favourable treatment to imported like grain, in violation of GATT
Article III:4
(a) United States' grain and Canadian grain are like products.
4.352 Each category of grain is a like product for purposes of the Panel's analysis under GATT
Article III:4 (i.e., wheat, whether domestic or foreign, or so ybeans, whether domestic or foreign). As
explained in detail in our responses to the Pane l's questions, origin cannot serve as a basis for
distinguishing like products. The Canada grain seg regation and rail transporta tion measures at issue
here differentiate among grains based not on physical characteristics or end-uses, but based on factors
not relevant to the definition of likeness, such as whether or not the grain is "foreign." Given the
nature of Canada's grain segregation and transportation measures, the United States has met its burden
of establishing that like products are at issue.
4.353 Even if Canada contends that the like product analysis should focus on specific varieties of
grain – an argument that is not supported by the me asures at issue and that the United States does not
concede – the fact remains that United States' growers in the northern United States plant wheat
varieties that are identical to wheat varieties plante d in Canada. Canada, in its answers to the Panel's
questions, notes that "[t]here are many different classes of wheat produced in Canada that have
different inherent characteristics and are grown for different uses, such as hard red spring wheat (for
bread) as opposed to soft white wi nter wheat (for cookies)." United States' wheat farmers also grow
hard red spring wheat, and it is this same product th at is subject to less favourable treatment under the
Canadian grain segregation and transportation measures.
(b) Canada's Regulations are measures affecting th e internal sale, offering for sale, purchase,
transportation, distribution or use of like products.
4.354 Although Canada suggests otherwis e in its first submission, there is no question that the
measures at issue here affect the distribution and tr ansportation of like products . As explained in our
responses to the Panel's questions, Section 57 of th e Canada Grain Act and Section 56 of the Canada
Grain Regulations are measures that affect the en try of grain into Canada's bulk grain handling
system. This bulk grain handling system is part of the internal transportation and distribution network
for grain in Canada. The rail revenue cap and producer rail car measures directly affect the
transportation of grain.
4.355 There is therefore no question that Article III a pplies to the measures at issue in this case.
Canada's references to Article V of the GATT 1994 a nd to in transit shipments are irrelevant. The
measures at issue in this case are measures affecti ng the internal transportation and distribution of
grain. Any imported grain or domestic grain entering Canada's bulk grain handling system is subject
to Canada's internal grain regulation when that grain arrives at an elevator in Canada, regardless of the
final destination of the product.
4.356 As explained in our responses to the Panel's ques tions, some United States' grain is truly "in
transit" through Canada and is not subject to Ca nada's internal regulatory process. United States'
grain shipped from the United States' State of Montan a by rail on sealed rail cars that travel through
Canada and do not stop until they reach their fi nal destination in the United States' State of
Washington are not subject to Canada's internal measures because that grain never enters the
Canadian grain handling system. Any Canadian regula tions in connection with such traffic in transit
are not at issue in this case.

(c) Canada's grain segregation measures accord im ported grain less favourable treatment than
domestic grain.
4.357 As discussed in our first submission, "the purpo se of Article III is to ensure that internal
measures not be applied to importe d or domestic products so as to afford protection to domestic
production."41 Canada thus has an obligati on under Article III:4 "to provide equality of competitive
conditions for imported products in relation to domestic products."42
4.358 To argue that Section 57 of the Canada Grain Act treats imported grain as favourably as like
domestic grain is disingenuous. On its face, Canada's grain segregation measures discriminate against
imported grain. Section 57 of the Canada Grain Act states that foreign grain may not enter grain
elevators in Canada, unless special authorization is granted. The default is a prohibition on foreign
grain. Canadian grain does not require any special au thorization to enter grain elevators. Similarly,
Canada's measures related to mixing treat imported grain less favourably than like domestic grain by
permitting mixing only "if neither of the grains is . . . foreign grain." These regulatory prohibitions
have a real, negative impact on the ability of imported United States' grain to move through the
Canadian bulk grain distribution and transport system, thereby affording protection to Canadian grain.
The default prohibition impedes commercial opportuniti es for United States' grain by making it more
costly and burdensome for United States' grain to move through the bulk grain handling system.
4.359 Canada argues that even though these measures prohibit the entry of imported grain into grain
elevators in Canada, the CGC is authorized to grant exceptions to these general prohibitions and, thus,
treatment is not necessarily "less favourable" for impor ted grain. Canada provides isolated examples
of these CGC authorizations in an attempt to demonstrate that the CGC does provide approvals for the
entry of foreign grain into Canadian elevators. However, these authorizations do not remedy what is
otherwise an Article III:4 violation. The fact that imported grain needs to obtain these authorizations,
while domestic grain does not, means that the imported grain is treated less favourably.
4.360 Even when a CGC authorization is obtained under the exception to Section 57 prohibiting
entry of imported grain into grain elevators, imported grain is subject to additional regulatory
requirements that are not placed on like domestic grain. And under the Wheat Access Facilitation
Programme, storage bins containing United States' wheat must be sealed by a CGC employee (not
simply the elevator manager, who is permitted to take such action for Canadian grain).
4.361 Despite Canada's statements to the contrary, these additional regulatory requirements result in
real costs to grain elevators and discourage grain el evators from handling United States' grain. This
limits the access that United States' grain has to the Canadian market.
4.362 In the same way that restricti ons on access to points of sale can be violations of Article III:4,
restriction on access to key entry points in the distribution network can deny imported grain
competitive opportunities afforded to like domes tic grain. For example, the Wheat Access
Facilitation Programme is a series of cumbersome regulatory requirements that imported wheat must
satisfy – but Canadian wheat need not satisfy – in order to enter Canadian grain elevators. These
cumbersome and costly additional requirements provide Canadian grain with more favourable
treatment and results in United States' grain being forced to compete on unequal footing.
4.363 As the CGC's Memorandum to the Trade explains , "[p]rimary elevator facilities are required
to notify the CGC . . . of the upcoming arrival of Un ited States' wheat at least 24 hours in advance to

41 Appellate Body Report, Korea – Measures Affecting Imports of Fresh, Chilled and Frozen Beef
("Korea – Various Measures on Beef "), WT/DS161/AB/R, WT/DS169/AB/R, adopted 10 January 2001,
DSR 2001:I, 5, para. 135.
42 Id. (italics in original).

ensure that a CGC employee/designate is on site when the wheat is unloaded." This CGC employee
must "take a sample for information purposes," "mon itor the flow of United States' wheat into the
bin(s)," and "seal the bin(s)." The primary elev ator must pay for these CGC services, thereby making
the costs of receiving United States' wheat higher th an the cost of receiving like Canadian wheat.
There are also indirect costs such as the time and equipment it takes to comply with the foreign grain
requirements, and the additional regulatory uncertainty resulting from the need to contact the CGC in
advance and rely upon its inspectors. For Canadi an grain, however, the elevator manager does any
necessary weighing and sampling without the need for advance notice.
4.364 Again, when United States' wheat is discharged, the primary elevator must pay for a CGC
employee to return to the elevator. The CGC's o ffice must be notified 24 hours in advance of the
discharge. The CGC employee then must go through the procedure of unsealing the bin(s), sampling,
and monitoring the outward flow of the grain. As Canada itself concedes, "[a]dditional requirements
apply to United States' wheat shipped to a processing facility or a terminal elevator."
4.365 Finally, despite the fact that the Wheat Access Facilitation Programme provides that "[d]uring
the initial stages of [the Programme], the CGC co sts of monitoring United States' wheat will be
covered by Agriculture and Agri-Food Canada ( AAFC) and the Canadian Department of Foreign
Affairs and International Trade (DFAIT)," this al one does not remedy the inequalities of the system,
which to this day discourage Canadian elevator ope rators from accepting United States' wheat that is
like Canadian wheat. The system puts into effect precisely the type of discrimination that Article III:4
forbids.
(d) Canada's transportation system affords less favourable treatment to imported grain.
(i) Producer Cars.
4.366 Canada has argued that producer cars are theoretically available to all producers, regardless of
whether those producers produce Canadian or foreign grain. But as discussed in our responses to the
Panel's questions, only Canadian producers can take advantage of producer rail cars under Section 87
of the Canada Grain Act, because all producer car lo ading stations are in Alberta, British Columbia,
Manitoba, or Saskatchewan.
4.367 Furthermore, Agriculture and Agri-Food Ca nada itself states that only "Canadian
 grain
producers with an adequate quantity of lawfully de liverable grain may apply to the Commission," and
the only eligible provinces are "Alberta, British Columbia, Manitoba and Saskatchewan."
4.368 Access to these producer cars is a competitive opportunity insomuch as they provide domestic
grain producers with increased transportation flexib ility and lower costs. Thus, denying imported
grain access to these cars results in less favourable treatment for imports.
(ii) Rail Revenue Cap.
4.369 The rail revenue cap also violates Article III:4 by treating imported grain less favourably than
like domestic grain. The revenue cap, which is only available for shipments of domestic grain,
reduces transportation costs and thus provides a tangibl e benefit to domestic grain. As discussed in
detail in our first submission and in our respon se to the Panel's questions, because there is a
significant penalty for shippers who exceed the rail re venue cap, shippers have an incentive to charge
lower fees on Canadian shipments than on like fore ign shipments. This denies imported grain the
same competitive conditions as accorded like domestic grain.
4.370 The United States' Commerce Department analysis mentioned by Canada is not relevant to
the legal question before the Panel. The Panel mu st examine whether the re venue cap results affords

domestic grain more favourable treatment than like fo reign grain in violation of Article III:4, and to
do so does not require that actual trade effects be shown. The Commerce Department analysis
focused on the fact that the rail revenue cap has not been reached in the 2001-01 and 2001-02 crop
years. The Commerce Department did not address the discriminatory aspect of the revenue cap, that
is, that railroads have an incentive to charge highe r rail rates for foreign grain than domestic grain on
the routes governed by the rail revenue cap.
3. Canada has failed to make the requisite sh owing under Article XX(d) with respect to its
grain segregation measures
4.371 Recognizing that its arguments under Article III:4 will fail, Canada attempts to justify its
grain segregation measures under Article XX(d) of the GATT 1994. This Article XX(d) defence must
also fail because Canada has continuously failed to ca rry its burden of proof with respect to such an
affirmative defence.43
4.372 As stated by the Appellate Body in United States - Gasoline and affirmed by the Appellate
Body in Korea - Various Measures on Beef , in examining Canada's grain segregation measures under
Article XX, a two-tiered analysis is appropriate.
First, the measure must be one designed to 'secure compliance' with laws or
regulations that are not themselves incons istent with some provision of the GATT
1994. Second, the measure must be 'ne cessary' to secure such compliance. A
Member who invokes Article XX(d) as a justification has the burden of
demonstrating that these two requirements are met.
44
(a) Canada has not demonstrated that its grain segregation measures at issue are necessary to
secure compliance with any provision of Canadian Law.
4.373 In a single paragraph in its first submission, Canada asserts that its grain segregation
requirements are necessary in order to secure comp liance with the grading provisions of the Canada
Grain Act and to ensure that there is no misrepresentation of grain in the system consistent with the
Competition Act. This mere assertion does not satisfy Canada's burden under Article XX(d).
4.374 Canada has also failed to show how the grain segregation measures are necessary to secure
compliance with either the grading requirements of the Canada Grain Act or the Competition Act.
Indeed, grain can be and is identified in the mark etplace based not on whether the grain is of foreign
or domestic origin, but based on the intrinsic charac teristics of the grain itself, such as grade and
protein.
(b) Canada's grain segregation measures constitute unjustifiable discrimination.
4.375 Not only are Canada's grain segregation measures unnecessary to secure compliance with the
Canada Grain Act, they also constitute unjustifia ble discrimination within the chapeau of Article XX
of the GATT 1994. Concerns about misrepresentati on and grading apply to all grain, and therefore
all grain – not just imported grain – should be subject to additional regulation and special CGC
oversight. To limit these regulatory requirements to foreign grain only thus results in arbitrary and
unjustifiable discrimination.

43 Furthermore, it is important to note that Canada fails to explicitly invoke this affirmative defence
with respect to its discriminatory rail transportation measures.
44 Appellate Body Report, Korea – Various Measures on Beef , para. 157.

4. Canada's grain segregation and rail transpor tation measures are inconsistent with
Article 2 of The TRIMs Agreement
4.376 As stated in our response to the Panel's ques tions, Canada's prohibition on the receipt of
foreign grain in elevators and prohibition on th e mixing of foreign grain are "mandatory" and
"enforceable" requirements within the meaning of the TRIMs Agreement Illustrative List. Moreover,
they provide direct cost advantages to those elevator operators that accept Canadian grain over foreign
grain because the need for special authorization to accept and/or mix foreign grain and the onerous
conditions that are often placed on such authoriza tions creates a regulatory regime that financially
rewards those elevators that accept domestic grain over foreign grain.
4.377 Similarly, the rail revenue cap and produ cer car programmes are "mandatory" and
"enforceable" within the meaning of the TRIMs Agreement Illustrative List. These measures provide
cost advantages in the form of lower rail transport ra tes to those shippers that choose to ship Canadian
grain rather than foreign grain.
4.378 Therefore, these TRIMs, which are inconsistent with Article III:4, are necessarily inconsistent
with Article 2 of the TRIMs Agreement.
L. S
ECOND WRITTEN SUBMISSION OF CANADA
4.379 In its second written submission, Canada made the following arguments:
1. Part One: Article XVII
(a) The United States mischaracterizes the law
4.380 The law does not vary according to the structure of the state trading enterprise in question.
The United States' assertion that Article XVII contains different obligations in different contexts is not
legally tenable. A central element of the WTO dis pute settlement system is that it provides "security
and predictability" to the multilateral trading sy stem. The dispute settlement system cannot be
predictable if obligations under the WTO Agreements are interpreted on a case-by-case basis.
4.381 Article XVII may not be interpreted to require Canada to establish "processes and
procedures" to oversee the operations of the CWB, while not requiring another Member to take such
measures with respect to its state trading enterprises. Either Article XVII entails an "obligation of
means" or it entails an "obligation of results". The way that the law is applied may vary depending on
the facts of the case, but obligations under the law are constant.
4.382 The law should be interpreted in accordance w ith the principles of treaty interpretation in
customary international law. The Panel must decide whether, as a matter of law, Article XVII
requires that Members must establish "processes and pr ocedures" or "statutory or other mechanisms"
to "ensure" that their state trading enterprises comp ly with Article XVII. Or, whether Article XVII
requires that a Member is responsible for the conduct of a state trading ente rprise that it establishes,
and that Article XVII does not prescribe how a Member must discharge that obligation. Once the
nature of the obligation has been clarified, the Pa nel may examine the facts of this case and determine
whether the law, as interpreted, is applicable to the circumstances at issue.
4.383 Article XVII contains an obligation of results, not an obligation of means. On its face,
Article XVII requires a specific outcome: that enterprises act in a particular manner. It does not
prescribe a particular means or mechanism by which a Member is to achieve that outcome. The word
"ensure", referred to repeatedly by the United States, is not used in Article XVII, Note Ad
Article XVII or the Understanding on the Interpreta tion of Article XVII of GATT 1994 , with the

exception of a reference to ensuri ng transparency of the activities of state trading enterprises.
Members did not use "ensure" to describe the oblig ation under Article XVII:1; this militates strongly
against reading in that word in Article XVII. Th e operative verb in Article XVII that describes the
obligation of Members is "undertakes". The Unite d States defines this word in its First Written
Submission, and the word "ensure" is not found in the definition. WTO Members have given an
undertaking, promise or pledge to be responsible if their state trading enterprises contravene the
requirements of Article XVII.
4.384 The United States has erred in its analysis of the law in three additional ways.
4.385 First, Article XVII places disciplines only on im permissible discrimination. The object of
Article XVII is to prevent Members from doing indir ectly through state trading enterprises that which
they have contracted not to do directly with respect to impermissible discrimination.
4.386 Article XVII:1(a) sets out the principal substa ntive obligation under Article XVII:1. At a
minimum, the term "general principles of non-discr iminatory treatment" refers to the most-favoured-
nation principle set out in Article I of GATT 1994. Article I provides that an advantage, favour or
privilege granted in respect of products destined to a WTO Member must be immediately and
unconditionally accorded to the products destined to other Members. In respect of export sales by a
state trading enterprise, Article I would prohibit the selling of products at a higher price or under more
stringent terms and conditions in one market than when selling in another. Under Article XVII, the
most-favoured-nation principle would require the state trading enterprise to extend the more
favourable of the terms and conditions to all other Members where it sells its products.
4.387 Article XVII:1(b) does not create an obligation independent of Article XVII:1(a). Rather, it
interprets and tempers the obligation under Article XVII:1(a). The interpretation was needed because
markets and market conditions vary from one country to another. Accordingly, to remain in business
internationally, all enterprises – whet her "state trading" or "private" – make distinctions as to pricing
and terms of sale that may be tied to the destination or the origin of a product, but that are
nevertheless based on commercial considerations. Th is category of "discriminatory" conduct, which
may be otherwise incompatible with Article XVII: 1(a), is protected by Article XVII:1(b). A non-
exhaustive list of commercial cons iderations is contained in Ar ticle XVII:1(b). Depending on the
nature of the enterprise or product, other considerations may also be relevant.
4.388 Accordingly, Article XVII:1(b) is not an independent obligation. It interprets
Article XVII:1(a) to the effect that a state tradi ng enterprise may discriminate in its purchases or sales
as long as it does so based on "commercial considera tions." Only where a state trading enterprise
discriminates between markets based on non-commercial considerations would it then violate
Article XVII.
4.389 If Article XVII:1(a) and (b) were interpreted as independent obliga tions, a violation of
Article XVII:1(a) would be found on the demonstration of "discrimination", even if such
discrimination were based on commercial considerations . State trading enterprises would not be able
to make distinctions between sellers or purchase rs based on the commercial considerations that
private enterprises make, such as "price, quality, av ailability, marketability, transportation and other
conditions of purchase or sale." In this wa y, they would be seriously disadvantaged vis-à-vis
private
traders. Nothing in Article XVII indicates that stat e trading enterprises should be more constrained in
their commercial conduct than private traders.
4.390 Article XVII does not limit the nature or scope of privileges that may be granted by Members
to state trading enterprises. Article XVII only disciplines a particular use of their special and
exclusive privileges: it prohibits state trading en terprises that benefit from "special and exclusive
privileges" from discriminatory conduct that is not based on commercial considerations. Accordingly,

Article XVII:1 may not be used to discipline measures or actions by Members with respect to state
trading enterprises that are appropriately remedied by other applicable disciplines in GATT 1994 or
other WTO Agreements.
4.391 Second, for an export state trading enterprise, the second clause of Article XVII:1(b) refers to
purchasers. The reference in the second clause of Article XVII:1(b) is to enterprises of other
Members that are interested in purchasing the products offered for sale by a state trading enterprise; in
the case of the CWB this would be wheat and barley. This interpretation is confirmed by the use of
the word "participation". In the context of e xports, enterprises that compete for business in export
markets do not "participate" in each ot her's sales. Rather, they compete against one another to get
those sales. In each transaction, it is the seller a nd the purchaser who "participate" in that transaction;
competitors do not "participate", unless they, too, were already invo lved in the transaction. The
reasoning behind this interpretation is simple: the whole object of a commercial enterprise engaged in
sales is to get the business of pur chasers, to the exclusion of its co mpetitors. Accordingly, the object
of a transaction is to benefit the "participants" in the transaction, to the exclusion of other potential
sellers and purchasers – the competitors. And so, the competitors of an exporter in export markets do
not participate in the sales of that exporter by virtue of the competition alone.
4.392 Commercial actors do not allow their competitors to participate in their sales. The objective
of a commercial actor is to win sales at the expense of its competitors, not to assist them. This is
customary business practice. Article XVII:1 does not obligate the CWB to allow multinational wheat
traders such as Cargill or ADM (enterprises that are many times larger than the CWB) to "participate"
in its sales. Rather, the CWB is obligated to afford wheat purchasers of all Members "adequate
opportunity, in accordance with customary business pr actice, to compete for participation in [the
CWB's]… sales."
4.393 Third, Article XVII does not require non-discrimination between sales in the domestic market
and sales in export markets. It is not clear on what basis "withhold[ing] goods from export markets"
can be equated with the obligation to not discr iminate between sales in the domestic and export
market. The proposition is inconsistent with the provisions of GATT 1994. To begin with, Note Ad
Article XI does not refer to Article I or Article III, and is not concerned with discrimination by a state
trading enterprise between sales in the domestic mark et and sales in the export market. Furthermore,
Note Ad Article XVII, which does refer to the genera l principles of non-discriminatory treatment,
expressly permits a state enterprise to charge different prices in different markets, provided that such
different prices are charged for commercial reasons. In any event, there is no evidence or analysis on
the record to demonstrate that the term "general principles of non-discriminatory treatment" includes a
national treatment obligation. Canada has demonstrated that the negotiating history, the jurisprudence
and the writings of prominent experts support the pr oposition that the term refers only to a modified
most-favoured-nation obligation. And, even if Artic le XVII:1(a) could be found to include national
treatment, it could only be in respect of import monopolies.

4.394 Finally, the "legal structure" and "incentiv es" of the CWB are fully consistent with
Article XVII. The United States has not established that the CWB does not act in accordance with
Article XVII:1, nor has it been demonstrated that the CWB cannot act in accordance with
Article XVII.
4.395 Canada would be in violation of its obligation under Article XVII if the United States were to
demonstrate that the CWB does not act in accordance with the general principles of non-
discriminatory treatment and that such discrimination was not based on the commercial
considerations. There is no evidence to demonstrate that the CWB does not act in a manner
consistent with the general principles of non-discriminatory treatment. Furthermore, the United States
has expressed its intention not to adduce any such evidence.

4.396 These are allegations as to conduct, but these consist merely of conclusory statements
unsupported by evidence of actual conduct. These do not show that the CWB in fact acts or does not
act in one way or another. Because this case has now been cast in the structure of an "as such"
challenge, it must be demonstrated not that the CWB does or does not act in a particular way, but that
the CWB cannot act in a way that would be consistent with Article XVII: in brief, that its structure
and statutory mandate require the CWB to not respect the provisions of Article XVII.
4.397 Furthermore, it has not been demonstrated that the CWB cannot act in accordance with
Article XVII. Canada argues that not only is the mandate of the CWB consistent with Article XVII,
but also that the exclusive and special privilege s granted to it do not result in a violation of
Article XVII.
4.398 With respect to the CWB's mandate, the CWB w as established by an Act of Parliament, the
CWB Act, which sets out its corporate structure and its object and powers. Under the CWB Act, the
CWB is incorporated with "…the object of marketin g in an orderly manner, in interprovincial and
export trade, grain grown in Canada." Further, Section 7(1) of the CWB Act provides that the CWB
"shall sell and dispose of grain acquired by it pursuan t to its operations under this Act for such prices
as it considers reasonable with the object of promoti ng the sale of grain produced in Canada in world
markets." This mandate does not preclude th e CWB from acting in accordance with commercial
considerations.
4.399 Nothing in the CWB Act mandates the CWB to act in a way inconsistent with the
requirements of Article XVII. In addition, there ha s been no analysis or evidence to demonstrate that
the CWB's mandate could not be fulfilled in a manne r that is consistent with Article XVII. The
United States expressly acknowledges the discretionary nature of the CWB's mandate in its First
Written Submission when it notes that the CWB could act in violation of Article XVII " if it so
chooses", not that the CWB must act in violation of Article XVII. Similarly, in its responses to the
Panel's Questions, the United States acknowledg es that the CWB's mandate does not necessarily
require it to act in violation of Article XVII.
4.400 The exclusive and special privileges granted to the CWB also do not result in a violation of
Article XVII. Under Article XVII, Members have the right to establish state trading enterprises and
to grant to these enterprises "exclusive or special pr ivileges". The nature and scope of such privileges
is neither prescribed nor proscribed in Article XV II. Commensurate with the right of Members to
grant privileges is the right of state trading enterp rises to receive such privileges and, as a corollary,
the right to use the privileges granted to them.
4.401 While it was originally asserted that Canada must be presumed to be in violation of
Article XVII:1 because the CWB could, " if it so chooses ", utilize its privileges in a manner
inconsistent with Article XVII:1, it is now asserted that the privileges granted to the CWB necessarily

result in a violation of Article XVII:1.
4.402 An interpretation that would require state trad ing enterprises that enjoy exclusive and special
privileges to act exactly like private enterprises that do not enjoy the same privileges makes the
granting of exclusive or special privileges meani ngless as the state trading enterprise would not be
able to use the privileges without violating Artic le XVII. This would transform the granting of
privileges into an irrebuttable presumption that stat e trading enterprises, by their very nature, cannot
act in accordance with Article XVII. If Article XVII does not place limits on the nature or scope of
privileges that may be granted, the use of these privileges per se cannot result in a violation of
Article XVII.
4.403 Similarly, assertions that a state trading enterpri se, in using its exclusive or special privileges,
must act in the same manner as do private enterpri ses that do not enjoy the same privileges, that is,

that are not in similar circumstances, is a re-statement of the per se theory. The use, and therefore the
grant, of special and exclusive privileges does not result in a violation of Article XVII.
(b) The United States mischaracterizes the facts
4.404 There are four fundamental ways in which the United States mischaracterizes the facts.
4.405 First, the CWB does not have a "guaranteed" supply of wheat. Wheat supply is subject to the
vagaries of the agricultural market. These include su ch things as farmers' planting decisions, other
production decisions and climatic conditions. Taken together, these factors determine the quantity
and quality of production. The quantity and quality of wheat produced at different times in a single
crop year and from one year to the next can vary si gnificantly. The CWB, therefore, does not have a
"guaranteed" supply of wheat that allows it to "forwa rd contract wheat for future delivery at a fixed
price". Like any commercial actor, the CWB's ability to forward contract is limited by factors beyond
its control.
4.406 Second, the exclusive and special privileges gr anted to the CWB are not unique. Other WTO
Members provide similar privileges to their own en terprises. For example, the United States offers
similar credit guarantees to its multinational grain traders, such as Cargill and ADM. The USDA
administers export credit guarantee programmes for commercial financing of United States'
agricultural exports. The use of credit sales gua rantees by the CWB is not only not unique, but does
not result in non-commercial behaviour. Rather, it is fully consistent with actions of private grain
traders, including United States' multinationals. Wh ere a state trading enterprise acts no differently
from commercial enterprises in similar circumstances, the state trading enterprise cannot be found to
have acted not in accordance with commercial considerations.
4.407 Third, the CWB does not impermissibly "target" markets. "Targeting" has not been
adequately defined, nor has any support been prov ided that "targeting" constitutes impermissible
discrimination under Article XVII. There is also no evidence to demonstrate that the CWB actually
targets markets. Therefore, this allegation should be rejected as not having met the threshold of prima
facie evidence.
4.408 Furthermore, the United States misinterprets the law. It alludes to "targeting" as driving
competitors out through lower prices. However, as established in Canada's First Oral Statement, the
"non-discrimination" obligation in Article XVII refe rs to the most-favoured-nation principle. Under
Article I, "targeting" amounts to "discrimina tion", not where the targeted market enjoys lower prices,
but where lower prices in certain markets are not offered in targeted premium markets.
4.409 Finally, even if it were established that th e CWB "targets" markets, such behaviour cannot
violate the obligation under Article XVII because th e identification of particular markets as being
especially worthy of marketing focus is commonplace commercial behaviour.
4.410 Fourth, the Government of Canada has the authority to direct the action of the CWB if
circumstances warrant. The United States' assertion that "while [Canada] could supervise the CWB
under Article 18, it chooses not to do so" is in correct. The CWB acts fully in accordance with
Article XVII, so it has not been n ecessary for the Government of Canada to direct the actions of the
CWB. If circumstances warrant, that is, if it were to come to the attention of the Government of
Canada that the CWB was acting in a manner in consistent with Cana da's obligations under
Article XVII, then Canada would take appropriate action.

2. Part Two: Article III:4
(a) The United States has erred in its analysis of the scope and substance of Article III:4
4.411 Article III:4 does not apply to United States-origin grain in the United States. With respect to
the allegation that Canada is in violation of its Article III:4 obligations because producer cars are
available only in Canada, Canada points out that the national treatment obligation of Article III:4 only
applies to "[t]he products of the territory of any contracting party imported into the territory of any
other contracting party" in respect of laws and re gulations of the Governme nt of Canada affecting
their " internal sale, offering for sale, purchase, transportation, distribution or use". There is no
support for the argument that the national treatment obligation applies extra-territorially to products
not yet imported.
4.412 Article III:4 also does not apply to goods in transit. The United States asks the Panel to
extend the coverage of Article III:4 to any and all goods that enter into Canada from the United States,
whether or not those goods are properly imported into Canada or are being offered in Canada for sale.
This is inconsistent with the provisions of Article V of GATT 1994. Twenty one per cent of
United States-origin grain that enters Canada, us ually by boat and sometimes by rail, goes into
transfer or terminal elevators for loadi ng to vessels and re-export to third countries. This grain is not
imported into Canada. As a basic matter, therefore, th is grain is not covered by Article III:4, which
governs measures applied to imported goods. Rather, for the purposes of customs documentation and
for all other purposes, this grain is transported through Canada in transit. In these circumstances, both
with respect to the CGA and the revenue cap, this grain is subject to Article V and not Article III:4 of
GATT 1994.
(b) The United States mischaracterizes the facts
4.413 First, the United States does not properly represent the movement of United States-origin
grain into Canada or movements of grain through th e elevator system. The United States' claim that
United States-origin grain is shut out of the Cana dian market and cut-off from the normal distribution
channels has no factual basis. Exhibit US-17 does not present a correct picture of movements of
United States-origin grain into Canada as it only tak es into account five of the twenty-one categories
of grain covered by the CGA. As a consequen ce, the United States significantly understates the
quantity of United States-origin grain actually imported into Canada.
4.414 In addition, the United States' assertion that United States-origin grain is cut off from the
"normal" distribution channels because elevator ope rators have to request authorization to receive
United States' grain is based on the incorrect premis e that grain destined for the domestic Canadian
market usually moves through the elevator system or th at there is an inherent advantage in doing so.
The majority of Canadian grain destined fo r domestic consumption does not move through the
elevator system: less than a third of the grain produced and consumed in Canada in 2001-02 and
2002-03 moved through the elevator system. Accord ingly, the "normal" distribution channel for
Canadian grain is direct sale to end-users. Th ere are no Section 57 entry authorization requirements
or mixing restrictions in respect of United States-origin grain that is sold directly to end-users. And
while United States-origin grain can enter the Canadi an bulk grain handling system much in the same
way as Canadian-origin grain, the economics and logistics of the grain-handling system usually
discourage such movements. Exactly for the reasons put forward by the United States, in the case of
United States-origin grain, because of proxim ity, it will usually make more sense for the
United States' farmer to deliver grain not to a Ca nadian elevator but to a nearby United States'
elevator or grain dealer; the grain will then be shi pped by rail directly to processors or other end-users
in Canada.

4.415 Second, not all Canadian grain of a certain type is like United States-orig in grain of the same
type. Not only is it insufficient to define "like pr oducts" by category, but the grades and varieties of
the grain must be taken into account in certain ci rcumstances because of their different end-uses and
end-use characteristics. In any event, the like produc t issue is irrelevant here as it has not been shown
that any difference in treatment between such imported a nd Canadian grain amounts to less
favourable treatment within the meaning of Article III:4.
4.416 Third, there are no onerous regulatory requireme nts related to the entry authorization under
Section 57 of the CGA. The United States refers to the entry authorization request as a requirement
for a "license" that is "conditionally granted." The Canadian Grain Commission does not issue
licenses regarding the entry or handling of foreign grain . There is no requirement for an importer to
obtain a license, or for imported grain to have a li cense. The authorization request simply requires a
letter or email to the CGC advising them of the el evator's intention to receive foreign grain, and
describing the type of grain, quality of the grain, origin and destinati on, and volume of the grain, as
well as the anticipated date of receipt. The authorization is issued almost immediately and can cover
several shipments or an entire crop year. The au thorization process is routine, quick, responsive to
the needs of elevators and does not result in additiona l costs. Elevator operators are aware of this
process and make use of it regularly and routinely, free of costs and administrative hassles.
4.417 Section 57 of the CGA allows for entry of fore ign grain into Canadian elevators and does not
mandate any additional requirements. While conditions regarding the handling of the grain in the
bulk system may be included in the order, these do not requ ire elevators to "satisfy additional onerous
regulatory requirements." These conditions are either in the nature of a notification requirement or
relate to keeping grain separate for identificati on purposes and do not themse lves result in additional
costs, except where certain precautions are necessary for phytosanitary reasons.
4.418 Fourth, Section 56 of the Regulations does not impose onerous regulatory requirements on
United States-origin grain. The mixing restrictions in Section 56 apply to both Canadian and United
States-origin grain, and can be lifted upon request. The process to obtain an authorization to mix
different Canadian grains is the same process as the process to obtain an authorization to mix
Canadian and foreign grain. Much like the S ection 57 entry authorization process, the process to
obtain authorization to mix Canadian and foreign grain is simple and cost free.
3. A proper application of the law to the facts leads to the conclusion that there is no
Article III:4 violation
4.419 First, Section 57 of the CGA and Section 56 of the Regulations do not result in less
favourable treatment. The facts do not support the conclusion that United States-origin grain is
receiving less favourable treatment. United States-origin grain can, and does, enter the Canadian bulk
grain handling system. Different treatment of United States-origin grain is necessary because
United States-origin grain is not subject to the same quality assurance system as Canadian grain. This
different treatment does not amount to less favourable treatment.
4.420 The CGC has discretion to authorize mixing of Canadian grain and foreign grain and does so,
just as it has the discretion to authorize the mixing of different classes or qualities of Canadian grain.
The fact that elevators have to make a request to mix Canadian grain and foreign grain so that it is not
misrepresented as "Canadian grain" does not amount to less favourable treatment of foreign grain.
4.421
Second, in any event, Section 57 of the CGA and Section 56 of the Regulations are justified
under Article XX(d). Article XX(d) is meant to "s ecure compliance with laws or regulations which
are not inconsistent with the provisions of [thi s] Agreement, including those relating to… the
enforcement of monopolies." It therefore covers me asures related to the enforcement of obligations

under laws or regulations consiste nt with GATT 1994. It also permits measures necessary to the
enforcement of monopolies.
4.422 Reviewing the relevant elements of Article XX(d ), the first point pertains to the "necessary"
character of the measure. A panel is not required to examine the necessity of the policy goal of the
measure at issue; only the necessity of the measure to implementing the policy. The term "necessary"
has been interpreted as referring to a range of de grees of necessity. The second point is that the
chapeau to Article XX sets out three requirements th at the measure must meet. It must not be applied
in such a manner as to constitute: (1) a means of arbitrary discrimination between countries where the
same conditions prevail; (2) a means of unjustifiable discrimination between countries where the same
conditions prevail; or, (3) a disguised restriction on in ternational trade. Discrimination in the context
of Article XX(d) is not the same as discriminati on under Article III:4. A finding that a measure is
inconsistent with Article III:4 does not necessarily mean that it amounts to arbitrary and/or
unjustifiable discrimination within the meaning of the Chapeau to Article XX.
4.423 Previous panels have interpreted the applica tion of a measure to other Members (not just
limited to the complaining party), to secure comp liance with the not otherwise inconsistent law or
regulation, as indicative of the measure not being applied in a manner which would constitute a means
or arbitrary or unjustifiable discrimination against countries where the same conditions prevail. In
this case, it is necessary to track and keep fore ign/United States' grain segregated from domestic
grain, unless otherwise authorized, in order "to secure compliance with laws or regulations which are
not consistent with the provisions of this Agreem ent, including those relating to…the enforcement of
monopolies". Section 57 of the CGA and Section 56 of the Regulations are not applied in a manner
which constitutes a means of arbitrary or unjustif iable discrimination between countries where the
same conditions prevail, or a disguised restriction on international trade.
4.424 With respect to justification of the entry aut horization requirement and mixing restrictions of
the CGA, Section 57 of the CGA and Section 56 of the Regulations are necessary to: (1) secure
compliance with grading requirements in the CGA; (2) secure compliance with the CWB Act and with
the enforcement of the CWB monopoly; and (3) secure compliance with the Competition Act by
ensuring that grain is not misrepresented in Canada and in third countries as Canadian grain. These
Acts (or the relevant provisions of the Act in the case of the CGA) are consistent with GATT 1994.
4.425 The Panel does not have to consider the choice made by Canada to protect consumers of its
grain against misrepresentation, to ensure the qua lity of Canadian grain, and to enforce the CWB
monopoly, nor the level of protection Canada wishes to achieve. The Panel need only determine if
Section 57 of the CGA and Section 56 of the Regulations fall within the range of policies designed to
achieve these goals.
4.426 Canada's choice of these measures is consistent with the Appellate Body's approach in Korea
- Various Measures on Beef . The Appellate Body held that "[a] measure with a relatively slight
impact upon imported products might more easily be considered as 'n ecessary' than a measure with
intense or broader restrictive effects." A more tr ade restrictive measure was available to Canada.
Pursuant to Article XI:2 of GATT 1994, Canada could have prohibited imports of United States-
origin grain destined for the elevator system to ma intain the quality of Canadian grain, the Canadian
grading system and quality assurances. Canada chose a less trade restrictive measure: it allows entry
into elevators and, where necessar y, it attaches conditions necessary to maintain Canada's grading
system and quality assurances and to avoid misrepresentation.
4.427 With respect to the necessity of the grading provisions of the CGA, the quality of grain grown
in Canada is assured through the varietal developm ent and registration system, which encourages the
development of cultivars with quality factors de manded by the end-user as well as good agronomic

performance. The ability to deliver grain of consis tent quality is maintained through the Canadian
grain grading system, which segregates grain into classes of similar end-use characteristics.
4.428 Canada uses a numerical grading system that separates grain into divisions of quality defined
by grading factors. A grade name or number identifies each division and grain is bought and sold on
the basis of these grades. Buyers obtain the speci fic quality desired by selecting the grain by grade
name and number. The Canadian grading system has been designed to reflect end-use quality through
the simple measurement of grading factors. The syst em design is such that it can be applied at all
points along the grain handling system by those who have been trained in its application.
4.429 There are a number of differences between th e Canadian and United States' grain quality
control systems. Of particular importance is the CGC's grain quality assurance programme. This
programme results in consistent a nd reliable shipments of grain that meet contract specifications for
quality, safety and quantity. In addition, Canadian gr ain, from the very beginning, is subject to strict
rules and guidelines before it is grown and delivered into the grain handling system. Conversely,
United States-origin grain is not subject to the same level of quality assurance. Thus, the uncontrolled
mixing of grain from these two very different system s would result in an inability on the part of the
CGC to grade the grain, to attest to the specific end- use characteristics of the grain, or to attest to the
origin of the grain. Segregation requirements for al l foreign grain that is not subject to the Canadian
quality assurance system are necessary to maintain th e integrity of the Canadian grading system and
to comply with Section 32 of the CGA.
4.430 In addition, because it is necessary to keep grain of different origin separate from one another
until they are delivered to the end-user or, if mixed, to identify it so it is not misrepresented as to its
origin, Section 57 of the CGA and Section 56 of the Regulations are necessary to secure compliance
with Canada's unfair competition and consumer protection laws. If Canada were not able to
determine and guarantee the origin of the grain in its grain handling system, it would not be able to
provide assurances as to its quality and end-use characteristics.
4.431 Canadian grain is graded by its visual char acteristics. Grades are carefully established to
describe the processing qualities of the grain. When the CGC certifies the grade of Canadian grain
(and thus its intrinsic qualities and end-use characteri stics), it is able to do so because it knows that it
is Canadian grain. CGC certificates are rec ognized internationally and accepted as Canada's
assurance that what our customers receive what they are expecting to receive. When buyers purchase
grain from other countries, they may wish to see the act ual grain they are buying before they close the
deal. Purchasers of Canadian grain are satisfied that Canadian grain will perform consistently and
have the end-use characteristics attached to the product's grade/quality.
4.432 No other measure is reasonably available that would ensure strict compliance with the
prohibition against misrepresentation of products.
4.433 Finally, Section 57 of the CGA and Section 56 of the Regulations are necessary to secure
compliance with the provisions establishing the CWB as a single desk exporting state trading
enterprise, as contained in the CWB Act , because the relevant CWB privileges apply to the sale of
Canadian wheat for export or for domestic hu man consumption. If foreign wheat were not
distinguished from Canadian wheat, the single-desk authority of the CWB could not be enforced and
the CWB could not attest that it is properly using the privileges it has been granted.
4.434 Section 57 of the CGA and Section 56 of the Regulations do not frustrate or defeat the trade
facilitation purpose of GATT 1994 and the WTO Agreem ents. Rather, by not applying a more
restrictive measure, such as denying imports access to the bulk handling system, Canada is facilitating
the potential flow of United States-origin wheat in to Canada, with only that level of regulation
required to maintain its own quality and grading system. Section 57 of the CGA and Section 56 of the

Regulations are applied in the same manner to all foreign grain and not just United States-origin grain,
and so, even in the event that it is found to be discr iminatory, it should not be found to be arbitrary or
unjustifiable in its application.
4.435 Section 57 of the CGA and Section 56 of the Regulations do not limit, or restrict in any way,
the import of United States' grain. In fact, they allow for importation while ensuring that the
Canadian grading system, competition laws, and the CWB's monopoly are not jeopardized.
4.436 Third, Section 87 of the CGA does not distinguish between Canadian and United States-
origin grain. The United States argues that "[d]es pite Canada's statement to the contrary, foreign
producers cannot take advantage of the producer ra il car programme…". The United States' "as such"
challenge seems to be based on the fact that the rele vant regulations do not state that foreign grain is
eligible for the producer rail car programme. The idea that a law should specify that it also applies to
foreign products or otherwise be f ound to be inconsistent with GATT Article III:4 has no basis in the
WTO Agreements. Given that the provision is neutral as to origin, it is, on its face, consistent with
Article III:4. To succeed in a challenge, it must be demonstrated, as a matter of fact, that the words of
Section 87 of the CGA mean something other than wh at they expressly state, and that as a result there
is a violation of Article III:4.
4.437 In addition, Article III:4 applies to measures that affect the internal sale of products imported
into Canada. There cannot be a breach of Article III:4 because producer cars are not made available
by Canada to United States-origin grain in the United States or because producer car loading sites are
only located in Canada. Nothing prevents a United States' farmer from trucking his grain across the
border to a Canadian producer car loading facility and requesting a producer car.
4.438 Fourth, the revenue cap does not provide less favourable treatment to United States-origin
grain. The only movements that are relevant for an Article III:4 analysis are movements, in Canada,
of United States' grain destined for the Canadian domestic market. In this case, these would be
movements through Thunder Bay or Armstrong, originating in Western Canada, to domestic
customers further east. Railways would charge market prices both for Canadian and United States'
grain on these movements. In addition, railways know the volume of traffic they will get. Moreover,
the railways are in contact with major shippers, in cluding the CWB, before and during each crop year
and are sophisticated at predicting volumes of moveme nt in order to plan for and optimize the use of
railway resources. In addition, the revenue cap app lies to all grains referred to in Schedule II of the
CGA, not only CWB grain.
4.439 Finally, the United States claims that shipments of Western Canadian grain that are subject to
the rail revenue cap pay lower transportation costs than those shipments would pay without the
revenue cap, but provides no support for this assertion. In fact, the analysis in the context of the
United States' CVD investigation demonstrates the contrary. Because the railways have been
significantly under their revenue cap since its inception – and it is expected this will be the case in the
future – and that in any event railways practice di fferential pricing, the revenue cap does not amount
to less favourable treatment of United States-origin grain going through Thunder Bay and Armstrong
and destined for the Canadian market.
4. Part Three: The TRIMs Agreement
4.440 As the panel in Indonesia - Autos
 stated in its analysis of the TRIMs Agreement, the existence
of an investment measure is a prerequisite for th e application for the agreement. The United States
has still not identified an investment measure; neither the CGA and its Regulations nor the CGA are
investment measures. As a result, the TRIMs Agreement does not apply.

4.441 With respect to the allegations that there is a requirement to "use" Canadian grain imposed on
Canadian elevators and shippers by virtue of the CGA and Regulations and the CGA, the measures at
issue contain no such local content requirements. The United States' equation of "use" with handling,
storage and transport of grain is inconsistent w ith basic principles of treaty interpretation. The
elevator operators who handle, store and transport grain do not "use" grain; they provide services to
farmers in relation to grain or they purchase it for re-sale. Shippers, whether the CWB or the grain
companies, do not "use" grain when th ey ship it by rail. They are using the railways to provide them
with transport services. In addition, neither in the CGA nor the Regulations is there a "requirement"
to "use" domestic products, nor is there an advantag e to elevators that is conditioned on the use of
domestic products. Elevator operators are interested in receiving as much grain as possible, Canadian
or foreign, so that they can earn their handling fee, plus any other charges they might levy for other
services that may be requested.
M. S
ECOND ORAL STATEMENT OF THE UNITED STATES
4.442 In its second oral statement, the United States made the following arguments:
1. Canada has breached its obligations under GATT Article XVII
4.443 Article XVII:1 contains three distinct legal obligations. First, Canada undertakes that its State
Trading Enterprise – the CWB – will "act in a manne r consistent with the general principles of non-
discriminatory treatment" prescribed in the GATT 1994. Second, Canada undertakes that the CWB
will make its purchases and sales "solely in accordance with commercial considerations." And third,
Canada undertakes that the CWB will "afford the enterprises of the other [Members] adequate
opportunity . . . to compete for participation in" the CWB's sales. A breach of any of these obligations
is sufficient to establish that Canada has violated Article XVII. This is not a novel interpretation of
Article XVII. The Korea – Various Measures on Beef
 panel reached the same conclusion.
4.444 As Canada itself points out, the word "undertak es" – which appears in Article XVII – means
"to commit oneself to perform" or to "guarantee." Canada therefore guarantees that the CWB will act
consistently with these principles of Article XVII. The CWB is not acting consistently with the
principles in Article XVII, and Canada has done nothing to guarantee that the CWB will act according
to the principles of Article XVII.
4.445 The CWB export regime viewed in its entirety – including the CWB's mandate, its unchecked
exercise of its exclusive and special privileges, and the lack of any countervailing supervision or
discipline by the Government of Canada – necessa rily results in sales that breach Article XVII's
standards. The CWB export regime provides the CWB with greater pricing flexibility and less risk
exposure than that experienced by an enterprise act ing in accordance with commercial considerations
and customary business practice. According to th e CWB's own analysis, the CWB "manages risk to
an extent not available in the open market[.]" Th e CWB uses this greater flexibility to act in a non-
commercial manner and in ways that do not provide the enterprises of other Members an adequate
opportunity to compete for participation in the sales of the CWB.
4.446 Indeed, Canada itself states that the CWB's pricing strategy in export markets is "primarily"
based on commercial considerations. Why does Canada need this qualifier, that its decisions are
"primarily" based on commercial factors? This is because the CWB also makes sales based on non-
commercial considerations – a violation of Article XVII.
4.447 An example of this non-commercial behaviour is the protein or quality giveaway. The CWB
pays premiums to farmers for high quality wheat , even when these premiums are not justified by
demand for high quality wheat in third-country mark ets. These premium payments result in high
quality wheat production that exceeds demand by 32 per cent. The CWB then uses this excess

production of high quality wheat to act in a non- commercial manner. Having an excess of high
quality wheat means that for certain transactions, the CWB provides a price discount for high quality
wheat so that it may meet the price competition for lower quality wheat in a given market.
4.448 This behaviour is not in accordance with comme rcial considerations, because the CWB is not
getting the full replacement value for the high quality wheat it is selling in the market. The CWB
gives away quality because its mandate – to maximize sales of Canadian wheat on the world market –
combined with the CWB's incentives and special privileges, necessarily result in this behaviour that is
not in accordance with commercial considerations. Wheat sellers in third-country markets are not
afforded an adequate opportunity to compete for participation in the CWB's sales when the CWB
gives away quality in this manner. The quality gi veaway also demonstrates how, in this case, a
violation of the standards set forth in Article XVII:1(b) necessarily leads to a violation of the non-
discriminatory treatment standard in Article XVII:1(a).
4.449 Article XVII:1(b) requires Canada to guarant ee that the CWB will afford the enterprises of
other Members an "adequate opportunity . . . to compete for participation in
" the CWB's sales.
Canada must guarantee that the CWB affords buyers and sellers of wheat an adequate opportunity to
compete in the marketplace, and the CWB does not do so.
4.450 Canada also tries to argue that Article XVII:1(b) only requires that the CWB give other
enterprises with CWB-like special and exclusive privileges an adequate opportunity to compete in
CWB sales. This defies logic and is again unsupport ed by the text of Article XVII. The obligation
under Article XVII:1(b) is not limited to compe tition among enterprises with special and exclusive
privileges. Article XVII:1(b) does not limit whic h enterprises shall be afforded an adequate
opportunity to compete in the CWB's sales, and do es not limit the obligation to only those enterprises
with privileges similar to those granted to the CWB. Canada must guarantee that the CWB affords all
enterprises an adequate opportunity to compete in the marketplace, and the CWB does not do so.
4.451 Finally, Article XVII:1(b) requires the CWB to act commercially , not merely rationally.
While Canada attempts to limit the scope of its obl igations under Article XVII:1(b), the text of the
Article makes clear that Canada has an obligation to ensure that the CWB acts in accordance with
commercial considerations.
2. Canada's measures violate GATT Article III:4
4.452 The measures at issue in this case are specific pr ovisions of the CGA, the Regulations and the
Canada Transportation Act CTA that provide less favorable treatment for foreign grain.
4.453 In this dispute, it appears that the parties ag ree that like products are those classes of grain
that have similar intrinsic characteristics and e nd uses. For example, United States' corn and
Canadian corn are like products, as are United St ates' durum wheat and Canadian durum wheat.
Nevertheless, even if one were to look at specific varieties rather than classes of grain in order to
establish like products in this dispute, in fact, United States' wheat farmers and Canadian wheat
farmers not only grow the same class of wheat ( e.g., durum), but they grow several identical varieties
of durum wheat ( e.g., Kyle). Yet even this identical product – United States' Kyle durum wheat -
when exported to Canada, is subject to less favor able treatment than Canadian Kyle durum wheat
merely because the United States' wheat is foreign.
4.454 There is also no question that the measures at issue here affect the distribution and
transportation of like products. Section 57 of the CGA and Section 56 of the Regulations are
measures that affect the entry of grain into Canada 's bulk grain handling system, part of the internal
transportation and distribution network for grain in Canada. The rail revenue cap and producer rail
car measures also affect the internal transportation of grain in Canada.

4.455 Section 57 of the CGA states quite simply that no grain elevator in Canada may receive
foreign grain. Under Section 56(1) of the Regulations, the mixing of foreign grain is prohibited. Both
measures are de jure prohibitions on the handling of foreign grain by Canadian grain elevators.
4.456 Canada admits in its second submission that fore ign grain is subject to different treatment
than Canadian grain. Canada argues that special authorization can be obtained for foreign grain and
that this need for special authorization results in no less favorable treatment. However, these
authorization procedures – contrary to Canada's asse rtions – impose real burdens that result in less
favorable treatment. The default prohibition ap plied to foreign grain impedes commercial
opportunities for United States' grain and makes it mo re burdensome for United States' grain to enter
into and move through Canada's bulk grain handling system.
4.457 Special authorizations granted to foreign grai n by the CGC do not remedy what is otherwise
an Article III:4 violation. As the Appellate Body concluded in United States – Section 211 , the
imposition of an additional regulatory hurdle only fo r foreign like products violates Canada's national
treatment obligation.
4.458 The Canadian measures at issue here provide less favorable treatment to all imported grain.
However, I would like to take a moment to focu s on shipments of United States' wheat to Canada.
The barriers to United States' wheat flowing thro ugh the Canadian bulk grain handling system are
readily apparent, as are the additional costs associ ated with the extra regulatory burdens placed on
United States' wheat as opposed to like Canadian wheat. My focus here is not on trade effects –
which the United States does not need to demonstrat e for purposes of this Article III:4 analysis – but
only on the additional burdens that result in less favorable tr eatment and less favorable competitive
conditions for United States' wheat.
4.459 Let us assume that a United States' farmer has gr own a Canadian variety of wheat, so that the
United States' product being exporte d to Canada and received by a Cana dian grain elevator is exactly
identical to the Canadian product being shipped to the same Canadian grain elevator.
4.460 Canada's statements that obtaining special au thorization from the CGC is a cost-free process
is an untenable supposition. Elevators can fr eely accept Canadian wheat under the CGA and the
Regulations. All wheat, whether domestic or foreign, must be inspected and weighed. However, in
addition to these general requirements, accepting Un ited States' wheat places the following additional
burdens on the elevator operator: (1) the CGC must be notified 24 hours in advance of the pending
arrival of a United States' wheat shipment; (2) a CG C employee who is paid by the elevator operator
must be on site when the United States' wheat is unloaded; (3) this CGC employee must monitor the
flow of United States' wheat into the elevator bins and take a sample of the wheat; (4) only the CGC
employee can seal the bins once the United States' wh eat is unloaded; (5) when United States' wheat
is discharged from the elevator, the elevator opera tor must once again give the CGC 24 hours notice;
(6) the CGC employee must go through the procedure of unsealing the bin(s), sampling, and
monitoring the outward flow of the wheat; and (7) th e elevator operator must provide the CGC with
the vehicle license numbers or railcar numbers for all United States' wheat shipments, along with the
final destination for that United States' wheat.
4.461 These are not insignificant burdens, and these burdens are not imposed on Canadian wheat.
When United States' wheat is received, the grain elevator must pay for special CGC inspection and
monitoring services, thereby making the cost of rece iving United States' wheat higher than the cost of
receiving like Canadian wheat. There are also indir ect costs such as the time it takes an elevator
operator to comply with the special requirement s for United States' wheat, and the additional
regulatory uncertainty resulting from the need to contact the CGC in advance and rely upon the CGC's
inspectors. These additional requirements and costs for United States' wheat shipments apply even if
a Canadian variety of wheat is shipped from the Un ited States to the Canadian grain elevator. The

additional costs and regulatory requirements for United States' wheat make United States' wheat a less
attractive option for elevator operators.
4.462 Canada's transportation measures also afford less favorable treatment to imported grain. As
set forth in our second submission, only Canadian grain can take advantage of producer rail cars under
Section 87 of the CGA. The Canadian Government itself states on the Agriculture and Agri-Food
Canada website that only Canadian grain producers may apply to the CGC for a producer rail car.
Foreign grain receives less favorable treatment, as it is denied access to producer cars. Access to
these producer cars provide Canadian grain produ cers with increased transportation flexibility and
lower costs that are unavailable to like foreign grain.
4.463 Canada's rail revenue cap also violates Article III:4. The revenue cap, which only applies to
shipments of domestic Canadian grain, reduces tran sportation costs and uncertainty regarding those
costs, thus providing a tangible benefit to domestic grain. Shipments of United States' grain are not
subject to the cap. Since there is a significant pe nalty for shippers who exceed the rail revenue cap,
shippers have an incentive to charge lower fees for shipments of Canadian grain than for shipments of
like foreign grain.
3. Canada's Article XX(d) defence fails
4.464 Canada attempts to invoke Article XX(d) of the GATT 1994 to justify the discriminatory
measures under Section 57 of the CGA and Section 56(1 ) of the Regulations. However, Canada fails
to meet its burden of proof with regard to this affirmative defence.
4.465 In attempting to establish its Article XX(d) defence, Canada goes on at length about its
varietal development system. However, Canada's grain segregation measures treat imported grain less
favorably than like domestic grain even when Ca nadian varieties – approved through Canada's
varietal development system – are grown in the United States and exported to Canada.
4.466 Canada has not demonstrated that its grain segregation measures based on origin – excluding
foreign grain from the bulk handling system and prohibiting mixing of foreign grain – are necessary
to secure compliance with the varietal development and registration system under the CGA or with
provisions of Canada's unfair competition and consumer protection laws.
4.467 Grain can be identified based not on whether the grain is of foreign or domestic origin, but
based on the intrinsic characteristics of the grain itsel f, such as protein content. Such an alternative
measure, which does not impermissibly treat foreign grain less favorably than like domestic grain, is
available if Canada wishes to pursue its objectives.
4.468 Not only are Canada's grain segregation measures unnecessary to secure compliance with the
CGA and Canada's unfair competition laws, but the measures also constitute unjustifiable
discrimination. Canada's concerns about misreprese ntation of grain apply to all grain, and therefore
all grain – not just foreign grain – should be subject to additional regulation and special CGC
oversight.
4. Canada's measures violate Article II of the TRIMs Agreement
4.469 Finally, Canada's grain segregation require ments and discriminatory rail transportation
measures violate Article 2 of the TRIMs Agreement . These measures fall squarely within the
Illustrative List 1(a) of the TRIMs Agreement as mandatory and enforceab le measures that provide
direct cost advantages to those elevator operators that accept Canadian grain over foreign grain.
Similarly, the rail revenue cap and producer car programmes are mandatory and enforceable measures
within the meaning of the Illustrative List. These measures provide cost advantages in the form of

lower rail transportation rates to those shippers that choose to ship Canadian grain rather than foreign
grain.
4.470 These TRIMs, which are inconsistent with Artic le III:4, are necessarily inconsistent with
Article 2 of the TRIMs Agreement.
N. S
ECOND ORAL STATEMENT OF CANADA
4.471 The following summarizes Canada's arguments in its second oral statement:
1. Introduction
4.472 The United States has still not identified what " actions of the CWB " are inconsistent with the
requirements set out in Article XVII:1. There has been no evidence of actual discrimination, and no
evidence of actual conduct not based on commercia l considerations: indeed, no evidence of conduct
of any sort; just assertion. Neither has the United States provided an interpre tation of the provisions
at issue that is consistent with the prin ciples enunciated by the Appellate Body in Reformulated
Gasoline and in practically every report since. The United States has simply not established its case,
and its claims should be dismissed.
4.473 Although the United States has not supported an y of its principal allegations and assertions
concerning the "actions" of the CWB, it does have one new factual allegation in respect of protein
over-delivery that purports to be supported by new evidence. In direct contravention of the Working
Procedures of the Panel , the United States makes a specific a llegation and adduces new evidence.
There is also one new legal allegation, with resp ect to the phrase "adequate opportunity to compete."
This allegation is based on a misleading presentati on of the law. The Panel should dismiss both the
new factual assertion and the new legal allegation.
4.474 The United States' case under Article III is just as problematic. It has adduced no evidence
and no analysis supporting its assertions that th e Canadian entry authorization provisions are
"onerous". Its only response to Ca nada's evidence is that its represents "isolated examples". Mere
denial is not sufficient in rebutting the only evid ence on the record as to how the Canadian entry
authorization provisions work. The evidence demonstrates that there is no "treatment less favourable"
as a result of the entry authorization requirement and this evidence has not be controverted.
2. Article XVII
(a) The United States' interpretation of the law is wrong
4.475 The United States' case has at least four egregious legal errors.
4.476 First, the United States persists in asserting an obligation of means in Article XVII without
justifying the assertion through legal analysis. The la test is "countervailing government supervision",
which has no basis in treaty language. The very notion of "countervailing government supervision" is
contradictory to Article XVII. To "countervail" mean s to "counterbalance" or to "neutralize the effect
of" an action or an event. This "countervailing su pervision" proposed by the United States would
neutralize the effect of an action or an event rela ted to the operations of the CWB. There is no
evidence of a discriminatory and non-commercial activity; the only events or actions mentioned by
the United States are the exclusive and special privileg es that Canada grants to the CWB. This, then,
is the United States' submission: to act in conform ity with its Article XVII obligations, Canada must
neutralize the effects of exclusive and special privile ges it has the right to grant to the CWB under
Article XVII. This is an absurd and unreasonable interpretation of Article XVII.

4.477 Further, the United States interprets Article XVII:1(a) and (b) as creating two independent
obligations. Such an interpretation would place state trading enterprises at a commercial disadvantage
as compared to private traders. A violation of Article XVII would be found on the demonstration of
discrimination alone, even if such discrimination was based on commercial considerations. State
trading enterprises would, therefore, not be perm itted to make distinctions between sellers or
purchasers based on commercial considerations that private traders make.
4.478 Second, Article XVII:1(a) does not prohibit "discrimination between domestic and third
country markets." Contrary to the United States' c ontention, Article XI is not appropriate context for
the interpretation of Article XVII as it is not con cerned with discrimination. If, however, the Panel
considers Article XI to be appropriate, Article XI would have an effect opposite to the one proposed
by the United States. Article XI prohibits restri ctions on exports, and not measures that may increase
exports. Accordingly, from this perspective, Article XI would be relevant only where a state trading
enterprise will only sell to export markets at a highe r price than in the domestic market, and thus
potentially acts in a way that would limit exports. This goes against United States' assertions.
4.479 Third, Article XVII:1(b) requires state tradi ng enterprises to act like private enterprises in
similar circumstances. The obligation is for the state trading enterprise to base its behaviour in the
market – including its use of those privileges – on the same considerations as private traders in similar
circumstances. Naturally, the proper benchmark of behaviour, in this context, would be private
traders that have the same or similar privileges.
4.480 Fourth, Article XVII:1(b) requires export state trading enterprises to afford adequate
opportunity to purchasers to compete for participation in pu rchases and sales. The CWB does not
have to allow its competitors to participate in its sales, but rather it must allow wheat purchasers of all
Members "adequate opportunity, in accordance w ith customary business practice, to compete for
participation in [its] sales." Customary business practice does not require an enterprise to allow its
competitors to participate in its sales. Rather, it is for enterprises to win sales at the expense of their
competitors, not to assist them. The United Stat es purports to read competition disciplines into
Article XVII that do not exist in that article or in the WTO Agreement in general, and have come up
with a new object for Article XVII: the protection of private traders against anticompetitive conduct.
(b) The United States mischaracterizes the facts
4.481 The United States also mischaracterizes the facts in at least four ways.
4.482 First, the United States undermines its own argument that, because of its mandate, the CWB
must, "necessarily", act in violation of Article XVII. Nothing in the CWB's mandate requires it to act
in violation of Article XVII. The United States even doubts its own arguments. For example, it
alleges that the CWB could "if it so chooses" act in violation of Article XVII - not that the CWB must
act in violation of Article XVII, but rather that it could. Similarly, it has asserted that the CWB has
the "ability to engage in conduct proscribed by Artic le XVII:1". In addition, it has alleged that the
CWB's privileges and incentives "enable[] the CWB to act in a discriminatory manner". Each of these
allegations imparts an element of voluntariness on the conduct of the CWB. The United States
acknowledges that the CWB has discretion and does not have to "necessarily so act".
4.483 Second, the United States fails to adduce any ev idence to demonstrate that the CWB actually
does what the United States accuses it of doing. The United States alleges that the CWB "uses its
pricing flexibility and its reduced risk exposure to make sales on non-commercia l terms […] to target
particular export markets." The United States has not adduced any evidence to demonstrate: (1) that
the CWB actually has "price flexibility" and "reduced risk exposure"; (2) that if it does, that the CWB
uses such "price flexibility" and "r educed risk exposure" to make sales on "non-commercial terms";
(3) what the "non-commercial terms" actually are (which would, of course, require the United States

to establish what "commercial terms" are); and (4) that the CWB actually discriminates between
particular markets by offering "non-commercial terms" to some "targeted" markets, but not to others.
Without demonstrating all of these factors, the United States cannot make out this allegation.
4.484 The United States also alleges that the CWB's special and exclusive privileges give it less
exposure to market risk than a commercial actor. A nd that "[s]uch a risk structure, by artificially
lowering CWB costs, clearly gives the CWB greater pricing flexibility than a commercial actor…"
The United States has not adduced any evidence to demonstrate that: (1) the CWB's privileges
actually give it less exposure to market risk than a commercial actor (which would require
establishing what the market risk of a commercial ac tor would be); (2) the risk structure artificially
lowers the CWB costs; (3) these lower costs give the CWB greater pricing flexibility; and (4) the
CWB actually uses this greater pricing flexibility to discriminate between markets in a way that a
commercial actor would not (which would require th e United States to demonstrate what the pricing
flexibility of a commercial actor actually is and how such flexibility is normally used). The
United States must establish all of these factors to make out this allegation.
4.485 The United States also makes allegations about the conduct of private traders, without
adducing any evidence in support of such allegati ons. The United States must establish not only a
certain conduct or pattern of conduct by the state tr ading enterprise in question, but also that that
conduct is not in accordance with a benchmark – the conduct of private traders. The United States
must establish a benchmark as against which the c onduct of the CWB must be gauged. It has not
done so.
4.486 Third, the United States' allegations with r espect to protein over-delivery are wrong. The
presentation of this factual allegation and the eviden ce allegedly presented in support at this stage of
the proceedings contravenes the Working Procedures of the Panel and should, therefore, be declared
inadmissible. In any event, the a llegations, even if true and relevant , are misguided. The point is not
only the actions of the CWB. Rather, it must be established that such actions are discriminatory and
are not based on commercial considerations. That is, they should be compared as against a
commercial benchmark. In respect of protein over-delivery, the United States does not provide such a
comparator, and the reason is because protein over-d elivery is routine commercial practice in the
wheat industry; it is done to avoid contract pena lties for protein under-delivery. The United States
International Trade Commission, in a December 2001 Report, found that "over-delivery of protein
occurs in exports of both United States' and Cana dian wheat." Wheat exporters, both United States'
private traders and the CWB, all of them commercia l actors, over-deliver protein to avoid contract
penalties for under-delivery. Therefore, even if Unit ed States' allegations as to protein over-delivery
were correct, the CWB would not be acting non-commercially were it to over-deliver protein.
4.487 Finally, the United States undermines its own argument that the CWB has greater pricing
flexibility than other wheat traders. United St ates' arguments that the CWB's alleged "price
flexibility" gives it greater power in the market misc haracterize the facts and are contradictory. The
United States asserts that the CWB can sell wheat at prices lower than a commercial grain trader
could because it makes allegedly low initial payments to farmers in exchange for their wheat.
However, in its Second Written Submission the Un ited States claims that "the CWB charges a
premium price for its high quality wheat." That is, the CWB actually charges high prices for its
wheat. These are contradictory. And they are further undermined by the study on "Domestic Costs of
Statutory Marketing Authorities", a United States' exhibit, which notes that "[t]here is a high degree of
substitutability among wheats [sic] from various expor ters and this means the CWB is essentially a
price taker in the wheat market."

(c) Conclusion for Article XVII
4.488 In paragraph 16 of its oral statement, the United States mischaracterizes Canada's submission.
In respect of the first element of Article XVII:1(b) , Canada has argued that the proper benchmark for
the operations of the CWB is a private trader in similar circumstances. That is the only way to
determine if the CWB is acting in accordance with commercial considerations. In respect of the
second element, Canada has observed that the CWB is not required to allow its competitors to
participate in its sales.
3. GATT Article III:4
(a) Entry and blending authorizations
4.489 In the context of the Canada Grain Act and Regulations, the question before the Panel with
respect to Article III:4 is this: does a formal di stinction between importe d and domestic goods give
rise to an irrebuttable presumption of violation? Does formally different treatment between domestic
and imported goods automatically result in a breach of Article III:4? The United States has not put
forward any evidence of less favourable treatment of foreign goods, but has simply relied on the
existence of different formal treatment. The expr ess language of Article III:4 as well as the findings
of panels and the Appellate Body support the position that the require ment under Article III:4 is that
imported products be granted "treatme nt no less favourable", and not "identical treatment". The mere
existence of a formal distinction is therefore not enough to demonstrate a violation: what the
United States must establish is that United States' products have been denied equal conditions of
competition because of their origin.
4.490 Canada asks the Panel to view the measures in question and the treatment of imported grain in
the light of the uncontroverted evidence on the reco rd. First, Section 57 of the CGA requires that
elevator operators request an authorization before accepting foreign grain that is not subject to the
same quality assurance system as Canadian grain. Wh at are the costs of this requirement? Both the
request and the authorization are cost-free. How burde nsome is the process? An email, fax or letter to
the Canadian Grain Commission listing the amount, the type and the origin of the grain suffices. An
authorization is then issued within a few days of the request. The eviden ce on the record establishes
the informal and flexible nature of the process. Has the authorization process resulted in refusals?
No requests have been refused sin ce the entry into force of the WT O Agreement. There have been
issues of concern such as the presence of unapprov ed genetically-modified maize in United States'
maize shipments, but even these we re dealt with by imposing certai n conditions with respect to the
handling of the grain and not by refusing its entry. How routine then is the procedure? Elevator
operators often contract for grain before making their request for authorization and that elevator
operators can request authorization for multiple shipments over the course of a crop year. The
evidence on the record, put before you by Canada, establishes this point as well. It is the only
evidence on the record with resp ect to the entry authorization process and it does not disclose
treatment less favourable of imported grain. Th is has not been controverted by United States'
evidence.
4.491 The same is true for Section 56 of the Regulations, which requires an elevator operator to
obtain an authorization in order to mix any Canadian Western grain of different grades, Eastern grain
with Western grain or any foreign grain with Canadian grain in transfer elevators. The United States
says that United States-origin gr ain suffers from an additional burden because it has to be kept in
separate bins in elevators. Keeping grain in separat e bins is not specific to United States-origin grain
as there are often as many as thirty different segrega tions of Canadian grain in elevators. And if
elevator operators want to mix grain, the same in formal, cost-free authorization process applies. The
authorization process does not therefore amount to treatment less favourable of foreign grain.
Provided that the mixed grain is not identified as Ca nadian grain, mixing will be authorized. Why is

it important to properly identify the grain? Quite apart from avoiding misrepresentation, because
United States-origin grain is not subject to the same grading and quality assurance systems, the end-
use characteristics of mixed Canada-United States' gr ain could not be guaranteed. Canada fails to see
how requiring that United States-origin grain be sold as United States-origin grain, or as mixed grain
when it is mixed, amounts to treatment less favourable of such grain. The United States has
repeatedly mischaracterized the m easures at issue and it has made a llegations of "onerous regulatory
burdens" without adducing any evidence or providing a single concrete example in support.
4.492 Neither of these measures subjects United Stat es-origin grain to additional regulatory
requirements. The fact that mixed Canada-United States' grain should not be represented as Canadian
grain is not an onerous regulatory requirement. It simply stems from the general regulation against
deceptive practices and false representation of products. The examples of entry and mixing
authorizations are not isolated examples but rather representative of the Canadian practice. This
practice is evidenced by the significant amount of Unite d States' grain that enters Canadian elevators.
In the absence of any evidence to th e contrary, this must be accepted. The fact that the treatment of
Canadian grain and foreign grain is not exactly the same is not conclusive of a violation of
Article III:4. Different treatment is required becau se foreign grain, unlike Canadian grain, is not
subject to the Canadian quality assurance system. The authorization requirement is not of
consequence in practice given that the authorizations are routinely granted. The different treatment,
therefore, does not amount to less favourable treatment.
4.493 Second, the United States criticizes the WAFP. This programme was created at the request of
the United States' government and negotiated with Unite d States' officials to resolve alleged concerns
about access of United States' wheat into Canada. The United States did not identify the WAFP as a
measure that it was challenging and has said again t oday that Section 57 of the CGA and Section 56
of the Regulations are the only measures before the Panel in respect of grain handling..
4.494 Third, even if the Panel were to find that the measures at issue amount to a violation of
Article III:4, These measures are justified under GA TT Article XX(d). Foreign grain that is not
subject to the same quality assurance system must not enter elevators in an uncontrolled manner and
possibly be misrepresented as being Canadian grain. There may be a same variety grown in Canada
and in the United States, but this misses the point: there are United States' varieties of wheat that are
indistinguishable from Canadian varieties but have different end-use characteristics. The Canadian
variety registration system ensures this is not the case in Canada. Misrepre sentation could affect the
whole basis of the Canadian marketing system, as the Canadian system is not based only on
differentiation on the basis of protein content of wheat, but also on the end-use characteristics of the
wheat. The measures are necessary to ensure comp liance with Canadian competition law, grading
provisions of the CGA and the CWB Act.
(b) Producer cars
4.495 The United States' challenge with respect to producer cars has relied on unsubstantiated
allegations that are false and on novel interpretations of Article II I:4 that would extend the national
treatment obligation extra-territorially to products not yet imported into Canada. With respect to the
internet page submitted in evidence by the Unite d States (Exhibit US-23), this contains minimal
information on the producer car programme and refers the reader to the responsible authority, the
CGC. It is Section 87 of the CGA that is the s ubject of the United States' challenge; a web page does
not have an independent legal status. Section 87 does not make any distinctions between domestic
and imported products.

(c) Revenue cap
4.496 The United States' challenge with respect to th e revenue cap also fails to establish any more
favourable treatment of Canadian grain. This is supported by a finding of the United States
Department of Commerce. Rail rates are driven by market factors whether the revenue cap applies or
not. In any event, the railways have never even come close to reaching their respective revenue cap.
The gap between actual revenues and the cap has b een increasing and this trend is expected to
continue over time. The impact or eventual impact of the cap on rates has simply not been
established.
4. TRIMs
4.497 Finally, the allegations of violation of the TRIMs Agreement fail not only for lack of evidence,
but in three fundamental respects: (1) the measures at issue are not i nvestment measures; (2) there is
no local content requirement or requirement to "use" domestic products over foreign products; and (3)
there is no advantage being granted for any use of domestic product.
O. T
HIRD PARTY WRITTEN SUBMISSION OF AUSTRALIA
4.498 In its third party written submission, Australia made the following arguments:
4.499 In its submission Australia addresses only those issues that are relevant to the content and
scope of Article XVII of the GATT 1994 concerning STEs45, in particular:
• the permissibility of STEs, including those exercising monopoly rights, under GATT
1994; defining the standards of STE behavi our envisaged by Article XVII:1 of GATT
1994;
• the need for the interpretation and application of these standards on a case by case basis;

• the need for consistency be tween standards applied to STEs and those applied to
governmental measures affecting imports or exports of private traders.

4.500 Australia notes, as accepted by both Parties a nd recognised by previous Panels, that the
creation of STEs (both state enterprises and ente rprises granted exclusive or special privileges by
Members) including those exercising monopoly rights, is entirely consistent with GATT 1994. With
regard to STEs, the issue before the Panel in this dispute is therefore when the activities of a particular
STE may become inconsistent with the general pr inciples of non-discriminatory treatment prescribed
by GATT 1994, such that the WTO Member creating that STE is in breach of its obligations under
Article XVII.
4.501 Also uncontested is that the purpose of Article XVII is to ensure that WTO Members do not
through an STE circumvent their obligations with respect to non-discriminatory treatment. Australia
submits that this objective - that STE creation do es not confer any advantage on a Member - must
necessarily be balanced by recognition that a Member choosing to create an STE to undertake certain
activities should not be placed in a worse position th an a Member whose private traders carry out the
same activities, just as STEs themselves should not be placed in a worse trading position than such
private traders.

45 Such enterprises are understood to mean, pursuant to Article XVII:1(a) both State enterprises
established or maintained by a Member , wherever located, or any enterprise to which that Member has granted,
formally or in effect, exclusive or special privileges and a reference in th is submission to STEs encompasses
both forms of enterprise.

4.502 In this context, Australia submits that the sta ndard to be applied to the acts of STEs must
complement, and be consistent with, standa rds applied under GATT disciplines reviewing
governmental measures affecting imports and exports of private traders. A different standard is
neither required by, nor consistent with, the text or the objective of Article XVII.
4.503 Australia also submits that Article XVII obliga tions should not be considered to provide an
avenue for contesting governmental measures that are otherwise permitted by, or not inconsistent
with, particular disciplines of GATT 1994. Article XVII should also not be used to attempt to address
situations more appropriately remedied by particular applicable GATT 1994 or other WTO
disciplines.
4.504 Finally, Australia also notes that this is the first dispute in which the application of
Article XVII to an exporting STE, and in particular one exercising export monopoly rights, is at issue.
Previous Panels addressing Article XVII a nd STEs have addressed importing STEs and the non-
discriminatory principles applicable to purchases a nd sales involving imports, and their opinions must
be considered in that context.
1. Article XVII of GATT 1994
(a) STEs are not inconsistent with GATT 1994
4.505 As acknowledged by both Parties to this dis pute, the creation of STEs to undertake purchases
or sales involving imports or exports, is entirely consistent with GATT 1994.
4.506 Moreover, it is also clear from the text of GATT 1994 and the conclusions of prior Panels
dealing with (import) monopolies that the crea tion of STEs exercising monopoly rights and their
behaviour as monopolies per se, is also not inconsistent with Members' obligations under GATT 1994
in general or Article XVII of GATT 1994 in particular.
4.507 As the 1989 Panel Report in Republic of Korea – Restrictions on Imports of Beef – Complaint
by the United States
46 concluded:
"the rules of the General Agreement did not concern the organization or management
of import monopolies but only their operations and effect on trade,... the existence of a
producer-controlled monopoly could not in itself be in violation of the General
Agreement."47
4.508 That such STEs are not in themselves incons istent with the GATT 1994 has been and should
continue to be a fundamental consideration for any Panel in interpretation and application of
Article XVII. For example, in considering whic h "principles of non-discriminatory treatment" are
appropriate, the Panel should ensure that the appli cation and/or interpretation of such principles does
not negate or undermine the permitted right of Members to create exporting STEs, including those
exercising export monopoly rights.
(b) The nature and scope of Article XVII:1(a)
4.509 Article XVII:1(a) of GATT 1994 essentially ser ves to ensure that WTO Members do not,
through an STE, circumvent their GATT obligations with respect to non-discriminatory treatment. In
practice, it essentially requires of Members, as regards their STEs, the same general standard

46 Panel Report, Republic of Korea – Restrictions on Imports of Beef – Complaint by the United States
("Korea – Beef (US) "), adopted 7 November 1989, BISD 36S/268.
47 Ibid , para 115 emphasis added

regarding consistency with the general principl es of non-discriminatory treatment of GATT 1994 as
such Members have undertaken regarding their measures affecting private import and export trade.
4.510 This is clear from the text of Article XVII:1(a) itself (emphasis added):
"Each [Member] undertakes that if it estab lishes or maintains a State enterprise,
wherever located, or grants to any enterp rise, formally or in effect, exclusive or
special privileges, such ente rprise shall, in its purchases or sales involving either
imports or exports, act in a manner consistent with the general principles of non-
discriminatory treatment prescribed in this Agreement for governmental measures
affecting imports or exports by private traders."
4.511 However it is equally clear that the obligation set out in Article XVII:1(a) is relevant to only a
particular set of activities by STEs – that is ' purchases or sales involving either imports or exports'.
Article XVII:1(a) does not extend this undertaking of consistency to all trade-related activities or to
the general behaviour of importing or exporting STEs.
4.512 Australia also notes that Article XVII:1(a) contains only a general obligation in the form of an
undertaking that STEs shall act consistently with the principles of non-discriminatory treatment of
GATT 1994. It does not contain additional obligations which specify, proscribe or direct how a
Member must give effect to its undertaking. Any Member is free to choose the approach it takes to
fulfil this obligation. It may choose direct oversight or supervision of its STE or create legislative,
regulatory reporting and monitoring structures, or it may not. It is under no obligation under
Article XVII to choose any particular course of action 48. Similarly, there is no inference that any
means of implementation is better than another, or that its presence or absence is more or less
indicative of GATT consistency, just as there is no in ference that any particular type of exclusive or
special privilege granted to an STE is inconsistent with GATT 1994 per se.
(c) Defining the standards applicable to STE behaviour
4.513 The fundamental primacy of the non-discriminatory treatment principles of the GATT 1994
in defining the standard against which STE beha viour (in purchases or sales involving imports or
exports) is to be measured is clearly evident from the text of Article XVII:1(a). This has been
confirmed in the approach that previous Panels have taken to the relationship of Article XVII with the
rest of GATT 1994. The panels in, Canada – Administration of the Foreign Investment Review Act 49,
Canada, Import, Distribution and Sale of Alcoho lic Drinks by Canadian Provincial Marketing
Agencies50 and Korea – Various Measures on Beef all essentially found, as the Korea – Various
Measures on Beef panel put it:
"(a) conclusion that the principle of non-di scrimination was violated would suffice to
prove a violation of Article XVII'."51
4.514 Subparagraph XVII:1(b) states that:

48 Even Article XVII:4 which prescribes STE notifi cation procedures and requirements on Members
only identifies the information to be provided, and does not determine how a Member should go about gathering
information domestically to fulfil this obligation.
49 Panel Report, Canada – Administration of the Foreign Investment Review Act ("Canada – FIRA "),
adopted 7 February 1984, BISD 30S/140.
50 Panel Report, Canada – Import, Distribution and Sale of Alcoholic Drinks by Canadian Provincial
Marketing Agencies ("Canada – Provincial Liquor Boards (EEC) "), adopted 22 March 1988, BISD 35S/37.
51 Korea – Various Measures on Beef , para 757

"The provisions of subparagraph (a) of this paragraph shall be understood to require
that such enterprises shall, having due re gard to the other provisions of this
Agreement, make any such purchases or sal es solely in accordan ce with commercial
considerations, including price, quality, av ailability, marketability, transportation and
other conditions of purchase or sale, and shall afford the enterprises of other
[Members] adequate opportunity, in accordan ce with customary business practice, to
compete for participation in such purchases or sales.'
4.515 From the text of Article XVII:1, it is clear that the role of subparagraph 1(b) is to provide
better identification, interpretation and applica tion of the obligation and standard set out in
subparagraph 1(a). This is unambiguously artic ulated in the wording of the first phrase of
subparagraph 1(b) itself – "(t)he provisions of sub-paragra ph (a) of this paragraph shall be
understood to require… having due regard to the other provisions of the GATT… ".
4.516 The Panels in the Canada - FIRA
52 case and the Korea - Various Measures on Beef case both
concluded (as stated by the Korea - Various Measures on Beef Panel), that "(t)he GATT jurisprudence
has also made clear that the scope of paragraph XVII:1(b), which refers to commercial considerations,
defines the obligations set out in paragraph 1(a)"53.
4.517 In this regard, the Korea - Various Measures on Beef Panel's additional statement that:
"similarly, a conclusion that a decision to purchase or buy was not based upon
commercial considerations would also suffice to show a violation of Article XVII."54
is not suggesting that Article XVII:1(b) creat es an entirely separate obligation on Members
concerning the standard of behaviour of their STEs. It would be inconsistent with the rest of that
Panel's analysis and conclusions on this matter for it to be suggested that the Korea - Various
Measures on Beef Panel is asserting that the elements of subparagraph (b) are to be considered and
interpreted in isolation from subpara graph 1(a). Rather, in that dispute, the reasoning of the Panel
suggested that a decision to purchase or buy not based on commercial consideration shows - or
demonstrates - that a violation of Article XVII:1(a) has occurred.
4.518 Australia therefore submits it is clear that "the general principles of non-discriminatory
treatment prescribed in the GATT" of subparagraph 1( a) is the standard against which the behaviour
of STEs is to be assessed. The definitional elemen ts and illustrative variables of subparagraph 1(b)
assist in this process.
4.519 The primary objective of Article XVII:1(c) is to require a certain standard of behaviour of the
Member government – that is, of not preventing its enterprises (STE and private alike) from acting
consistently with the general principles of non- discriminatory treatment of GATT 1994. This
obligation runs parallel to, and complements, a Member's other undertakings under Article XVII and
under GATT 1994 itself.
4.520 As with the obligation enunciated in XVII:1(a), si milarly XVII:1(c) is silent as to how and to
what degree a Member is to act so as to 'not prev ent' consistency. This remains the choice of the
Member concerned. Similarly, Australia submits th at this obligation to refrain cannot be read to
imply a more direct obligation on a Member to actively ensure any form of behaviour by its
enterprises.

53 Panel Report, Korea – Various Measures on Beef ,para 755
54 Panel Report, Korea – Various Measures on Beef , para 757, emphasis added.

4.521 Subparagraph 1(c) also envisages that subparagra phs (a) and (b) are to be read together in
enunciating the obligation contained in subparagraph 1(c). Following this reasoning, when examining
the scope of subparagraph 1(c), the Panel in Canada FIRA concluded that "s ubparagraph 1(b) does
not establish a separate general obligation to allo w enterprises to act in accordance with commercial
considerations"55 .
(d) The need for a case by case approach to the interpretation and application of the standard
4.522 Any application of the elements of Article XVII must necessarily be undertaken on a case-by-
case basis. What is an appropriate application to the particular enterprise in question of the general
principles of non-discriminatory treatment prescribed in GATT 1994, including which principles are
of relevance to the particular acts complained of in the instant case, must be considered.
4.523 It should also be noted that, when elements of subparagraph (b) are a pplied, the language of
the subparagraph itself requires a case by case approach. For example, in considering the meaning of
'solely in accordance with commercial considerations ' it is clear that the a dditional variables listed
('including price, quality, availability, marketability, tr ansportation and other conditions of purchase
or sale') are not intended to be exclusive or exhaustive.
4.524 Additionally, what is a relevant commercial consideration and what would be indicative
evidence that an STE is or is not acting solely in accordance with such cons iderations will vary from
enterprise to enterprise and from industry sector to industry sector. Relevant factual considerations
may include the particular privileges granted to the STE and the regulatory environment under which
it operates.
4.525 Also relevant is what is usual or customar y commercial business practice in the market,
including that of private traders, and the nature and conditions of the international market. For
example, market segregation for the purposes of marketing and pricing is a common private sector
business practice, considered to be in accordance with commercial considerations. Like private
traders, export STEs can and do differentiate be tween markets as a result of supply and demand
conditions. That this is considered permissible behaviour for an STE is expressly recognised in the
interpretive Ad Note to this Article.
56 Similarly pooling arrangements are a normal commercial risk
management and marketing tool used in agricultu ral production and trade by agricultural and other
co-operatives and also are used in other industry sectors, such as insurance.
4.526 Article XVII must not be interpreted in such a way as to be held to require a different
standard for regulation of STE behaviour by Memb ers as distinct from their regulation of private
traders involved in the same activities. This would in effect undermine the legitimacy of the existence
of such enterprises under GATT 1994. Any standard/s applied to purchases and sales involving either
imports or exports by STEs must complement and be consistent with those applied to governmental
measures affecting private traders.
2. Conclusions
4.527 State Trading Enterprises, including those exercising monopoly rights for purchases or sales
involving imports or exports, are permissible under, and are not inconsistent with, GATT 1994.
4.528 The obligation undertaken by a Member under Article XVII:1(a) concerning the conduct of
its STEs is a general obligation to achieve a resu lt, and does not encompass any specific obligations
concerning how that result is to be achieved. The obligation under Article XVII:1(a) also only

55 Panel Report, Canada – FIRA, paras. 5 and 16.
56 Interpretive Note Ad Article XVII paragraph 1.

extends to the behaviour of its STEs in making pur chases or sales involving imports and exports and
not to other behaviour of that STE.
4.529 In regard to assessing whether a member has met its obligation under Article XVII:1, the
behaviour or action of the STE at issue will need to be considered against the standard provided for in
Article XVII:1(a), as assisted by the additional de finitions provided in subparagraph 1(b). The
unambiguous wording of Article XVII:1(a), and the we ight of opinion in previous Panels indicates
that the applicable standard is that of consis tency of the behaviour or action with the general
principles of non-discriminatory treatment prescribed in GATT 1994. What the applicable general
principles are will depend on the facts of each case and the behaviour complained of regarding a
STE's purchases or sales, and possibly also whether the purchase or sale involves imports or exports.
4.530 Similarly, in reviewing the further elements of interpretation in subpa ragraph 1(b) including
'commercial considerations', such requirements mu st be considered on a case by case basis, having
regard to the particular factual situation of each dispute.
4.531 Article XVII must not be interpreted in such a wa y as to require a different level of obligation
to be applied to Members with regard to their non-discriminatory treatment undertakings concerning
their STEs as compared to their measures affecting impor ts or exports by private traders. Similarly, it
must not be interpreted so as to prohibit activities that are permitted, or not prohibited, elsewhere in
the WTO Agreement.
P. T
HIRD PARTY ORAL STATEMENT OF AUSTRALIA
4.532 Australia, in its oral statement, made the following arguments:
4.533 It appears we all agree that the intent of Article XVII is to ensure that Members cannot
circumvent their GATT 1994 obligations regarding non-discrimination through the creation of State
Trading Enterprises to undertake certain trading activities.
4.534 Article XVII does this by having Members undertake that their STEs will act, in their
purchases and sales for import or export, in a manner consistent with the same general principles of
non-discriminatory treatment to which those Members are otherwise bound under the Agreement as
regards their governmental measures affecting imports and exports.
4.535 If the same principles are applied, and if STEs are clearly recognised as not in themselves
inconsistent with GATT 1994, it follows that the in terpretation or application of Article XVII should
not place Members who choose to create and use State Trading Enterprises in a different, and
certainly not a worse, position, than Members who do not utilise STEs. This fundamental approach
must guide the Panel.
4.536 In this regard, Australia believes that it is cr ucial to fulfilling the inte ntion of Article XVII
that the elements of subparagra ph 1(b) are considered and interp reted within the context of, and
therefore consistently with, how the general pr inciples of non-discriminatory treatment noted in
subparagraph 1(a) are interpreted and applied in GATT 1994. Any de -linking of subparagraph 1(b)
elements, for example the 'commercial considerat ions' requirement, from this context risks the
development under Article XVII of a different sta ndard of non-discriminatory behaviour for STEs
from that applied in the rest of the Agreement to governmental measures affecting import and export
trade. This could lead in turn to the undermini ng of the legitimate right of Members to create and
grant privileges to their STEs.

4.537 Also fundamental is that Article XVII covers only the purchases and sales involving imports
or exports of STEs. The nature of that STE, includi ng its particular structur e and privileges, and its
non-purchasing and non-selling activities should not be at issue.
4.538 Consideration of Article XVII a nd its relationship to the rest of the Agreement also suggests
to Australia that care must be taken to distingui sh between situations in which a Member may be
found not to have met one of its GATT 1994 obligati ons (Article XVII) because its STE has not acted
in the way that Member has undertaken it will, and situations in which a Member's own governmental
measures are more directly at issue. Article XV II should not be used to pursue issues regarding the
GATT consistency of a Members' measures which ar e more appropriately dealt with elsewhere under
the agreement.
4.539 Finally, Australia wishes to underline th e need for taking a case-by-case approach, having
regard to the particular factual situation of each enterprise and each dispute, when considering
whether an STE has acted, pursuant to Article XVII, in a manner consistent wi th the relevant general
principles of non-discriminatory treatment applied in GATT 1994 to governmental trade measures.
Our submission to the Panel, and we note those of ot hers, have outlined several factors that will need
to be considered, including, but not limited to, wh at is effective and accepted commercial practice by
private traders operating in the same sector.
Q. THIRD PARTY WRITTEN SUBMISSION OF CHINA
4.540 China, in its written submission, made the following arguments:
1. State Trading Enterprise Issues
(a) Substantive obligations are imposed regarding th e state trading enterprises in Article XVII Of
GATT 1994
4.541 The key issue of Article XVII is to regulate th e activities of state trading enterprises. Under
Article XVII: 1 (a), WTO Members unde rtake that if they maintain a st ate trading enterprise, or grant
exclusive or special privileges to any enterprise, such enterprise shall act in a manner consistent with
the general principles of non-discriminatory treatment , which is further required by explanation in
Article XVII: 1(b) to mean that such enterprises sh all make purchases and sales solely on the basis of
commercial considerations and shall afford th e enterprises of the other Members adequate
opportunity, in accordance with customary business prac tices, to compete for participation in such
purchases or sales.
4.542 Thus, if the requirements of commercial c onsiderations and ade quate opportunity for
competition are met, the non-discriminatory principle is met by WTO Members maintaining or
establishing state trading enterprises or granting exclusive or special privileges to any enterprise.
(b) GATT Article XVII does not impose an obligation on governments to involve in state trading
enterprises' everyday management
4.543 State trading enterprise issue and the interpretation of Article XVII of GATT 1994 are among
the entangled questions under GATT and in WTO, a nd not many panel decisions have touched this
issue. We concern the issue that what role shoul d a Member's government play in regulating state
trading enterprises. According to the position of th e United States, a government should "ensure" that
a state trading enterprise does not engage in trade- distorting conduct. What the United States intends
to establish is that government should pry into or monitor the state trading enterprise's day-to-day
business to ensure that the activities of the ente rprise comply with GATT Article XVII. We cannot
share this view with the United States on this point for the following reasons.

(i) If a government were imposed such an obligation, it would be too burdensome and not
practical.
4.544 By its terms, Article XVII: 1 covers (i) state enterprises and (ii) enterprises granted exclusive
or special privileges. The most recent authoritativ e definition on state trading enterprises lies in the
1994 Understanding on the Interpre tation of Article XVII, which includes the following working
definition:
"Governmental and non-governmental enterprises, including marketing boards, which
have been granted exclusive or special right or privileges, including statutory or
constitutional powers, in the exercise of which they influence through their purchases
or sales the level or direction of imports or exports."
4.545 Neither Article XVII nor the Understanding specifies what percentage of ownership
constitutes a state trading enterprise, nor do they include an illustrative list of special privileges.
Therefore, if an enterprise is conferred some ki nd of privileges by a government, the exercise of
which will influence the level or direction of imports or exports, then it will be considered as a state
trading enterprise. If a government has to monitor or interfere with the day-to-day operation of all
such enterprises, it seems to be unreasonable a nd prohibitively impossible. Neither can the
government afford the personnel nor the time to do this in a market economy. In addition, government
officials are not in a better position to make busines s decisions than the management of state trading
enterprises can do.
(ii) Such an obligation runs afoul of the objective of GATT Article XVII.
4.546 Article XVII 1(b) provides:
"The provisions of sub-paragraph ( a) of this paragraph shall be understood to require
that such enterprises shall, having due re gard to the other provisions of this
Agreement, make any such purch ases or sales solely in accordance with commercial
considerations,* including price, quality, availability, marketability, transportation
and other conditions of purchase or sale, a nd shall afford the enterprises of the other
contracting parties adequate opportunity , in accordance with customary business
practice, to compete for participation in such purchases or sales."
4.547 "With commercial considerations" means that a state trading enterprise should conduct
business in a manner consistent with normal business practices of privately held enterprises in similar
circumstances. The purpose of this provision is to prohibit a government from interfering with state
trading enterprises' day-to-day management a nd evading its obligations under GATT through the
business of state trading enterprises. The United St ates argues that a government shall "ensure" the
state trading enterprises it established acting WTO- legally, and that the non-supervision policy of
Canadian government is inconsistent with its WTO obligations. However, we think that the activities
of state trading enterprises could not be ensure d to be conducted on the basis of "commercial
considerations" if the government interferes with the daily operation of state trading enterprises or
pries or directs their transactions, and thus the objective of Article XVII would be hard to be achieved.
On the other hand, the operations of state trad ing enterprises are carried out on the basis of
"commercial considerations" where their actions ar e not directed by political considerations, and
under government supervision and control neither.
(iii) The Article XVII 1(a) imposes on WTO Members an "obligation of result", not an "obligation
of conduct".
4.548 On this point, we think Canada's argument will stand.

(c) Revenue is a commercial consideration
4.549 The United States alleged that the Canadian Wh eat Board is an revenue -maximizor, and this
kind of enterprises tend to make sales in greater volumes, and at lower prices, than a normal, profit-
maximizing firm. This is only a hypothesis. Moreover, profit is one kind of commercial
considerations; revenue is a kind of commercial consideration, too. According to the United States'
logic, "commercial considerations" in Article XVII would be interpreted as "not including revenue".
This is not right.
4.550 As to the meaning of the phrase "commercial cons iderations", the interpretative notes and the
drafting history indicate that Article XVII:1 (b) would not preclude the charging by a state trading
enterprise of different prices in different export markets
57; nor consideration of the advantages of
receiving a "tied loan" in connection with a purchase. 58 Moreover, it was understood that the phrase
"customary business practice" as used in Article XVII:1 (b) was intended to cover business practices
customary in the respective line of trade.59
4.551 Panels have held that producer-controlled im port monopolies, although they may in practice
infringe rules such as Article XI:1 and XVII, are not intrinsically contrary to GATT. 60 If the
monopoly enterprise handles business with commercial c onsiderations, that will be WTO-legal. The
Canadian Wheat Board is a producer-controlled expo rt monopoly; similarly, it does not inherently
infringe GATT provisions. Only when it concludes transactions with non-commercial considerations
or fails to give adequate competing opportunities, th en it could be accused of violating Article XVII.
In this case, substantial evidences must be put forward before accusing that any GATT or WTO
provisions have been violated.
4.552 To conclude, if a state trading enterprise tries to make sales as much as possible, and it is
doing business with commercial considerations, one cannot say that it violates GATT Article XVII.
(d) Canada's policy of non-supervision does not violate its obligations under Article XVII
4.553 From the submissions of the United States a nd Canada, it is obvious that the Canadian
government does not have complete control over th e Canadian Wheat Board. The majority of the
board of directors are wheat producers. The Canadian government grants some privileges to the
Canadian Wheat Board, but this does not change th e commercial nature of it. It is unreasonable to
oblige Canadian government to look into everyday operation of the Canadian Wheat Board.
4.554 Moreover, as above-mentioned, Article XVII:1 imposes on Contracting Parties of GATT an
"obligation of result", not an "obligation of conduc t". Canada has the discret ion to decide the ways
and means to achieve this goal. Canadian governme nt's obligation is that if the state trading
enterprises it established is proved of violating Article XVII, it will assume the responsibility.
Therefore, Canada's non-supervision does not constitute a violation of Article XVII.
(e) National treatment or most-favoured-nation treatment
4.555 Paragraph 1(a) of Article XVII states that Me mbers shall undertake that their state trading
enterprises shall act in a manner consistent with the general principles of non-discriminatory treatment
prescribed in GATT.

57 Interpretative Note Ad Article XVII:1.
58 Interpretative Note Ad Article XVII:1(b).
59 GATT Analytical Index: Guide to Law and Practice, Updated 6th Edition (1995), p. 477.
60 Panel Report, Korea – Beef (US), para. 115.

4.556 The United States alleges that the "non-discrimin atory treatment" refers to national treatment
rather than most-favoured-nation treatment. Their only support is from the panel report on the Korea -
Various Measures on Beef case. However, various authorities show that the Article XVII 1(a) refers to
most-favoured-nation treatment. The drafting history can be read to suggest that only MFN treatment
is required. For example, in the original Unite d States' proposal only MFN treatment was required,
and there is an explicit statement in the rele vant sub-committee that this was the intention.
61 This
interpretation also finds s upport in two panel reports. 62 Moreover, a United States' proposal in the
Uruguay Round to explicitly subject state trading to the national treatment obligation was not
accepted.
63
4.557 The United States submits that the panel report in Korea - Various Measures on Beef is "far
better reasoned and represents the correct view". We do not agree. The Korea - Various Measures on
Beef panel relied on the GATT Note to Article XI , XII， XIII, XIV and XVIII and concluded that
in a case involving a state trading enterprises import monopoly, the "general principles of non-
discriminatory treatment" in GATT Article XVII:1(a) must include national treatment; otherwise, the
state trading enterprises could refuse to import any fo reign beef, and thus would be free to impose the
type of import restriction prohibited by Article XI.64
4.558 We think that the Korea – Various Measures on Beef panel might be too worried over this
issue. An Interpretative Note explains that a state enterprise may charge different prices for its sales of
a product in different markets as long as this is done for commercial reasons, to meet conditions of
supply and demand in export markets. This provi sion can be reasonably construed as that, if a
transaction is concluded on commercial consider ations, there will no discrimination existing.
Similarly, if a state trade enterprise, with comme rcial considerations, does not import foreign goods
while buying domestic products, it will be WTO-legal.
4.559 On the contrary, if a state trading enterpri se, with non-commercial considerations, favours
domestic products over impor ted ones in its purchases, it might violate Article XVII. In the other
cases, if the state trading enterprises' manner constitu tes any kind of import restriction prohibited by
Article XI, the Article XI will apply. In any case, ther e is no need to stretch the "general principles of
non-discriminatory treatment" to cover national treatment.
4.560 Professor Jackson also has concluded that a m odified or relaxed form of the most-favoured-
nation obligation seems to be the general thrust of Article XVII.65
The preparatory work reflects that the words "general principles of non-
discriminatory treatment" were inserted in Article XVII, paragraph 1(a), at Geneva
(1947) in order to allay the doubt that " 'commercial principles' [in Article XVII,
paragraph 1(b)] meant that exactly the same price would have to exist in different
markets." Thus it appears that what is m eant by "non-discriminatory treatment" is a
Most-Favoured-Nation principle tempered by "commercial consider ations," such as
those listed in Article XVII, paragraph 1(b).

61 See, GATT Analytical Index, op, cit., 475.
62 Panel Report, Belgian Family Allowances (allocations familiales) ("Belgium – Family Allowances "),
63 Terence P. Stewart as editor: The GATT Uruguay Round—A negotiation History (1986-1992),
at 1833.
64 The Note provides that:” Throughout Article XI , XII, XIII, XIV and XVIII, the terms ‘import
restrictions’ or ‘export rest rictions’ include restrictions made eff ective through state-trading operations.”
Article XI, referred to in the Ad note, generally prohibits import restriction.
65 John H. Jackson, World Trade and the Law of GATT (1969), at 346.

(f) The United States did not meet its obligations to prove that Canada violated Article XVII
4.561 The United States claims that Canada does not "intend" for the Canadian Wheat Board to
make sales in accordance with its obligations under Article XVII, and that the privileges provided to
the Canadian Wheat Board "enable" or "allow" the Canadian Wheat Board to act in a fundamentally
non-commercial manner. But the United States cannot bring out any particular transaction concluded
by the Canadian Wheat Board in a non-commercial manner. Mere allegation is not enough to support
the United States' claim.
4.562 The United States alleged that relevant Canadian laws and regulations with respect to the
Canadian Wheat Board such as the Canadian Wheat Board Act "enable" or "allow" the Canadian
Wheat Board to do business with non-commercial cons ideration. However, these Canadian laws and
regulations do not necessarily lead to the result th at the Canadian Wheat Board has handled business
with non-commercial considerations. According to United States' logic, any monopoly or privilege
will entail non-commercial behaviour, and all state trading enterprises are pr esumed to do business
with non-commercial considerations. If this is the case, th e existence of state trading enterprises itself
will be WTO-illegal, and Members w ill be deprived of the right to establish state trading enterprises
and Article XVII will be turned void.
2. Canada's Treatment Of Imported Grain
(a) Segregation is not inconsistent with Article III in itself
4.563 According to the panel report of Korea – Various Measures on Beef, the "dual retail" system
that keeps imported beef and domestic beef apar t does not amount to a competitive advantage for
domestic beef. 66 If United States is to establish that Canadian grain segregation system violates
Article III, it must adduce adequate evidence and/ or prove that the relevant Canadian laws and
regulations regarding the segregation system are in violation of Article III (4) in itself. Without
meeting such burden of proof, it is inappropriate to reach a conclu sion that the Canadian segregation
of imported goods from domestic products violates Article III (4). We do not think the United States
provided adequate evidence in this regard.
3. Conclusion
4.564 The Canadian Wheat Board is a state trading enterprise. Nonetheless, the existence of the
Canadian Wheat Board itself is not a violation of GATT Article XVII. Only if there is sufficient proof
that the Canadian Wheat Board has done busin ess not in a manner in acco rdance with commercial
considerations, Canada might be held to have violated Article XVII. A government has no positive
obligations to involve in state trading enterpri ses' everyday business. Therefore, the Canadian non-
supervision policy to the Canadian Wheat Board does not violate its obligation under Article XVII.
4.565 The United Stated fails to prove that Cana dian grain segregation requirements between
domestic and imported grain violate GATT Article III: 4The Basic Principle of Good Faith
R. THIRD PARTY ORAL STATEMENT OF CHINA
4.566 China, in its oral statement, made the following arguments:

66 Panel Report, Korea – Beef (US), paras. 135 and 137.

1. State Trading Enterprise Issues
(a) Substantive obligations are imposed regarding th e state trading enterprises in Article XVII Of
GATT 1994
4.567 The key issue of Article XVII is to regulate th e activities of state trading enterprises. Under
Article XVII: 1 (a). WTO Members unde rtake that if they maintain a st ate trading enterprise, or grant
exclusive or special privileges to any enterprise, such enterprises shall act in a manner consistent with
the general principles of non-discriminatory treat ment. Article XVII: 1 (a) is explained in
Article XVII: 1(b) to mean that such enterprises sh all make purchases and sales solely on the basis of
commercial considerations and shall afford the en terprises of the other Members adequate competing
opportunity.
4.568 Thus, if the requirements of commercial c onsiderations and ade quate opportunity for
competition are met, the non-discriminatory principle is met by WTO Members maintaining or
establishing state trading enterprises
(b) GATT Article XVII does not impose an obligation on governments to involve in state trading
enterprises' everyday management
4.569 We concern the issue that what role should a Member's government play in regulating state
trading enterprises. According to the position of th e United States, a government should "ensure" that
a state trading enterprise does not engage in trade-di storting conduct. What the United States intends
to establish is that government should pry into or monitor the state trading enterprise's day-to-day
business to ensure that the activities of the ente rprise comply with GATT Article XVII. We cannot
share this view with the United States' for the following reasons.
(i) If a government were imposed such an oblig ation, it would be too burdensome and not
practical.
4.570 By its terms, Article XVII: 1 covers (i) state enterprises and (ii) enterprises granted exclusive
or special privileges. The most recent authoritativ e definition on state trading enterprises lies in the
1994 Understanding on the Interpretation of Article XVII, which includes a working definition.
4.571 Neither Article XVII nor the Understanding specifies what percentage of ownership
constitutes a state trading enterprise, nor do they include an illustrative list of special privileges.
Therefore, if an enterprise is conferred some ki nd of privileges by a government, and the exercise of
these privileges will influence the level or direction of imports or exports, then it will be considered as
a state trading enterprise. If a government has to mo nitor or interfere with the day-to-day operation of
all such enterprises, it seems to be unreasonabl e and prohibitively impossible. Neither can the
government afford the personnel nor the time to do this in a market economy. In addition, government
officials are not in a better position to make busines s decisions than the management of state trading
enterprises can do.
(ii) Such an obligation runs afoul of the objective of GATT Article XVII
4.572 Article XVII 1(b) provides that state trading enterprises shall make purchases or sales solely
in accordance with commercial considerations.
4.573 "With commercial considerations" means th at a STE should conduct business in a manner
consistent with normal business practices of privat ely-held enterprises in similar circumstances. The
purpose of this provision is to prohibit a governme nt from interfering with state trading enterprises'
day-to-day management and evading its oblig ation under GATT through the business of such

enterprises. The United States' argues that a government shall "ensure" the state trading enterprises it
established acting WTO-legally, and that the non-s upervision policy of Canadian government is
inconsistent with its WTO obligations. However, we think that the activities of state trading
enterprises could not be ensured to be conducted on the basis of "commercia l considerations" if the
government interferes with the daily operation of st ate trading enterprises, and thus the objective of
Article XVII would be hard to be achieved. On the other hand, the operation of state trading
enterprises will be carried out on the basis of "comme rcial considerations" where their actions are not
directed by political considerations, and not under government supervision or control.
(iii) The Article XVII 1(a) imposes on WTO Members an "obligation of result", not an "obligation
of conduct"
4.574 On this point, we think Canada's argument in their first written submission will stand.
(iv) There are no "two levels of " obligations in Article XVII
4.575 The United States argues that Article XVII places two levels of Member obligations, a strict
supervising obligation on state trading enterprises and a less rigid one on ot her enterprises provided
by Article XVII 1(c).
4.576 The plain text of Article XVII 1(c) is that th is provision applies to state trading enterprises
and other enterprises equally. This means that no matter a state trading enterprise or not, a
government should not interfere with its operation w ith non-commercial considerations. We could not
see any intention in this provision that different sta ndards shall be applied to a state trading enterprise
and a non-state trading enterprise.
(c) Revenue is a commercial consideration
4.577 The United States alleged that the Canadian Wh eat Board is an revenue -maximizor, and this
kind of enterprises tend to make sales in greater volumes, and at lower prices, than a normal, profit-
maximizing firm. This is only a hypothesis. Moreover, profit is one kind of commercial
considerations; revenue is a kind of commercial consideration, too. According to the United States'
logic, "commercial considerations" in Article XVII would be interpreted as "not including revenue".
This is not right.
4.578 Panels have held that producer-controlled im port monopolies, although they may in practice
infringe rules such as Article XI:1 and XVII, are not intrinsically contrary to GATT.
67 If the
monopoly enterprise handles business with commercial c onsiderations, that will be WTO-legal. The
Canadian Wheat Board is a producer-controlled expo rt monopoly; similarly, it does not inherently
infringe GATT provisions. Only when it concludes transactions with non-commercial considerations
or fails to give adequate competing opportunities, th en it could be accused of violating Article XVII.
In this case, substantial evidences must be put forward before accusing that any GATT or WTO
provisions have been violated.
4.579 To conclude, if a state trading enterprise tries to make sales as much as possible, and it is
doing business with commercial considerations, one cannot say that it violates GATT Article XVII.
(d) Canada's policy of non-supervision does not violate its obligation under Article XVII
4.580 From the submissions of the United States' and Canada, it is obvious that the Canadian
government does not have complete control over th e Canadian Wheat Board. The majority of the

67 Panel Report, Korea – Beef (US), para. 115.

board of directors are wheat producers. The Canadian government grants some privileges to the
Canadian Wheat Board, but this does not change th e commercial nature of it. It is unreasonable to
oblige Canadian government to look into everyday operation of the Canadian Wheat Board.
4.581 Moreover, as above-mentioned, Article XVII:1 imposes on Contracting Parties of GATT an
"obligation of result", not an "obligation of conduc t". Canada has the discret ion to decide the ways
and means to achieve this goal. Canadian governme nt's obligation is that if the state trading
enterprises it established is proved of violating Article XVII, it will assume the responsibility.
Therefore, Canada's non-supervision does not constitute a violation of Article XVII.
(e) National treatment or most-favoured-nation treatment
4.582 Paragraph 1(a) of Article XVII states that Me mbers shall undertake that their state trading
enterprises shall act in a manner consistent with the general principles of non-discriminatory treatment
prescribed in GATT.
4.583 The United States alleges that the "non-discrimin atory treatment" refers to national treatment
rather than most-favoured-nation treatment. Thei r only support is from the panel report on the Korea
– Various Measures on Beef case. However, various authorities show that the Article XVII 1(a) refers
to most-favoured-nation treatment. The drafting hi story can be read to suggest that only MFN
treatment is required. For example, in the origin al United States' proposal only MFN treatment was
required, and there is an explicit statement in the relevant sub-committee that this was the intention.
68
This interpretation also finds support in two panel reports.69 Moreover, a United States' proposal in the
Uruguay Round to explicitly subject state trading to the national treatment obligation was not
accepted.
70
4.584 The United States submits that the panel report in Korea – Various Measures on Beef is "far
better reasoned and represents the correct view". We do not agree. The Korea – Various Measures on
Beef panel relied on the GATT Note to Article XI, XII, XIII, XIV and XVIII and concluded that in
a case involving a state trading enterprise import monopoly, the "general principles of non-
discriminatory treatment" in GATT Article XVII:1(a) must include national treatment; otherwise, the
state trading enterprises could refuse to import any fo reign beef, and thus would be free to impose the
type of import restriction prohibited by Article XI.71
4.585 We think that the Korea – Various Measures on Beef panel might be too worried over this
issue. An Interpretative Note explains that a state enterprise may charge different prices for its sales of
a product in different markets as long as this is done for commercial reasons, to meet conditions of
supply and demand in export markets. This provi sion can be reasonably construed as that, if a
transaction is concluded on commercial consider ations, there will no discrimination existing.
Similarly, if a state trade enterprise, with comme rcial considerations, does not import foreign goods
while buying domestic products, it will be WTO-legal.
4.586 On the contrary, if a state trading enterpri se, with non-commercial considerations, favours
domestic products over impor ted ones in its purchases, it might violate Article XVII. In the other
cases, if the state trading enterprises' manner constitu tes any kind of import restriction prohibited by

68 See, GATT Analytical Index, op, cit., 475.
69 Panel Report, Belgian Family Allowances, para. 4; Panel Report, Canada – FIRA, para. 6.16.
70 Terence P. Stewart as editor: The GATT Uruguay Round — A negotiation History (1986-1992), at
1833.
71 The Note provides that:” Throughout Article XI, XII XIII, XIV and XVIII, the terms ‘import
restrictions’ or ‘export rest rictions’ include restrictions made eff ective through state-trading operations.”
Article XI, referred to in the Ad note, generally prohibits import restriction.

Article XI, the Article XI will apply. In any case, ther e is no need to stretch the "general principles of
non-discriminatory treatment" in Article XVII to cover national treatment.
4.587 Professor Jackson also has concluded that a m odified or relaxed form of the most-favoured-
nation obligation seems to be the general thrust of Article XVII in his famous book World Trade and
the Law of GATT.72
(f) The United States did not meet its obligations to prove that Canada violated Article XVII
4.588 The United States claims that Canada does not "intend" for the Canadian Wheat Board to
make sales in accordance with its obligations under Article XVII, and that the privileges provided to
the Canadian Wheat Board "enable" or "allow" the Canadian Wheat Board to act in a fundamentally
non-commercial manner. But the U. S. cannot bring out any particular transaction concluded by the
Canadian Wheat Board in a non-commercial manner . Mere allegation is not enough to support the
United States' claim.
4.589 The United States alleged that relevant Canadian laws and regulations with respect to the
Canadian Wheat Board such as the Canadian Wheat Board Act "enable" or "allow" the Canadian
Wheat Board to do business with non-commercial consid eration. However, these laws and regulations
do not necessarily lead to the r esult that the Canadian Wheat Bo ard has handled business with non-
commercial considerations. According to United St ate's logic, any monopoly or privilege will entail
non-commercial behaviour, and all state trading enterprises are presumed to do business with non-
commercial considerations. If this is the case, the ex istence of state trading enterprises itself will be
WTO-illegal, and Members will be deprived of th e right to establish state trading enterprises and
Article XVII will be turned void.
2. Canada's Segregation of Imported Grain Is Not Inconsistent with Article III In Itself
4.590 According to the panel report of Korea - Various Measures on Beef, the "dual retail" system
that keeps imported beef and domestic beef apar t does not amount to a competitive advantage for
domestic beef.
73 If United States is to establish that Canadian grain segregation system violates
Article III, it must adduce adequate evidence and/ or prove that the relevant Canadian laws and
regulations regarding the segregation system are in violation of Article III (4) in itself. Without
meeting such burden of proof, it is inappropriate to reach a conclu sion that the Canadian segregation
of imported goods from domestic products violates Article III (4). We do not think the United States
provided adequate evidence in this regard.
S. THIRD PARTY WRITTEN SUBMISSION OF THE EUROPEAN COMMUNITIES
4.591 In its third party written submission, the European Communities made the following
arguments:
1. The United States' Claims under Article XVII:1 GATT 1994
(a) The non-discrimination obligation under Article XVII:1(a) and (b) GATT 1994
4.592 In the European Communities' view, Article XVII:1(a) and (b) GATT do not have an identical
scope, even though they are interrelated. Subparagr aph (b) does not give an exhaustive interpretation
or qualification of subparagraph (a). The language of subparagraph (b) does not say that subparagraph
(a) shall be understood to require only that STEs should act in accordance with "commercial

72 John H. Jackson, World Trade and the Law of GATT (1969), at 346.
73 Panel Report, Korea – Beef (US), paras. 135 and 137.

considerations" and respect the "adequate opportu nities" obligations. Moreover, it would seem
implausible that one sole qualification such as that under subparagraph (b) could define
comprehensively the general principle s of non-discriminatory treatment under subparagraph (a). For
these reasons, the European Communities consider s that the scope of the obligation of non-
discrimination under subparagraph (a) is broa der than the related qualification under
subparagraph (b).
4.593 The European Communities notes a certain ambi guity in the Panel jurisprudence on the
relationship between subparagraphs (a) and (b). Yet, the European Communities agrees with a
conceptual approach according to which subparagra ph (b) does not give an exhaustive definition, but
rather qualifies one specific aspect of the obligation contained in subparagraph (a).
4.594 With regard to the scope of the "non-discriminatory treatment" obligation under subparagraph
(a), the European Communities concurs with the Korea – Various Measures on Beef Panel that this
provision encompasses the most favoured nation ("MF N") and the national treatment principle. Yet,
the European Communities notes that the GATT Ad Note Article XVII modifies the application of the
MFN principle because if a STE varies its prices for "commercial reasons" it would not violate the
non-discriminatory obligation under Article XVII:1(a) GATT in conjunction with the MFN principle.
4.595 With regard to subparagraph (b), the Europ ean Communities considers that if a STE operates
in its trade related activities on the basis of its sp ecial and exclusive commercial advantages it is not
per se prevented from acting "in accordance with commercia l considerations". This notion has to be
interpreted in the light of a normal (private) commercial behaviour. The European Communities
would also emphasise that the second criterion und er Article XVII:1(b) GATT which is to provide
other enterprises "adequate opportunities,…, to comp ete for participation in such purchases or sales"
counterbalances to a certain extent the commercial use of the STEs special and exclusive economic
rights.
4.596 The European Communities has doubts whethe r the CWB in its export sales activities
respects the non-discrimination standard under Article XVII:1(a) and (b) GATT. Sections 5 and 7(1)
of the CWB Act , which describe the purpose of the CWB, do not contain any requirement that
operations should be made "in accordance with comme rcial considerations" or that they require to
afford for "adequate opportunities" for competitors. Similarly, neither provision requires the CWB to
act in accordance with general principles of non-discriminatory treatment, as required by
Article XVII:1 (a).
4.597 One appropriate way of dete rmining whether the CWB is acting in accordance with
"commercial considerations" would be to assess th e relevant data on prices charged by the CWB on
export sales and the European Communities would en courage the Panel to ask Canada whether it
could provide respective data.
4.598 The European Communities would, in principle, agree with the United States' economic
analysis on the impact of CWB exclusive and speci al rights corroborating the European Communities'
doubts whether the CWB's trade activities are "in ac cordance with commercial considerations", and
whether they afford "adequate opportunities" to other competitors. The European Communities finally
considers that the general principles of non-discrim inatory treatment in respect of MFN may not be
respected if the CWB targets specific third country markets. Whether this is the case is primarily a
factual question. However, the European Communiti es recalls that under Sections 5 and 7(1) of the
CWB Act
 export sales must not necessarily be made in accordance with "commercial considerations".

(b) The Member's obligation to secure complian ce with the non-discriminatory principles under
Article XVII:1(a) and (b) GATT 1994
4.599 The language of Article XVII:1(a) unequivocally provides that Members "undertake" that
their STEs comply with the basic non-discriminatory GATT rules. Thus, Members must "ensure" that
STEs do not engage in trade-distorting conduct. Ther efore, Members do not es cape their basic GATT
obligations by establishing or maintaining a STE.
4.600 The nature of this Member's obligation is an " obligation of result" and not an "obligations of
means". Article XVII:1(a) GATT does not prescribe precise ways and means on how to achieve the
objective of compliance with the general principl es of non-discriminatory treatment. The European
Communities does not understand the United States' position to suggest certain specific "processes
and procedures" to meet the obligations under Artic le XVII:1(a) GATT and which could therefore be
regarded as an "obligation of means". Yet, the European Communities consider that under
Article XVII:1(a) and (b) GATT, a Member has to provide for some kind of mechanism in order to
effectively ensure whether its STEs comply with the objective of non-discriminatory treatment as set
out under this provision. In this sense, a failure to employ the necessary means may result in a
violation of the "obligation of result".
4.601 A violation of the Member's obligation under Ar ticle XVII:1(a) GATT could, in principle,
occur in two cases:
• Either because of structural shortcomings due to which a STE will systematically violate in its
trade-related operations Article XVII:1(a) and (b) GATT.
• Or if a STE disregards in specific cases Article XVII:1(a) and (b) GATT.
4.602 The European Communities con cerns regarding CWB's respect of the requirements under
Article XVII:1(a) and (b) GATT are of structural nature. Logically it would follow that, in turn,
Canada by establishing and maintaining the CWB, did not comply with its obligations under
Article XVII:1(a) and (b) GATT. More specifi cally, the European Communities notes Canada's
argument during the preliminary proceedings that th e CWB "is not under the control or influence of
Canada". While the European Communities agr ees that the purpose of the obligation under
Article XVII:1(a) GATT is not to oblige Members to interfere in the day-to-day business, the
European Communities considers it nevertheless indi spensable that a Member should take whatever
measures are necessary, including possibly some kind of supervisory control on STE's operations.
4.603 The European Communities also considers th at Canada's explanation of the CWB's
institutional structure does not provide for suffi cient assurances that the CWB actually acts in
accordance with the obligations under Article XVII:1 (a) and (b) GATT. Canada's defence is solely
focused on the commercial behaviour of the CWB. However, under Article XVII:1(b) GATT it is
equally necessary that enterprises from other Memb ers should be given "adequate opportunities (…)
to compete for participation in such purchases or sales". Canada's explanation does not address how
its control mechanisms take into account this aspect of Article XVII:1(b) GATT.
2. The United States' Claims under Article III:4 of the GATT 1994
(a) The Canadian Grain Segregation Requirements
4.604 The requirements to be fulfilled to establish a violation of Article III:4 are defined as follows:
•
 the imported and domestic products must be like products;

• the measure at issue must be a law, regulation, or requirement affecting the internal sale,
offering for sale, purchase, transportation, distribution, or use;
• the imported products must be accorded "less fa vourable treatment" than that accorded to like
domestic products.
4.605 The European Communities does not see a legal di fficulty in regard to the definition by the
United States of the like products concerned which are under stood to be, but for the difference in
origin, otherwise identical.
4.606 Furthermore, the European Communities unde rstands the United States' claims under
Article III:4 GATT to be concerned exclusively with the internal sale of wheat in Canada, but not
with the transit of grain through Canada.
4.607 The European Communities considers that the ge neral prohibition for foreign grain to enter
Canadian grain elevators results in conditions of competition less favourable to foreign grain than to
domestic grain. By generally prohibiting the entry of foreign grain into Canadian grain elevators,
Canada effectively shuts the Canadian bulk grain handling system to foreign grain. Such a closure of a
central part of the handling and distribution networ k to foreign products must be considered as
constituting less favourable treatment within the meaning of Article III:4 GATT. Support for this
interpretation can be found in the Appellate Body Report in Korea – Various Measures on Beef and in
the Panel Report in Canada – Provincial Liquor Boards (EEC)

4.608 The European Communities consider s that the facts evoked by Canada in its defence such as
direct end user deliveries, the good knowledge of the processes, or possibility of authorisations
granted by the Canada Grain Commission, do not remove the less favourable treatment of foreign
grain. As the Panel held in Korea - Various Measures on Beef , it is not necessary to demonstrate
actual and specific negative effects of a trade measure in order to establish a violation of Article III:4
GATT:
4.609 The European Communities considers the prohi bition on mixing of Canadian and foreign
wheat equally as a less favourable treatment of foreign grain. The possibility of a special authorisation
for mixing of imported grain, which is not required for domestic grain, does not remove this violation
of Article III:4 GATT.
4.610 With regard to a possible justification under Article XX(d) GATT, the European
Communities recalls that in United States – Gasoline , the Appellate Body clarified the two-step
analysis in the application of Article XX GATT, i. e. first, whether the measure is "provisionally
justified" under one or another of the particular exceptions – paragraphs (a) to (j) – listed under
Article XX; and second, it must be appraised whet her the measure satisfies also the requirements
imposed by the opening clauses of Article XX GATT.
4.611 The party who invokes Article XX GATT bears th e burden of proof. Canada, thus far, has
failed to prove that the measure is provisionall y justified under Article XX (d) GATT. The simple
reference to the enforcement of the "CGA, the CWB Act, and the misrepresentations and consumer
protection provisions of Canada's competitions laws" is not sufficient to estab lish that these laws and
regulations are "consistent with the Agreements ", and that the measures in question would be
"necessary" to ensure compliance with such laws. Canada appears to assume that foreign grain is
inferior to Canadian grain. The European Co mmunities does not share this assumption. In this
context, the European Communities notes in partic ular the statement by Canada that there are no
mixing restrictions that apply to end-users. If this is so, the question arises why such restrictions are
maintained at the level of the bulk-trading system.

4.612 Even if the objective of the CGA to ensure seg regation of Canadian and foreign wheat were
considered legitimate, the Eur opean Communities still doubts that they could be considered as
"necessary", as defined in United States - Section 337, since less restrictive alternatives are available.
For instance, in order to avoid contact or mixi ng of foreign and domestic grain, regulations on
elevator management and cleaning coupled with on-the-spot checks could easily have achieved the
same goal. Similarly, in respect of the mixing requirement, appropriate labelling or grading provisions
could make the mixed origin of wheat transparent to the purchaser or consumer.
(b) Differential Treatment in the Canadian Transportation System
4.613 As regards the revenue cap, the European Commun ities considers that to the extent that this
measure results in lower charges for the transport of domestic grain compared to imported grain, it
constitutes less favourable treatment of imported compared to domestic products, and therefore
violates Article III:4 GATT. In this context, the European Communities recalls the findings of the
Panel in Canada - Periodicals , which held that the provision of special lower postal rates for the
posting of domestic periodicals constituted a violation of Article III:4 GATT. As to Canada's defence
that the revenue cap has never been reached, and th erefore has not had an effect on rates and charges,
the European Communities considers that the onus to show that the revenue cap has had no effect on
rates should be on Canada. The European Commun ities also notes that the revenues indicated by
Canada were not very significantly short of the revenue cap.
4.614 In respect of the producer railway car allo cation, the European Communities considers the
availability of such railway cars to foreign producers as a factual question. The European
Communities, therefore, cannot take a position on this. However, the Euro pean Communities would
like to stress that if such railway cars are indeed available only for the transportation of domestic
grain, but not for imported products, this would constitute a violation of Article III:4 GATT.
3. The United States' Claims under the TRIMs Agreement
4.615 Regarding the relationship between Article III:4 GATT and the TRIMS the European
Communities recalls the finding of the Panel in Indonesia - Cars , according to which the TRIMs
Agreement and Article III GATT are two legally independent and distinct sets of provisions. On the
other hand, Panels have also exercised judici al economy and based themselves exclusively on
Article III:4 GATT in cases where they came to the conclusion that a measure was already
incompatible with Article III:4 GATT, or if they felt that their conclusions as to Article III:4 GATT
also invalidated the claims made under Article 2 of the TRIMs.
4.616 Should the Panel consider it necessary to examine the United States' claims under Article 2 of
the TRIMS, the European Communities would remark that the coverage of the TRIMs Agreement is
defined in Article 1 thereof. It should be stressed that only TRIMs, and not any violation of Article III
of the GATT, fall under the TRIMs Agreement.
4.617 The TRIMs Agreement does not contain a definition of the term "investment measure".
However, in Indonesia - Cars the Panel attached significance to th e fact that the measures in question
had "investment objectives and investment features" and "were aimed at encouraging the development
of a local manufacturing capability". In the presen t case, the European Communities does not see in
which way the Canadian measures would be related to investments.
4.618 As to the United States' reference to point 1 (a) of the Illustrative List, the European
Communities doubts that the Canadian measures fall under this definition. In particular, it should be
noted that Point 1 (a) refers to "the purchase or us e by an enterprise of products of domestic origin".
However, neither grain elevator nor rail car opera tors normally "purchase or use" the grain; rather,

they provide a service with respect to the grain, namely the handling, storage, or transportation
thereof.
4. Conclusion
4.619 For these reasons the European Communities submits that
• Canada appears not to comply with the obligations under Article XVII:1(a) and (b) GATT.
• Canada is in violation of Article III:4 GATT w ith regard to the Canadian grain segregation
requirements, and, depending on the clarification of certain factual issues, also with regard to
the differential treatment of domestic and im ported grain under the Canadian transportation
system.
• The Canadian measures do not fall under the TRIMs Agreement.
T. T
HIRD PARTY ORAL STATEMENT OF THE EUROPEAN COMMUNITIES
4.620 The European Communities, in its oral statement, made the following arguments:
1. The United States' Claims under Article XVII:1 GATT 1994
4.621 The European Communities would note that the language of Article XVII:1(a) is
unequivocal: Members "undertake" that their STEs comply with the basic non-discriminatory GATT
rules, as refined by Article XVII:1(b) GATT. To this extent, Members must "ensure" that STEs do not
engage in trade-distorting conduct. Thus, a Memb er may not escape its basic GATT obligations by
establishing or maintaining a state trading enterprise.
4.622 In the European Communities' view, the nature of the Member's obligation is an "obligation
of result" and not an "obligations of means" . Indeed, Article XVII:1(a) GATT does not prescribe
precise ways and means on how to achieve the objectiv e of compliance with the general principles of
non-discriminatory treatment. Yet, the European Communities considers it as evident that under
Article XVII:1(a) and (b) GATT, a Member would ha ve to provide for some kind of mechanism in
order to effectively ensure that its STEs comply w ith the objective of non-discriminatory treatment as
set out under this provision.
4.623 In the European Communities' view, a vi olation of the Member's obligation under
Article XVII:1(a) GATT could be established in two ways:
• Either because of structural shortcomings due to which a STE will systematically violate in its
trade related operations Article XVII:1(a) and (b) GATT.
• Or if a STE acts in specific cases in a matter in compatible with Article XVII:1(a) and (b)
GATT.
4.624 Turning to the substantive content of the ob ligations of Article XV II:1 (a) and (b), the
European Communities considers it necessary to first examine the relationship between these
subparagraphs of Article XVII:1. In this respect , the European Communities would submit that, even
though they are interrelated, Article XVII:1(a) a nd (b) GATT do not have an identical scope. In the
view of the European Communities, subparagraph (b ) does not give an exhaustive interpretation of
subparagraph (a). Indeed, subparagr aph (b) does not say that subparagraph (a) shall be understood to
require only that STEs should act in accordance with "commercial considerations" and respect the
obligation to provide "adequate opportunities".

4.625 In the view of the European Communities, an interpretation which would equate the standards
of subparagraph (b) with those of subparagrap h (a) would render one of the two provisions
superfluous. For these reasons, the European Communiti es considers that Articles XVII :1 (a) and (b)
establish related, but complementary obligations. In other words, the scope of the obligation of non-
discrimination under subparagraph (a) is broader th an the obligation to act in accordance with
commercial considerations under subparagraph (b).
4.626 With regard to the content of Article XVII:1 (a), the European Communities would agree with
the Korea - Various Measures on Beef Panel that this provision encompasses the most-favoured-
nation ("MFN") and the national treatment principle. Yet, the European Communities would also note
that the GATT Ad Note to Article XVII modifies the application of the MFN principle because if a
STE varies its prices for "commercial reasons" it would not violate the non-discriminatory obligation
under Article XVII:1(a) GATT in conjunction with the MFN principle.
4.627 With regard to the obligations under subparagraph (b), the European Communities considers
that the fact that a STE operates in its trade relate d activities on the basis of its special and exclusive
commercial advantages does not per se prevent it from acting "in accordance with commercial
considerations". However, should an STE use its specia l privileges in order to act in a way that is not
motivated by commercial considerations, this would be incompatible with Article XVII:1 GATT.
4.628 Against this background, the European Comm unities has doubts whether the CWB's structure
and activities are compatible with Article XVII:1(a) and (b) GATT.
4.629 First, the European Communities would refer to the statutory provisions of the Canadian
Wheat Board Act, and notably Sections 5 and 7(1) thereof, which describe the overall purpose of the
CWB's activities. The first provision merely refers to the "marketing in an orderly manner". This
general purpose is further specified by the provision that CWB must charge "reasonable" prices in
view of promoting the sale of grain in world ma rkets. In contrast, neither provision contains any
requirement that operations should be made "in a ccordance with commercial considerations" or that
they provide "adequate opportunities" for competito rs. Similarly, neither provision requires the CWB
to act in accordance with general principles of non-discriminatory treatment. On the basis of these
provisions, it appears that the mandate of the CWB is not limited to commercial activities, but that it
is also mandated to take into account considerations which are not of a commercial nature.
4.630 Second, the European Communities would, in principle, agree with the United States'
economic analysis of the impact of CWB's exclusive and special rights. In the European
Communities' view, these privileges corroborate its doubts as to whether the CWB's trade-related
activities are "in accordance with commercial consider ations", and whether they afford "adequate
opportunities" to other competitors. Similarly, th e European Communities sh ares the United States'
concern that general principles of non-discriminatory treatment in respect of MFN may not be
respected if the CWB targets particular export ma rkets and harms other Member's wheat sellers by
shutting them out of markets.
4.631 In this context, the European Communities w ould emphasize that an appropriate way of
determining whether the CWB is acting in accordance with "commercial considerations" would be to
assess the relevant data on prices charged by the CWB on export sales. For the purpose of these
proceedings, the European Communities would ther efore encourage the Panel to ask Canada, in
accordance with Article 13 DSU, whether it could provide respective data on these export sales.
4.632 The European Communities, therefore, is con cerned that the structure and activities of the
CWB are not in compatibility with Article XVII:1(a) and (b) GATT.

2. The United States' Claims under Article III:4 of the GATT 1994
4.633 The main issue arising under Article III:4 is whether the Canadian grain segregation measures
can be regarded as granting less favourable treatment to imported wheat. As the United States has
aptly pointed out, the purpose of Article III:4 GATT mu st be seen in the light of Article III:1 GATT,
from which it results that "internal measures shoul d not be applied to impor ted or domestic products
so as to afford protection to domestic production".
4.634 When applied to the Canadian prohibition for fore ign grain to enter Canadian grain elevators,
the European Communities considers that this prohi bition clearly results in conditions of competition
less favourable to foreign grain than to domestic gr ain. As Canada has itself stated, the Canadian
grain handling and transportation system is primar ily a bulk system. Thus, by generally prohibiting
the entry of foreign grain into Canadian grain elev ators, Canada effectively shuts the Canadian bulk
grain handling system to foreign grain. Such a closure of a central part of the handling and
distribution network to foreign products must be considered as constituting less favourable treatment
within the meaning of Article III:4 GATT. Supp ort for this interpretation can be found in the
Appellate Body Report in Korea – Various Measures on Beef and in the Panel Report in Canada –
Provincial Liquor Boards (EEC)

4.635 The fact evoked by Canada that foreign prod ucers are not obliged to use Canadian grain
elevators, and may for instance deliver directly to Canadian end users, does not remove the
unfavourable effects of the prohibition. It must be presumed that an efficient bulk grain handling
system offers cost advantages compared to ad hoc distribution possibilities.
4.636 Finally, Canada argues in defence of its measure that derogations from this general
prohibition may be granted by the Canada Grain Co mmission, and that the latter has never refused the
entry into Canadian grain elevators of foreign gr ain. However, in the Eu ropean Communities' view,
this possibility of derogation does not remove the l ess favourable treatment of foreign grain. Already
the requirement to obtain an authorization, whic h does not apply to domestic products, constitutes a
competitive disadvantage, which constitutes less favourable treatment.
4.637 The fact that the CGC has never refused entry of foreign grain, which was referred to by
Canada, similarly does not affect this conclusion. As the Panel held in Korea - Various Measures on
Beef, it is not necessary to demonstrate actual and specific negative effects of a trade measure in order
to establish a violation of Article III:4 GATT. Accord ingly, the fact that an authorization was granted
in all cases an application was made does not preclude that the authorization requirement may have
deterred exporters from third countries, who may therefore not even have applied.
4.638 As regards the prohibition on mixing of Canadian and foreign wheat, the European
Communities considers that this equally constitutes less favourable treatment of foreign grain. In a
bulk trading system, the quantity of grain supplie d by one provider and the quantity demanded may
not always coincide. In this situation, it will be natural for grain handlers to mix grain of different
origins, as long as it is otherwise identical, in orde r to meet the quantity demanded. To be excluded
from this possibility of mixing is a significant co mpetitive disadvantage for foreign grain, which
constitutes only a minor proportion of the Canadian market.
4.639 In this context, Canada argues that under certain circumstances defined in its law, the mixing
of Canadian and foreign wheat may nevertheless be allowed. However, as already outlined above, the
requirement of a special authorization for mixi ng of imported grain constitutes a violation of
Article III:4 GATT. Moreover, these derogations seem to have been granted only in few narrowly
defined cases.

4.640 Regarding Canada's reference to Article XX(d) , the European Communities would recall that
the party who invokes Article XX GATT bears the burden of proof. Yet, in the European
Communities' view, Canada fails to prove that the measure is provisionally justified under
Article XX(d) GATT. The simple referen ce to the enforcement of the "CGA, the CWB Act, and the
misrepresentations and consumer protection provi sions of Canada's competitions laws" is not
sufficient to establish that these laws and regulations are "consistent with the Agreements", and that
the measures would be "necessary" to ensure compliance with such laws.
4.641 In its submission, Canada describes at some length its "Grain Quality Assurance Scheme",
and stresses the importance it attaches to this for en suring the quality of "Canadian grain". However,
the segregation requirements and mixing prohibitio ns seem to be based on the assumption that
Canadian grain is necessarily superior in quality to imported grain. As the United States has aptly
noted, this is particularly striking in the drafting of Section 57 of the Canada Grain Act, which seems
to put foreign grain on a par with infested or contaminated grain.
4.642 The European Communities sees no basis for such an assumption of an inferiority of foreign
to Canadian grain. Whereas the European Commun ities appreciates the need to ensure appropriate
protection of traders and consumers with respect the variety, grade, and other relevant characteristics
of grain, the European Communities does not believe this justifies the segregation measures taken by
Canada.
4.643 For this reason, the European Communities does not consider the CGA and the CWB "to
constitute laws or regulations cons istent with the provisions of the GATT". For the same reason, the
European Communities does not consider that the measures in question are necessary for the
prevention of deceptive practices.
4.644 Even if the objective of the CGA to ensure seg regation of Canadian and foreign wheat were
considered legitimate, the Eur opean Communities still doubts that they could be considered as
"necessary".
4.645 In the current context, it appears that the Cana dian restrictions on access to elevators were not
necessary, since less restrictive alternatives were available. In order to avoid contact or mixing of
foreign and domestic grain, regulations on elevat or management and cleaning coupled with on-the-
spot checks could easily have achieved the same goal. Indeed, it is not clear why an elevator which
has previously received imported grain could not sub sequently receive Canadian, and vice versa. This
is in line with the findings of the Panel in Korea - Various Measures on Beef , which held that a
separate retail system for domestic and imported be ef was an excessive measure to prevent deception
of consumers as to the origin of beef.
4.646 Similarly, less restrictive alternatives are also available in respect of the mixing requirement.
In particular, appropriate labelli ng or grading provisions could make the mixed origin of wheat
transparent to the purchaser or consumer. This is in fact exactly what was done in the exceptional case
in which Canada authorized the mixing of Canadian and US wheat.
3. The United States' Claims under the TRIMs Agreement
4.647 The European Communities considers that in or der to establish a claim under the TRIMs, the
United States must demonstrate that the Canadian measures are indeed trade-related investment
measures within the meaning of Article 1 of the TRIMs Agreement.
4.648 The TRIMs Agreement does not contain a definition of the term "investment measure".
However, reference can be made to the Panel's findings in Indonesia - Cars , in which the Panel
attached significance to the fact that the meas ures in question had "investment objectives and

investment features" and "were aimed at encour aging the development of a local manufacturing
capability".
4.649 In the present case, the Eur opean Communities does not see in which way the Canadian
measures would have a specific "investment objectiv e" or "encourage investment". As to the
United States' reference to point 1 (a) of the Illu strative List, the European Communities doubts that
the Canadian measures fall under this definition. In particular, it should be noted that Point 1 (a) refers
to "the purchase or use by an enterprise of produc ts of domestic origin". However, neither grain
elevator nor rail car operators normally "purchase or use" the grain; rather, they provide a service with
respect to the grain, namely the handling, storage, or transportation thereof.
U. T
HIRD PARTY ORAL STATEMENT OF THE SEPARATE CUSTOMS TERRITORY OF TAIWAN,
PENGHU, KINMEN AND MATSU
4.650 The Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu, in its oral statement,
made the following arguments:
4.651 The Separate Customs Territory of Taiwan, Pe nghu, Kinmen and Matsu considers that this
case concerns the right of every Member to main tain state trading enterprises and to grant such
enterprises and other ones exclusive or special pr ivileges in accordance with Article XVII of the
GATT 1994, and thus we have a sy stemic interest in the proper interpretation of this article.
Accordingly, we would like to limit our comments on the interpretation of the word "undertakes" in
the first sentence of Article XVII:1(a) of the GAT T 1994 and on the establishment of a violation of
this article.
4.652 We do not believe that Article XVII:1(a) imposes on the Member concerned a positive
obligation to adopt explicit means to ensure th at its state trading enterprises conform to the
requirement of the provision. We agree with Ca nada that international obligations needs to
differentiate between obligation "of means" and obl igation "of result". Since there is no prescription
about the means of a Member in ensuring state tr ading enterprises from acting discriminatorily, we
believe that Article XVII only contains an obliga tion of result. Had the negotiators intended for
Members to take positive processes and procedures to ensure compliance of Members' undertaking
under Article XVII, one would expect to find explicit re quirements to that effect in the Article itself,
or in the Understanding on the Interpretation of Article XVII of GATT 1994. We find no such
requirement
4.653 The United States in essence argues that the word "undertakes" contains in Article XVII:1(a)
imposes on a Member the obligation to adopt processes or procedures to ensure that their state-trading
enterprises comply with Article XVII. It is hard for us to see how one word can be interpreted to
contain such an elaborate positive obligation. We th erefore do not share the view of the United States
that the word "undertakes" poses such a positive obligation on Members in adopting processes or
procedures in relation to the supervision of their state-trading enterprises.
4.654 We also note from the exhibits to the United St ates' First Written Submission that Canada has
in fact exercised its supervision on the Canadian Wheat Board. In US-5 the report from the Auditor
General of the Canadian Government, the scope of th e audit is rather broad as to include examination
and recommendation on various commercial practices of the CWB. If there exists any obligation of
positive supervision on Members under Article XV II in the form of adopting processes and
procedures, which we doubt, we consider that an y comprehensive audit similar to that by the
Canadian Auditor General and its recommendations would arguably satisfy that obligation.
4.655 Turning to the issue of the establishment of a violation of Article XVII:1 of GATT 1994, we
consider that a demonstration of special and excl usive privileges granted to an enterprise for the

purpose of Article XVII, even though the nature and substance of the privileges are such as to lead to
possible abuse, does not discharge a complaining Member's obligation in proving that non-
discriminatory treatment under Article XVII:1(a) and (b ) has been violated. The mere allegation that
a Member has no control or influence over the st ate trading enterprises can only suggest a remote
possibility that the state enterprises are acting in viola tion of Article XVII. It is still very likely that
there is no discrimination maintained by such state enterprises.
4.656 The United States, in this case, seems to be arguing that by virtue of the "exclusive or special
privilege" granted to CWB and the lack of substan tive involvement by the Canadian government in
the commercial affairs of the CWB, the CWB would be presumed to have harmed "other Members'
wheat sellers by, in effect, shutting them out of market s, or portions of markets, that are subject to the
CWB's targeting." Even disregarding our reservation on whether the provision of Article XVII:1
covers such a broad interpretati on of "non-discriminatory treatment", the United States' presumption
is inappropriate. Nowhere in Article XVII:1 does it suggest that the presumption as prescribed by the
United States exists. The basic fact remains that the United States, as the complaining party in this
case, bears the burden of proof, and with that burden, the United States must prove that the Canadian
Wheat Board, by its own action, has violated Article XVII:1.
4.657 By way of conclusion, my delegation would lik e to point out that under our reasoning, if a
Member has a comprehensive control process to ensu re conformity with Article XVII, and yet its
STEs are acting in a discriminatory manner, the Memb er should still be considered in violation of
Article XVII. On the other hand, if a Member has not adopted any control process, and no
discrimination is being carried out by the STE in que stion, then there is no reason to find the Member
in violation of Article XVII. We consider this to be the appropriate interpretation of Article XVII:1.
V. INTERIM REVIEW
74
A. BACKGROUND
5.1 For reasons indicated at paragraph 6.11 be low, the DSB has successively established two
panels to resolve this dispute. One panel was established on 31 March 2003 (hereafter the "March
Panel"), the other on 11 July 2003 (hereafter the "J uly Panel"). In letters dated 16 January 2004,
Canada and the United States requested an interim review by the Panel of certain aspects of the
interim reports issued to the pa rties on 22 December 2003. Neither pa rty requested an interim review
meeting. As agreed by the Panel, both parties were permitted to submit further comments on the other
party's interim review requests. Both parties submitted further comments on 23 January 2004.
5.2 We have outlined our treatment of the parties' requests below in the following manner:
(a) Section V.B concerns the descriptive part of both Panels and the preliminary ruling
on Canada's request under Article 6.2 of the DSU issued by the March Panel.
(b) Section V.C concerns the review of the fi ndings of the July Panel on the "measure
relating to exports of wheat" which the Un ited States claims is inconsistent with
Article XVII:1 of the GATT 1994.
(c) Section V.D concerns the review of the findi ngs of both the March and the July Panel
on "measures affecting the treatment of imported grain" which the United States

74 Pursuant to Article 15.3 of the DSU, the findings of the final panel reports shall include a discussion
of the arguments made at the interim review stage. This Section of the Panel reports is therefore part of the
Panel's findings.

claims are inconsistent wi th Article III:4 of the GA TT 1994 and Article 2 of the
TRIMs Agreement.
5.3 We have also made certain necessary technical revisions to our reports.
B. C
ONFIDENTIALITY OF THE CONSULTATIONS
5.4 Canada recalled that Article 4.6 of the DSU requires Members to maintain the confidentiality
of consultations. To this end, Ca nada requested that the Panel redact a number of specific references
to the discussions and events that occurred during the consultations from the final report, replacing
them with square brackets.
5.5 The United States responds that according to Article 18.2 of the DSU, and subject to the
second sentence of that paragraph, written submissions to the Panel "shall be treated as confidential."
Nevertheless, it is accepted practice that in the inte rest of transparency and for the benefit of all
Members, summaries of the parties' submissions (factual presentations and arguments) are disclosed
in the descriptive part of the Panel's report, as cont emplated in Article 15.1 of the DSU. The United
States considered that, all of the statements in the Panel's report related to consultations are
appropriate, and Canada's requests for deletion should not be accepted. The United States notes that
the majority of Canada's comments seek to modify descriptions of United States arguments.
75 In the
view of the United States the statements in the desc riptive part of the Panel's report accurately reflect
United States arguments, and Canada does not argue to the contrary. Moreover, these descriptions are
necessary in order to fully present the United States ' positions. The statements Canada refers to do
not contain any “strictly confidential information, ” which the United States considers to be the only
appropriate grounds for requesting brackets in the te xt of the Panel's report. The United States argues
that if Canada's request is granted, a one-sided vi ew of the arguments will be presented in the Panel's
final report. The United States specifically argued with respect to some of the redactions requested by
Canada that redacting parts of the description of the arguments of one party at the request of the other
party would be contrary to current practice and ma y present an unbalanced view of the United States'
position. Finally, the United States also notes that th e Panel circulated its preliminary ruling in this
dispute to Members on 21 July 2003. That pr eliminary ruling summarized United States arguments,
including references to consultations , and Canada did not object at that time to the inclusion of such
references.
5.6 At the outset the Panel notes that we do not disagree with Canada that Article 4.6 of the DSU
establishes an obligation to maintain the confidentialit y of consultations. In our view, such obligation
is imposed on the Members that participated in the consultations, and refers to information that is not
otherwise in the public domain and is disclosed by the other party.
5.7 In addressing Canada's request, we first recall the sequence of events concerning disclosure of
information about the consultations in the current case. Information on the consultations was first
disclosed to the Panel by the United States in its pr eliminary written submission, and then in its oral
statement at the preliminary hearing. On its part , Canada also referred to the consultations in its
statement at the preliminary hearing. Subsequently, the parties requested that, given the brevity of the
preliminary submissions and statements, they be treated as their own executive summaries to be
reproduced in the descriptive part of the March Pane l's report. Submissions by both parties contained
references to the consultations. The Panel then in cluded a brief description of these references in the
relevant part of the preliminary ruling. At the request of the United States, and after seeking the
views of Canada and the relevant third parties, the preliminary ruling was circulated as a WTO

75 The United States does not comment on Canada's requests with respect to Canada's own
argumentation in paragraphs 4.119, 4.121, and 4.128 of the interim report.

document.76 At no stage throughout this procedure did Canada object to the disclosure of information
presented by the parties about the consultations.
5.8 We note that Canada's redaction request rela tes to the summary of the arguments of the
parties in the preliminary ruling of the Panel and th e parties' descriptions of their arguments in the
descriptive part of the report. With respect to th e information that refers to the summary of the
arguments of the parties in the preliminary ruling of the Panel, we note the United States’ argument
that the ruling has already been released as a WTO document.77 The Panel has explained in document
WT/DS276/11 the reasons and circumstances why it was considered appropriate to accede to the
United States' request for circulation of the preliminary ruling. Therefore, in light of the fact that the
information in the preliminary ruling that Canada has requested to be redacted from the report is
already in the public domain we decline Canada's request to redact certain information from
paragraph 25 (page 116), paragraph 35 (page 119), paragraph 41 (page 120), paragraph 42 (page 121),
and paragraph 55 (page 124) of the interim report.
5.9 With respect to the parties' descriptions of th eir arguments, the Panel finds itself in a very
particular situation in that some of the informa tion that Canada now seeks to be redacted from the
description of the parties' arguments has also been disclosed to the public. Indeed, the arguments that
were presented by the parties during the prelimin ary stage of the Panel proceedings have been
summarized in the preliminary ruling of the Panel, including information which Canada now seeks to
be redacted. Therefore, we see no object in now deleting parts of the description of the arguments
presented by the parties when the underlying inform ation has already been summarized and published
as part of the preliminary ruling of the Panel. We also note that some of the information that Canada
requests to be redacted concer ns descriptions by the United States of its own conduct during the
consultations (e.g., that questions were posed, etc.), but does not disclose the content of the positions
or views adopted by Canada during those consulta tions. We do not see a justification for redacting
such information. In light of the above considera tions, the Panel declines Cana da's request to redact
certain information from paragraphs 4.52 to 4.54, 4. 56, 4.60. 4.61, 4.63, 4.79, 4.84 to 4.86, 4.119,
4.121, 4.128, and 4.162 to 4.164 of the interim report.
5.10 Regarding Canada's request that we redact the information in paragraphs 4.57, 4.58, 4.59 and
certain information in 4.298, we note that this in formation has not been discl osed in the preliminary
ruling and pertains to Canada's positions durin g the consultations. In light of the above
considerations, we accept Canada's request to redact the information in para graphs 4.57, 4.58, 4.59
and certain information in paragraph 4.298 from the report. However, we wish to highlight that when
a party wishes that information disclosed to the Panel, by itself or by the other party, be treated as
confidential information and not included in the public version of the panel report, it should so
indicate at a time that is early enough to avoid an interpretation that the party has waived its right to
confidentiality.
C. MEASURE RELATING TO EXPORTS OF WHEAT
5.11 The United States requests that the Panel delete th e second sentence of paragraph 6.27,
arguing that it is misleading because informati on on particular export sales transactions is not
necessary for the United States' challenge or the Panel's analysis.
5.12 Canada considers that the second sentence of paragraph 6.27 should be retained.
5.13 The Panel does not agree with the United States that the sentence in ques tion is misleading.
To the contrary, the sentence is important becau se it makes clear that, in the present case, the

76 WT/DS276/12.
77 WT/DS276/12.

United States is not complaining about individual CWB export sale transactions. The United States
itself has stated that "perhaps in some other case, a complainant might choose to meet its burden of
proof through the submission of sales data".
78 For these reasons, the Panel declines to delete the
second sentence.
5.14 The United States requests that the Panel modify the third sentence of paragraph 6.40,
arguing that the requested change is necessary to accurately reflect the United States' position that
Canada's failure to exercise its authority to over see the CWB is one of the elements of the CWB
Export Regime which leads to non-conforming CWB sales.
5.15 Canada considers that the Panel's wording accura tely reflects the United States' position and
that the proposed modification confuses its position.
5.16 The Panel notes that the third sentence of paragraph 6.40 states the Panel's understanding of
what the United States is not arguing in this case. The modificati on requested by the United States
would transform this sentence into a statement on what the United States is arguing in this case.
However, the Panel indicates its understanding of what the United States is arguing in this case in the
fourth sentence of paragraph 6.40. The United St ates has made no comments on the fourth sentence.
In any event, the fourth sentence reflects the United States' argument that "Canada's failure to exercise
its authority to oversee the CWB is one of the elements of the CWB Export Regime which leads to
non-conforming CWB sales". In the light of these considerations, we do not find it appropriate to
make the requested change to the third sentence of paragraph 6.40.
5.17 The United States requests that the Panel delete references to subparagraph (b) of
Article XVII:1 in paragraphs 6. 40 and 6.41 and references to subparagraph (a) of Article XVII:1in
paragraph 6.42. The United States considers these changes to be necessary to accurately reflect its
argument that Articles XVII:1(a) and (b) contain distin ct obligations and to reflect the fact that the
relevant section of the Panel's report discusses only Article XVII:1(a).
5.18 Canada has not expressed a view on these comments.
5.19 The Panel does not consider it appropriate to delete the specified references to
subparagraph (b) of Article XVII:1 in paragraphs 6.40 and 6.41. Nevertheless, the Panel has made
appropriate changes in paragraphs 6.40-6.42, including by adding two footnotes, in order to reflect
more clearly the United States' argument that Articles XVII:1(a) and (b) contain distinct obligations.
Regarding the requested change to paragraph 6.42, the Panel does not find it necessary to delete
references to subparagraph (a) of Article XVII:1 b ecause the undertaking by Members is set forth in
Article XVII:1(a). The Panel has made an editorial change to make this point clearer.
5.20 The United States requests that the Panel make the statement made in the footnote
accompanying paragraph 6.43 in the text of para graph 6.43 in view of the importance of the
statement.
5.21 Canada has not expressed a view on this comment.
5.22 The Panel notes that the footnote in question "recalls" a statement that is made earlier in the
text. The Panel does not find it necessary to repeat this point in the text, given that it is already made
at paragraph 6.41. Nevertheless, the Panel has in cluded a cross-reference to paragraph 6.41 in the
footnote in question and has also clarified the relevant statement at paragraph 6.41.

78 United States' first oral statement, para. 21.

5.23 The United States requests the Panel to remove from paragraph 6.88 the example of "the
national (economic or political) interest of the Member maintaining the STE". The United States
finds the example confusing and ambiguous. The United States also considers that an STE that acts in
the national economic interest of the Member that maintains the STE could be acting consistently with
"commercial considerations", depending on the circumstances.
5.24 Canada disagrees with the United States and requests that the Panel retain its original
wording.
5.25 The Panel has added a footnote to clarify the example in question. The Panel notes that it is
of course true that an STE which acts solely in accordance with commercial considerations may be
acting in the national economic or political interest. But this is not the point the Panel is making in
paragraph 6.88. The Panel's point is that where an STE is directed to make, or does make, purchases
or sales in accordance with considerations relating to the national economic or political interest, it
would not be making purchases or sales "solely" in accordance with commercial considerations.
5.26 The Panel has also corrected a typographical error in paragraph 6.149.
D. MEASURES AFFECTING THE TREATMENT OF IMPORTED GRAIN
1. Panel's analysis of the "necessity" of Section 57(c) of the Canada Grain Act and Section
56(1) of the Canada Grain Regulations under Article XX(d) of the GATT 1994
5.27 The United States urges the Panel to adopt the "weighing and balancing" test that was
referred to by the Appellate Body in Korea – Various Measures on Beef noting, however, that such an
approach would lead to the same result as that reached by the Panel in its interim reports.
5.28 Canada submits that with respect to the United St ates' additional submissions in response to
Canada's defence under Article XX(d) of the GATT 1994, it is not appropriate for the United States to
be re-litigating points at this late stage in the Panel's proceedings.
5.29 The Panel does not consider that its analysis in th e interim reports is inconsistent with the
Appellate Body's findings in Korea - Various Measures on Beef. Indeed, the Panel specifically relied
on the Appellate Body's findings in that case.
5.30 We had indicated in footnote 282 of our interim re ports that, in light of the statements by the
Appellate Body in Korea – Various Measures on Beef that "the weighing and balancing process we
have outlined is comprehended in the determination of whether a WTO-consistent alternative measure
which the Member concerned could 'reasonably be exp ected to employ' is available, or whether a less
WTO-inconsistent measure is 'reasonably available'" 79 and given that Canada had argued before the
Panel that the challenged measures are "necessary" becau se less trade-restrictive alternatives were not
available to Canada, we would de termine whether there were altern ative measures that achieved the
same objective and which were re asonably available to Canada. 80 We consider that, in light of the
way in which the Appellate Body in Korea - Various Measures on Beef and subsequently in EC -
Asbestos applied the "weighing and balancing" test, the examination of the existence of a reasonably
available alternative measure is clearly relevant. 81 The United States agrees. 82 We agree that, in

79 Appellate Body Report, Korea – Measures Affecting Imports of Fresh, Chilled and Frozen Beef
("Korea – Various Measures on Beef "), WT/DS161/AB/R, WT/DS169/AB/R, adopted 10 January 2001,
para. 166.
80 See Canada's second written submission, paras. 112 – 113.
81 See Appellate Body Report, Korea – Various Measures on Beef , supra, para. 178; Appellate Body
Report, European Communities – Measures Affecting Asbestos and Asbestos -Containing Products ("EC –
Asbestos"), WT/DS135/AB/R, adopted 5 April 2001, para. 172.

addition, other elements of consideration, such as the importance of the value pursued by the laws or
regulations to be enforced, are also relevant.
83 Indeed, in our examination of Canada's Article XX
defence, we took into account all re levant considerations, even if we did not find it necessary, in this
case, to specifically discuss our other considerations in our findings. In view of the United States'
request that we modify our initial analysis, we have, however, supplemented our initial analysis in
paragraph 6.222 to include some specific discussion of our other considerations.
5.31 The United States argues that the factors pointed to by the Panel in paragraph 6.223 of its
interim reports, where the Panel describes the relevant factors for determining whether an alternative
measure is reasonably available, misstates the Appe llate Body's guidance. More particularly, the
United States submits that these factors should be used in evaluating the WTO measure at issue in the
dispute -- in this case, Sections 57(c) of the Canada Grain Act and Section 56(1) of the Canada Grain
Regulations -- not the reasonableness of alternative measures.
5.32 The Panel notes firstly that, contrary to what has been suggested by the United States, we did
not examine the "reasonableness of alternative measur es". Rather, the Panel considered whether an
alternative measure which achieved the same objective was reasonably available. Secondly, the Panel
does not agree that the factors referred to in paragr aph 6.223 do not relate to the question of whether
the alternative measure is reasonably available. With respect to the first factor -- the extent to which
the alternative measure contributes to the realizati on of the end pursued -- we note that the Appellate
Body in EC – Asbestos stated that a WTO-consistent alternative measure is reasonably available to the
extent to which it contributes to the realization of the end pursued. 84 In relation to the second factor --
the difficulty of implementation -- the Appellate Body in EC – Asbestos stated that an alternative
measure which is impossible to implement is not reasonably available. 85 The Appellate Body further
stated in that case that, in determining whethe r a suggested alternative measure is reasonably
available, several factors must be taken into account, besides the difficulty of implementation. 86 In
respect of the third factor -- the extent to which th e alternative measure restricts trade -- the Appellate
Body in EC – Asbestos stated that the remaining question, th en, is whether there is an alternative
measure that would achieve the same end and that is less restrictive of trade than a prohibition.87
5.33 The United States also argues that there is no need to reach the question of a hypothetical,
"less WTO-inconsistent measure" where there are WTO- consistent alternatives available. The United
States suggests that there are a number of WTO-consistent alternative measures that are available.
5.34 The Panel notes that the Appellate Body in Korea – Various Measures on Beef stated the
following:
In our view, the weighing and balancing process we have outlined is comprehended
in the determination of whether a WTO-consistent alternative measure which the
Member concerned could "reasonably be expected to employ" is available, or whether
a less WTO-inconsistent measure is "reasonably available".88 (emphasis added)
It is clear from this statement, as well as from the findings of the panel in US – Section 337 89 that, in
determining whether alternative measures are reasona bly available to a responding Member, a panel

82 United States' comments on the interim reports, page 6.
83 Appellate Body Report, EC – Asbestos, supra, para. 172.
84 Ibid.
85 Ibid., para. 169.
86 Ibid, para. 170.
87 Ibid. para. 172.
88 Appellate Body Report, Korea – Various Measures on Beef, supra, para. 166.
89 Panel Report, United States - Section 337 of the Tariff Act of 1930 ("US – Section 337 "), adopted
7 November 1989, BISD 36S/345, para. 5.26.

needs to satisfy itself that an alternative measure which would be available is, at a minimum, less
WTO-inconsistent than the measur es maintained by the responding Me mber. However, the fact that
an alternative measure exists which is less WTO-in consistent than the challenged measure in no way
prejudges the issue of whether or not there might al so be WTO-consistent alternative measures. Nor
does it necessarily mean that a Member may use a less WTO-inconsistent measure.90
5.35 We also note that in this case, the Panel h as not stated that the alternative measures to
Section 57(c) of the Canada Grain Act and Section 56(1) of the Canada Grain Regulations to which
the Panel refers, purely by way of example, are WTO- consistent. Nor has the Panel stated that they
are necessarily WTO-inconsistent. The Panel merely states that, at a minimum , they are less WTO-
inconsistent than the challenged measures.
2. United States' proposal that the Panel make alternative findings under the chapeau of
Article XX(d)
5.36 The United States encourages the Panel to make findings in the alternative under the chapeau
to Article XX of the GATT 1994.
5.37 Canada argues that it does not believe that it is necessary to make alternative findings under
the chapeau to Article XX in light of the Panel's findi ngs with respect to the test in sub-paragraph (d)
of Article XX.
5.38 The Panel does not consider that additional findings under the chapeau of Article XX are
necessary given the Panel's conclusion that the rele vant measures are not provi sionally justified under
subparagraph (d) of Article XX. We note in this regard that the Appellate Body in US – Shrimp said,
in respect of a measure for which justification was claimed under Article XX(g), that "[i]f the measure
is not held provisionally justified under Article XX(g), it cannot be ultimately justified under the
chapeau of Article XX".91 We believe the same is true in this case where the measures at issue are not
provisionally justified under Article XX(d). Moreover, in our view, there is no need in this case to
make additional findings in the alternative.
3. Editorial changes proposed by the United States
5.39 The United States has requested that the heading on pa ge 170 of the Panel's interim reports
be changed to read "Canada fails to demonstrate that Section 57 does not affect the conditions of
competition between domestic grain and imported gr ain". The United States makes this request on
the basis that, in the section of the interim reports following the relevant heading, the Panel rejects a
number of arguments put forth by Canada.
5.40 The Panel does not agree that the proposed change is necessary. The paragraph preceding the
heading in question clearly indicates that the Panel intends to deal with Canada's defences, one of
which is the argument that "Section 57 does not affect the conditions of competition between
domestic grain and imported grain". Therefore, there could be no doubt in a reader's mind that the
heading is not a finding by the Panel but, rather, identif ies a defence raised by Canada, which the
Panel intends to examine. Further, the Panel's conclusion that Canada has "failed to demonstrate" this
defence is illustrated after the heading and not before.

90 Indeed, it is clear to us from the statement of the panel in US - Section 337 reproduced at para. 6.222
of our findings, which statement was also referred to by the Appellate Body in Korea – Various Measures on
Beef at paras. 165-166, that a Member may only use a less WTO-inconsistent measure if a WTO-consistent
alternative measure is not reasonably available.
91 Appellate Body Report, United States – Import Prohibition of Certain Shrimp and Shrimp Products ,
("US – Shrimp ") WT/DS58/AB/R, adopted 6 November 1998, DSR 1998:VII, 2755, para. 149.

5.41 We note that we have corrected the typographical error in paragraph 6.221 referred to by the
United States. We have also made some conse quential changes that became necessary after making
the changes referred to above.

VI. FINDINGS
A. S
TRUCTURE OF THE FINDINGS
6.1 This dispute concerns two very different cate gories of measures. One relates to Canadian
exports of wheat92, the other to the treatment of grain imported into Canada. 93 Moreover, for reasons
indicated at paragraph 6.11 below, the DSB has su ccessively established two panels to resolve this
dispute. One panel was establis hed on 31 March 2003 (hereafter th e "March Panel"), the other on
11 July 2003 (hereafter the "July Panel").
6.2 In response to a question posed by the Panel, the parties indicated that they did not wish the
two Panels to issue separate reports in separate documents. 94 The two Panels saw no compelling
reason to proceed differently 95 and therefore decided to issue thei r separate Reports in the form of a
single document.96
6.3 The remainder of the Findings section of this document is structured as follows:
(a) Section VI.B reproduces certain preliminary decisions and rulings issued by the
March Panel in response to requests by Canada.97
(b) Section VI.C examines the "measure relating to exports of wheat" which the
United States claims is inconsistent w ith Article XVII:1 of the GATT 1994. The
findings in this subsection are those of the July Panel.98
(c) Section VI.D examines the "measures affecting the treatment of imported grain" that
the United States claims are inconsistent with Article III:4 of the GATT 1994 and
Article 2 of the TRIMs Agreement (Agreement on Trade-Related Investment
Measures). Subsection D contains findings which are common to the March Panel
and the July Panel. In other words, the March Panel and the Ju ly Panel have made
identical findings with respect to the "measures affecting the treatment of imported
grain", but these findings are reproduced in this document only once.

92 United States' first written submission, para. 16.
93 Ibid., para. 5.
94 Parties' letters to the Panel of 23 July 2003.
95 It should be noted in this regard that the March Panel and the July Panel were both established under
the case name and under
the case number 276 (WT/DS276). Bo th Panels are composed of the same panellists. Moreover, after the
establishment of the July Panel, the two Panels harmonized their timetables. They received combined written
submissions from the parties and third parties and held combined substantive meetings with the parties and third
parties. Thus, as a practical matter, once the July Panel had been established, the two proceedings were
conducted as if there was only one panel.
96 We note that the panel in United States – Definitive Safeguard Measures on Imports of Certain Steel
Products followed a similar approach. Panel Report, United States – Definitive Safeguard Measures on Imports
of Certain Steel Products ("US – Steel Safeguards "), WT/DS248/R, WT/DS249/R, WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R, WT/DS258/R, WT/DS259/R and Corr.1, adopted 10 December 2003, as modified
by the Appellate Body Report, WT/DS248/AB/R, WT/DS249/AB/R, WT/DS251/AB/R, WT/DS252/AB/R,
WT/DS253/AB/R, WT/DS254/AB/R, WT/DS258/AB/R, WT/DS259/AB/R, para. 10.725.
97 The July Panel was not requested to make preliminary decisions or rulings.
98 The March Panel made no findings with respect to the "measure relating to exports of wheat".

(d) Section VII, which is the Conclusion section of this document, contains two sets of
conclusions, one for the March Panel and one for the July Panel.
6.4 For simplicity, in the remainder of this documen t, the term "Panel" will be used to refer to
either the March Panel, the July Panel, or to both. The term "Panel" will be used in the singular even
in those instances where the findings are those of both the March Panel and the July Panel.
B. PROCEDURAL DECISIONS AND RULINGS BY THE MARCH PANEL
6.5 On 13 May 2003, Canada requested the March Pa nel to decide certain issues before the due
date of the parties' first written submissions. Th ese issues concerned the consistency with Article 6.2
of the DSU of the United States' request for the establishment of a panel of 6 March 2003 and certain
additional procedures proposed by Canada for the pr otection of proprietary or commercially sensitive
information.
(a) Third-party participation in the preliminary stage of the proceedings
6.6 Canada's requests for preliminary decisions on the two above-noted issues gave rise to the
question of how the third parties were to be involve d in this preliminary phase of the proceedings. In
this connection, the Panel sent a letter to the parti es and third parties. The letter, dated 27 May 2003,
is reproduced, in relevant part, below:99

99 Footnotes included in the letter are gathered as endnotes to the quotation.
"I. Procedural Background
2. On 13 May 2003, Canada provided the Panel and the United States with two
preliminary written submissions in which it requested the Panel to decide certain
issues before the due date of the parties' first written submissions.
1 On 21 May 2003,
the Panel held the organizational meeting with the parties. At that meeting, the Panel
consulted the parties on the procedures it pr oposed in response to Canada's requests
for early preliminary rulings. The Panel not ably proposed to give the United States
an opportunity to provide preliminary writte n submissions in response to Canada's
earlier preliminary submissions and also indicated a willingness to schedule a
preliminary hearing if requested by either party. The Panel further requested the
parties to provide comments on the issue of third party participation in any
preliminary hearing. The Panel received written comments on this issue on
23 May 2003. Also on 23 May 2003, the Panel provided the parties with the final
version of the timetable and the Working Pr ocedures. The timetable provided for the
United States to make preliminary written submissions in response to Canada's earlier
submissions on 27 and 28 May 2003, respectively. At the request of Canada, the
Panel also scheduled a preliminary hear ing for 6 June 2003. Finally, the Panel
indicated that it would issue the requested preliminary rulings on 13 June 2003.
II. The Panel's decision
3. The Panel, after consulting the par ties to the dispute in accordance with
Article 12.1 of the DSU
2, has decided that the third parties to this dispute shall be
invited to participate in the preliminary stage of these panel proceedings3 as follows:
(a) third parties shall receive the preliminary written
submissions of the parties to the dispute4;

(b) third parties shall have an opportunity to make preliminary
written submissions to the Panel for purposes of commenting
on the parties' preliminary written submissions; and
(c) third parties shall have an opportunity to be heard by the
Panel on the issues raised in the parties' preliminary written
submissions.
4. Consistent with this decision, the Panel hereby amends paragraph 6 of its
Working Procedures of 23 May 2003 such that it reads as follows:
6. The third parties shall be invited in writing to present their
views during a session of the preliminary hearing of the Panel set
aside for that purpose as well as during a session of the first
substantive meeting of the Panel set aside for that purpose. The third
parties may be present during the entirety of these sessions.
5. The Panel's decision to allow the third parties to participate in the preliminary
stage of these proceedings is consistent w ith the flexibility the DSU allows to panels
to establish their own procedures. More specifically, in establishing additional
procedures governing third party participation in the preliminary stage of the
proceedings, the Panel was guided by the following considerations.
6. Turning first to our decision that "[t]hird parties shall receive the preliminary
written submissions of the parties to the dispute", we note that this was recommended
by both parties. We also attach signifi cance to the circumstance that, had Canada
made its requests for preliminary rulings in its first written submission, there would
have been no question that the third parties would have received all written
submissions made pursuant to Canada 's requests for preliminary rulings.
5 We do not
consider that the mere fact that Canada in this case provided the Panel with prompt
notice of its requests in order to permit th e Panel to make an early ruling justifies
denying the third parties access to the in formation contained in the parties'
preliminary written submissions.
7. Regarding our decision that the "third parties shall have an opportunity to
make written submissions to the Panel for purposes of commenting on the parties'
preliminary written submissions [and] […] to be heard by the Panel on the issues
raised in the parties' preliminary written submissions", we think it would be
incongruous to give the third parties access to the parties' preliminary written
submissions without also giving them an opportunity to address the Panel on the
issues discussed therein. Since this Panel in tends to issue a preliminary ruling before
the due date of the parties' first writte n submissions, and since there would be no
point in having the third parties address the preliminary issues after the Panel has
ruled on those issues, the Panel necessarily needs to receive the third parties'
arguments with respect to those issues before it issues its preliminary ruling.
8. In respect of Canada's request concerning the alleged failure by the
United States to comply with Article 6.2 of the DSU, we note, moreover, that inviting
the third parties to present their views to th e Panel is warranted also in view of the
serious consequences that would result if we were to accept Canada's request that we
"not assume jurisdiction" in respect of the United States' claims under Article XVII of
the GATT 1994, Article III:4 of the GATT 1994 and Article 2 of the TRIMs
Agreement. Regarding Canada's other request, viz., that we adopt certain procedures

for the protection of proprietary or commercially sensitive information, we note that,
in Canada - Aircraft , the Appellate Body had to deal with a similar request for a
preliminary ruling relating to procedures governing business confidential information.
The Appellate Body in that case ruled on th e request at a preliminary stage of the
relevant proceedings, after having given th e third participants an opportunity to
present their views.6
9. Finally, in the specific circumstances of this case, we consider it appropriate
to invite the third parties to address the Panel both in writing and orally, during a
session of the preliminary hearing of the Panel set aside for that purpose. In this
regard, we note that, in the interest of an expeditious disposition of the preliminary
issues raised by Canada, it was necessary to set a tight deadline for the third parties to
provide written submissions on the preliminary issues. As a consequence, the Panel
found it appropriate, given this tight deadline, to give an additional opportunity to the
third parties to develop or refine their arguments during a session of the preliminary
hearing of the Panel set aside for that purpose."

1 On 23 May 2003, Canada also provided its preliminary written submissions to the third
parties to this dispute.
2 On 23 May 2003, the United States and Canada provided written comments on the issue of
third party participation in the preliminary stage of the Panel's proceedings.
3 For the purposes of these proceedings, the ex pression the "preliminary stage of these panel
proceedings" refers to the pro ceedings up to the time the Pane l issues its pr eliminary ruling
on the requests made in Canada's preliminary written submission of 13 May 2003.
4 For the purposes of these proceedings, the ex pression "preliminary written submissions of
the parties to the dispute" refers to the preliminary written submissions by Canada of
13 May 2003 and the preliminary written submissions to be filed by the United States on 27
and 28 May 2003.
5 See Appellate Body Report, United States – Tax Treatment for "Foreign Sales
Corporations" – Recourse to Article 21.5 of the DSU by the European Communities ("US –
FSC (Article 21.5 – EC) "), WT/DS108/AB/RW, adopted 29 January 2002, para. 245
6 Appellate Body Report, Canada – Measures Affecting the Export of Civilian Aircraft
("Canada – Aircraft "), WT/DS70/AB/R, adopted 20 August 1999, DSR 1999:III, 1377,
para. 126.

6.7 In accordance with the Panel's d ecision, the third parties were provided with copies of the
parties' preliminary written subm issions on 23, 27 and 28 May 2003, and were given the opportunity
to address the Panel in writing by 4 June 2003 and or ally on 6 June 2003 at a special session of the
preliminary hearing.
(b) Establishment of procedures for the protecti on of proprietary or commercially sensitive
information
6.8 On 13 June 2003, the Panel issued the following decision in response to Canada's request for
the adoption of specific procedures for the prot ection of proprietary or commercially sensitive
information:100
"1. Canada asserts that, if the Panel finds that any of the allegations raised in the
United States' panel request fall within the Panel's jurisdiction, and if the
United States meets its prima facie burden with respect to these allegations, Canada
may well be required, in its defence, to submit evidence to the Panel that contains

100 Footnotes included in the decision are gathered as endnotes to the quotation.

proprietary or commercially sensitive information ("strictly confidential
information").
2. Canada recalls, for example, that the United States makes certain allegations
with respect to whether the Canadian Wheat Board ("CWB") makes purchases and
sales solely in accordance with commercial c onsiderations. In Canada's view, to the
extent that these allegations are clarified a nd substantiated, Canada may well have to
adduce evidence on the commercial practices of the CWB, including its sales and
pricing policies as well as on specific commercial transactions. Such evidence will
necessarily contain strictly confidential information. In this respect, Canada notes
that although the CWB has been notified as a state trading enterprise, it is not under
the control or influence of the Government of Canada. Nor is Canada in possession
of information regarding the CWB's comme rcial negotiations and contracts with
suppliers, service providers or customers on the prices, terms and other conditions of
wheat sales. Canada will be able to obtain, assess and provide such strictly
confidential information to the Panel only where it can give the CWB and its
customers adequate assurance of confid entiality of their commercially sensitive
information.
3. Canada further argues that effective dispute settlement pursuant to the DSU is
premised on an objective assessment by a dispute settlement panel of the matters in
dispute, including an objective assessment of the facts of the case. According to
Canada, the receipt and provision of factual information is a central feature of the
process. Members must be able to discl ose and receive the evidence necessary to
defend or challenge the measure at issue. In order to do so, assurances that the
confidentiality of the information will be maintained are critical.
4. In Canada's view, the provisions of the DSU governing the protection for
confidential information offer insufficient procedural protection for strictly
confidential information. Canada submits in this regard that the absence of clear and
effective rules to protect such information can be detrimental to a Member's ability to
advance or defend a challenge and thereby to the effectiveness of the dispute
settlement system.
5. For these reasons, Canada proposes a pa rticular procedure governing strictly
confidential information, which is set out in the annex to its preliminary written
submission on the matter at issue. Canada submits that this procedure achieves a
reasonable balance between the competing interests involved. Canada therefore
requests that the Panel adopt the proce dures proposed by Canada as part of its
working procedures, pursuant to Article 12.1 of the DSU.
6. The United States responds that it is surprised that this issue is the subject of
a request for a preliminary ruling. There is no disagreement between the parties as to
the adoption of special procedures, and this is in any event a matter of the panel's
organization. Accordingly, there is nothing on which to "rule". To the extent the
Panel considers that a ruling is necessary , the United States believes that the ruling
should be that panels can, as they have in the past, at their discretion exercise their
authority under Article 12 of the DSU to adopt additional procedures in consultation
with the parties. The United States stands ready for such consultations and to assist
the Panel in this matter.
7. The United States recalls that, acco rding to Canada, procedures for the
protection of strictly confidential inform ation should be established because Canada

may need to submit such information du ring the course of these proceedings. The
United States notes that, to the extent that Canada will be submitting such
information, the United States does not object to the Panel establishing procedures for
its protection, as nothing in the DSU precludes panels from adopting additional
procedures for protecting such information. The United States also recalls that, at the
panel organizational meeting of 21 May 2003 , the United States represented that it
does not plan to rely on strictly confidential information in its presentations before the
Panel.
8. The United States notes that this same situation arose in a very recent dispute
between Canada and the United States. In that dispute, United States – Final
Dumping Determination on Softwood Lumber from Canada (WT/DS264), Canada
and the United States were able to agree on procedures for the treatment of strictly
confidential information. There was no need for a preliminary ruling in that dispute.
The United States believes that these procedures, which both Canada and the
United States are already familiar with and are currently utilizing, should simply be
adopted by this Panel to protect strictly confidential information in this dispute.
According to the United States, nothing in Canada's request for a preliminary ruling
suggests the need for procedures different from those used by the above-referenced
panel. By adopting these previously agreed-to procedures, the Panel and the parties
could also avoid wasting time and effort in considering and debating the uncertain
implications of Canada's newly developed proposals.
9. For these reasons, the United States as ks the Panel to adopt the procedures
referenced above for the treatment of stri ctly confidential information in these panel
proceedings.
10. The Panel notes that the request it is asked to rule on is very specific.
Canada requests that the Panel "adopt the pr ocedures [governing strictly confidential
information] set out in Annex I [to Cana da's preliminary written submission on this
matter] as part of its working procedures".
1
11. We have carefully considered Cana da's proposal, as well as the comments on
that proposal by the United States and tw o third parties, Chile and the European
Communities. On balance, we are not pers uaded that it is appropriate to adopt the
procedures proposed by Canada without modification. In particular, we are
concerned about the fact that the proposed procedures do not take into account third
party interests. 2 Moreover, we are unable to agree with some of the proposed
wording.
12. At the same time, we do not find it appropriate to accept the proposal by the
United States that we simply adopt the procedures adopted by the Panel in
United States – Final Dumping Determination on Softwood Lumber from Canada .
We note, in this regard, the concern expressed by Canada that, in the circumstances of
this case, the procedures adopted by the aforementioned Panel would not provide a
sufficient level of protection of strictly confidential information.
3 We also note that
the procedures used in United States – Final Dumping Determination on Softwood
Lumber from Canada are not very detailed in respect of issues like the designation
and approval of persons with access to st rictly confidential information, or the
treatment and use of the information submitted as strictly confidential.
13. This said, we note that neither the United States nor any of the third parties
that chose to comment on Canada's proposal objected to the Panel adopting additional

procedures regarding the protection of stric tly confidential information, as requested
by Canada. We further note that previous panels have decided to adopt special
procedures for the protection of strictly confidential information.
4 Since Canada has
sufficiently explained and substantiated the need for such procedures in this case, and
given the absence of any objections on the part of other participants to these
proceedings, we see no reason not to put in place such procedures before the parties'
first written submissions are due. 5 However, as always when establishing additional
procedures, we must comply with the requirement in Article 12.1 of the DSU to
consult the parties.
14. In the light of the above, the Panel has prepared a proposal of its own (see
attachment), which is based on Canada's proposal and which takes into account the
views expressed on this issue by the United States and two third parties, Chile and the
European Communities. Consistent with Ar ticle 12.1 of the DSU, we invite the
parties to offer their comments on the Panel's proposal in writing. Since the parties
have already had opportunities to address th is matter, the Panel requests that the
parties provide their views to the Panel no later than 5:30 p.m. on Tuesday,
17 June 2003. After considering the views of the parties, the Panel will decide on the
additional procedures to be adopted and w ill transmit those to the parties and third
parties."

1 Canada's preliminary written submission, para. 10; Canada's preliminary oral statement,
para. 51.
2 We note that, under Canada's proposal, access to strictly confidential information is limited
to the disputing parties. Canada's preliminary oral statement, para. 48.
3 Canada argues, inter alia , that in United States – Final Dumping Determination on
Softwood Lumber from Canada , the Panel is examining sensitive commercial information
that already exists and is in the possession of the United States. According to Canada, in
this case, much of the strictly confidential information which Canada thinks it may need
may have to be obtained from private parties not party to this dispute. Canada's preliminary
oral statement, paras. 47.
4 See, e.g., Panel Reports, Brazil – Export Financing Programme for Aircraft ("Brazil –
Aircraft "), WT/DS46/R, adopted 20 August 1999, as modified by the Appellate Body Report,
WT/DS46/AB/R, DSR 1999:III, 1221; United States – Definitive Safeguard Measures on
Imports of Wheat Gluten from the European Communities ("US – Wheat Gluten "),
WT/DS166/R, adopted 19 January 2001, as modified by the Appellate Body Report,
WT/DS166/AB/R; Decision by the Arbitrators, European Communities – Regime for the
Importation, Sale and Distribution of Bananas – Recourse to Arbitration by the European
Communities under Article 22.6 of the DSU ("EC – Bananas III (US) (Article 22.6 – EC) "),
WT/DS27/ARB, 9 April 1999, DSR 1999:II, 725; exhibit US-3 (re: procedures concerning
business confidential information adopted by the Panel on United States – Final Dumping
Determination on Softwood Lumber from Canada (WT/DS264)).
5 Canada specifically requested that we "make a d ecision on this procedural issue before the
Parties' first substantive submissions are du e". Canada's preliminary written submission,
para. 11.

6.9 On 25 June 2003, the Panel adopted Additiona l Working Procedures for the Protection of
Strictly Confidential Information ("SCI"), after considering comments submitted by Canada and the
United States.101

101 The parties later gave their consent to a waiver on some specific aspects of the Additional Working
Procedures related to the treatment of third parties. It is worth noting that, at the request of Canada and with the
agreement by the United States, the same SCI procedures were later adopted by the July Panel as well.

(c) Consistency of the United States' panel request with Article 6.2 of the DSU and timeliness of
Canada's objection to the United States' panel request
6.10 On 25 June 2003, the Panel issued the followi ng preliminary ruling in response to Canada's
allegation that the United States' panel request of 6 March 2003 did not satisfy the requirements of
Article 6.2 of the DSU:102

102 Footnotes included in the preliminary ruling are gathered as endnotes to the quotation.
"1. Consistency of the United States' panel request with Article 6.2 of the
DSU
 (a) Introduction
1. Article 6.2 of the DSU provides in relevant part:
The request for the establishment of a panel shall … identify the
specific measures at issue and provide a brief summary of the legal
basis of the complaint sufficient to present the problem clearly.
 2. Canada asserts that certain claims set out in the United States' panel request 1
fail to satisfy the requirements of Article 6.2 of the DSU. Canada considers that
Article 6.2 establishes the basis for the Panel's authority to reject those elements of the
United States' panel request that do not meet the requirements of Article 6.2.
Specifically, Canada requests that the Panel not assume jurisdiction in respect of (i)
the claim under Article XVII of the GATT 1994, (ii) the claim under Article III:4 of
the GATT 1994 concerning rail car allocation and (iii) the claims under Article 2 of
the TRIMs Agreement concerning rail car allocation and grain segregation.
 3. The United States considers that Canada's arguments in support of its request
for a preliminary ruling in respect of th e consistency of the United States' panel
request with Article 6.2 of the DSU are without merit. The United States submits,
therefore, that the Panel should reject Canada's request for a favourable preliminary
ruling. The United States also argues that, even if its panel request were defective,
this would not automatically deprive the Pane l of jurisdiction over the matter. Rather,
the Panel must consider the particular circumstances of the case, including whether
Canada has been prejudiced by the relevant defect. Also, the United States argues,
Canada's procedural objections to the Unite d States' panel request are in any event
untimely. The United States notes in this regard that procedural objections must be
raised at the earliest possible opportunity and not, as in this case, for the first time in a
letter sent after the establishment of the panel.
2
4. The Panel notes that Canada's request for a preliminary ruling regarding the
consistency of the United States' panel requ est with Article 6.2 of the DSU concerns
three distinct elements of the panel requ est. The Panel will examine these elements
separately and in the order in which they were addressed in Canada's request for a
preliminary ruling.

5. However, before addressing the three elements identified by Canada, it is
well to recall the recent Appellate Body report on United States – Countervailing
Duties on Certain Corrosion-Resistant Carbon Steel Flat Products from Germany ,
wherein a summary is given of the Appellate Body jurisprudence on Article 6.2 of the
DSU. The summary states in relevant part:
3
There are [… ] two distinct requirements [in Article 6.2 ], namely
identification of the specific measures at issue , and the provision of
a brief summary of the legal basis of the complaint (or the claims).
Together, they comprise the "matter referred to the DSB", which
forms the basis for a panel's terms of reference under Article 7.1 of
the DSU. 4
The requirements of precision in the request for the establishment of
a panel flow from the two essential purposes of the terms of
reference. First, the terms of reference define the scope of the
dispute. Secondly, the terms of reference, and the request for the
establishment of a panel on which they are based, serve the due
process objective of notifying the parties and third parties of the
nature of a complainant's case.

5 When faced with an issue relating to
the scope of its terms of reference, a panel must scrutinize carefully
the request for establishment of a panel "to ensure its compliance with
both the letter and the spirit of Article 6.2 of the DSU."

6
As we have said previously, compliance with the requirements of
Article 6.2 must be demonstrated on the face of the request for the
establishment of a panel. Defects in the request for the establishment
of a panel cannot be "cured" in th e subsequent submissions of the
parties during the panel proceedings.

7 [… ] Moreover, compliance
with the requirements of Article 6.2 must be determined on the
merits of each case, having considered the panel request as a whole,
and in the light of attendant circumstances.

8
6. With this statement of Appellate Body jurisprudence in mind, we now turn to
the first element of the panel request in respect of which Canada seeks a ruling.
 (b) Claims under Article XVII of the GATT 1994
7. The United States' panel request sets out a claim under Article XVII of the
GATT 1994 as follows:9
(1) The Government of Canada has established the Canadian
Wheat Board ("CWB"), and has gran ted to this enterprise exclusive
and special privileges. These exclusive and special privileges include
the exclusive right to purchase w estern Canadian wheat for export
and domestic human consumption at a price determined by the
Government of Canada and the CWB; the exclusive right to sell
western Canadian wheat for export and domestic human
consumption; and government gua rantees of the CWB's financial
operations, including the CWB's borrowing, the CWB's credit sales
to foreign buyers, and the CWB's initial payments to farmers.

 The laws, regulations and actions of the Government of
Canada and the CWB appear to be inconsistent with the obligations
of the Government of Canada under Article XVII of the GATT 1994.
In particular, the laws, regulations and actions of the Government of
Canada and the CWB related to exports of wheat appear to be:
• inconsistent with paragraph 1(a) of Article XVII of the
GATT 1994, pursuant to which the Government of
Canada has undertaken that the CWB, in its purchases or
sales involving wheat exports, shall act in a manner
consistent with the general principles of non-
discriminatory treatment prescribed in the GATT 1994;
and
• inconsistent with paragraph 1(b) of Article XVII of the
GATT 1994, pursuant to which the Government of
Canada has undertaken that the CWB shall make such
purchases or sales solely in accordance with commercial
considerations and shall afford the enterprises of other
WTO Members adequate opportunity, in accordance with
customary business practice, to compete for such
purchases or sales.
The apparent inconsistency with Canada's obligations under
Article XVII of the GATT 1994 includes the failure of the
Government of Canada to ensure that the CWB makes such
purchases or sales in accordance with the requirements set forth in
paragraphs 1(a) and 1(b) of Article XVII.
8. Canada considers that the United States ' claim under Article XVII as set out
in the panel request fails to satisfy the re quirements of Article 6.2 of the DSU in at
least three ways. First, Canada considers that the Article XVII claim does not
"identify the specific measures at issue". According to Canada, the foundation for the
United States' claim is in various "laws, regulations and actions", but these laws,
regulations and actions are nowhere describ ed. Canada submits that any number of
laws, regulations and actions may be rela ted to the export of wheat but have no
relevance to the instant claim. Canada argues that there are dozens of "laws and
regulations" that could be the subject of th e United States panel request as worded.
With respect to the term "actions", Canada notes that this term implies some specific
conduct or instance, but the United States pa nel request identifies neither conduct nor
a specific instance.
9. Second, Canada recalls that the United States alleges a violation of
Article XVII:1(b) and that that article c ontains two distinct obligations. Canada
asserts that the United States panel request is defective in that it does not make clear
which laws, regulations or actions result in the violation of which obligation.
10. Third, Canada considers that the United States' panel request does not set out
a brief summary of the legal case sufficient to present the problem clearly. According
to Canada, there is nothing in the United States' Article XVII claim which establishes
the legal basis of allegations by the Un ited States that the CWB does not follow

customary business practice or does not take into account commercial considerations
in its conduct, or that Canada is in viola tion of its Article XVII obligations because it
has failed to ensure such conduct.
11. The United States considers that Canada's first argument regarding
identification of specific measures is without merit. The United States submits that
Canada is incorrect to argue that the foundation for the United States' claim is in
various "laws, regulations and actions " which are nowhere described. The
United States argues that any person reading the phrase "laws, regulations and
actions" would take note of the immediatel y preceding paragraph of the United States
panel request, which identifies the speci fic measures at issue. These measures
include the establishment of the CWB gr anting the CWB exclusive and special
privileges, including the exclusive right to purchase western Canadian wheat for
export and domestic human consumption at a price determined by the Government of
Canada and the CWB, the exclusive right to sell western Canadian wheat for export
and domestic human consumption and government guarantees of the CWB's financial
operations. The United States further argu es that the subsequent paragraph also
clarifies that the measures at issue include the failure by the Government of Canada
to ensure that the CWB acts in conformity with the provisions of Article XVII. With
regard to the term "actions", the United States notes that its panel request uses the
term "actions" because the provisions of Ar ticle XVII:1 quoted in the request impose
obligations with regard to purchases and sales involving wheat exports. The terms
"laws and regulations" were not sufficient to cover this aspect of conduct addressed in
the panel request.
12. In response to the second deficiency alleged by Canada, the United States
argues that its panel request cites both ob ligations contained in Article XVII:1(b)
because the Canadian measures are inconsistent with both of these obligations.
13. Regarding the third alleged deficiency, the United States recalls that
Article 6.2 of the DSU requires "a brief summary of the legal basis of the complaint
sufficient to present the problem clearly" . The Unites States notes that a panel
request may satisfy this requirement simply by listing the provisions of the WTO
agreements with respect to which the measure s at issue are allegedly inconsistent.
The United States argues that there is no requirement in Article 6.2 that panel
requests contain a summary of the legal arguments in support of a claim.
 (i) Identification of the Specific Measures at Issue
14. The Panel begins its analysis with Canada's assertion that the United States'
panel request fails to "identify the speci fic measures at issue". In determining
whether the United States' identification of the measures at issue in this dispute is
sufficient for the purposes of Article 6.2, we consider, as an initial matter, the
provisions of Article 6.2 itself. At issue is the phrase "identify the specific measures
at issue". The dictionary defines the term "identify" as "establish the identity of".
10
The term "specific" is defined as "clearly or explicitly defined; precise; exact" 11.
Thus, the ordinary meaning of the phrase "i dentify the specific measures at issue" is
"to establish the identity of the precise measur es at issue". Accordingly, based on the
text of Article 6.2, it is clear to us that in the present case the United States' panel
request must establish the identity of the precise measures at issue.
15. Having regard to the relevant contex t of Article 6.2 of the DSU, we note
Article 4.4 of the DSU, which deals with the contents of requests for consultations. It

states in relevant part that "any request fo r consultations shall give the reasons for the
request, including identification of the measur es at issue". Notably, Article 4.4 omits
the term "specific" in referring to the "measures at issue". We believe that this
difference in language is not inadvertent and must be given meaning. Indeed, in our
view, this difference in language supports the view that requests for consultations
need not be as specific and as detailed as requests for establishment of a panel under
Article 6.2 of the DSU. As a corollary, in our view, this relevant context bears out
the importance of the term "specific" as it appears in Article 6.2.
16. We note, in addition, that it is clear from the Appellate Body report on US –
Carbon Steel that the purposes underlying the requirements of Article 6.2 are (i) to
define the scope of a dispute and thus a pa nel's jurisdiction, and (ii) to notify and
inform the responding party and the third parties of the nature of the complaining
party's case.
12 We believe that the emphasis deriving from the presence of the term
"specific" in the phrase "identify the specifi c measures at issue" is consistent with
these purposes. Indeed, without identificati on of the precise measures at issue, the
jurisdiction of a panel could not be clearly established. Likewise, the due process
objective of notifying and informing the responding party and the third parties could
not be attained.
17. In considering whether a panel requ est can be said to have identified the
specific, or precise, measures at issue, we find relevant the statement by the Appellate
Body that whether the actual terms used in a panel request to identify the measures at
issue are sufficiently precise to meet the requirements of Article 6.2 "depends [… ]
upon whether they satisfy the purposes of [those] requirements".
13 We also find
relevant the statement by the Appellate Bo dy that "compliance with the requirements
of Article 6.2 must be determined on the me rits of each case, having considered the
panel request as a whole, and in the light of attendant circumstances".
18. With these considerations in mind, we now turn to examine whether the
United States' Article XVII claim set out in the panel request "identifies the specific
measures at issue". We agree with Canada that the measures covered by the panel
request are set out in the second paragraph of the Article XVII claim contained in the
panel request. In that paragraph, the United States refers to "the laws, regulations and
actions of the Government of Canada and the CWB related to exports of wheat".
Canada objects to this description of the measures at issue on the grounds that it is
overly broad.
19. We note that the United States' panel request refers to "laws" and
"regulations", yet does not specify the releva nt laws and regulations by name, date of
adoption, etc. We consider that it is desirable for Members to be as specific as
possible in identifying measures of general a pplication, including by indicating their
name and date of adoption. However, by its terms, Article 6.2 does not require that
panel requests explicitly specify measures of general application – i.e., laws and
regulations – by name, date of adoption, etc.
14 Therefore, we consider that the fact
that the United States has not specified the re levant laws or regulations by name, date
of adoption, etc. does not necessarily rende r the panel request inconsistent with
Article 6.2.
20. We consider that in the absence of an explicit identification of a measure of
general application by name, as in the present case, sufficient information must be
provided in the request for establishment of a panel itself that effectively identifies
the precise measures at issue. Whether suffi cient information is provided on the face

of the panel request will depend, as noted above, on whether the information provided
serves the purposes of Article 6.2, and in particular its due process objective, as well
as the specific circumstances of each case, incl uding the type of measure that is at
issue.
21. In light of the foregoing and in the absence of an explicit reference to the
laws and regulations at issue, we proceed now to examine whether, in the absence of
an explicit reference to the laws and regula tions at issue, the information provided by
the United States in its panel request is su fficient to inform Canada, as the responding
party in this case, of the specific measures at issue.
22. In this regard, we note firstly that the panel request uses the terms "laws" and
"regulations" in the plural. This stro ngly suggests that more than one law and
regulation are implicated by the United States' panel request. Precisely how many
laws and regulations are covered by the panel request is not stated in explicit terms.
This absence of clarity as to the number of laws and regulations at issue is the source
of significant uncertainty.
23. Secondly, the precise content of th e laws and regulations which are being
challenged is unclear. In particular, in identifying the measures at issue, the
United States, in the second paragraph of its Article XVII claim, refers to the "laws,
regulations and actions of the Government of Canada and the CWB related to exports
of wheat". This phrase suggests that the laws and regulations implicated by the panel
request are those "related to exports of wh eat" by the Government of Canada and the
CWB. On the other hand, the first paragraph of the United States' Article XVII claim
provides a description of certain aspects of the Canadian legal regime governing the
activities of the CWB. In particular, it specifies certain exclusive and special
privileges which have allegedly been grante d by the Government of Canada to the
CWB. We agree with the United States that reference should be made to that
paragraph given that, as always when interpre ting portions of a text, it is important to
take account of the relevant context. Ho wever, when the first and second paragraph
of the Article XVII claim are read together, confusion and uncertainty arise. First, it
is unclear whether the measures at issue in clude only those laws and regulations, or
those parts of laws and regulations, which govern the activities of the CWB
mentioned in the first paragraph, or whethe r other laws and regulations, or other parts
of laws and regulations, w ould also be included. Second, another source of
uncertainty is that the second paragraph is concerned with me asures "related to
exports of wheat", while the first paragra ph appears to refer also to activities which
are not necessarily export-related, such as the purchase and sale of wheat by the CWB
for domestic consumption, or "government guarantees of the CWB's financial
operations, including the CWB's borrowing, the CWB's credit sales to foreign buyers,
and the CWB's initial payments to farmers". Accordingly, we do not agree with the
United States that the first paragraph removes all uncertainty as to the precise content
of the laws and regulations which are being challenged.
24. In our view, the United States' panel request, by creating considerable
uncertainty as to the identity, number and content of the laws and regulations which
it is challenging, does not provide adequate information on its face to identify the
specific measures at issue. In particular, we consider that it does not fulfil the due
process objective inherent in Article 6.2. Due process requires that the complaining
party fully assume the burden of identifyi ng the specific measures under challenge.
In the present case, the panel request effectively shifts part of that burden onto
Canada as the responding party, inasmuch as it leaves Canada little choice, if it wants

to begin preparing its defence 15, but to undertake legal research and exercise
judgement in order to establish the precise identity of the laws and regulations
implicated by the panel request.
25. The United States has offered no persuasive explanation for the lack of
precision about the identity of the laws and regulations at issue. The United States
argues that Canada knows what is at issue in this dispute from the discussions at the
consultations preceding the panel request and, indeed, from 15 years of previous
discussions between the two countries on this issue.
16 Even assuming that this was
correct, Article 6.2 requires that a panel request provide the necessary information,
regardless of whether the same informati on, or additional information, is already
available to the responding party through different channels, e.g., previous
discussions between the parties. Moreover, the fact that Canada would know or
should know which laws and regulations the United States meant to be covered by the
panel request would not relieve the United St ates of its obligation to establish, in its
panel request, the identity of the laws and re gulations at issue. In our view, it is a
corollary of the due process objective inherent in Article 6.2 that a complaining party,
as the party in control of the drafting of a panel request, should bear the risk of any
lack of precision in the panel request.
26. With respect to the term "actions" as it appears in the phrase "the laws,
regulations and actions of the Government of Canada and the CWB related to exports
of wheat", Canada argues that these actions are nowhere identified and that it is
unclear what the actions at issue are. Th e United States asserts that it used the term
"actions" because Article XVII prescribes certain conduct with respect to purchases
and sales by state-trading enterprises.
17 In our view, the two indents of the second
paragraph of the Article XVII claim as well as the first and third paragraphs bear out
this assertion, inasmuch as the only actions re ferred to in these paragraphs are actions
relating to purchases and sales involving wh eat exports. While we consider that the
United States could certainly have include d additional information regarding the
actions to which it wished to refer in its panel request, we agree with the
United States that the Article XVII claim sufficiently establishes the nature of the
actions at issue.18
27. Canada notes that the CWB is involve d in thousands of transactions with
multiple parties.19 We agree that the panel request as drafted potentially applies to a
multitude of actions which are not specified in the request. However, we consider
that, for this type of measure, the Un ited States need not necessarily specify the
relevant actions individually. 20 Failure to identify the relevant actions individually
inevitably creates some uncertainty for Canada as the responding party.
Nevertheless, unlike in the case of the refe rence to "laws" and "regulations" in the
United States' panel request, it is clear that th e relevant part of th e panel request that
refers to actions of the CWB relates to purchases and sales of wheat for export.
Therefore, we do not think that the uncertainty created by the lack of enumeration of
each action significantly impairs Canada's ability to prepare its defence.
28. In conclusion, we note that, taken as a whole, the United States' panel request
does not sufficiently establish the identity of the "laws" and "regulations" at issue in
the Article XVII claim. In particular, the identification of the measures at issue in
this claim is inadequate because it creat es significant uncertainty regarding the
identity of the precise measures at issue and thus impairs Canada's ability to "begin
preparing its defence"
21 in a meaningful way. 22 Accordingly, we conclude that the

United States' panel request is inconsistent with Article 6.2 because the Article XVII
claim set out therein does not "identify the specific measures at issue".
23
 (ii) Legal Basis of the Complaint Sufficient to Present the Problem
Clearly
29. Canada makes the further assertion that the United States' panel request is
inconsistent with Article 6.2 because it do es not make clear which laws, regulations
or actions result in the violation of which of the two obligations set forth in
Article XVIII:1(b). The first observation to be made here is that the panel request
identifies both obligations contained in Ar ticle XVIII:1(b). Thus, the panel request
thus does more than merely list Article XVII. By referring to the Government of
Canada and the CWB when identifying the two obligations, the panel request also
links those obligations to the facts of the case. Thus, we believe that the request on
its face provides adequate notice to Canada and the third parties that the United States
may have wished to raise claims of violation under the two obligations set out in
Article XVII:1(b). We do not agree with Canada's assertion that the panel request
does not make it clear which laws, regulations or actions are inconsistent with which
obligation. The panel request states that "the laws, regulations and actions of the
Government of Canada and the CWB relate d to exports of wheat appear to be [… ]
inconsistent with paragraph 1(b) of Article XVII of the GATT 1994 [… ]" (emphasis
added). This wording suggests to us – and we consider that it should suggest to
Canada and the third parties as well – th at the United States may have wished to
claim before us that each of the three categories of measures identified – laws,
regulations and actions – is inconsistent with both obliga tions of Article XVII:1(b).
This way of presenting the Article XVII claim does not, in our view, have as a
consequence that Canada does not know what case it has to answer and so cannot
begin to prepare its defence, or that the third parties are uninformed as to the legal
basis of the complaint and thus lack an opportunity effectively to respond to the
United States' complaint. We do not cons ider, therefore, that this aspect of the
presentation of the Article XVII claim compels the conclusion that the United States'
panel request falls short of the requirements of Article 6.2.
30. Canada's third and fina l allegation is essentially that the United States' claim
under Article XVII:1(b) does not establish why and how the CWB does not follow
customary business practice or does not act in accordance with commercial
considerations, or why or how Canada fails to ensure that the CWB acts consistently
with Article XVII:1(b). The requirement im posed by Article 6.2 is that the panel
request "provide a brief summary of the le gal basis of the complaint sufficient to
present the problem clearly". The panel re quest in this case explicitly identifies the
relevant legal provisions by citing the relevant subparagraph of the article at issue and
states the two distinct obligations contai ned in the relevant subparagraph. As
previously noted, the panel request also li nks those obligations to the Government of
Canada and the CWB. We find this summary of the legal basis of the United States'
Article XVII:1(b) claim to be adequate, in the circumstances of this case, to present
the problem clearly. It is apparent to us – and we consider that it should be apparent
to Canada and the third parties as well – th at the United States may have wished to
claim before us that, as a result of the laws and regulations at issue or through its
conduct in specific instances, the CWB fa ils to make purchases or sales involving
wheat exports solely in accordance with co mmercial considerations and to afford the
enterprises of other Members adequate oppor tunity to compete for such purchases or
sales. Moreover, if the measures at issue had been sufficiently identified, the link
established in the panel request between, on the one hand, the mentioned laws and

regulations and, on the other hand, the a lleged violation of Article XVII:1(b) would
no doubt have had more meaning. Thus, while the summary provided of the legal
basis for the United States' claim under Artic le XVII:1(b) is brief, we do not think
that this results in Canada not knowing wh at case it has to answer and hence being
unable to begin preparing its defence, or in the third parties being uninformed as to
the legal basis of the complaint and thus lacking an opportunity effectively to respond
to the United States' complaint. We ther efore do not agree with Canada that the
summary of the legal basis for the Article XVII:1(b) claim fails to comply with the
requirements of Article 6.2.
31. It should also be recalled that, unde r Article 6.2 as interpreted by the
Appellate Body, the United States' panel request must set out the United States'
claims, but not the arguments supporting those claims.
24 Accordingly, we do not
consider that the United States' panel requ est is defective because it does not set out
arguments supporting the conclusion that the measures at issue are inconsistent with
the obligations contained in Article XVII:1(b).
32. Overall, we thus conclude that t hose portions of the United States' panel
request which deal with the Article XVII claim fail to satisfy the requirements of
Article 6.2 insofar as they do not "iden tify the specific measures at issue". As a
result, we will refrain from addressing the merits of this claim.
 (c) Claim in respect of rail car allocation
33. The United States' panel request sets out a claim in respect of rail car
allocation as follows:
25
(2) With regard to the treatment of grain that is imported into
Canada, Canadian measures discrim inate against imported grain,
including grain that is the product of the United States:
 [… ]
• Canadian law caps the maximum revenues that railroads
may receive on the shipment of Canadian domestic grain,
but not revenues that railroads may receive on the
shipment of imported grain. In addition, in allocating
railcars used for the transport of grain, Canada provides
a preference for domestic grain over imported grain .
These measures concerning rail transportation accord to
imported grain less favorable treatment than that accorded
to like domestic grain, and thus appear to be inconsistent
with the obligations of Cana da under Article III:4 of the
GATT 1994 and Article 2 of the TRIMs Agreement.
34. Canada considers that the United States claim in respect of rail car allocation
as set out in the panel request fails to meet the requirements of Article 6.2 of the
DSU. Specifically, Canada asserts that th e panel request does not give any indication
of the specific measures with which the United States takes issue. In Canada's view,
it is insufficient to raise generally the issue of rail car allocation without providing
details as to the measure at issue. Canada submits that it is not possible for Canada to

prepare a defence against this claim wit hout being alerted in some detail to the
provisions that are alleged to violate WTO obligations.
35. The United States does not agree with Canada that the United States' claim
regarding rail car allocation fails to identify the specific measures at issue. Moreover,
in the United States' view, in view of Canada's conduct with regard to the
consultations addressed to this issu e, Canada's argument is disingenuous.
26 T h e
United States asserts that, during consultati ons, it sought elaboration from Canada on
a statement from the website of the Canadian Grain Commission ("CGC") indicating
that Canada had adopted a measure providing differential treatment for Western
Canadian and imported wheat. According to th e United States, Canada stated that it
had no knowledge of any Canadian rules on this issue. The United States notes that,
in the absence of confirmation of the proper a ppellation or legal status of this rule, its
panel request reasonably addressed this issue. The United States further points out
that, six weeks after the consultations, and after it had filed its panel request, Canada
confirmed that it does establish rules governi ng the allocation of rail cars used in the
transport of grain. The United States notes that Canada referred to the allocation
powers of the CGC under Section 87 of the Canada Grain Act and under Section 68
of the Regulations to the Canada Grain Act a nd also stated that, on a crop year basis,
the CGC issues to the industry at large an order that sets out how the CGC will
allocate producer cars for the various grains and destinations for the coming crop
year.
27 The United States also notes that Cana da's response does not explain whether
these rules and orders are publicly available. The United States submits that, in the
light of the aforementioned circumstances, there can be no legitimate confusion over
the rail car allocation measures at issue. Canada must certainly be aware of the
content of CGC grain car allocation orders.
36. The Panel understands Canada to allege that the claim set out in the
United States' panel request concerning th e issue of rail car allocation fails to
"identify the specific measures at issue" in the sense of Article 6.2. The claim in
question is set out in the panel request in the following terms: " [I]n allocating railcars
used for the transport of grain, Canada provides a preference for domestic grain over
imported grain". We note that this description of the measures at issue does not
specify any particular laws, regulations or other legal instrument. However, as noted
by us previously in relation to the Article XVII claim, the fact that a panel request
does not specify by name, date of adoption, etc. the relevant law, regulation or other
legal instrument to which a claim relates does not necessarily render the panel request
inconsistent with Article 6.2, provided th at the panel request contains sufficient
information that effectively identifies the preci se measures at issue. In this regard, as
we have also noted above, whether a pane l request provides sufficient information
will depend on whether the information pr ovided serves the purposes of Article 6.2
and, in particular, its due process objective. It will also depend upon the specific
circumstances of each case, which include, inter alia, the type of measure that is at
issue.
37. In examining whether, in the absence of an explicit reference to the particular
laws, regulations or other instruments, th e description provided in the United States'
panel request of the measures at issue in the claim regarding rail car allocation is
sufficient for the purposes of Article 6.2, we begin by considering whether that
description adequately notifies and inform s Canada of the measures under challenge
so that Canada can begin preparing its defence in a meaningful way.

38. The first thing to be noted is that unlike in the case of the United States' claim
under Article XVII, where it is in many wa ys unclear what me asures "related to
exports of wheat" are being challenged, the United States' claim here at issue
identifies clearly what specific Canadian measures concerning rail transportation are
at issue. The panel request makes it clear that the specific measures at issue are
Canada's measures concerning the allocation of rail cars used for the transport of
grain.
39. We observe, furthermore, that the cl aim in respect of rail car allocation does
not explicitly indicate whether the measures at issue are laws, regulations and/or
actions.
28 However, we consider that the description in the panel request is broad
enough to cover both measures of general application – i.e., laws and regulations
related to the allocation of rail cars – and in dividual (administrative) acts of rail car
allocation.
40. Moreover, we note that, in its defen ce, the United States suggests that it has
been unable to obtain confirmation from Canada of the proper name or legal status of
the relevant measures and that, in the absen ce of such confirmation, its panel request
reasonably identifies the measures at issue. In considering this argument, we recall
that "compliance with the requirements of Article 6.2 must be determined on the
merits of each case, having considered the panel request as a whole, and in the light
of attendant circumstances".
29
41. The facts and circumstances which we have been made aware of and which
we consider relevant are as follows. At the conclusion of the consultations of
31 January 2003 in Ottawa, Canada agreed to provide in writing and at a subsequent
time answers to a number of questions. In one of these questions, the United States
sought "[i]nformation on any rules, regulati ons or administrative actions concerning
the [Canadian Grain Commission 's] allocation of railcars".
30 It appears that a written
version of this and other questions w as sent to Canada on 11 February 2003. 31 On
12 March 2003, i.e., almost five and a half weeks after completion of the
consultations and six days after the Unite d States' panel request of 6 March 2003 32,
Canada provided the United States with th e requested answers, including to the
question on rail car allocation. 33 At the preliminary hearing, the United States stated
that, at the time it submitted its panel request to Canada and the WTO, it was not
confident that Canada would still provide written answers. 34 Canada, on the other
hand, stated that, during the consultations in Ottawa, Canada's head of delegation had
given her word that the relevant questions would be answered and that, at the time the
United States filed its panel request, Cana da was in the midst of answering the
United States' questions. 35 The parties have made conflicting statements regarding
whether the United States renewed its requ est for answers before filing its panel
request.36
42. In addition, it should be noted that in the answer Canada provided to the
United States' question on rail car allocation, Canada refers, in a general way, to
certain allocation orders issued by th e Canadian Grain Commission ("CGC") on a
crop year basis. 37 At the preliminary hearing, Canada provided the further
explanation that there are two types of CGC allocation orders, regulatory and
shipment-specific ones, and that only the former are publicly available.38
43. To reiterate, it is our view that th e panel request makes it clear that the
specific measures at issue are Canada's measures concerning the allocation of rail cars
used for the transport of grain. This said, we accept the United States' contention that

the aforementioned facts and circumstances affected the degree of precision with
which the United States did set out and could be expected to have set out the
measures at issue in its claim in respect of rail car allocation. More specifically, we
consider the fact that the panel request does not explicitly indicate whether the
measures at issue are laws, regulations and/or actions to be justified in the light of the
attendant circumstances
39 and the fact that the description in the panel request is
broad enough to cover both measures of general application and individual acts of rail
car allocation.
44. Therefore, having regard to the text of the panel request and the particular
facts and circumstances of this case, we consider that the United States' claim
regarding rail car allocation adequately notif ies and informs Canada of the specific
measures under challenge. We do not agree with Canada that it is impossible for it to
prepare its defence because the panel requ est in this case is inadequate. The
United States' panel request in our view provides sufficient information on the
measures at issue to allow Canada to "begin preparing its defence"
40 in a meaningful
way. The information on relevant rules governing rail car allocation transmitted by
Canada to the United States days after the filing of the panel request confirms our
view.
45. With respect to whether the claim regarding rail car allocation adequately
notifies and informs the third parties of the specific measure under challenge, we note
that one of the third parties to these pane l proceedings, Japan, has suggested that, by
failing to specify the relevant laws, regula tions and actions, the United States did not
fully take into account the object and purpose of Article 6.2, i.e., to inform the third
parties, in addition to Canada, of the substance of the complaint. 41 Another third
party, the European Communiti es, has stated that it is unclear from the description in
the panel request whether the United States seeks to challenge legislation, or
administrative or commercial practices.42 As we have already stated, we think that the
United States' panel request clearly identifies the Canadian rail transportation
measures at issue. Also, it is clear from the panel request as worded that it covers
both measures of general application and in dividual (administrative) acts of rail car
allocation. Finally, we recall our finding that, due to the particular circumstances of
this case, it was justifiable for the United States to set out the measures concerning
rail car allocation by using the descripti on provided in the United States' panel
request. We consider, therefore, that it woul d be inconsistent for us to conclude that,
notwithstanding these particular circumstan ces, the United States' panel request is
inadequate because it does not sufficiently info rm the third parties of the measures at
issue. Were we to conclude otherwise, we would, in effect, require the United States
to do more than it could be expected to do in the circumstances of this case.
46. In conclusion, we find that Ca nada has failed to establish that the
United States' panel request, when examined on its face and in light of the attendant
circumstances, is inconsistent with Article 6.2 because the rail car allocation claim set
out therein does not "identify the specific measures at issue". Accordingly, we see no
reason not to address the merits of this claim.
43
 (d) Claims under Article 2 of the TRIMs Agreement
47. The United States' panel request sets out claims under Article 2 of the TRIMs
Agreement as follows:44

(2) With regard to the treatment of grain that is imported into
Canada, Canadian measures discrim inate against imported grain,
including grain that is the product of the United States:
• Under the Canada Grain Act and Canadian grain
regulations, imported grain must be segregated from
Canadian domestic grain throughout the Canadian grain
handling system; imported grain may not be received into
grain elevators; and imported grain may not be mixed
with Canadian domestic grain being received into, or
being discharged out of, grain elevators. These measures
accord to imported grain less favorable treatment than that
accorded to like Canadian grain, and thus appear to be
inconsistent with the obliga tions of Canada under Article
III:4 of the GATT 1994 and Article 2 of the TRIMs
Agreement.
• Canadian law caps the maximum revenues that railroads
may receive on the shipment of Canadian domestic grain,
but not revenues that railroads may receive on the
shipment of imported grain. In addition, in allocating
railcars used for the transport of grain, Canada provides a
preference for domestic grain over imported grain. These
measures concerning rail transportation accord to
imported grain less favorable treatment than that accorded
to like domestic grain, and thus appear to be inconsistent
with the obligations of Cana da under Article III:4 of the
GATT 1994 and Article 2 of the TRIMs Agreement.
48. Canada considers that the United States' claims under Article 2 of the TRIMs
Agreement as set out in the panel request fail to meet the requirements of Article 6.2
of the DSU. Canada asserts that the Unite d States appears to rely solely on the
relationship between Article 2 of the TRIMs Agreement and Article III:4 of the
GATT 1994. Canada notes that the United States does not provide any indication as
to the nature of the investment measure that it alleges is WTO-inconsistent. For
example, there is no reference to any measures of the type identified in the illustrative
list under Article 2 of the TRIMs Agreement. Therefore, Canada submits that it can
only speculate as to the specific investment measures at issue and the legal basis for
the allegation of breach of Article 2 of the TRIMs Agreement.
49. The United States rejects Canada's arguments. According to the
United States, Canada's arguments are not about the "specific measures at issue".
Rather, Canada is essentially arguing that the panel request must lay out the legal
arguments why the specifically identified measures are within the scope of the TRIMs
Agreement. However, there is no such requirement in Article 6.2 of the DSU.
50. The Panel begins its analysis with Canada's assertion that the United States'
claims under the TRIMs Agreement do not give any indication as to the nature of the
specific "investment measures" at issue.
45 The requirement imposed by Article 6.2 of
the DSU is that a panel request "identify th e specific measures at issue". We do not
consider that Article 6.2 requires the Unite d States to establish, in its panel request,

that the measures identified by it are trad e-related investment measures within the
meaning of the TRIMs Agreement , or that they fit within one of the investment
measures enumerated in the illustrative list in the Annex to the TRIMs Agreement .
That the measures identified by the United St ates in its panel request are properly to
be considered trade-related investment measures within the meaning of the TRIMs
Agreement is something to be established by the United States in its written
submissions and oral statements, through evidence and argument. We therefore
disagree with Canada that the United States' panel request is inconsistent with
Article 6.2 because it fails to set out the "investment measures" which are alleged to
be contrary to the TRIMs Agreement.
51. According to Article 6.2, the United States' panel request must "provide a
summary of the legal basis sufficient to present the problem clearly". The claims
under Article 2 of the TRIMs Agreement set out in the panel request cite the relevant
article, which has two paragraphs, but in fact contains only one obligation. The
claims also state that the measures at issue "accord to imported grain less favourable
treatment than that accorded to like domest ic grain", which makes it clear that the
United States' claims are based on Article 2 of the TRIMs Agreement insofar as that
article incorporates the obligations contained in Article III:4 of the GATT 1994. This
is confirmed by the fact that the measur es which are being challenged under Article 2
of the TRIMs Agreement are also challenged under Article III:4 of the GATT 1994.
The claims also contain allegations regard ing how the relevant measures concerning
rail transportation, rail car allocation and grain segregation give rise to less favourable
treatment for imported grain. In view of the foregoing, we think that the summary of
the legal basis for the United States' claims under Article 2 of the TRIMs Agreement
presents the problem raised with sufficient cl arity, such that Canada is able to know
the case it has to answer and begin prepari ng its defence. We also think that the
summary provided is sufficient to inform th e third parties about the legal basis of the
complaint and to give them an opportunity effectively to respond to the United States'
complaint. We therefore do not consider th at the summary of the legal basis for the
claims under Article 2 of the TRIMs Agreement fails to comply with the requirements
of Article 6.2.
52. Based on the above considerations, we reject Canada's assertion that the
United States' panel request is inconsistent with Article 6.2 because the claims under
Article 2 of the TRIMs Agreement do not identify the specifi c measures at issue and
do not indicate the legal basis for the complaint. Accordingly, we see no reason not to
address the merits of these claims.

 2. Timeliness of Canada's objection to the United States' panel
request
53. Having concluded above that the United States' panel request fails to satisfy
the requirements of Article 6.2, we need to consider, as an additional matter, the
United States' argument that Canada's request for a preliminary ruling on Article 6.2
should be denied on the basis that Canada failed to raise its procedural objection at
the earliest opportunity.
54. The United States notes that at no ti me prior to the establishment of this
Panel did Canada indicate that it considered the panel request deficient, and that it
waited until after the panel was established to offer its objection. The United States
considers that Canada's procedural objec tion to the panel request is untimely and
should not stand in the way of consideration of the substantive issues in this dispute.

The United States points out that the Appellate Body in United States - Tax
Treatment for "Foreign Sales Corporations"46 upheld the panel's rejection of a United
States request for a preliminary ruling under very similar circumstances.
55. In addressing the United States' argument, we first recall the relevant facts as
we understand them. Canada filed its requests for a preliminary ruling on
13 May 2003, the day after the Director-General of the WTO announced the Panel's
composition to the parties. Prior to that, on 7 April 2003, Canada wrote to the
United States, indicating, inter alia , that "[t]he U.S. request, dated 6 March 2003,
does not meet the requirements of Article 6(2). […] We ask the U.S. to promptly
identify the specific measures at issue and pr ovide a brief summary of the legal basis
for its complaint".
47 Canada did not receive a reply from the United States. 48 The
DSB established this Panel on 31 March 2003. The parties disagree over whether
Canada raised objections prior to the establishment of the Panel.
49 Canada asserts
that it raised similar objections in r espect of the United States' request for
consultations during consultations, which is denied by the United States.50
56. The United States considers that Canada should not have raised its objections
for the first time in a letter sent after th e establishment of the Panel. In considering
this issue, we note that Canada informed the United States of its concerns about the
consistency of the United States' panel request with Article 6.2 by letter. Before us,
Canada described the letter it sent to the United States as "a good-faith effort to
clarify the grounds" for the United States panel request. Canada noted in this regard
that the Appellate Body in Thailand - H-Beams made the following statement:51
In view of the importance of the request for the establishment of a
panel, we encourage complaining pa rties to be precise in identifying
the legal basis of the complaint. We also note that nothing in the
DSU prevents a defending party from requesting further clarification
on the claims raised in a panel request from the complaining party,
even before the filing of the first written submission. In this regard,
we point to Article 3.10 of the DSU which enjoins Members of the
WTO, if a dispute arises, to engage in dispute settlement procedures
"in good faith in an effort to resolve the dispute". As we have
previously stated, the "procedural rules of WTO dispute settlement
are designed to promote, not the development of litigation
techniques, but simply the fair, prompt and effective resolution of
trade disputes".
52
57. We find this statement relevant to th e issue before us. The Appellate Body
made this statement as part of its review of a finding by the panel that the request for
the establishment of a panel submitted by Poland was sufficient to meet the
requirements of Article 6.2 of the DSU. The panel, in turn, made this finding in
response to a request for a preliminary ruling by Thailand, the defending party in that
case. Thailand submitted its request to the panel as part of its first written
submission.
53 There is no indication in the Panel report that Thailand made its
concerns known to Poland before filing its first written submission.
58. The above-quoted statement by the Appellate Body notes that there is no
legal bar to any Member requesting clarifi cation of a panel request even before the
filing of the first written submission. The statement does not suggest that, in
Thailand - H-Beams, Thailand should have raised its concerns at the DSB meetings at
which Poland's panel request was on the ag enda. In the case at hand, Canada did

avail itself of the possibility of seeking clar ification of the claims raised in the
United States' panel request. As suggested by the Appellate Body, Canada did so
"before the filing of the first written submission", namely, soon after this Panel was
established. Canada did not receive a reply from the United States.
54 Canada then
filed its request for a preliminary ruling immediately upon receiving notice that this
Panel had been duly constitute d. Unlike Thailand in the Thailand - H-Beams case,
Canada did not wait until the due date of its first submission before filing its request.
In fact, Canada informed the Panel at th e earliest possible opportunity. In addition,
Canada requested the Panel to rule on its request at the earliest possible opportunity,
namely, before the due date of the parties' first written submissions. In the light of
this, we do not think that the conduct of Ca nada in this case justifies the conclusion
that Canada has engaged in "litigation techni ques" in an effort to prevent this Panel
from considering the substantive issues of this dispute.
59. We note that Canada could arguabl y have sought clarification of the
United States' panel request earlier than it did. We recall in this regard that Canada
waited a month, from 6 March 2003 to 7 April 2003, before it informed the
United States of its concerns.
55 Had Canada informed the United States earlier, it
might have convinced the United States to amend its panel request, which, in turn,
might have obviated the need for Canada to request a preliminary ruling. We might
then have been able to proceed to ex amine the substance of the United States'
Article XVII claim. Obviously, this would have been a preferable outcome. At the
same time, Canada might have failed to convince the United States to amend its panel
request. If the United States had declined to amend its panel request, and if it had
done so notwithstanding the merits of some of Canada's arguments, Canada could not
have prevented the panel from being established.
60. While we thus consider it unfortunate that Canada did not act more promptly
in raising its concerns with the United Stat es, it would, in our view, be inappropriate,
in the specific circumstances of this case, to focus solely on the conduct of Canada.
As we have said, Canada's letter of 7 April 2003 was not answered by the
United States. If the United States had provide d sufficient clarification of its panel
request to Canada, Canada might, for in stance, have refrained from requesting a
preliminary ruling. Indeed, Canada st ated so at the preliminary hearing.
56 We do not
see why it should be assumed by us that th e United States would have amended its
panel request if Canada had raised concer ns at a relevant DSB meeting, but that
Canada would necessarily have proceeded with its request for a preliminary ruling if
the United States had provided clarification of its panel request. 57 W e f i n d i t
incongruous, therefore, for the United Stat es to suggest that Canada should have
raised its concerns before the Panel was established (and thus assisted the
United States in making use of its right to have a dispute resolved effectively and
promptly) when the United States itself made no attempt at addressing Canada's
concerns (and thus at assisting Canada in exercising its rights of defence effectively)
once Canada did raise those concerns with the United States. In our view, both
disputing parties are under an obligation to engage in dispute settlement procedures in
good faith in an effort to resolve their dispute.
61. We do not think that the Appellate Body report on US - FSC assists the
United States in this case. Contrary to what the United States suggests
58, the
Appellate Body in that case did not address a preliminary objection by the
United States based on Article 6.2 of the DSU, i.e., an objection in respect of a panel
request. Rather, the objection in questi on was based on Article 4.4 of the DSU and

thus concerned the request for consultations in that case. 59 It was in this context that
the Appellate Body stated that:60
[…] a year passed between su bmission of the request for
consultations by the European Co mmunities and the first mention of
this objection by the United States – despite the fact that the
United States had numerous opportunities during that time to raise its
objection. It seems to us that, by engaging in consultations on three
separate occasions, and not even raising its objections in the two
DSB meetings at which the request for establishment of a panel was
on the agenda, the United States acted as if it had accepted the
establishment of the Panel in this dispute, as well as the consultations
preceding such establishment. In these circumstances, the United
States cannot now, in our view, assert that the European
Communities' claims under Article 3 of the SCM Agreement should
have been dismissed and that the Panel's findings on these issues
should be reversed.
62. As an initial matter, we note that, in the present case, it was not a year that
passed between submission of the panel request and the first mention of Canada's
objection to the request, but a month. Regarding the issue of whether Canada should
have raised its objections in the DSB meeti ngs in this case, it should be noted that
later in the US - FSC report, the Appellate Body stated that "the […] principle of
good faith requires that responding Members seasonably and promptly bring claimed
procedural deficiencies to the attention of the complaining Member, and to the DSB
or the Panel, so that corrections, if n eeded, can be made to resolve disputes"
61. We
think that if the Appellate Body was of th e view that raising objections at relevant
DSB meetings is always necessary in cases where such objections could be made at
such meetings, the Appellate Body would have used different wording. We note that,
in a subsequent case, Mexico – Anti-Dumping Investigation of High Fructose Corn
Syrup (HFCS) from the United States – Rec ourse to Article 21.5 of the DSU by the
United States, the Appellate Body stated that:62
In examining Mexico's conduct, we note that Mexico did not bring
up the issues it now relies upon at the DSB meeting on
23 October 2000. Rather, Mexico in effect consented to refer the
matter to the Article 21.5 Panel at the first DSB meeting where the
matter was raised. We further note th at Mexico did not refer to these
issues, at all, in either of its written submissions to the Panel. Nor
did Mexico ask the Panel to make any preliminary ruling on these
issues. The alleged deficiencies in the authority of the Panel were
mentioned by Mexico only at the meeting with the Panel on
20-21 February 2000.
63. The Appellate Body then went on to find that the panel in that case "could
reasonably have concluded that Mexico's ' objections' were not raised in a timely
manner".
63 However, there is no indication that the Appellate Body based this
finding primarily, or even solely, on Mexico's failure to raise its "objections" at the
DSB meeting where the matter was raised. We believe that, in the circumstances of
the present case, we cannot reasonably conclude that solely because Canada did not
raise its objections at the relevant DSB m eetings, Canada's request for a preliminary
ruling should be denied.

64. For these reasons, we are unable to accept the United States' argument that
we decline Canada's request for a prelim inary ruling on the grounds that it was not
raised in a timely manner. Accordingly, we grant Canada's request for a preliminary
ruling and, consistent with our ruling, will refrain from considering the substance of
the United States' claim under Article XVII.
65. In reaching this conclusion, we wish to emphasise once again that disputing
parties are required, under the provisions of Article 3.10 of the DSU, to engage in
dispute settlement procedures "in good faith in an effort to resolve the dispute."
Accordingly, should the United States wish to see a panel address the substance of its
Article XVII claim promptly, we believe that the procedures of the DSU are
sufficiently flexible, if adhered to in good fa ith by both disputing parties, to allow the
United States to do so. Thus, we consider that, in working with each other towards a
resolution of this dispute, it may be possi ble for the parties to explore, and avail
themselves of, the flexibility offered by the DSU. In our view, the options open to
the parties include the possibility of the United States filing a new panel request and
the parties agreeing to have a panel established at the first DSB meeting at which the
panel request is on the agenda.
64 The Panel, for its part, stands ready to assist the
parties in their efforts to reach a fair, prompt and effective resolution of this dispute."

1 See document WT/DS276/6.
2 On 7 April 2003, Canada sent a letter to the United States in which it stated its view that
the United States' panel request did not meet th e requirements of Article 6.2 of the DSU and
requested that the United States promptly identify the specific measures at issue and provide
a brief summary of the legal basis for its complaint. Canada's preliminary written
submission, para. 30.
3 Appellate Body Report, United States – Countervailing Duties on Certain Corrosion-
Resistant Carbon Steel Flat Products from Germany (" US – Carbon Steel "),
WT/DS213/AB/R and Corr.1, adopted 19 December 2002, paras. 125-127.
4 (original footnote) Appellate Body Report, Guatemala – Cement I, paras. 69-76.
5 (original footnote) Appellate Body Report, Brazil – Desiccated Coconut , at 186. See also,
Appellate Body Report, EC – Bananas III, para. 142.
6 (original footnote) Appellate Body Report, EC – Bananas III, para. 142.
7 (original footnote) Ibid., para. 143.
8 (original footnote) Appellate Body Report, Korea – Dairy, paras. 124-127.
9 See document WT/DS276/6.
10 The New Shorter Oxford English Dictionary , L. Brown (ed.) (Clarendon Press, 1993),
Vol. 1, p. 1304.
11 Ibid., Vol. 2, p. 2972.
12 Appellate Body Report, US – Carbon Steel, supra, para. 126.
13 Appellate Body Report, Appellate Body Report, European Communities – Customs
Classification of Certain Computer Equipment ("EC – Computer Equipment "),
WT/DS62/AB/R, WT/DS67/AB/R, WT/DS68/AB/R, adopted 22 June 1998,
DSR 1998:V, 1851, para. 69
14 At the preliminary hearing, the parties expressed the same view. Canada's reply to
preliminary Panel question no. 6; United States' reply to preliminary Panel question no. 3.
15 Appellate Body Report, Appellate Body Report, Thailand – Anti-Dumping Duties on
Angles, Shapes and Sections of Iron or Non-Alloy Steel and H-Beams from Poland
("Thailand – H-Beams "), WT/DS122/AB/R, adopted 5 April 2001, para. 88.
16 United States preliminary written submission, para. 28; United States reply to preliminary
Panel question no. 6.
17 United States' preliminary written submission, note 15.

18 It should be noted that the term "actions" could, in principle, be read to refer to actions by
the Government of Canada as well as by the CWB. It is thus somewhat unclear whether the
term "actions" was meant to refer only to CWB actions, just like, presumably, the term
"laws" was intended to refer only to the Government of Canada, or whether the
United States meant to indicate that the actions of the CWB were attributable also to the
Government of Canada. Whereas this lack of cl arity is regrettable, we note that, in either
case, the nature of the actions at issue is the same.
19 Canada's preliminary oral statement, para. 11.
20 We note that, in EC – Computer Equipment , the Appellate Body found that a general
reference to the "application of tariffs on LAN equipment and PCs with multimedia
capability by customs authorities in the European Communities" constituted a "proper"
identification of the "specific m easures at issue" within the meaning of Article 6.2, even
though these measures were not normative rules. Appellate Body Report, EC – Computer
Equipment, supra, para. 65.
21 Appellate Body Report, Thailand – H-Beams, supra, para. 88.
22 In view of our finding that that the United States' panel request fails to give adequate
notice to Canada of the measures at issue, we do not need to examine, in addition, whether
the panel request gives adequate notice to the third parties.
23 We believe that our finding is sufficient to resolve the issue before us and we do not,
therefore, find it necessary to "limit" the Un ited States' Article XVII claim to certain
measures identified by Canada. Canada's preliminary oral statement, para. 24.
24 Appellate Body Report, European Communities – Regime for the Importation, Sale and
Distribution of Bananas ("EC – Bananas III "), WT/DS27/AB/R, adopted
25 September 1997, DSR 1997:II, 591, para. 141.
25 See document WT/DS276/6 (emphasis added).
26 The United States notes in this regard that it finds it difficult to reconcile Canada's
conduct of the consultations with its obligations under Article 4.3 of the DSU.
27 The United States refers to exhibit US-2, para. 15.
28 See also EC preliminary written third party submission, para. 18
29 Appellate Body Report, US – Carbon Steel, supra, para. 127.
30 The United States sent similar questions to Canada in advance of the consultations in
Ottawa. Exhibit US-1, question nos. 35 and 48. It is not clear whether the final version of
these questions was agreed during the Ottawa consultations.
31 United States' reply to preliminary Panel question no. 4.
32 The panel request was circulated to WTO Members on 7 March 2003. See document
WT/DS276/6. We further note that the United States' request for consultations is dated
19 December 2002 and that, pursuant to Article 4.7 of the DSU, if the consultations fail to
settle a dispute, the complaining party may request a panel within 60 days after the date of
receipt of the request for consultations.
33 Exhibit US-2. Canada provided relatively short answers to all fifteen questions. We also
note that the United States did not consider Ca nada's answer to the question on rail car
allocation fully satisfactory. United States' preliminary written submission, note 20.
34 United States' reply to preliminary Panel question no. 10.
35 Canada's reply to preliminary Panel question nos. 10 and 4. Canada indicated that the
"delay" was due, inter alia, to the need for interdepartmental consultations and vetting of
replies by lawyers. Canada's reply to preliminary Panel question no. 4.
36 United States' reply to preliminary Panel que stion no. 4; Canada's reply to preliminary
Panel question no. 10.
37 Exhibit US-2, para. 15.
38 Canada's reply to preliminary Panel question no. 5.
39 See also Appellate Body Report, Thailand – H-Beams, supra, paras. 91-92.
40 Appellate Body Report, Thailand – H-Beams, supra, para. 88.
41 Japan's preliminary oral third party statement, para. 9.
42 European Communities' written third party submission, para. 18. We note that, in its third
party submission, Chile did not suggest that the United States' panel request insufficiently
informs the third parties of the measure at i ssue in the United States' claim concerning rail
car allocation.

43 We believe that our finding is sufficient to resolve the issue before us and we do not,
therefore, find it necessary to "limit" the United States' claim regarding the rail car allocation
to certain measures identified by Canada. Canada's preliminary oral statement, para. 24.
44 See document WT/DS276/6.
45 Canada's preliminary oral statement, para. 25.
46 Appellate Body Report, United States – Tax Treatment for "Foreign Sales Corporations"
("US – FSC "), WT/DS108/AB/R, adopted 20 March 2000, DSR 2000:III, 1619.
47 Canada's preliminary written submission, para. 30.
48 Ibid.
49 Canada's comments at the preliminary hearing on para. 9 of the United States' preliminary
oral statement; United States' preliminary written submission, para. 24.
50 Since there appears to be no formal reco rd of the consultations, we are unable to
determine whether or not Canada raised an objection during the consultations in respect of
the request for consultations, and whether the alleged objection should have assisted the
United States in drafting its panel request in a way which meets the requirements of
Article 6.2.
51 Appellate Body Report, Thailand - H-Beams, para. 97.
52 (original footnote) Appellate Body Report, United States – Tax Treatment of "Foreign
Sales Corporations", WT/DS108/AB/R, adopted 20 March 2000, para. 166.
53 Panel Report, Thailand – Anti-Dumping Duties on Angles, Shapes and Sections of Iron or
Non-Alloy Steel and H-Beams from Poland (" Thailand – H-Beams "), WT/DS122/R,
adopted 5 April 2001, as modified by the Appellate Body Report, WT/DS122/AB/R,
para. 7.1.
54 The United States indicated in this regard th at any clarification of its panel request could
not have cured possible defects of its panel request, and that the United States' panel request
was sufficient on its face. United States' reply to preliminary Panel question no. 3.
55 Canada indicated to us that it used the time from 7 to 31March 2003 to hold
interdepartmental consultations on the panel request which it considered unclear. Canada
indicated that these consultations involved several ministries, including those of agriculture,
finance, transport, foreign af fairs and trade, as well as the Canada Wheat Board and the
Canadian Grain Council. Canada's comments on para. 9 of the United States' preliminary
oral statement.
56 Canada's comments on para. 9 of the United States preliminary oral statement.
57 It is true that the United States could not have "cured" any inconsistencies with Article 6.2
of its panel request subsequent to the establishment of this Panel and hence could not have
prevented Canada from successfully challenging the panel request. However, this does not
provide a justification in itself for the United States not working with Canada to clarify its
request. Indeed, if that were the case, there would have been little point in the Appellate
Body pointing out, in Thailand - H-Beams, that responding parties may seek clarification of
panel requests even before the filing of their first written submissions to panels.
58 United States' preliminary oral statement, para. 9.
59 Article 4.4 of the DSU reads as follows:
All such requests for consultations shall be notified to the DSB and the relevant
Councils and Committees by the Member which requests consultations. Any
request for consultations shall be submitted in writing and shall give the reasons for
the request, including identification of the measures at issue and an indication of the
legal basis for the complaint.
60 Appellate Body Report, US – FSC, supra, para. 165.
61 Appellate Body Report, US - FSC, supra, para. 166 (emphasis added).
62 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 ("Mexico – Corn Syrup (Article 21.5 – US ) "), WT/DS132/AB/RW, adopted
21 November 2001, para. 45.
63 Appellate Body Report, Mexico - Corn Syrup (Article 21.5 - US), para. 50.
64 Without taking a position on this issue, we note that the provisions of Article 9.3 of the
DSU may also be of interest to the parties.

6.11 In response to the Panel's preliminary ruling, the United States requested and was granted a
suspension of the work of the Panel until 21 July 2003. 103 During the period of suspension of the
Panel's work, on 30 June 2003, the United States filed a new request for the establishment of a
panel.
104 As previously noted, on 11 July 2003, the DSB established a second panel, the July Panel,
pursuant to the United States' request of 30 June 2003.
C. MEASURE RELATING TO EXPORTS OF WHEAT
1. Measure at issue
6.12 The United States' complaint in respect of Canadian wheat expor ts is directed against what
the United States refers to as the "CWB Export Regime". The abbreviation "CWB" stands for
"Canadian Wheat Board". The CWB Export Regime as defined by the United States comprises three
elements. They are:
(i) the legal framework of the CWB;
(ii) Canada's provision to the CWB of exclusive and special privileges; and
(iii) the actions of Canada and the CWB with respect to the CWB's purchases and sales
involving wheat exports.105
6.13 These three elements taken collectively constitute the measure under challenge.106
6.14 The first element - the "legal framework of the CWB" 107 - comprises the governing statute of
the CWB, the Canadian Wheat Board Act108 (hereafter the "CWB Act").109
6.15 The second element -- Canada's provision to the CWB of exclusive and special privileges -
encompasses a number of privileges provided to the CWB by the Government of Canada. 110 T h e
privileges at issue are:111
(i) the exclusive right to purchase and sell Western Canadian wheat for export and
domestic human consumption;
(ii) the right to set, subject to government approval, the initial price 112 payable for
Western Canadian wheat destined for export or domestic human consumption;

103 WT/DS276/10.
104 WT/DS276/9.
105 Ibid., para. 15.
106 Ibid.
107 The United States appears to treat the term "legal structure of the CWB" as interchangeable with the
term "legal framework of the CWB". United States ' replies to Panel question Nos. 2(b) and (e) and
United States' second written submission, para. 3.
108 Exhibit US-2.
109 United States' first written submission, paras. 2, 17 and 65-66.
110 Canada does not deny the existence of these privileges. Canada's first oral statement, paras. 10 and
81; Canada's first written submission, paras. 4 and 126.
111 United States' first written submission, paras. 21-36.
112 For an explanation of the concept of "initial price", see, e.g. , Canada's notification pursuant to
Article XVII:4(a) of the GATT 1994 concerning state trading enterprises, where it is stated that "[a]ll funds
received by the CWB from the sale of grains are pooled. Separate pools are maintained each year fore each type
of grain, i.e., wheat, durum wheat, barley and designated barley. All producers will, at any time during the crop
year, receive the same initial payment for the same grade of grain delivered to the CWB. In the first phase of

(iii) the government guarantee of the initial payment to producers of Western Canadian
wheat;
(iv) the government guarantee of the CWB's borrowing; and
(v) government guarantees of certain CWB credit sales to foreign buyers.
6.16 The third element may be divided into two sub-elements. The first of these - "the actions of
Canada" with respect to wheat exports by the CWB – comprises: (1) Canada's alleged failure to
exercise its authority to oversee the CWB, (2) Ca nada's approval of the CWB's borrowing plan and
Canada's guarantee of the CWB's borrowing and credit sales, and (3) Canada's approval and guarantee
of the initial payment to producer s of Western Canadian wheat.
113 The other sub-element - "the
actions of the CWB" with respect to wheat e xports - concerns CWB purchases and sales of wheat
destined for export on allegedly discriminatory or non-commercial terms.114
6.17 Since Canada did not express any concerns about the United States' use of the term "CWB
Export Regime", the Panel will hereafter use the term in the sense ascribed to it by the United States.
2. Findings requested by the parties and main supporting arguments
6.18 The United States requests the Panel to find that the CWB Export Regime is inconsistent
with Canada's obligations under Article XVII:1 of the GATT 1994.
6.19 Pursuant to Article XVII:1(a), each Member unde rtakes that if it establishes or maintains a
state trading enterprise (hereafter "STE"), that STE must, in its purchases or sales involving either
imports or exports, "act in a manner consistent with the general principles of non-discriminatory
treatment" prescribed in the GATT 1994. Article XVII:1(b) goes on to state that this obligation
requires the STE concerned: (1) to make purchases or sales involving either imports or exports
"solely in accordance with commercial considerations " and (2) to "afford the enterprises of other
[Members] adequate opportunity to compete for participation in such purchases or sales".115
6.20 In the United States' view, the very structur e of the CWB Export Regime leads the CWB to
act inconsistently with all of the standa rds set forth in Article XVII:1(a) and (b). 116 In other words, it
leads the CWB to make export sales that: (i) viol ate the principles of non-di scriminatory treatment
found in the GATT 1994, (ii) are not in accordance w ith commercial considerations, and (iii) deny the
enterprises of other Members an adequate opportunity to compete.
6.21 More specifically, the United States argues th at the CWB's unique legal structure and
mandate, its exercise of its exclus ive or special privileges, its in centives to act in a non-commercial
and discriminatory manner, and the absence of a ny government supervision or other countervailing
incentives necessarily result in the CWB making ex port sales that are not in accordance with the
Article XVII:1 standards and, hence, in Canada not meeting its obligations under Article XVII:1.

the pooling system, producers receive an initial payment when they deliver grain to a primary elevator. The
level of this initial payment is set by the Government and varies from year to year according to market
conditions. At the end of th e crop year, the net value of grain in eac h pool account is determined after all grain
has been sold and all costs involved in marketing have been deducted. [...] All funds remaining in the pool after
deduction of costs are returned to producers in the form of a final payment. This payment is made in accordance
with the number of tonnes and grad e of grain each producer delivered during the crop year." G/STR/N/4/CAN,
p. 12 (Exhibit US-1).
113 United States' reply to Panel question No. 1(c).
114 United States' reply to Panel question No. 1(d).
115 For the full text of Article XVII:1, see para. 6.30 below.
116 United States' second oral statement, para. 6; United States' second written submission, paras. 5-7.

6.22 Canada requests the Panel to find that the CWB Export Regime is not inconsistent with
Article XVII:1 of the GATT 1994. More particularly , Canada requests the Panel to find that the
CWB, in its sales involving wheat exports has acted in a manner consistent with the general principles
of non-discriminatory treatment prescribed in the GATT 1994 and, therefore, that Canada is not in
breach of Article XVII:1(a) of the GATT 1994.
6.23 Canada considers that the United States' asser tions in respect of the CWB's alleged non-
compliance with the Article XVII:1 standards and Ca nada's alleged violation of Article XVII:1 are
founded neither in law nor in fact. Canada submits that the United States' assertions are based on an
incorrect interpretation of the obligations contained in Article XVII:1. Moreove r, Canada asserts that
the United States has in any event failed to establis h that the CWB does not act in accordance with
Article XVII:1, or that it cannot so act because of it s "legal structure" or "incentives". In Canada's
view, the United States' claim under Article XVII:1 should, therefore, be dismissed.
3. Substance of the United States' claim
6.24 Before assessing the merits of the parties' requests for findings, it is necessary briefly to
address the substance and nature of the United States' claim in respect of the CWB Export Regime. In
an effort to obtain further clarification in this regard, the Panel has put a series of questions to the
United States.117 Based on the replies offered by the Unite d States and the United States' submissions
as a whole, the Panel understands the United Stat es' claim and main argument to be essentially the
following:
Canada has breached its obligations under Ar ticle XVII:1 because the CWB Export Regime,
including:

(i) the CWB's legal structure and mandate,
(ii) the privileges enjoyed by the CWB, and the incentives created by these
privileges as well as the CWB's legal structure and mandate, and
(iii) the lack of any supervision or controls by the Government of Canada, or
other countervailing incentives,
necessarily results in CWB export sales which are not in accordance with the standards set
forth in Article XVII:1(a) and (b) (hereafter "non-conforming" CWB export sales).118

117 Panel question Nos. 1(a)-(d) and 2(a)-(e).
118 It should be recalled here that the United States has identified "the actions […] of the CWB with
respect to the CWB's purchases and sales involving wheat exports" as an element of the CWB Export Regime.
United States' first written submission, para. 15. This language, which also appears in the United States' request
for the establishment of the July Panel (WT/DS276/9), might suggest that the United States' claim in respect of
the CWB Export Regime concerns not only CWB sales of wheat, but also CWB purchases of wheat. However,
whereas the United States' submissions to the Panel co nsistently indicate a concern with whether the CWB
makes sales of wheat on non-discriminatory and comme rcial terms and also put forward specific arguments
regarding why and how certain aspects of the CWB Export Regime result in the CWB making non-conforming
export sales of wheat, the United States' submissions do not do the same with respect to CWB purchases of
wheat. In fact, the United States did not present an d develop specific arguments which could support the
conclusion that certain aspects of the CWB Export Regime result in CWB wheat purchases which do not meet
the Article XVII:1 standards. In these circumstances, it would be neither possible nor appropriate for the Panel
to make specific findings on whether CWB actions with respect to wheat purchases are in accordance with the
Article XVII:1 standards.
As a separate matter, we note that there is eviden ce on the record which sugg ests that the CWB does
not actually "purchase" wheat, but is simply transferre d ownership of a Western Canadian producer's wheat so

6.25 The Panel understands the United States to argue that it is the combination of the various
elements of the CWB Export Regime, not any one elem ent taken in isolation, that necessarily results
in the CWB making non-conforming export sales.
119 Indeed, the United States has observed that if
one of the elements making up the CWB Export Regi me were to be modified, the GATT-consistency
of the CWB Export Regime would need to be "re-evaluated".120
6.26 The view that the United States in this case only challenges the CWB Export Regime "as a
whole"121 is borne out by the fact that the United Stat es does not appear to ch allenge the constituent
elements of the CWB Export Regime separately. By way of example, in the Panel's understanding,
the United States does not claim that the CWB's gove rning statute as such is inconsistent with
Article XVII:1.122 Similarly, the United States does not ch allenge the fact that the CWB has been
granted the privileges identified above. 123 Moreover, it is clear to the Panel that the United States
does not allege that a lack of government superv ision of the CWB and its operations would in itself
give rise to an inconsistency with Article XVII:1.124
6.27 The United States identified "the actions of the CWB" with respect to export sales as an
element of the CWB Export Regime. The term "the actions of the CWB" is apparently not intended
to refer to particular CWB export sale transactions. 125 Rather, it seems that this term is intended to
refer to certain types of CWB actions - non-commercial and discriminatory CWB export sales126 - that
are alleged to result from other elements of the CWB Export Regime. 127 Thus, the United States in
this case is not complaining about specific CWB e xport sale transactions, but the (alleged) fact that
the CWB Export Regime necessarily results in non-conf orming "actions of the CWB" with respect to
export sales.
6.28 It is clear from the foregoing that the United States is making a per se challenge to the CWB
Export Regime viewed in its entirety. Canada did not argue that the Panel should not assess the
WTO-consistency of the CWB Export Regime as defi ned by the United States. Also, none of the
third parties raised concerns in this regard. For the purposes of its analysis, the Panel will assume that
it may entertain the United States' per se challenge to the CWB Export Regime.
4. Article XVII:1 of the GATT 1994
6.29 Having set out its understanding of the United St ates' claim in respect of the CWB Export
Regime, the Panel now turns to assess the merits of that claim. As an initial matter, the Panel needs to

that it, the CWB, can sell the wheat on the producer's behalf. Therefore, we will hereafter put the word
"purchases" in quotation marks whenever we use that word in connection with the CWB. Exhibit US-24, p. 14.
119 United States' second oral statement, para. 6; United States' first oral statement, para. 20;
United States' reply to Panel question No. 2(e).
120 United States' reply to Panel question No. 2(e).
121 United States' replies to Panel question Nos. 1(b) and 2(c).
122 United States' replies to Panel question Nos. 1(a) and 26.
123 The United States has stated in this regard that "Article XVII does not fo rbid a WTO Member from
providing an STE with such extensive privileges [as those enjoyed by the CWB], even if such privileges could
distort markets to the detriment of other WTO Members" (United States' first written submission, para. 3). See
also United States' first written submission, para. 50; United States' first oral statement, para. 3; United States'
reply to Panel question No. 1(b).
124 United States' replies to Panel question Nos. 2(a) , 2(b), 2(c) and 2(e); United States' first oral
statement, para. 19.
125 United States' first oral statement, para. 22. The United States did not supply information on
particular CWB export sale transactions.
126 United States' reply to Panel question No. 1(d).
127 United States' reply to Panel question No. 1(b).

address the parties' disagreement over the meaning to be given to the provisions of Article XVII:1. In
a subsequent step, the Panel will examine whethe r the CWB Export Regime necessarily results in
non-conforming CWB export sales.
6.30 Article XVII:1 of the GATT 1994 and its ad Note provide in relevant part:
"Article XVII
State Trading Enterprises
1.* (a) Each contracting party undertak es that if it establishes or maintains a
State enterprise, wherever locat ed, or grants to any enterpri se, formally or in effect,
exclusive or special privileges,* such en terprise shall, in its purchases or sales
involving either imports or exports, act in a manner consistent with the general
principles of non-discriminatory treatment prescribed in this Agreement for
governmental measures affecting imports or exports by private traders.
 (b) The provisions of subparagraph (a) of this paragraph shall be
understood to require that such enterprises shall, having due regard to the other
provisions of this Agreement, make any such purchases or sales so lely in accordance
with commercial considerations,* including price, quality, availability, marketability,
transportation and other conditions of purchase or sale, and shall afford the
enterprises of the other contracting parties adequate opportunity, in accordance with
customary business practice, to compete for participation in such purchases or sales.
 (c) No contracting party shall prevent any enterprise (whether or not an
enterprise described in subparagraph (a) of this paragraph) under its jurisdiction from
acting in accordance with the principles of subparagraphs (a) and (b) of this
paragraph.
Ad Article XVII
Paragraph 1
[…]
 The charging by a state enterprise of different prices for its sales of a product
in different markets is not precluded by the provisions of this Article, provided that
such different prices are charged for commercial reasons, to meet conditions of
supply and demand in export markets."
6.31 The United States bases its clai m in respect of the CWB Export Regime on the provisions of
subparagraphs (a) and (b) of Artic le XVII:1. While there is some disagreement between the parties
regarding the interpretation of s ubparagraph (a), the main and funda mental disagreement is over the
meaning to be given to subparagraph (b).
6.32 The Panel begins its analysis with subparagraph (a).

(a) Article XVII:1(a) of the GATT 1994
6.33 The parties' arguments regarding the interpre tation of subparagraph (a ) have centred on two
issues: (i) the obligation imposed on Members establishing or maintaining an STE
128 and (ii) the
meaning of the phrase "the general principles of non-discriminatory treatment prescribed in this
Agreement for governmental measures affecting imports or exports by private traders".
(i) Obligation imposed on Members in respect of their state trading enterprises
6.34 Beginning with the first issue, the United States argues in its first written submission that it is
clear from the verb "undertake" that Article XVII:1 imposes an obligation on Members establishing or
maintaining an STE. The obligation imposed on Memb ers is the obligation to ensure that the STE in
its purchases or sales complies with certain specified st andards. According to the United States, this
view is confirmed by the provisions of Article XVII:1(c), which provides a lesser obligation for
enterprises which are not STEs, but which are nonethel ess affected by government regulations. With
respect to such enterprises, a Member merely has a negative obligation not to require such enterprises
to engage in trade-distorting conduct. In cont rast, Article XVII:1(a) imposes a higher level of
obligation for STEs in that with respect to an STE, a Member has an obligation to ensure that that
STE does not engage in trade-distorting conduct.
6.35 In its first oral statement, the United States cl arifies that its use of phrases like "Canada must
ensure that the CWB meets the Article XVII standards" is simply a shorthand for the obligations of
Members under Article XVII:1(a). Moreover, use of the word "ensure" is entirely appropriate in view
of the provisions of Article XVI:4 of the Marrakesh Agreement Establishing the World Trade
Organization (hereafter the " WTO Agreement ").
129 Finally, the United States notes that its first
written submission does not argue that Article XVII:1(a) contains "obligations of process"130.
6.36 Relying on the term "undertake", Canada argues that, as a matter of international law,
Article XVII:1(a) commits a Member with respect of the conduct of its STEs. In other words, under
Article XVII:1(a), a Member is responsible under international law for the conduct of an STE. Where
a complaining party does not demonstrate that th e conduct of another Member's STE does not meet
the standard in Article XVII:1(a) and (b), that Member must be assumed to have honoured its
undertaking.
6.37 Canada notes that Article XVII:1 does not prescribe a particular route or mechanism by which
a Member must carry out its undertaking. On its face, Article XVII:1 requires a specific outcome, or
result: that STEs act in a particular manner. Noth ing in the wording of Article XVII:1 indicates that
the drafters had in mind specific mechanisms or acti ons for a Member to "ensure" that its STEs meet
the standard set out in Article XVII:1(a) and (b). The word "ensure" is not used in Article XVII:1, nor
does the word "ensure" correspond to one of the dicti onary meanings of the word "undertake", a word
which is used in Article XVII:1. Rather, the choi ce of the means by which a Member maintaining or
establishing an STE achieves the desired outcome, or resu lt, is left to that Member. Therefore, on a
proper interpretation, Article XVII:1(a) sets out an obligation of "results" and not of "means".

128 Like the parties, the Panel uses the term "STE" or "state trading enterprise" to refer to both types of
enterprises covered by Article XVII:1, i.e., State enterprises or enterprises that have formally or in effect been
granted exclusive or special privileges.
129 Article XVI:4 provides:
Each Member shall ensure the conformity of its laws, regulations, and administrative
procedures with its obligations as provided in the annexed Agreements.
130 The Panel understands the United States to use the expression "obligations of process" as a synonym
for the more commonly used expression "obligations of means".

6.38 In Canada's view, Article XVII:1(c) does not indicate that Article XVII encapsulates a two-
tiered structure of obligations. More particul arly, it does not follow from the provisions of
Article XVII:1(c) that, with respect to STEs, Members must put in place specific mechanisms, or take
specific actions, to ensure that STEs act in accordance with Article XVII:1(a) and (b).
6.39 The Panel agrees with the parties that subparagraph (a) of Article XVII:1 imposes an
obligation on Members establishing or maintain ing STEs. Article XVII:1(a) uses the verb
"undertake", which, as noted by the United States
131, is defined as "[t]ake on (an obligation, duty, task,
etc.)", "commit oneself to perform", "[g]ive a fo rmal promise or pledge", "guarantee, affirm". 132 In
Article XVII:1(a), Members therefore formally guaran tee, pledge, or promise that their STEs shall act
in the prescribed manner. That subparagraph (a) should be understood as imposing a legal obligation
on Members using STEs is also supported by anothe r consideration. If subparagraph (a) did not
impose a legal obligation on Memb ers, Members could create and use STEs to evade disciplines
imposed by the GATT 1994 on governmental measures affecting imports or exports by private
traders, since Members could not be brought to task in the event that their STEs did not abide by the
disciplines imposed by Article XVII:1. The Panel considers it highly unlikely that the drafters of
subparagraph (a) intended to leave the door open fo r Members to circumvent their obligations under
the GATT 1994 in this way. Indeed, such an interpretation of Article XVII:1 would also be
inconsistent with the purpose of other GATT 1994 disciplines bearing on state trading.
133
6.40 The United States considers that the obliga tion imposed by subparagraph (a) on Members
using STEs is an obligation to "ensure" that the re levant STEs act in accordance with the principles of
Article XVII:1(a) and (b). Considering the United States' submissions in their entirety, we do not
understand the United States to argue that Member s must always and necessarily take positive
measures to ensure that their STEs comply with the principles of Article XVII:1(a) and (b). 134 As we
understand it, the United States does not argue that Canada is in breach of its obligation under
Article XVII:1(a) because Article XVII:1(a) requires Canada to put in place appropriate statutory or
supervisory mechanisms to ensure that the CWB obs erves the principles of Article XVII:1(a) and (b)
and because Canada has not done so. Rather, the United States' basic argument appears to be as
follows: Canada is in breach of its obligati on under Article XVII:1(a) whenever the CWB acts
inconsistently with the principles of Article XVII:1(a) or (b); in the absence of affirmative steps taken
by Canada, the CWB's legal structure, the privile ges enjoyed by the CWB and the incentives created
thereby will necessarily result in th e CWB acting inconsistently with those principles; therefore,
Canada has failed to meet its obligation under Article XVII:1(a).
6.41 It follows from the preceding paragraph that in order to resolve the present dispute, we need
not and do not determine whether Article XVII:1( a) requires Members to take positive measures to

131 United States' first written submission, para. 49.
132 The New Shorter Oxford English Dictionary , L. Brown (ed.) (Clarendon Press, 1993), Vol. II,
p. 3476.
133 The panel in Canada – Import, Distribution and Sale of Certain Alcoholic Drinks by Provincial
Marketing Agencies stated that "Articles II:4, XVII and the Note Ad Articles XI, XII, XIV and XVIII [of the
GATT 1994] clearly [indicate] the drafters' intention not to allow [Members] to frustrate the principles of the
General Agreement governing measures affecting private trade by regulating trade through monopolies". Panel
Report, Canada – Import, Distribution and Sale of Certain Alcoholic Drinks by Provincial Marketing Agencies
("Canada – Provincial Liquor Boards (US) "), adopted 18 February 1992, BISD 39S/27, para. 5.15. Similarly,
the panel in Japan – Restrictions on Imports of Certain Agricultural Products stated that the "[t]he basic
purpose of [the Note ad Articles XI, XII, XIII, XIV and XVIII of the GATT 1994] is to extend to state-trading
the rules of the General Agreement governing private trade and to ensure that [Members] cannot escape their
obligations with respect to private trade by estab lishing state-trading operations". Panel Report, Japan –
Restrictions on Imports of Certain Agricultural Products (" Japan – Agricultural Products I "), adopted
2 March 1988, BISD 35S/163, para. 5.2.2.2.
134 United States' replies to Panel question Nos. 2(a) and 2(e).

ensure that their STEs observe the principles of Arti cle XVII:1(a) and (b). The issue we need to and
do resolve is whether a Member that maintains a measure which "necessarily results" in an STE acting
inconsistently with the principles of Article XVII:1(a) or (b)
135 can be said to be honouring the
undertaking contained in Article XVII:1(a).
6.42 In our view, it is apparent from the text of Article XVII:1(a) that if a Member's STE does not
act in accordance with the principl es of Article XVII:1(a) or (b) 136, or if it is clear from relevant facts
and circumstances that the STE will not so act, this ipso facto places the Member concerned in breach
of the undertaking contained in Article XVII:1(a).137
6.43 The immediate context of Article XVII:1(a) s upports this view. Article XVII:1(c) requires
Members not to prevent any enterprise under its jurisdiction, including its STEs, from acting
consistently with the principles of Article XVII:1(a) and (b). 138 Thus, under the provisions of
Article XVII:1(c), a Member is not responsible fo r the conduct of its STEs or other enterprises, as
long as it does not prevent its STEs or other enterprises from observing the principles of
Article XVII:1(a) and (b). In contrast, by virtue of the undertaking given in Article XVII:1(a), a
Member is responsible for the conduct of its STE s even if it does not prevent them from acting
consistently with the principles of Article XVII:1(a) and (b). In other words, Article XVII:1(a) goes
further than Article XVII:1(c), in that, unde r Article XVII:1(a), non-conforming conduct by a
Member's STE engages that Member's responsibility under international law, even in the absence of
intervention of the Member itself, as would be necessary under Article XVII:1(c).139
(ii) "The general principles of non-discriminatory treatment prescribed in the GATT 1994"
6.44 The Panel now turns to consider the phrase "t he general principles of non-discriminatory
treatment prescribed [in the GATT 1994] for governme ntal measures affecting imports or exports by
private traders". It should be noted at the outset th at since the present dispute concerns an STE which
is involved in exports, the Panel's analysis here and elsewhere focuses on the principles to be followed
by STEs of this type. For simplicity, the Panel will hereafter refer to STEs which are involved in
exports as "export STEs".
6.45 In the United States' view, the phrase quoted in the preceding paragraph is about more than
just the most-favoured-nation principle reflected in Article I:1 of the GATT 1994, as it has a broad
scope and does not refer to a specific article of th e GATT 1994 or a specific obligation. According to
the United States, two types of conduct by an export STE would run counter to the general principles
of non-discriminatory treatment prescribed in the GATT 1994: (i) discrimination in the terms of sale
between different export markets; and (ii) discrimination in the terms of sale between export markets,
on the one hand, and the domestic market of the Member establishing or maintaining the STE, on the
other hand.

135 We note that, for reasons indicat ed at para. 6.59 below, we are assuming, for the sake of argument,
that an inconsistency with Article XVII:1 can be estab lished merely by demonstrating that an STE is acting
contrary to the principles of subparagraph (b).
136 Here again, we are assuming, for the sake of ar gument, that an inconsistency with Article XVII:1
can be established by demonstrating that an STE is acting contrary to the principles of subparagraph (b).
137 The parties appear to agree with this basic proposition. United States' comments on Canada's
second oral statement, para. 7; United States' second oral statement, para. 4; Un ited States' reply to Panel
question No. 2(a); Canada's second wr itten submission, para. 34; Canada's first written submission, paras. 95-
96.
138 For the text of Article XVII:1(c), see para. 6.30 above.
139 To recall, the Panel does not take a position on whether Article XVII:1(a) requires Members to take
positive measures to ensure that their STEs do not engage in non-conforming conduct.

6.46 In support of the second type of prohibited conduc t, the United States points to Article XI of
the GATT 1994 and its ad Note. The United States recalls that Article XI generally prohibits
restrictions on exports. The ad Note, for its part, makes clear that a Member cannot circumvent its
obligations under Article XVII:1(a) by acting throu gh an STE. In the United States' view, these two
provisions establish that the non-discriminatory treatment prescribed in the GATT 1994 includes non-
discriminatory treatment between export markets and the domestic market.
6.47 Canada considers that the reference in subpara graph (a) to the general principles of non-
discriminatory treatment prescribed by the GATT 1994 is a reference to the most-favoured-nation
treatment principle set out in Article I:1 of the GATT 1994. Canada disagrees with the United States'
argument that the general principles of non-discriminatory treatment prescribed by the GATT 1994
would require export STEs not to discriminate in their sales between domestic and third-country
markets. Canada considers that Article XI is not appropriate context for the interpretation of
Article XVII, which deals with STEs. The Note to Article XI does deal expressly with STEs, but does
not refer to Article I or Article III of the GA TT 1994. It is, therefore, not concerned with
discrimination. Canada notes that, in any event, Article XI could be relevant only where an export
STE sells to export markets at a higher price than in the domestic market. Canada recalls that, in this
case, the United States is alleging the opposite, namely that the CWB sells at a lower price in export
markets than in Canada.
6.48 The Panel has no difficulty accepting the parties' view that the phrase "the general principles
of non-discriminatory treatment prescribed [in the GATT 1994] for governmental measures affecting
imports or exports by private traders" includ es the general principles of most-favoured-nation
treatment as enshrined in Article I:1 of the GATT 1994. Article I:1 of the GATT 1994 clearly
prescribes "non-discriminatory treatment […] for govern mental measures affecting imports or exports
by private traders".
140 Also, interpreting the phrase in question in this way is consistent with the
views expressed by previous panels.141
6.49 In our view, it is clear from the Note ad Article XVII:1142 that an export STE would not act in
a manner inconsistent with the general principles of most-favoured-nation treatment as prescribed in
the GATT 1994 if it were to charge different pri ces for its sales of a product in different export
markets, provided that such different prices are charged for commercial reasons.143
6.50 The United States is of the view that the phrase "the general principles of non-discriminatory
treatment prescribed in [the GATT 1994] for governme ntal measures affecting imports or exports by
private traders" should be interpreted to require also that, in their sales, export STEs should not

140 Article I:1 reads:
With respect to customs duties and charges of any kind imposed on or in connection with
importation or exportation or imposed on the intern ational transfer of payments for imports or
exports, and with respect to the method of levying such duties and charges, and with respect to
all rules and formalities in connection with importation and exportation, and with respect to all
matters referred to in paragraphs 2 and 4 of Article III, […] any advantage, favour, privilege
or immunity granted by any contracting party to any product originating in or destined for any
other country shall be accorded immediately and unconditionally to the like product
originating in or destined for the territories of all other contracting parties.
141 Panel Reports, Korea – Measures Affecting Imports of Fresh, Chilled and Frozen Beef ("Korea –
Various Measures on Beef "), WT/DS161/R, WT/DS169/R, adopted 10 January 2001, as modified by the
Appellate Body Report, WT/DS161/AB/R, WT/DS169/AB/R, DSR 2001:I, 59, para. 753; Canada –
Administration of the Fore ign Investment Review Act (" Canada – FIRA "), adopted 7 February 1984,
BISD 30S/140, para. 5.16.
142 For the text of the Note, see para. 6.30 above.
143 We understand the parties to agree with this point. See United States' first written submission,
para. 61; Canada's first written submission, paras. 75 and 78.

discriminate between export markets, on the one hand, and their home market, on the other hand.
144
Since resolving this particular issue would not aff ect our disposition of the United States' claim, we
need not and do not take a position. 145 This said, for the sake of argument, we will continue on the
assumption that the United States' view is correct.146
(b) Article XVII:1(b) of the GATT 1994
6.51 In the circumstances of this case, the provisions of subparagraph (b) of Article XVII:1 present
essentially three interpretative issues: (i) the legal relationship between subparagraph (a) of
Article XVII:1 and subparagraph (b), (ii) the meaning of the term "commercial considerations" in the
first clause of subparagraph (b), and (iii) the meani ng of the term "enterprises of other Members" as it
appears in the second clause of subparagraph (b).
(i) Relationship with Article XVII:1(a) of the GATT 1994
6.52 With regard to the relationship between subpa ragraphs (a) and (b) of Article XVII:1, the
United States notes that while subparagraphs (a) and (b) are related and, hence, must be read
together, they nevertheless contain distinct legal obligations. Referring to the introductory clause in
subparagraph (b) - "the provisions of subparagraph (a) of this para graph shall be understood to
require" - the United States argues that subpara graph (b) sets forth examples of conduct that
subparagraph (a) requires. In the United States' vi ew, to fail to engage in the required conduct under
subparagraph (b) constitutes a violation of Article XVII:1.
6.53 Based on the argument set out in the previous paragraph, the United States submits that
Article XVII:1 contains three distinct legal obligations. First, Canada in this case undertakes that the
CWB will "act in a manner consistent with the general principles of non-discriminatory treatment"
prescribed in the GATT 1994. Second, Canada undertakes that the CWB will make its purchases and
sales "solely in accordance with commercial considerations". And third, Canada undertakes that the
CWB will "afford the enterprises of the other [Mem bers] adequate opportunity […] to compete for
participation in" the CWB's sales. According to the United States, a breach of any of these
obligations is sufficient to estab lish that Canada has violated Article XVII:1. The United States
considers that the panel in Korea - Various Measures on Beef reached the same conclusion. That
panel stated unequivocally that:
"A conclusion that the principle of non-di scrimination was violated would suffice to
prove a violation of Article XVII; similarly, a conclusion that a decision to purchase
or buy was not based on "commercial consid erations", would also suffice to show a
violation of Article XVII."
147
6.54 Canada submits that, by its express terms, subparagraph (b) of Article XVII:1 does not create
an obligation independent of subparagraph (a). The operative obligation is set out in subparagraph
(a), not (b). Without subparagraph (a), s ubparagraph (b) would not impose an obligation on
Members. In Canada's view, what subparagraph (b ) does is to interpret and temper the obligation
under subparagraph (a). Accordi ng to Canada, the interpretati on was needed because market

144 The United States bases this view on the provisions of Article XI of the GATT 1994 and its ad
Note.
145 We note that Canada appears to agree that it is not necessary in this case for the Panel to take a
position on this issue. Canada's first written submission, para. 138.
146 We also assume that the rationale of the Note ad Article XVII:1 would be equally valid in a
situation where the comparison is between sales in an export STE's home market and its sales abroad. In other
words, we assume that export STEs may discriminate between export markets and their home market for
commercial reasons.
147 Panel Report, Korea – Various Measures on Beef , supra, para. 757.

conditions vary from one country to another. Accordingly, to remain in business internationally, all
enterprises - whether STEs or not - make distinctions as to pricing and terms of sale that may be tied
to the destination or the origin of a product, but that are nevertheless based on commercial
considerations. Canada argues that this categor y of "discriminatory" conduct, which may be
otherwise incompatible with subpa ragraph (a), is protected by subparagraph (b). As a result, only
where an STE discriminates between markets on non-commercial considerations would it violate
Article XVII:1.
6.55 Canada argues that the United States' interpreta tion should also be rejected because it would
place STEs at a commercial disadvantage vis-à-vis private traders. First, a violation of the
subparagraph (a) could then be found on the dem onstration of "discrimination", even if such
discrimination were based on commercial considerations. Second, STEs would not be able to make
distinctions between sellers or purchasers based on the commercial considerations that private
enterprises make. Nothing in Article XVII indicates that STEs should be more constrained in their
commercial conduct than private traders.
6.56 Regarding the statement by the panel in Korea Various Measures on Beef , Canada considers
that, in that case, there was ample evidence of di scriminatory treatment by the STE in question and
ample evidence that it was not acting in accordance w ith commercial considerations. As a result, the
statement by the panel in that case with respect to there being two obligations was not necessary to the
panel's decision. Moreover, the panel in Korea Various Measures on Beef expressly endorsed the
views of the panel in Canada – FIRA, which read subparagraphs (a) and (b) as one obligation.148
6.57 In Canada's view, to prove a violation of Ar ticle XVII:1, the United States must establish,
first, that there has been discrimination and, second, that the discrimination has not been in
accordance with commercial considerations. A demons tration that an STE did not act in conformity
with the standards set out in subparagraph (b ) alone is not enough to prove a violation of
Article XVII:1. This is because the first step in determining the existence of a violation under
Article XVII:1 is a finding that the STE did not act in a manner consistent with the general principles
of non-discriminatory treatment.149
6.58 The Panel notes that, in the present case, the United States' allegation of discriminatory sales
behaviour by the CWB is in the nature of a consequen tial allegation. That is to say, the United States
argues that, on the facts of this case, the allege d discriminatory sales behaviour by the CWB is a
necessary result of the CWB not making sal es solely in accordance with commercial
considerations.150 Thus, if the United States succeeded in demonstrating that the CWB Export
Regime necessarily leads to the CWB not maki ng sales solely in accordance with commercial
considerations, this case would present the inte rpretative issue whether an inconsistency with
Article XVII:1 could be established merely by s howing that an STE is acting contrary to the

148 Canada refers to the following statement by the panel in Canada - FIRA:
"The fact that sub-paragraph (b) does not establish a separate general obligation to allow
enterprises to act in accordan ce with commercial considerations, but merely defines the
obligations set out in the preceding subparagra ph, is made clear through the introductory
words 'The provisions of subparagraph (a) of the paragraph shall be understood to require ...'."
(Panel Report, Canada - FIRA, supra, para. 5.16)
149 In support of its view, Canada points to the following statement by the panel in Canada - FIRA:
"[T]he commercial considerations criterion becomes relevant only after it has been determined
that the governmental action at issue falls within the scope of the general principles of non-
discriminatory treatment by the Ge neral Agreement." (Panel Report, Canada - FIRA , supra,
para. 5.16)
150 United States' second oral statement, para. 12; United States' second written submission, paras. 7
and 11; United States' reply to Panel question No. 20; United States' first written submission, para. 78.

principles of subparagraph (b) of Article XVII:1. As is clear from the preceding paragraphs, the
parties have opposite views on this interpretative issue.
6.59 The Panel does not consider it necessary to take a position on this issue. For reasons which
are set out in subsection C.5 below, the Panel is not persuaded that the CWB Export Regime
necessarily leads to the CWB making sales in a manner inconsistent with the principles of
subparagraph (b) of Article XVII:1. In this case, the Panel therefore does not reach the above-
mentioned interpretative issue. Nevertheless, for the sake of argument, the Panel will proceed on the
assumption that an inconsistency with Article XVII:1 can be established merely by demonstrating that
an STE is acting contrary to the principles of subparagraph (b).
151
(ii) Second clause of Article XVII:1(b) of the GATT 1994
6.60 Both parties agree that the two clauses of subparagraph (b) impose separate requirements. 152
The order in which the Panel analyses the two clauses is, therefore, of no particular importance. The
Panel begins its analysis with the second clau se because the United States relies on the second clause
to support its interpretation of the first clause.
6.61 In regard to the second clause of subparagraph (b), the United States argues that, as a result
of that clause, an export STE has an obligation to afford all enterprises an adequate opportunity to
compete for participation in its export sales. In th e instant case, the enterprises at issue would include
any enterprise that is competing for particip ation in CWB wheat sales, including enterprises
competing to purchase wheat from the CWB ( i.e., wheat buyers) and those enterprises selling wheat
in the same market as the CWB (i.e., wheat sellers).
6.62 Concerning the latter category of enterprises, that is enterprises selling the same product as an
export STE in the same markets, the United Stat es argues that export STEs must afford such
enterprises of other Members an adequate opportunity to compete in the marketplace, according to
customary business practices. According to the Un ited States, the obligation under the second clause
of subparagraph (b) focuses on the protection of comme rcial actors and is, therefore, not limited to
competition among enterprises with special or exclusive privileges. Therefore, to give all enterprises
of other Members, including enterprises whic h do not enjoy government-conferred special or
exclusive privileges, an adequate opportunity to compete, export STEs must make their sales on
commercial terms.
6.63 Canada argues that for an export STE the relevant "enterprises" referred to in the second
clause of subparagraph (b) are the enterprises of ot her Members that are interested in purchasing the
products offered by the STE. According to Canada, this interpretation is confirmed by the use of the
word "participation". In the context of exports , competing enterprises do not "participate" in each
other's sales. Rather, they compete against one another to get those sales. In each transaction, it is the
seller and the purchaser who "participate" in that tr ansaction. Competitors do not "participate". The
competitors of an exporter in export markets do not pa rticipate in the sales of that exporter by virtue
of the competition alone.
6.64 Canada notes that under the second clause of s ubparagraph (b), export STEs must allow the
enterprises of other Members "adequate opportunity, in accordance with customary business practice,
to compete for participation in [their] sales". Canada submits that customary business practice does

151 We note in this regard that Canada has stated that even under the United States' own interpretation
of the relationship between subparagraph (a) and subparagraph (b) of Article XVII:1, the United States failed to
support its allegation that the CWB Export Regime necessarily results in the CWB not acting in accordance with
the principles of subparagraphs (a) and (b) of Article XVII:1. Canada's second oral statement, para. 10.
152 United States' first written submission, para. 59; Canada's reply to Panel question No. 96.

not require an enterprise to allow its competitors to "participate" in its sales. Customary business
practice is for enterprises to win sales at the e xpense of their competitors, not to assist their
competitors. For these reasons, Canada consider s that export STEs do not have to allow their
competitors to participate in their sales.
6.65 Regarding the object of the second clause of s ubparagraph (b), Canada notes that, in the case
of export STEs, the second clause focuses, not on th e terms and conditions of a sales agreement (an
issue which is addressed in the first clause of subparagraph (b)), but on the very chance, the
opportunity to compete for such transactions. In Canada's view, the second clause thus addresses a
situation where no export sale has taken place b ecause the export STE refuses to consider even
allowing a purchaser the opportunity to compete for par ticipation in its sales. In such a situation, the
first clause of subparagraph (b) and the factors set out therein, such as price, quality, etc. are not
immediately relevant.
6.66 The Panel commences its analysis by recalling the text of the second clause of subparagraph
(b): "[An STE] shall afford the enterprises of the other contracting parties adequate opportunity, in
accordance with customary business practice, to compete for participation in such purchases or sales".
It is clear to the Panel, and the parties appear to agree
153, that the expression "such purchases or sales"
is a reference to the expression "its purchases or sales involving either imports or exports" as it
appears in subparagraph (a) of Article XVII:1. Sin ce the present case concerns only the "sales" of an
export STE, the requirement set out in the second clause of subparagraph (b) can be restated as
follows: "[An export STE] shall affo rd the enterprises of the other [Members] adequate opportunity,
in accordance with customary business practice, to compete for participation in [its] sales".154
6.67 The parties' disagree on the meaning to be gi ven to the term "enterprises of the other
[Members]" in a case concerning the "sales" of an export STE. The United States considers that, in
such a case, the term "enterprises of the other [Members]" encompasses the en terprises interested in
buying the products offered for sale by an export STE (i.e., the customers of an export STE) as well as
the enterprises interested in selling the same product in the same markets as the export STE ( i.e., the
competitors of the export STE). Canada, on the othe r hand, considers that the term in question should
be interpreted to refer only to the enterprises interested in buying from the export STE.
6.68 As a textual matter, it would appear that the term "enterprises of the other [Members]" is, in
principle, open to the interpretation advanced by th e United States. There may be "enterprises of the
other [Members]" which are interested in buying a product from an export STE, just like there may be
"enterprises of the other [Members]" which se ll the same product as the export STE in the same
markets.
6.69 As always when interpreting treaty terms, however , we must also have regard to the context
in which those terms occur. The phrase "compete for participation in [the relevant export STE's]
sales" is part of the immediate context of the term "enterprises of the other [Members]". Considering
the term "enterprises of the other [Members]" in this context, we have no difficulty accepting the
notion that enterprises interested in buying the product offered for sale by an export STE may
compete to "participate", or to "have a part or share"
155, in an export STE's sales. 156 On the other

153 Parties' replies to Panel question No. 21(a).
154 United States' second oral statement, paras. 14 and 16; United States' replies to Panel question
Nos. 21(a) and (b); Canada's second written submission, para. 48; Canada's second oral statement, para. 39;
Canada's replies to Panel question Nos. 21(a) and (b).
155 The Merriam-Webster OnLine Thesaurus, http://www.m-w.com (December 2003), defines the verb
"participate" as "to have a part or share in something".
156 It is instructive to note here that the term "participate" appears to be used in very similar context in
the WTO Agreement on Government Procurement . Article VIII(c) of the Agreement, which deals with the
"Qualification of Suppliers", provides:

hand, we think it cannot equally be said that enterprises selling the same product as an export STE
compete to "participate", or to "have a part or share", in an export STE's sales.
157 T o b e s u r e ,
enterprises selling the same product as an export STE may "compete" with an export STE for sales in
general. But we are not persuaded that, in thei r capacity as sellers, such enterprises "compete for
participation in [the relevant export STE's] sales". Indeed, as also noted by Canada, rather than
wanting to participate, themselves, in the sales of an export STE, such enterprises would ordinarily
want to prevent such sales, in the sense that th ey would want to win for themselves the sales which
might otherwise be captured by the export STE in question.
6.70 We also believe that if the second clause of subparagraph (b) was inte nded to refer to the
competitors of an export STE, as the United States su ggests, different wording would have been used.
The second clause might then have required, for inst ance, that an export STE afford the enterprises of
the other Members "adequate opportunity to compete", or that it afford them "adequate opportunity to
compete in the marketplace". We note that, in its submissions to the Panel, the United States uses
both of these alternative phrases to refer to the requirement set out in the second clause.
158 I t i s
sufficient to observe in this rega rd that the meaning of the phrases "adequate opportunity to compete"
or "adequate opportunity to compete in the marketplace" is not the same as the phrase actually used in
the second clause of subparagraph (b), which is "adequate opportunity [...] to compete for
participation in […] sales".
6.71 Finally, we note the United States' argument that the purpose of subparagraph (b) is to protect
"commercial actors", including those selling the same product as an export STE ( i.e., the competitors
of an export STE). 159 We will return to this argument below. 160 Suffice it to say at this point that
even if this argument was correct, this would not alter the fact that enterprises selling the same
product as an export STE cannot reasonably be regarded as competing for participation in that export
STE's sales.161 In other words, the United States' argument would not justify giving the second clause
an interpretation that we are not convinced it can reasonably bear.
6.72 In light of the above considerations, we are unable to accept the United States' view that, in
the case of an export STE, the "enterprises of the other [Members]" may include enterprises selling
the same product as that offered for sale by the export STE in question ( i.e., the competitors of the
export STE).
6.73 Since both parties agree with our view that enterprises interested in buying the products
offered for sale by an export STE fall within the meaning of the term "enterprises of the other

"Suppliers requesting to participate in a particular intended procurement who may not yet be
qualified shall also be considered, provided there is sufficient time to complete the
qualification procedure." (emphasis added)
Of course, the closest analogy in th e state trading context to the situation envisaged in Article VIII(c)
would not be an export STE, but an import STE. Under the second clause of Article XVII:1(b), an import STE
is to afford the enterprises of other Members adequate opportunity to "compete for participation in [its]
purchases". We wish to stress, howe ver, that we refer to Ar ticle VIII(c) purely for illustrative purposes; we do
not rely on that provision as relevant context.
157 Unless, of course, those enterprises, in addition to selling the same product as a given export STE,
were also engaged in buying that product from the export STE in question.
158 United States' second oral statement, paras. 15-16; United States' second written submission,
paras. 2, 18-19; United States' reply to Panel question No. 3; United States' first oral statement, para. 4; United
States' first written submission, paras. 65 and 77.
159 United States' second written submission, para. 18; United States' reply to Panel question No. 23.
160 See para. 6.93 below.
161 Again, we note the theoretical possibility that those enterprises, in addition to selling the same
product as a given export STE, might also be engaged in buying that product from the export STE in question.

[Members]"162, and since the United States in this case is not focusing on the opportunities afforded
such enterprises by the CWB 163, it is unnecessary, in the specific ci rcumstances of this case, to offer
additional analysis of the second clause of subparagraph (b).164
(iii) First clause of Article XVII:1(b) of the GATT 1994
6.74 Regarding the first clause of subparagraph (b), which refers to the need for STEs to make
their sales solely in accordance with "commercial considerations", the United States notes that the
first clause specifically references consideration of price, quality, availability, etc., as "commercial
considerations". According to the United States, commercial behaviour driven by these
considerations would result in actions that reflect market realities and are consistent across all actors
in a given industry or market sector. Where an export STE has been granted special and exclusive
privileges which permit it to operate without the normal market constraints faced by a commercial
actor, that STE could make use of its privileges to ga in market share in particular markets, but such
behaviour would not be commercial. The United States considers that one example of such non-
commercial behaviour would be sustained, long -run price discrimination which involves selling a
product in one market at a price that is less than its replacement value.
6.75 The United States notes that it may be rational for an export STE to use its privileges to make
sales on terms which could not or would not be offered by commercial operators. But, the
United States maintains, subparagraph (b) nowhere states or implies that an export STE must merely
make its sales as a rational actor with special priv ileges. Acting rationally and acting commercially
are not the same thing. A synonym for "rational" is "reasonable". 165 "Commercial", on the other
hand, is defined as "[i]nterested in financial return rather than artistry; likely to make a profit;
regarded as a mere matter of business". 166 In the United States' view, an export STE like the CWB
which sells its products for a price it deems "rea sonable" and hence maxi mizes sales rather than
profits may be acting rationally, but it is not acting commercially.
6.76 That mere rational behaviour is not sufficient to meet the requirement set out in the first
clause of subparagraph (b) is also clear from the second clause of that subparagraph. Subparagraph
(b) must be read in its entirety. It requires expor t STEs to act according to commercial considerations
and to afford enterprises of other Members an adequate opportunity to compete, according to
customary business practice. The first clause of subparagraph (b) cannot render moot the second
clause. Therefore, the United States submits, the "commercial considerations" requirement in the
second clause must be intended to ensure that STEs do not use their special and exclusive privileges
to the disadvantage of commercial actors.
6.77 In Canada's view, an appropriate interpretation of the term "commercial considerations"
would be "considerations consiste nt with normal business practices of privately-held enterprises in
similar circumstances". Canada considers that this interpretation is consistent with the context of
subparagraph (b), including the factors mentioned in th e first clause (price, quality, availability, etc.).
These factors are the types of considerations that a private sector enterprise would normally take into

162 United States' comment on Canada's reply to Panel question No. 96; United States' reply to Panel
question No. 21(b); United States' second oral statement, paras. 14-15; Canada's reply to Panel question
No. 21(b).
163 United States' second oral statement, paras. 11 and 16; United States' second written submission,
164 We also note that since this case does not concern the "purchases" of an export STE, we need not
and do not take a position regarding whether the term "enterprises of the other [Members]" could include the
suppliers to the relevant export STE, as China and th e European Communities appear to suggest. China's reply
to Panel question No. 2(b); European Communities' reply to Panel question No. 2(b).
165 Merriam-Webster's Collegiate Dictionary: Tenth Edition (2001), p. 967
166 The New Shorter Oxford English Dictionary, L. Brown (ed.) (Clarendon Press, 1993), Vol. I, p. 451.

account in its purchasing and sales activities. Also, the Note ad Article XVII:1
167 makes clear that
actions "to meet conditions of supply and demand" are considered as commercial considerations.
Canada further points out that the object and purpose of Article XVII is to prevent Members from
doing indirectly through STEs that which they have contracted not to do directly. Canada submits
that where an STE acts based on commercial considerations of business and trade, the purpose of
Article XVII is not implicated because the STE would not be used to circumvent GATT 1994
obligations.
6.78 Canada submits that in determining whether an STE and a private trader are in similar
circumstances, one would need to compare the STE with enterprises in similar circumstances.
Canada notes in this regard that the beha viour of a commercial company depends on the
circumstances in which it operates. It may vary de pending on the size of the enterprise, the market in
which it operates, the type of organisation that it is, etc. Regarding the size of an enterprise, Canada
notes that a large enterprise with significant assets may be willing to extend supplier credits that a
smaller enterprise would not be able to extend because of the economic risk involved. Each enterprise
would be acting consistently with commercial c onsiderations, even though the resulting conduct is
opposite. Regarding the type of or ganization, Canada notes that an STE, such as the one at issue in
this case, which functions as a cooperative marketing agency should be comp ared with a privately-
held enterprise functioning in that same capacity, rather than with a share-capital corporation.
6.79 Canada considers that in determining whethe r an STE and a private trader are in similar
circumstances, account must also be taken of th e special or exclusive pr ivileges that have been
granted to the STE in question. Such an inquiry would need to concentrate on whether the STE acts
as would a private enterprise that has the same rights and privileges as the relevant STE. Canada does
not agree with the United States that the first cl ause of subparagraph (b) requires STEs which enjoy
exclusive and special privileges to act exactly lik e private enterprises which do not enjoy the same
privileges. If the special and exclusive privileges granted to an STE allow it to charge a lower price
than a private trader, doing so would be consistent with commercial considerations, as it is exactly
what any private enterprise with the same privile ges would do. In fact, Canada notes, an STE would
be acting non-commercially if it were to ignore its competitive advantage.
6.80 Canada also argues that the United States' interpretation would make the granting of exclusive
or special privileges meaningless because STEs would not be able to use them without violating
Article XVII. But Article XVII neither prescribes nor proscribes the nature or scope of privileges that
may be granted by Members to STEs. Canada subm its that if Article XVII does not place limits on
the nature or scope of privileges that may be granted, an STE's use of these privileges per se ,
including in the business activities of the STE, ca nnot result in a violation of Article XVII.
Article XVII only disciplines a particular use of an S TE's special or exclusive privileges: it prohibits
the STE that benefits from such privileges from enga ging in discriminatory conduct that is not based
on commercial considerations.
6.81 Finally, Canada observes that there is a di stinction between non-co mmercial behaviour and
anti-competitive behaviour. In some circumstances, se lling into one market at a price that is intended
to deter other exporters from contesting that market may be commercial behaviour, even if it may also
be anti-competitive. It is precisely because commercial considerations may lead enterprises to engage
in anti-competitive behaviour that some Members have adopted laws prohibiting such behaviour.
Article XVII, or indeed the WTO Agreement, does not prohibit anti-competitive behaviour. Canada
also notes in this context that a Member which be lieves it has been disadvantaged by a particular
commercial pricing strategy of an STE might be able to challenge such behaviour, or the privileges
from which such behaviour may result, under the Agreement on Subsidies and Countervailing

167 The relevant part of the Note is reproduced at para. 6.30 above.

Measures (hereafter the " SCM Agreement") or the Agreement on Implementation of Article VI of the
General Agreement on Tariffs and Trade 1994 (hereafter the "Anti-Dumping Agreement").
6.82 The United States rejects Canada's argument that the expression "commercial
considerations" in this case means the considerations of a private grain trader in circumstances similar
to those of an export STE. The United States submits that this would mean that an export STE would
need to afford an adequate opportunity to comp ete only to enterprises with exclusive and special
privileges similar to those enjoyed by the STE in ques tion. In the United States' view, this defies
logic. The obligation under subparagraph (b) is not to protect the non-commercial behaviour of an
STE with special and exclusive privileges in one country from the non-commercial behaviour of an
STE with special and exclusive privileges in anothe r. Subparagraph (b) focuses on the protection of
commercial actors. Also, the first clause of subparagraph (b) does not qualify the word "commercial".
Canada impermissibly reads into the first clause wo rds which are simply not there. Finally, under the
second clause of subparagraph (b), all enterprises, not just those with privileges similar to those
granted to an export STE, must be afforded the opportunity to compete in the marketplace.
6.83 The United States also disagrees with Canada 's assertion that, under the United States'
interpretation of the first clause of subparagra ph (b), Members could grant special or exclusive
privileges, but not use them. The United States notes that the use of special and exclusive privileges
is permitted within certain parameters. For example, subparagraph (b) allows the CWB to exercise its
monopoly privilege related to the sale of Western Ca nadian wheat for export. In other words, the
CWB is not required, under subparagraph (b), to le t other entities sell Western Canadian wheat. The
United States also considers that the Note ad Article XVII:1 provides an example of an STE's use of
its privileges that is consistent with subparagraph (b).
168
6.84 The Panel commences its analysis by no ting that relevant dictionary meanings of the word
"commercial" are: "engaged in commerce; of, pertai ning to, or bearing on commerce" or "[i]nterested
in financial return rather than artistry; likel y to make a profit; regarded as a mere matter of
business".169
6.85 In the particular context of the first clause of subparagraph (b), which provides that STEs are
to "make […] purchases or sales sole ly in accordance with commercial considerations", we think the
term "commercial considerations " should be understood as meaning considerations pertaining to
commerce and trade, or considerations which involve regarding purchases or sales "as mere matters of
business".
6.86 This interpretation draws support from anothe r element of the context of the term
"commercial considerations". Th e term "commercial considerations" is immediately followed by the
phrase "including price, quality, availability, mark etability, transportation and other conditions of
purchase or sale". The word "including" makes clear that price, quality, etc. are to be regarded as
"commercial considerations". This supports our interpreta tion of the term "commercial
considerations", for if an STE makes purchases or sales based solely on such elements of
consideration as price, quality, av ailability, etc., it makes purchases or sales based on considerations
which relate to, and are characteristic of, commerce and trade, and which involve regarding purchases
or sales as mere matters of business.
6.87 In our view, the requirement that STEs make purchases or sales solely in accordance with
commercial considerations must imply that they should seek to purchase or sell on terms which are
economically advantageous for themselves and/or their owners, members, benefici aries, etc. Were it
otherwise, an export STE could sell a good to the bu yer offering the lowest price and justify that sale

168 The relevant part of the Note is reproduced at para. 6.30 above.
169 The New Shorter Oxford English Dictionary, L. Brown (ed.) (Clarendon Press, 1993), Vol. I, p. 451.

as being driven by the sole consideration of "price", which is listed in the first clause of subparagraph
(b) as a "commercial consideration". Manifestly, such an interpretation would be unreasonable.
6.88 The preceding paragraphs lead us to the view that if an STE is directed to make, or does
make, purchases or sales on the basis of such cons iderations as the nationalit y of potential buyers or
sellers, the policies pursued by their governments, or the national (economic or political) interest of
the Member maintaining the STE
170, it would not be acting solely in accordance with commercial
considerations.
6.89 The considerations mentioned in the previ ous paragraph do not relate to, and are not
characteristic of, commerce and trade, and they are not consistent with regarding purchases or sales as
mere matters of business. Such considerations ar e also unlike any of the commercial considerations
specifically mentioned in the first clause (price, qualit y, etc.). Moreover, allowing STEs to take into
account such considerations would be inconsistent with the purpose of Article XVII:1, which, as
previously noted, is to ensure that Members do not use STEs to escape GATT 1994 obligations with
respect to private trade. For instance, if STEs, in their purchases or sales, could make distinctions
between buyers or sellers based on their nationalities, Members could use STEs to circumvent their
obligations under Article I:1 of the GATT 1994, which prohibits the imposition of discriminatory
import or export duties on like products originating in or destined for the territory of another Member.
6.90 According to the United States, the first clause of subparagraph (b) mu st be interpreted to
require, in the instant case, that export STEs not use their special or exclusive privileges to the
disadvantage of "commercial actors", including those selling the same product as an export STE in the
same markets. The United States bases this inte rpretation essentially on three elements: (i) the term
"commercial" in the first clause of subparagraph (b), (ii) the second clause of subparagraph (b), and
(iii) the implications of not adopting the proposed interpretation.
6.91 In relation to the term "commercial", the United States argues that this term makes clear that
export STEs must act like "commercial actors", no t merely like "rational economic actors" with
special or exclusive privileges. For the United St ates, "commercial actors" are actors that maximize
profit, do not enjoy government-conferred privileges a nd are disciplined by market forces. Therefore,
to the extent the privileges enjoyed by an expor t STE divorce it from normal market constraints, it
may not use its privileges to gain special advantages in the marketplace vis-à-vis "commercial actors".
6.92 In considering this argument, the first observation to be made is that, by its terms, the first
clause of subparagraph (b) does not require export S TEs to act like "commercial actors". In fact,
subparagraph (b) nowhere uses the term "commercial actors". What the first clause actually requires
is that export STEs make sales solely in accordan ce with "commercial considerations". But the
"commercial considerations" requirement does not imply that in deciding whom to sell to and on what
terms, export STEs must act as if they were "comme rcial actors" as the United States has defined this
term.
6.93 The logic underlying the United States' argument basically appears to be as follows: Because
STEs are not inherently "commercial actors", a nd because subparagraph (b) focuses on the protection
of "commercial actors"
171, the "commercial considerations" requi rement must be intended to require

170 To give an example, suppose that a Member has a substantial trade deficit with another Member. If
in such a situation the Member concerned directs its STEs to sell their goods to the Member with which it has a
trade deficit, because this is deemed to be in the national interest, even though, for the STEs concerned, it
implies foregoing sales at higher prices offered by other Members, the STEs concerned would not be making
their sales solely in accordance with commercial considerations.
171 United States' second written submission, para. 18; United States' reply to Panel question No. 23.

STEs to behave like "commercial actors". 172 While we have no particular difficulty with the first
premise173, we do not agree that subparagraph (b) focu ses on the protection of "commercial actors"
competing with STEs. As we have already noted, the first clause of subparagraph (b) talks about
"commercial considerations", not "commercial actors". Moreover, the second clause of subparagraph
(b) as we interpret it does not support the view that subparagraph (b) focuses on the protection of
"commercial actors" competing with STEs.174
6.94 In our view, the circumstance that STEs are not inherently "commercial actors" does not
necessarily lead to the conclusion that the "commercial considerati ons" requirement is intended to
make STEs behave like "commercial" actors. In deed, we think it should lead to a different
conclusion, namely, that the requirement in qu estion is simply intended to prevent STEs from
behaving like "political" actors. 175 To elaborate, "commercial actors" must make purchases or sales
solely in accordance with commercial ( i.e., not political, etc.) considerations in order to stay in
business.176 STEs, on the other hand, because they are not inherently "commercial actors", may be
able to make purchases or sales in accordance with non-commercial ( i.e., political, etc.)
considerations and still stay in business. As we see it, this is precisely why it is necessary to require
them to make purchases or sales sole ly in accordance with commercial ( i.e., not political, etc.)
considerations. Otherwise, Members could seek to use STEs to escape relevant GATT 1994
obligations.177
6.95 Another concern we have with the United St ates' interpretation of the first clause of
subparagraph (b) is that for STEs to be able to act like "commercial actors", in many cases, they
effectively would need to be "commercial actors", at least with respect to their purchase or sale
operations. In order to subject themselves to the same sort of market constraints as those faced by
"commercial actors", they might, fo r instance, need to refrain from using certain of their privileges
when making purchases or sales, or isolate their purchase or sale operations from other operations in
respect of which privileges may have been granted ( e.g., financial operations). We believe that if the
intent behind the "commercial considerations" requ irement had been to produce such far-reaching
consequences, this intent would have been expressed both with greater clarity and in more detail.
6.96 Finally, the United States' argument that STEs must act like "commercial actors" tends to
overlook the fact that STEs are not necessarily used only for commercial purposes. STEs may also be
established or maintained to carry out governmental policies or programmes ( e.g., policies related to
food security, policies aimed at reducing alcohol consumption, policies to achieve price stabilization,
etc.).
178 Such STEs must and, hence, do purchase or sell on the basis of commercial considerations,
but they do not normally purchase or sell for the purpose of maximizing profit.
6.97 Since, in our view, the term "commercial" in the first clause of subparagraph (b) does not
imply that export STEs may not use their special or exclusive privileges to the disadvantage of
"commercial actors", we proceed to examine th e second element relied on by the United States, i.e.,
the second clause of subparagraph (b). The Unite d States argument concerning the second clause is

172 United States' reply to Panel question No. 21(b).
173 We recall that STEs include enterprises which have been granted, formally or in effect, exclusive or
special privileges.
174 See para. 6.72 above.
175 We use the word "political actors" here merely to contrast our understanding of the first clause with
that of the United States. Non-commercial consid erations include, but are not limited to, political
considerations. See para. 6.88 above.
176 See also United States' reply to Panel question No. 87(b).
177 Indeed, as Jacob Viner aptly put it: "Private enterprise, as such, is normally non-patriotic, while
government is automatically patriotic". Jacob Viner, "International Relations between State-Controlled National
Economies", American Economic Review, no. 34, supplement (March 1944), p. 439.
178 See, e.g., G/STR/2, paras. 4-8; G/STR/4, para. 8.

that the first clause of subparagraph (b) must not be interpreted so as to render ineffective the second
clause.
179 To recall, the United States considers th at the second clause requires an export STE to
afford all enterprises of other Members, includi ng those selling the same product as the export STE in
the same markets, an adequate opportunity to compete. The United States submits that an export STE
could not meet this requirement if the first clause were interpreted to permit an export STE to use its
special or exclusive privileges to the disadvantag e of "commercial actors" selling the same product as
the export STE.
6.98 We agree that we should not give an interpreta tion to the first clause which would deprive the
second clause of its intended meaning and eff ect. However, as we have stated above 180, we do not
consider that the second clause can be interpreted as meaning that export STEs are to afford their
competitors, which may include "commercial actors ", an adequate opportunity to compete in the
marketplace. Logically, no interpretation of th e first clause can deprive the second clause of a
meaning or an effect it does not have. For this reason, we do not agree that the second clause supports
the United States' view that the first clause requir es export STEs not to use their special or exclusive
privileges to the disadvantage of "commercial actors".
6.99 The third element adduced by the United States in favour of its interpretation of the first
clause relates to the implications of not adopting th e United States' interpretation. According to the
United States, if export STEs could use their excl usive or special privileges to gain a competitive
advantage vis-à-vis "commercial actors", effectively, only ot her enterprises with similar exclusive or
special privileges would have an adequate opportuni ty to compete with them. The United States
argues that such an outcome would "defy logic".181
6.100 We agree that, in principle, it is possible th at export STEs might be granted exclusive or
special privileges which, when exercised in a pa rticular manner, might place "commercial actors",
including those selling the same product as the ex port STE in the same markets, at a competitive
disadvantage. However, as we explain below, this fact alone neither requires nor authorizes us to
interpret the first clause so as to prevent export STEs from using their exclusive or special privileges
to gain a competitive advantage in the marketplace.
6.101 To begin with, and this has also been noted by the United States itself, the word "commercial"
in the first clause is unqualified. 182 Notably, the first clause does not require export STEs to make
sales solely in accordance with "fair" commercial c onsiderations. Also, as previously indicated, we
do not consider that subparagraph (b) focuses on th e protection of "commercial actors" competing
with STEs, or that the second clause of subpara graph (b) requires export STEs to afford their
competitors an adequate opportunity to compete. Accordingly, we do not think that particular sales
by an export STE could be regarded as not in acco rdance with "commercial" considerations merely
because the specific terms of these sales could not ha ve been offered in the absence of the exclusive
or special privileges granted to the export STE.
6.102 However, if, for example, an export STE were to use its exclusive or special privileges to sell
into one export market at the economically best pr ice possible and into other export markets at a price
that is lower than would be necessary to meet local conditions of supply and demand, this would tend
to indicate that the STE in question is not ch arging the lower price for commercial reasons. 183 We

179 United States' second written submission, para. 19; United States' replies to Panel question Nos. 3
and 23.
180 See para. 6.72 above.
181 United States' second written submission, para. 19.
182 United States' reply to Panel question No. 87(a).
183 We note, however, that an export STE might, for instance, want to charge a lower price than the
market would bear in order to deter competitors from entering the market. In our view, such sales might be
considered to be based on commercial considerations.

find support for this view in the Note ad Article XVII:1, which provides that "[t]he charging by a state
enterprise of different prices for its sales of a produ ct in different markets is not precluded by the
provisions of this Article, provide d that such different prices are charged for commercial reasons, to
meet conditions of supply and demand in export markets" (emphasis added).
6.103 Thus, as we see it, the only constraint the fi rst clause of subparagraph (b) imposes on the use
by export STEs of their exclusive or special priv ileges is that these privileges must not be used to
make sales which are not driven exclusively by "commercial considerations" as we understand that
term. Whether particular sales by an export STE are driven exclusively by commercial considerations
must be assessed in light of the specific circ umstances surrounding these sales, including the nature
and extent of competition in the relevant market.
6.104 It is important to point out that the United Stat es' view - that the first clause of subparagraph
(b) should not be interpreted so as to permit export S TEs to use their privileges to the disadvantage of
"commercial actors" - takes no account of relevant disciplines set out elsewhere in the WTO
Agreement. For instance, Members' freedom of action with regard to the nature and extent of
privileges they may grant to their export STEs is constrained, in effect, by the provisions of, inter alia,
the Agreement on Agriculture and the SCM Agreement. Furthermore, Members whose "commercial
actors" have been or may be adversely affected by the conduct of export STEs may under certain
conditions take measures in order to offset or pr event such conduct, in accordance with the provisions
of, inter alia, Article VI of the GATT 1994, the Anti-Dumping Agreement and the SCM Agreement.
6.105 Also, it should be remembered that there ar e, in any event, other provisions of the WTO
Agreement which, if used, could have the effect of enhancing the competitive position of the
enterprises of the Member making use of these provisions vis-à-vis the "commercial actors" of other
Members. To give just one example, the provisions of the Agreement on Agriculture as they stand
permit Members to grant export subsidies in respect of agricultural products. 184 If a Member chooses
to grant such subsidies to its producers, this may put "commercial actors" - the producers of a
Member which does not provide such subsidies - at a competitive disadvantage in the marketplace.
6.106 In light of the above, we consider that neither the text of the first clause of subparagraph (b)
nor "logic" requires or authorizes us to interpret the first clause so as to prevent export STEs from
using their exclusive or special privileges to the disadvantage of "commercial actors".
5. Consistency of the CWB Export Regime with Article XVII:1 of the GATT 1994
6.107 The Panel now turns to examine whether the Un ited States has established that the CWB
Export Regime is inconsistent with Article XVII:1.
6.108 As an initial matter, we note that both parti es consider that the CWB is an STE within the
meaning of Article XVII:1(a). 185 We are satisfied that the CWB falls within the category of
enterprises other than State enterpri ses which have been granted, formally or in effect, exclusive or
special privileges. 186 There is no doubt that at least the CWB's exclusive right to sell Western
Canadian wheat for export constitutes an "exclusive or special privilege" within the meaning of

184 Certain types of export subsidies are, however, subject to reduction commitments.
185 Parties' replies to Panel question No. 7; G/STR/N/4/CAN, p. 8.
186 The CWB is neither a Crown corporation nor an agent of Her Majesty. Canada's reply to Panel
question No. 7; Section 4(2) of the CWB Act; Exhibit US-11.

Article XVII:1(a).
187 It is clear, therefore, that the CWB Export Regime, the measure at issue here, is
subject to the provisions of Article XVII:1.
6.109 The United States' claim is that the CW B Export Regime "necessarily results" in non-
conforming CWB export sales. 188 The Panel has asked the United States to elaborate on the meaning
of the phrase "necessarily results". It is clear fro m the United States' response that the United States
does not mean to argue that it can be "presumed", in light of the various elements of the CWB Export
Regime, that the CWB will make non-conforming export sales. Rather, what the United States argues
is that non-conforming CWB export sales are an "inescapable consequence" of the CWB Export
Regime.189 Consistent with the clarification provided by the United States, we will assess whether the
CWB Export Regime "necessarily" or "inescapably" results in non-conforming CWB export sales.
We commence this task by setting out in broad outline the parties' main arguments.
6.110 The United States' claim essentially rests on four broad assertions. First, the United States
asserts that the privileges enjoyed by the CWB give it more flexibility with respect to pricing and
other sales terms than a "commercial actor". Specifi cally, the United States asserts that the exclusive
right to purchase Western Canadian wheat for export or domestic consumption, together with the fact
that the CWB does not need to pay Western Cana dian wheat producers the market value of their
wheat, but only an initial price which is generally equal to 65 to 70 per cent of the estimated final
market value of the wheat, gives the CWB a stable supply of wheat at a cost of acquisition well below
its market value. According to the United States, the CWB thus enjoys greater flexibility in setting
prices than "commercial" grain traders, which must purchase wheat for market prices. Moreover, the
United States maintains that the exclusive right to purchase Western Canadian wheat, together with
the fact that the initial price the CWB has to pay fo r such wheat is fixed for an entire marketing year,
results in a stable supply of wheat and gives the CWB price certainty, which, in turn, enhances its
ability to forward contract or enter into long-term contracts. The United States argues, furthermore,
that the government guarantee of the initial price resu lts in less risk exposure which also gives the
CWB greater pricing flexibility. Finally, the Unite d States submits that the government guarantees of
CWB borrowings allow the CWB to offer more fa vourable credit terms and to obtain additional
revenue which goes into the pool accounts 190, again giving the CWB more flexibility with respect to
pricing and other sales terms.
6.111 Second, the United States asserts that the alleged pricing flexibility resulting from the CWB's
privileges enables the CWB to offer "non-commercial" 191 sales terms (contrary to the first clause of
subparagraph (b) of Article XVII:1) and thus to deny "commercial" enterprises of other Members an
adequate opportunity to compete (contrary to the second clause of subparagraph (b)). The
United States further asserts that the CWB can also use its pricing flexibility to make sales on "non-
commercial" terms in order to target particular markets. That is to say, the pricing flexibility gives the
CWB the ability to discriminate in its sales between export markets or between its home market and
export markets (contrary to subparagraph (a) of Article XVII:1).
6.112 Third, the United States asserts that the CWB's legal mandate and structure, together with the
privileges granted to it, create an incentive for the CWB to discriminate between markets by making
some of its sales in a "non-commercial" manner. The United States maintains that it is clear from the

187 The parties are in agreement that the CWB has be en granted "exclusive or special privileges".
United States' first written submission, para. 2; Canada's first oral statement, para. 82; Canada's first written
submission, paras. 4 and 126. Canada also accepts that the CWB's sole responsibility for the sale of Western
Canadian wheat in export markets is an exclusive or special privilege. G/STR/N/4/CAN, p. 9.
188 See para. 6.24 above.
189 United States' reply to Panel question No. 86.
190 For an explanation of the term "pool accounts", see footnote 112 above.
191 The term "non-commercial" is to be understood here in the sense ascribed to it by the United States.

CWB's legal mandate and governance structure that the CWB maximizes sales, or revenue, rather
than profit. Regarding the CWB's mandate, the Un ited States submits that the CWB is required by
law to promote the sale of Western Canadian wheat in world markets and thus is driven to maximize
sales quantity, not profit. Regarding the CWB's gover nance structure, the United States notes that the
CWB's Board of Directors is largely elected by Western Canadian farmers. The United States
considers that the Board therefore has an incentive to satisfy the greatest possible number of farmers.
In the United States' view, these farmers would likely express strong dissatisfaction if the CWB began
to maximize profits by refusing to purchase wheat from significant numbers of producers. According
to the United States, due to its mandate and structur e, the CWB has an incentive to use its privileges,
and the pricing flexibility resulting therefrom, to maximize sales by selling wheat in some markets at
lower prices than "commercial actors" could offer. According to the United States, this would also
deny the "commercial actors" of other Members an adequate opportunity to compete according to
customary business practice.
6.113 The United States notes that one example of such "non-commercial" and discriminatory
behaviour by the CWB is the protein or quality give-away. According to the United States, the CWB
encourages over-production of high-quality wheat in order to ensure it has sufficient quantities of
high-quality wheat. The United States asserts th at the CWB encourages production of high-quality
wheat by rewarding farmers through price premiu ms, even when such price premiums are not
warranted by demand for high-quality wheat in thir d-country markets. The United States contends
that to the extent Western Canadian production of high-quality wheat exceeds world demand for high-
quality wheat (with the consequence that the CW B cannot sell the excess production at a premium
price), the CWB uses its privileges, including its bo rrowing privilege, to provide a price discount for
certain transactions involving high-quality wheat in order to meet the price competition for lower-
quality wheat in a given market. According to the United States, this amounts to a protein or quality
give-away, in that the CWB provides wheat at a gr eater protein or quality level than the commercial
terms of the contract require. The United States argues that such a protein or quality give-away
results in discrimination between markets wh ich is not in accordance with "commercial
considerations", because the CWB is not getting the full replacement value for the high-quality wheat
it is selling.
6.114 Fourth, the United States asserts that the Government of Canada is not taking any steps to
ensure that CWB export sales conform to the principles of subparagraphs (a) and (b) of
Article XVII:1.
 The United States contends that in the ab sence of any government supervision, the
CWB's legal structure and incentives will necessarily result in non-conforming CWB export sales.
6.115 Canada's response to the first assertion is that the United States has not adduced any
evidence to demonstrate that the CWB actually h as greater "pricing flexibility" and less "exposure to
market risk" than a "commercial actor". In particul ar, Canada considers that the United States has not
established what the pricing flexibility and risk e xposure of a "commercial actor" would be. Canada
also contends that the CWB does not have a "guara nteed" supply of wheat which allows it to forward
contract wheat for future delivery at a fixed price. Canada notes that the supply of wheat is subject to
the vagaries of the agricultural market. Also, Cana da submits that farmers who feel they can get
greater economic returns from other crops will switch away from wheat.
6.116 Regarding the second assertion by the United States, Cana da agrees that in theory the CWB
could act not in accordance with commercial considerations. 192 However, Canada submits that the
mere possibility that the CWB may act inconsiste ntly with commercial considerations does not
establish that Canada is in violation of its obligations under Article XVII.

192 Canada's second oral statement, para. 13.

6.117 In respect of the third assertion, Canada notes that the CWB uses its privileges, as would
private sector entities in similar circumstances. But, Canada submits, the United States has not
demonstrated that the CWB's use of its privileg es necessarily results in the CWB making sales which
are not in accordance with Article XVII:1. Cana da argues in this regard that nothing in the CWB Act
requires the CWB to act in a manner inconsistent with the requirements of Article XVII:1, or prevents
the CWB from acting in a manner consistent with th e requirements of Article XVII:1. The same is
true for the mandate the CWB has been given by its Board of Directors. Canada points out in this
regard that the CWB's Board of Directors has mandated the CWB to maximize returns to farmers and,
therefore, to act commercially. Thus, in Ca nada's view, the CWB's legal mandate does not
"necessarily result" in non-conforming CWB export sales. Canada also considers that the distinction
drawn by the United States between revenue ma ximizing and profit maximizing is artificial.
193
According to Canada, the CWB acts similar to an agricultural marketing cooperative. Canada notes
that under a marketing cooperative system, profit maximization for the producer means revenue
maximization for the marketing cooperative, because the marketing cooperative may not make profits
for itself and does not incur costs of production. Canada submits that the primary objective of a
marketing cooperative is to achieve the best price possible for the products that it markets. This
results in the highest return to producers, which, in turn, maximizes their profits.
6.118 Canada further argues that the United States has not provided any evidence to demonstrate
that the CWB actually uses its privileges to discrimin ate between particular markets by offering "non-
commercial" terms to some "targeted" markets, but not to others. Regarding the United States'
allegation in respect of protein over-delivery, a nd the evidence which purports to support it, Canada
submits that the allegation is inadmissible, because it is a factual allegation which, under the Panel's
Working Procedures, should have been made and supported no later than the first substantive meeting
of the Panel with the parties. Canada notes that , in any event, protein over-delivery is routine
commercial practice in the wheat industry, due to ef forts made by wheat exporters to avoid contract
penalties for protein under-delivery. In addition, Ca nada points out that there would be a give-away
only if the final contract price is not adjusted upw ards to reflect the additional protein delivered.
Canada notes that the United States has not adduced any evidence in this regard.
6.119 Finally, with regard to the fourth assertion by the United States, Canada notes that the
Government of Canada does not interfere in the day-to-day operations of the CWB. In Canada's view,
this non-interference makes the CWB more commercial, not less. Canada points out, however, that if
it came to its attention that th e CWB was acting inconsistently with Canada's obligations under
Article XVII:1, Canada could and would direct the actions of the CWB under Section 18 of the CWB
Act. Canada further argues that, effectively, the CWB is also supervised and disciplined by the
farmers on whose behalf it sells wheat. Western Canadian farmers are not obligated to grow wheat.
Canada maintains that if producers are dissatisfied with the returns they r eceive from the CWB, they
can and do grow alternative crops. According to Cana da, the farmers will, therefore, ensure that the
CWB acts in accordance with commercial considerations.
6.120 The Panel understands the United States to argue that the four United States assertions taken
together demonstrate that the CWB Export Regi me "necessarily results" in non-conforming CWB
export sales.
194 Thus, for the United States' claim unde r Article XVII:1 to be successful, the
United States must at least establish each of its four assertions.
6.121 The Panel will begin its analysis with the th ird assertion put forward by the United States,
viz., the assertion that the CWB's legal structure and ma ndate, together with the privileges granted to

193 Canada also argues that the United States is in correct in suggesting that the CWB has a mandate to
maximize sales at all costs.
194 United States' second oral statement, paras. 6-7 and 11-13; Unite d States' second written
submission, paras. 3 and 8; United States' reply to Panel question No. 2(e). See also para. 6.25 above.

it, create an incentive for the CWB to discriminate between markets by making some of its sales in a
"non-commercial" manner. For the purposes of this analysis, the Panel will assume that the first 195
and second196 assertions by the United States have been established.
6.122 Under the rubric "legal structure of the CWB", the United States has discussed essentially two
elements. One is the governance structure of th e CWB. The CWB is currently governed by a 15-
person Board of Directors. Ten of the Board's directors are elected by Western Canadian producers of
wheat and barley, the remaining five, including the president, are appointed by Canada's Governor in
Council, i.e., by the Government of Canada. 197 With the exception of the president, directors hold
office for a maximum term of four years, and may serve up to three terms. 198 Thus, the CWB is
controlled by the producers whose grain the CWB markets.199 The other structural element referred to
by the United States is the uncontested fact that the Government of Canada does not control, or
interfere in, the day-to-day operations of the CWB.200
6.123 In our view, the two aforementioned elements of the legal structure of the CWB, together
with the CWB's privileges, do not establish that the CWB has an incentive to make sales based on
considerations which are not exclusively "commercial" in the sense we ascribe to that term in the
context of Article XVII:1(b). As we have noted , the majority of the directors who serve on the
CWB's Board are elected by Western Canadian wheat and barley producers and must be re-elected by
those producers if they wish to serve for more than one term of office. The United States itself infers
from the CWB's governance structure that the CWB's Board has "a strong incentive to satisfy the
greatest number of producers".
201 The Board satisfies producers by ensuring that their financial
returns from the CWB's sales of their wheat or ba rley are maximized. The mission the CWB's Board
has given the CWB confirms this point: the CWB is to "market[...] quality products and services in
order to maximize returns to western Canadian grain producers". 202 Moreover, the CWB Act requires
that, in the exercise of their responsibilities, direct ors and officers of the CWB "act honestly and in
good faith with a view to the best interests of the [CWB]". 203 For these reasons, we are not persuaded
that the CWB has an incentive, becau se of its "legal structure", to make its wheat sales on the basis of
considerations other than price, quality, availability, marketability, etc.204

195 See para. 6.110 above.
196 See para. 6.111 above.
197 Section 3.02(1) of the CWB Act; Canada's reply to Panel question No. 36.
198 Section 3.02(2) of the CWB Act.
199 It appears that, at present, the majority of Board directors are themselves grain producers. Canada's
first written submission, para. 48; Exhibit CDA-42.
200 Pursuant to Section 18(1) of the CWB Act, Canada's Governor in Council may, by order, direct the
CWB with respect to the manner in which any of its operations, powers and duties are to be conducted,
exercised or performed. Canada has noted that it could and would use Section 18 to direct the actions of the
CWB if it were to come to its attention that the CWB was acting in a manner inconsistent with Canada's
obligations under Article XVII:1. Canada's second written submission , para. 77; Canada's first written
submission, para. 118.
201 United States' first written submission, para. 84.
202 Exhibits CDA-7; CDA-43B, p.1 and 8; CDA-43C, inside front cover.
203 Section 3.12(1)(a) of the CWB Act.
204 We note that the United States has submitted a 1998 article from an academ ic journal (Exhibit US-
22), which suggests that the CWB may in the past have overdelivered wheat protein to its customers. The
article argues that such behaviour results in higher marketing costs for Western Canadian grain producers, but
"presumably" generates political support for the CWB from its customers. Exhibit US-22, pp. 314, 318-319.
For the reason indicated below at para. 6.139-6.140, we do not consider that Exhibit US-22 is properly before
us. Even disregarding this, we note that the article does not explain how the specified behaviour would generate
political support. Moreover, the data relied on to support the conclusion that the CWB may in the past have
overdelivered wheat protein in a manner which was contrary to the interests of Western Canadian wheat
producers, appears to be limited to the 1984-1994 period. However, in 1998, the CWB's governance structure

6.124 As we see it, the non-interference by the G overnment of Canada in the CWB's sales
operations reinforces rather than weakens this conc lusion. In view of the CWB's current governance
structure, which gives Western Canadian producer s control over the CWB, the fact that the
Government of Canada does not supervise the CWB's sales operations makes it more rather than less
likely that the CWB markets wheat solely in accordance with th e commercial interests of the
producers whose marketing agent it is.
205
6.125 Turning to the "legal mandate" of the CWB, we note that Section 5 of the CWB Act provides
that the CWB "is incorporated with the object of marketing in an orderly manner, in interprovincial
and export trade, grain grown in Canada". Section 5 of the CWB Act must be read together with
Section 7(1) of the same Act, which deals with "pricing". Section 7(1) stipulates that "[s]ubject to the
regulations, the [CWB] shall sell and dispose of gr ain acquired by it pursuant to its operations under
this Act for such prices as it considers reasonabl e with the object of promoting the sale of grain
produced in Canada in world markets".
6.126 Thus, the object, or mandate, of the CWB is to market, or promote the sale of, Western
Canadian wheat in world markets. We note that th e CWB is to market wheat "in an orderly manner".
In this regard, a research report by the United States Department of Agriculture (the "USDA")
submitted to us by Canada states that "[m]any produce buyers emphasise the importance of working
with a reliable, consistent supp lier" and that suppliers can, therefore, enhance their competitive
position if they can achieve "a more orderly flow" of their agricultural product to the market and thus
build relationships with buyers. 206 This suggests to us that, in the case of agricultural products,
making sales in an orderly manner is not inconsis tent with making sales solely in accordance with
"commercial considerations" as we understand that term.
6.127 Similarly, we consider that the object of "promoting the sale" of Western Canadian wheat in
world markets is an object which almost by definition is commercial in nature. 207 Therefore, we do
not think that this object, per se, could be said to require or encourage the CWB to make sales which
are not based on commercial considerations. At any rate, in view of the legal structure of the CWB,
we see no reason for assuming that the CWB is driven to maximize sales "at all cost", that is to say,
without regard for the returns to Western Canadian producers. 208 Also, Canada has confirmed in this
respect that the CWB can defer sales if doi ng so would maximize returns to producers. 209 Finally,

was reformed, and the CWB was transformed from a Canadian Crown Corporation into the producer-run, mixed
corporation that it is today. In view of this major stru ctural reform, we do not consider that we could justifiably
draw inferences from the alleged behaviour of the CWB under its former governance structure as to its
behaviour under the current governance structure.
205 As a separate matter, we note that the Unite d States has highlighted the presence in the CWB Act of
a clause (Section 61.1) which requires the CWB to comply with certain North American Free Trade Agreement
("NAFTA") provisions and the absence of a similar "WTO clause". United States' first written submission,
para. 66. We do not think that the absence of a "WTO clause", or similar regulatory control, is evidence that the
Government of Canada did not intend for the CWB to comply with the principles of subparagraphs (a) and (b)
of Article XVII:1. Canada has explained in this regard that the "NAFTA clause" was included in the CWB Act
in view of the specific wording of the relevant NAFTA provisions, which require Canada to take action to
"ensure, through regulatory control, administrative supervision or the application of other measures" that the
CWB complies with NAFTA requirements. Canada's reply to Panel question No. 40.
206 Exhibit CDA-5, pp. 3 and 15.
207 We do not see the United States as disagreeing w ith this proposition. United States' reply to Panel
question No. 29.
208 This view is supported by a public statement by the CEO of the CWB, which was submitted to us by
the United States. The statement is to the effect that "[t]he objective of the Canadian Wheat Board is to
maximize returns to producers. […] We intend to market all wheat and barley offered by producers and we will
strive to obtain the best possible value for their grain". Exhibit US-13, p. 3.
209 Canada's reply to Panel question No. 38; G/STR/N/ 4/CAN, p. 9. Canada has pointed out that in
deciding whether or not to defer sales at a particular point in time, the CWB would need to weigh the expected

there is evidence to suggest that the CWB defers purchases if it considers that no satisfactory returns
could be obtained from the sale of the product concerned.210
6.128 Pursuant to the pricing "rule" set forth in Section 7(1) of the CWB Act , the CWB must sell
wheat "for such prices as it considers reasonable w ith the object of promoting the sale of grain
produced in Canada in world markets". The Unite d States contends that Section 7(1) requires the
CWB to obtain only "reasonable" prices, not prof it-maximizing prices or prices which would cover
the replacement value of the wheat sold. 211 The United States appears to deduce from this that the
CWB therefore has an incentive to increase its sales of wheat by selling at prices which may be
"reasonable" in light of the privileges it enjoys, but which "commercial actors" could not offer.212
6.129 Initially, we recall our view that the fact that an export STE like the CWB might, due to the
privileges it enjoys, sell wheat at lower prices than "commercial actors" could offer would not, in
itself, justify the conclusion that such sales would not be in accordance with commercial
considerations.213 We have also said, however, that if an export STE were to sell into a particular
market at a price that is lower than the best price available to it in that market, this might indicate that
the STE in question is not charging the lower price for purely commercial reasons.
6.130 Applying these considerations to Section 7(1) of the CWB Act , it is clear that the mere fact
that the CWB is mandated to promote sales of whea t and that the "reasonable pricing" standard may
allow the CWB to do so by selling at prices whic h "commercial actors" could not offer does not
warrant the conclusion that the CWB has an incentiv e to make sales which are not in accordance with
commercial considerations.
6.131 We do not understand the United States to argue that Section 7(1) encourages the CWB to sell
at prices which are lower than the best prices available to it in different markets. 214 In any event,
based on the information on the record, we are no t convinced that Section 7(1) creates such an
incentive. If the CWB were to sell into some mark ets at prices which are lower than the prices which
these markets would have borne, it would diminish re turns to Western Canadian producers. In view
of the fact that the CWB is a producer-controlled marketing agency, it seems unlikely that the CWB
would deliberately make such below-best-price sales. 215 In fact, there is evidence on the record to
suggest that, in some cases, the CWB may not be pr epared to sell at all, even at the best price
possible.216

benefit of deferring sales against the extra storage fees the CWB would be charged by private grain handlers.
Canada's reply to Panel question No. 38. It is worth noting here, as well, that there is evidence to suggest that
the CWB defers purchases on these grounds.
210 Exhibit CDA-54, p. 5.
211 United States' second oral statement, para. 13; Un ited States' reply to Panel question No. 28; United
212 Ibid.
213 See para. 6.101 above.
214 The United States itself has stated that the CWB, in trying to sell the wheat it has purchased, "will
presumably try to obtain the best prices". United States' first written submission, para. 80.
215 It is worth noting here that the CWB's Board of Directors states in the 2001-2002 CWB Annual
Report that "[w]e use the tools at our disposal – the single-desk, th e pool accounts and government guarantees
on credit sales and farmer payments – [...] to ensu re that [producers'] returns from the marketplace are
maximized". Exhibit CDA-43C, p.1 (emphasis added).
216 Exhibit CDA-54 provides information on CWB acceptance levels for, inter alia , 2002-2003
Series C delivery contracts. It is clear from Exhibit CDA-54 that th e CWB did not accept delivery of certain
lower quality Western Canadian wheat offered to it under the 2002-03 Series C delivery contracts because there
was "limited international demand for lower quality wheat at reasonable prices". Exhibit CDA-54, p. 5
(emphasis added). See also Canada's reply to Panel question No. 38.

6.132 The United States deduces from Section 7(1) th at the CWB's objective is to maximize
revenue rather than profit.
217 According to the United States, this means that the CWB has strong
incentives to act inconsistently with commercial cons iderations, because even if the CWB tries to get
the best prices, it will not conduct itself like a privat e grain trader. The United States asserts in this
regard that revenue-maximizing firms will tend to ma ke sales in greater volumes and at lower prices
than would profit-maximizing firms.218
6.133 It is uncontested that the objective of the CWB in selling wheat is not to make a profit for
itself.219 All the revenue obtained by the CWB from the sale of wheat is pooled and returned to
Western Canadian wheat producers at the end of the crop year, after deduction of the CWB's
marketing costs.
220 In our view, the mere fact that the CWB does not make a profit for itself does not
support the conclusion that the CWB has an incentiv e not to make sales solely in accordance with
commercial considerations.221 As we have said above, because of its governance structure, the CWB
has an incentive to maximize retu rns to the producers whose products it markets. Furthermore, even
if the CWB were to make sales in greater volumes and, in some instances, at lower prices than a
profit-maximizing enterprise, this would not necessarily imply that the CWB's sales 222 would not be
based solely on commercial considerations. As not ed above, we are not convinced that Section 7(1)
creates an incentive for the CWB to sell at prices which are lower than the best prices available to it in
different markets. Indeed, if it were to do so, it would not maximize sales revenue.
6.134 Also, we see nothing in Article XVII:1 to s uggest that export STEs like the CWB can only
meet the "commercial considerations" requirement if their sales operations are structured so as to
maximize profit. Nor do we see anything in the te xt of Article XVII:1 which would indicate that the
CWB must conduct itself in the marketplace exactly like privately-held profit-maximizing share-
capital corporations would. Indeed, it is not clear why it should. As Canada has pointed out, there are
privately-organized agricultural marketing cooperatives which are similar in structure to the CWB and
do not maximize profits.
223 Since such privately-organized cooperatives do not enjoy government-
conferred privileges, they must make sales based on purely commercial considerations. For all these
reasons, we do not consider that merely because the CWB may be a revenue-maximizer the CWB has
"strong incentives" to make sales not in accordance with commercial considerations.
6.135 Up to this point, we have examined whet her the United States has established based on the
text of the CWB Act, CWB statements, Canada's notification concerning STEs, etc. that the CWB's

217 United States' first oral statement, para. 14.
218 United States' first written submission, para. 85-86.
219 Canada's first oral statement, para. 9; Canada's comments on the United States' reply to Panel
question No. 87.
220 G/STR/N/4/CAN, p. 12 (Exhibit US-1); Canada's first written submission, para. 50.
221 Indeed, it is important to recall in this contex t that STEs are not nece ssarily used only for
commercial purposes, but may also be established or maintained to carry out governmental policies or
programmes. See para. 6.96 above. While the latter type of STE must also make purchases or sales solely in
accordance with commer cial considerations, such STEs ordinarily do not purchase or sell for the purpose of
maximizing profit.
222 It should be recalled here that we are focussing in this case on the CWB's sales of wheat, not its
"purchases" of wheat. See footnote 118 above.
223 Canada's first written submission, paras. 150-151 and 158. We also note that the USDA research
report referred to above, which deals with private cooperative pooling operations, states that the main objective
of the sales staff of private agricultural marketing cooperatives is "to maximize the returns to the producer" and
that under the marketing agreements or contracts establishing such private marketing cooperatives, the
cooperative usually "agrees to sell the member's produce for the best price possible and to return payment to the
grower". Exhibit CDA-5, pp. 3 and 4. Thus, the USDA's research report appears to recognize that private
cooperatives do not seek to make a pr ofit for themselves. It is nowhere sugge sted in the report that this gives
private marketing cooperatives an incentive not to make sales solely on the basis of commercial considerations.

legal structure and mandate, together with the privileges granted to it, create an incentive for the CWB
to make some of its sales not in accordance with commercial considerations. We have found that the
United States has failed to establish its assertion in those terms. Below, we will examine whether,
notwithstanding our findings up to this point, the Unit ed States has adduced factual evidence of actual
CWB sales behaviour which supports its assertion.
6.136 We recall in this regard that the United St ates has alleged that the CWB gives Western
Canadian wheat producers a deliberate incentive to over-produce high quality wheat by paying price
premiums for such wheat and then sells some of this over-production of high quality wheat in some
markets at a price discount in order "to meet th e price competition for lower quality wheat" in those
markets.
224 According to the United States, such a prot ein or quality give-away is not in accordance
with commercial considerations because "commerc ial actors" could not afford to sell high quality
wheat without getting the full replacement value for such wheat.225
6.137 Concerning the alleged incentive to over-produ ce high quality wheat, the United States has
submitted evidence which suggests that, on average, Western Canadian production of high quality
wheat has exceeded the demand which has been willing to pay a commercial premium for it. 226 The
evidence in question, a 1999 joint study by the Manitoba Rural Adaptation Council Inc. and the CWB
on the market competitiveness of Western Canadian wheat, does not indicate whether the abundant
supply of high quality wheat in the past was the re sult of incentives provided by the CWB. The study
does note, however, that "the need to be able to service high-quality wheat customers in years of poor-
quality production is an importa nt marketing consideration". 227 Thus, it would seem that even if the
CWB were encouraging over-production of high-qua lity wheat by offering price premiums, this may
well be in accordance with commercial considerations.
6.138 Concerning the alleged CWB practice of selli ng high-quality wheat in some markets at a
discounted price in order to meet the price comp etition for lower quality wheat in those markets and
thus giving away quality, we think that such a sales practice could be viewed as not reflecting
commercial considerations if it involved foregoing reasonably available opportunities to sell high
quality wheat at premium prices and if it involved selling high quality wheat at prices which are lower
than would be necessary to meet the price comp etition for lower quality wheat. The evidence the
United States relies on to support this allegati on consists of a 1998 academic article on the CWB
(hereafter the "1998 article") and a 1996 brief submitt ed by the CWB to the Western Grain Marketing
Panel (hereafter the "1996 brief"). We address these two elements in turn.
6.139 In relation to the 1998 article, we note, as a preliminary matter, that Canada objects to the
Panel considering this article on th e grounds that it was introduced in contravention of the provisions
of paragraph 12 of the July Panel's Working Procedur es. Pursuant to paragraph 12 of the July Panel's
Working Procedures, the United States was to have submitted all factual evidence to the Panel no later
than during the Panel's first substantive meeting w ith the parties, except w ith respect to evidence
necessary for purposes of rebuttals, answers to ques tions or comments on answers provided by the
other party or the third parties. 228 The 1998 article, which contains factual information regarding the

224 United States' second oral statem ent, paras. 9-10; United States' second written submission, paras.
12-14.
225 United States' second oral statement, para. 11.
226 Exhibit US-15, p. ix.
227 Ibid., pp. v and ix.
228 Para. 12 reads:
Parties shall submit all factual evidence to the Panel no later than during the first substantive
meeting, except with respect to evidence necessary for purpos es of rebuttals, answers to
questions or comments on answers provided by ot hers. Exceptions to this procedure will be
granted upon a showing of good cause. In such cases, the other party shall be accorded a
period of time for comment, as appropriate.

alleged CWB practice of protein or quality give-a way, was submitted as an attachment to the
United States' second written submission, that is to say, after the Panel's first substantive meeting with
the parties. Until the second written submission, the United States never referred to the alleged
practice of protein or quality give-away. In its de fence, the United States argues that it referred to the
alleged protein or quality give-away to "further explain" statements made in its first written
submission regarding Canada's ex cess production of high quality wh eat and to "rebut" Canada's
allegations in its first written submission that the United States had adduced no evidence of non-
commercial behaviour because none exists.
229
6.140 The United States had an opportunity in its first oral statement to "rebut" allegations made by
Canada in its first written submission, including by introducing new factual evidence. Also, while the
United States was free to "further explain" its ear lier statements in its second written submission, it
should have submitted all factual in formation supporting these earlier statements during or before the
Panel's first substantive meeting. It should also be noted that the United States did not indicate that
the 1998 article was not accessible to it by the date of the first substantive meeting, nor did the
United States otherwise try to show "good cause" 230 for the late submission of new factual evidence.
For all these reasons, we agree with Canada that the 1998 article is not properly before us.
6.141 In any event, even if we were to consider that the article in question is properly before us, it
would, in our view, be of little evidentiary value. The article does not establish a link between excess
production of high quality wheat and the alleged CWB practice of overdelivering protein or quality.
Moreover, the article alleges the existence of a CW B practice of overdelivering protein based on data
that apparently covers the 1984-1994 time period. In other words, the article purports to describe the
CWB's sales behaviour during a period when the CWB had a legal structure which was very different
from its present structure, which was adopted in 1998. 231 This difference is important because the
article suggests that the alleged CWB practice of overdelivering protein was not in the best
commercial interests of Western Canadian wheat producers, but served the political interests of the
CWB itself.
232 We do not consider that the statements made in the 1998 article regarding the
behaviour and incentives of the CWB under its previ ous legal structure assist the United States in
demonstrating that under the CWB's current legal structure, which gives Western Canadian producers
control over the CWB, the CWB has an incentive to use its privileges to make sales which are not
solely in accordance with commercial considerations and which do not maximize returns to Western
Canadian wheat producers.233
6.142 As noted above, the other evidentiary element referred to by the United States is a 1996 brief
submitted by the CWB to the Western Grain Marketi ng Panel on the role of the CWB in the Western

229 United States' comments on Canada's second oral statement, para. 6.
230 Para. 12 of the July Panel's Working Procedures.
231 See footnote 204 above.
232 Exhibit US-22, pp. 314, 318-319.
233 It should also be noted that the allegation made in the 1998 article of protein overdelivery by the
CWB is based essentially on CWB wheat sales to Japan during the 1984-1994 time period. However, it is not
clear from the article whether the CWB could in fact have sold the relevant wheat in Japan at higher prices. Nor
is it clear from the article whether the CWB could have sold the wheat in question at higher prices in other
markets. The article states in this regard that:
There is a high degree of substitutability among wheats from various exporters and this means
the CWB is essentially a price taker in the wheat market. This is reinforced by the fact that
75% to 80% of the wheat is imported by developing countries, whose main consideration is
price. Essentially, only Japan, the United Kingdom, and the United States are quality markets,
willing to pay for product differentiation and high protein in wheat. (Exhibit US-22, p. 316
(footnote omitted).)

Canadian grain marketing system.234 The United States considers that this brief supports its view that
the CWB is selling high quality wheat at a low quality wheat price and confirms that the CWB gives
away quality in its sales. Specifically, the issue he re is whether one partic ular paragraph of the 1996
brief may be understood as suggesting that the CWB mi ght in the past have sold all or most No. 2
Canada Western Red Spring ("CWRS") 13.5 per cent pr otein wheat at lower prices than the prices at
which all No. 3 CWRS wheat (a wheat of lower quality than No. 2 CWRS 13.5) was sold.
235
6.143 The main purpose of the paragraph in question is to explain why the CWB pooling system is
not based on the averaging of CWB sales prices fo r a given type, class and grade of wheat. The
paragraph gives the example of No. 2 CWRS 13.5 to illustrate why averaging would be problematic.
However, the paragraph in question does not state th at the CWB actually sold No. 2 CWRS 13.5 at a
price below the price for No. 3 CWRS. 236 Also, it is not clear from the paragraph at issue whether,
independently of the example of No. 2 CWRS 13.5, th e type of pricing practice referred to has a basis
in fact or whether it is hypothetical. Therefore, we do not agree with the United States that the
relevant paragraph admits of the inference that the CWB does, in fact, engage in such "pricing
schemes".237
6.144 In any event, the paragraph gives no explana tion as to why the CWB would choose to engage
in such practices. The United States suggests that such practices would be intended to increase the
CWB's sales and market share, and to preclude ot her competitors from competing in the relevant
markets. According to the United States, the CWB' s competitors could not sell high quality wheat at
the price for low quality wheat without incurring a loss. 238 Even if the United States' suggestion was
correct, it would not establish that such pricing pr actices would not be in accordance with commercial
considerations. Indeed, the United States itself contends that the CWB would engage in such
practices for commercial reasons, namely, to increase the CWB's market share or to deter its
competitors from contesting particular markets. Therefore, and in the absence of more detailed

234 We note that the United States relies on a particular paragraph of this brief, parts of which it quoted
in a footnote to the United States' second written submission. United States' second written submission,
footnote 15. In that footnote, the United States referred the Panel to the correct page number of the brief in
question as well as to Exhibit US-12. Exhibit US-12 contains excerpts of the brief in question, but not the page
containing the aforementioned paragraph. We note that Canada did not object to the Panel considering the
paragraph in question. For this reason, and in the light of the fact that it is uncl ear whether the United States
was under the impression that it had already submitted the relevant paragraph to the Panel as part of Exhibit US-
12, we take the paragraph in question into consideration.
235 The relevant paragraph reads as follows:
Pooling is sometimes mistakenly thought of as the (weighted) averaging of CWB sales prices
for a given type, class, and grade of grain over a given crop year. If this was what pooling
really was, somebody who had delivered No. 2 CWRS 13.5 per cent protein wheat during
1994-95 would have ended up r eceiving the weighted average of all sales of No. 2 CWRS
13.5 per cent protein wheat during that year. The problem with that type of system would be
that all or most of the No. 2 CWRS 13.5 might have been sold at lower prices than the prices
at which all the No. 3 CWRS wheat was sold. Th e result of this woul d be that the average
return for No. 3 CWRS wheat would be higher than that for No. 2 CWRS 13.5 wheat, even
though No. 2 CWRS 13.5 was worth more in the market than No. 3 CWRS at all times
throughout that year . That would obviously not be a proper market relationship between
those two grades of wheat. (Exhibit US-24, p. 15 (emphasis in original))
236 Indeed, the paragraph is cast in hypothetical terms, as is clear from the phrase "all or most of the
No. 2 CWRS 13.5 might have been sold at lower prices than the prices at which all the No. 3 CWRS wheat was
sold" (emphasis added).
237 United States' reply to Panel question No. 90.
238 Ibid.

information, there is no basis upon which we could c onclude that the pricing practices at issue, if
adopted by the CWB, would necessarily be inconsistent with commercial considerations.
239
6.145 In light of the foregoing, we do not consider that the CWB's 1996 brief to the Western Grain
Marketing Panel assists the United States in establis hing that the CWB has an incentive, due to its
mandate and privileges, to make sales which are not based on commercial considerations.
6.146 In summary, for the reasons set out above 240, we are not persuaded that the CWB's legal
structure and mandate, together with the privileg es enjoyed by the CWB, create an incentive for the
CWB to make sales which are not solely in accord ance with commercial considerations. The factual
evidence adduced by the United States regardi ng actual CWB sales behaviour does not prove
otherwise.
6.147 Since it has not been demonstrated that th e CWB has an incentive to make sales based on
considerations which are not commercial in nature, there is no basis for concluding that the CWB has
an incentive to discriminate between markets by selling in some markets (or not selling in some
markets) on the basis of considerations which are no t solely commercial in nature. At any rate, we
see nothing in the legal structure of the CWB, its mandate, or its privileges which would create an
incentive for the CWB to discrimin ate between markets for reasons which are not commercial. Nor
have we seen any evidence of such sales behaviour by the CWB.241
6.148 We therefore conclude that the United States has failed to establish its third assertion, to the
effect that the CWB's legal structure and mandate, t ogether with the privileges granted to it, create an
incentive for the CWB to discriminat e between markets by making some of its sales not solely in
accordance with commercial considerations.
6.149 As we have said, for the United States' claim that the CWB Export Regime necessarily results
in non-conforming CWB export sales to be successful , the United States must establish each of its
four assertions. Since the United States has failed to establish one of the four assertions, we reach the
further and consequential conclusion that the Unit ed States has not demonstrated that the CWB
Export Regime necessarily results in CWB export sales which are not solely in accordance with
commercial considerations (and, he nce, inconsistent with the pr inciple of the first clause of
subparagraph (b) of Article XVII:1) and which are inconsistent w ith the general principles of non-
discriminatory treatment prescribed in the GATT 1994 for governmental measures affecting exports
by private traders (and, hence, inconsistent with the principle of subparagraph (a) of Article XVII:1).

239 We note in this regard that it is not clear that the example given in the relevant paragraph of all or
most of the No. 2 CWRS 13.5 wheat being sold at lower prices than the prices at which all the No. 3 CWRS
wheat was sold would be an example of the CWB giving away protein or quality and thus deliberately making
below-best-price sales. A price/quality reversal of the ty pe referred to in the example may occur as a result of
price fluctuations during the crop year and differences in the timing of sales of different types of wheat. Thus,
even if No. 2 CWRS 13.5 wheat was worth more in the market than No. 3 CWRS wheat at all times throughout
a particular year, it may happen, due to contractual commi tments, imperfect knowledge, etc., that all of the No.
3 CWRS wheat was sold at a time when the price for such wheat was at its peak, and all or most of the No. 2
CWRS 13.5 wheat was sold at another time of the year when the price for such wheat was below the average
price for such wheat during the year in question. In such circumstances, "all or most of the No. 2 CWRS 13.5
might have been sold at lower prices than the prices at which all the No. 3 CWRS wheat was sold" (Exhibit US-
24, p. 15).
240 See paras. 6.122-6.134 above.
241 On the other hand, there is evidence before us which suggests that the CWB may sometimes charge
different prices for the same quality of wheat in differen t export markets for commercial reasons, to "reflect
various market factors". Exhibits US-21, p. 2; US-24, p. 10.

6.150 Before coming to a final conclusion with respect to the United States' claim under
Article XVII:1, it is necessary to address one more element of that claim. The United States asserts
that the CWB Export Regime necess arily results in the CWB not affording the enterprises of other
Members adequate opportunity, in accordance with customary business practice, to compete for
participation in its sales, contrary to the provi sions of the second clause of subparagraph (b) of
Article XVII:1. For reas ons we have set out above
242, we consider that the second clause of
subparagraph (b) requires that the CWB afford its customers, and not its competitors, adequate
opportunity to compete for participation in its wheat sales. The United States has not argued in this
case that the CWB does not provide the enterprises of other Members which are interested in buying
wheat from the CWB (i.e., the CWB's customers) adequate opportunity to compete for participation in
its wheat sales. Nor has the United States subm itted any evidence which would support such an
argument. In light of this, we conclude that the United States has not established that the CWB
Export Regime necessarily results in the CWB not affording the enterprises of other Members
adequate opportunity, in accordance with customary business practice, to compete for participation in
its sales.
6.151 Having considered all elements of the United States' claim under Article XVII:1, and having
regard to the entirety of the foregoing considerations, we conclude as follows:
(a) The United States has not established th at the CWB Export Regime necessarily
results in non-conforming CWB export sales; and, as a consequence243
(b) the United States has not established that Canada has breached its obligations under
Article XVII:1 of the GATT 1994.
D. MEASURES AFFECTING THE TREATMENT OF IMPORTED GRAIN
1. Measures at issue
6.152 The United States has challenged four distinct measures as being in violation of Article III:4
of the GATT 1994 and Article 2 of the Agreement on TRIMs . Two of these measures concern the
treatment of imported grain prior to and following entr y into Canadian grain elevators. The other two
measures concern the treatment of imported grain in the Canadian rail transportation system.
6.153 In particular, the United States has challenge d the following measures that concern the
treatment of imported grain prior to and following entry into Canadian grain elevators:
(a) Section 57(c) of the Canada Grain Act relating to the receipt of foreign grain into
Canadian grain elevators; and
(b) Section 56(1) of the Canada Grain Regulations relating to the mixing of certain grain
in Canadian transfer elevators.
6.154 The United States has also challenged the follo wing measures that concern the treatment of
imported grain in the Canadian rail transportation system:
(a) Sections 150(1) and 150(2) of the Canada Transportation Act, which impose a cap on
revenue that may be earned by certain ra ilways for the transportation of Western
Canadian grain for particular movements identified in the Act; and

242 See paras. 6.66-6.72 above.
243 We recall that the United States claim is th at Canada has breached its obligations under
Article XVII:1 because the CWB Export Regime necessarily results in non-conforming CWB export sales.

(b) Section 87 of the Canada Grain Act, which allows for producers of grain to apply for
a railway car to receive and carry the grain to a grain elevator or to a consignee.
2. Claims under Article III:4 of the GATT 1994
(a) General
6.155 Article III:4 of the GATT 1994 requires in relevant part:
"The products of the territory of any contr acting party imported into the territory of
any other contracting party shall be accord ed treatment no less favourable than that
accorded to like products of national origin in respect of all laws, regulations and
requirements affecting their internal sale, offering for sale, purchase, transportation,
distribution or use."
6.156 The Panel notes that a complaining party must demonstrate three elements in order to
establish a violation of Article III:4 of the GATT 1994. In particular:
(a) the imported products that are allegedly treated less favourably by a particular
governmental measure must be "like" the domestic products that are said to enjoy
better treatment;
(b) the governmental measure at issue must be a law, regulation or requirement affecting
the internal sale, purchase, transportation, distribution or use of the imported
products; and
(c) the application of the governmental measure must result in less favourable treatment
of the imported products vis-à-vis the like domestic products.
244
6.157 As a preliminary matter, the Panel notes that in respect of three of the four measures that have
been challenged by the United States -- namely, Section 57(c) of the Canada Grain Act, Section 56(1)
of the Canada Grain Regulations , and sub-sections (1) and (2) of Section 150 of the Canada
Transportation Act - - Canada has argued that some of the grain subject to or affected by the
challenged measures is not "imported" into Canada but, rather, is "in transit". In Canada's view, grain
which is in transit is not within the scope of Ar ticle III:4 of the GATT 1994 but, rather, falls within
the scope of Article V. The United States has not claimed a violation of Article V of the
GATT 1994.
6.158 By its terms, Article III:4 only applies to products "imported into the territory of [a
Member]". Therefore, in assessing the United States' claims under Article III:4, the Panel must satisfy
itself that the relevant measures apply to grain "imported" into Canada. If the relevant measures apply
to "imported" grain, then the possibility that the sa me measures might also apply to grain "in transit"
would not, in the Panel's view, remove those measu res from the scope of Article III:4. Accordingly,
the Panel need not and does not examine whether the re levant measures also apply to grain that is "in
transit" within the meaning of Article V.
(b) Section 57 of the Canada Grain Act: receipt of foreign grain
6.159 Section 57 of the Canada Grain Act provides that:

244 Appellate Body Report, Korea – Measures Affecting Imports of Fresh, Chilled and Frozen Beef
("Korea – Various Measures on Beef "), WT/DS161/AB/R, WT/DS169/AB/R, adopted 10 January 2001,
para. 133.

Except as may be authorized by regulati on or by order of the [Canada Grain]
Commission, no licensee operating an elevator shall receive into the elevator
(a) any grain, grain product or screenings unless the grain, grain product or
screenings is weighed at the elevator immediately before or during receipt;
(b) any material or substance for storag e other than grain, grain products or
screenings;
(c) any foreign grain; or
(d) any grain that the operator has reason to believe is infested or contaminated.
6.160 It is clear from the United States' submissions that the United States is challenging
Section 57(c) of the Canada Grain Act. The United States claim is that Section 57(c) of the Canada
Grain Act, as such, is inconsistent with Article III:4 of the GATT 1994.
245
(i) Like products
6.161 The United States argues that, even when of the exact same type as domestic Canadian grain,
US grain as "foreign grain" is subject to di fferential treatment under Section 57(c) of the Canada
Grain Act . According to the United States, given that Section 57(c) discriminates on the basis of
origin rather than physical char acteristics or end-uses, even when all other product characteristics are
exactly the same, one must reach the conclusion that the measure at issue applies to like domestic and
foreign products. The United States submits that, in any event, the imported and domestic products at
issue, namely those covered by Section 57(c) of the Canada Grain Act are identical and are, therefore,
"like products". More particularly, all importe d and domestic products falling within each of the
categories of "grain" as defined in Section 5(1) of the Canada Grain Regulations are "like products"
for the purposes of Article III:4. The United States fu rther submits that some imported United States
grain is the same variety as Canadian grain, the only difference being that the US grain is grown south
of the Canadian border.
6.162 Canada argues that, for the purposes of the Canada Grain Act, not all types of grain are like.
Not only is it not sufficient to define "like products " by category, but the grades and varieties of the
grain must also be taken into account in certain circumstances because of their different end-uses and
end-use characteristics. Accordingl y, within each type of grain, there are different "like" products.
Canada notes that it is not arguing that no US grain is like Canadian grain simply because of its
origin. Canada submits that, rather, because Canadian and US grain are not subject to the same
quality assurance system, different treatment of the Canadian and US grain does not amount to less
favourable treatment under Article III:4.
6.163 As noted above by the Panel, pursuant to Article III:4 of the GATT 1994 , the imported
products that are allegedly treated less favourably by a particular governmental measure must be
"like" the domestic products that are said to enjoy better treatment.
6.164 We recall relevant WTO jurisprudence, which supports the view that where a difference in
treatment between domestic and imported products is based exclusively on the products' origin, the
complaining party need not necessarily identify specific domestic and imported products and establish
their likeness in terms of the traditional criteria -- that is, the physical properties, end-uses and

245 United States' reply to Panel question No. 8.

consumers' tastes and habits. Instead, it is suffici ent for the purposes of satisfying the "like product"
requirement, to demonstrate that there can or will be domestic and imported products that are like.
246
6.165 Section 57(c) of the Canada Grain Act provides that foreign grain may not enter Canadian
grain elevators unless authorization is first obtained from the Canada Grain Commission ("CGC").
Thus, by its terms, Section 57(c) only applies to foreign grain.
247 By virtue merely of its origin,
domestic grain is not subject to the authorization requirement of Section 57(c).
6.166 The United States has established to our satis faction that, as a result of the origin-based
distinction contained in Section 57(c), domestic grain that is like foreign grain would not be subject to
Section 57(c).248 Indeed, even domestic grain that is identi cal to foreign grain in all respects except
for origin would not be subject to the authorization requirement contained in Section 57(c).
6.167 Accordingly, the Panel considers that, since dom estic grain that is like foreign grain is not
subject to Section 57(c), the "like products" re quirement in Article III:4 of the GATT 1994 is
satisfied.
(ii) Measure affecting internal distribution and/or transportation
6.168 The United States argues that Section 57(c) of the Canada Grain Act is a law affecting the
distribution and transportation of grain. Accordi ng to the United States, most grain transported
internally in Canada will, at some point, be received and/or stored in a Canadian grain elevator.
6.169 Canada argues that the measures at issue regarding the treatment of imported grain may only
be examined from the perspective of their effect on the internal sale, offering for sale, purchase,
transportation, distribution or use of the imported gr ain. Canada submits that a portion of US grain
that enters the Canadian bulk grain handling system is destined for re-export to third countries. To the
extent that the authorization requirement of Section 57(c) of the Canada Grain Act affects US grain in
transit through Canada, it is outsi de the scope of Article III:4 of the GATT 1994 and of the Panel's
terms of reference.

246 In Argentina – Hides and Leather, in dealing with a claim under Article III:2 of the GATT 1994, the
panel found that where a Member draws an origin-based distinction in respect of internal taxes, a comparison of
specific products is not required and, consequently, it is not necessary to examine th e various likeness criteria.
Panel Report, Argentina – Measures Affecting the Export of Bovine Hides and Import of Finished Leather
("Argentina – Hides and Leather "), WT/DS155/R and Corr.1, adopted 16 February 2001, DSR 2001:V, 2021,
paras. 11.168 – 11.170. While this finding pertained to Article III:2, we consider that the same reasoning is
applicable in this case mutatis mutandis. Further, in US – FSC (Article 21.5 – EC), in considering a claim under
Article III:4, the panel stated that it did not believe that the mere fact that a good had US origin rendered it
"unlike" an imported good. Accordingly, the panel did not consider it necessary to have evidence that any
particular class of imported goods would be accorded less favourable treatment than a class of like products of
national origin. Panel Report, United States – Tax Treatment for "Foreign Sales Corporations", Recourse to
Article 21.5 of the DSU by the European Communities ("US – FSC (Article 21.5 – EC)
 "), WT/DS108/RW,
adopted 29 January 2002, as modified by the Appellate Body Report, WT/DS108/AB/RW, paras. 8.132–8.134.
247 It would appear that foreign grain is also subject to the other provisions of Section 57 that apply
equally to domestic grain, namely Section 57(a), which applies to grain that has not been weighed before or
during receipt into a grain elevator, and Section 57(d), which applies to gr ain that the elevator operator believes
is infested or contaminated. Canada's reply to Panel question No. 103 confirms that at least Section 57(d)
applies to foreign grain.
248 We do not exclude the possibility that there might exceptionally be cases in which differences in
origin might coincide or correlate w ith differences in physical properties, end-uses, and consumers' tastes and
habits as between imported and domestic products so as to render them "unlike" for the purposes of Article III:4
of the GATT 1994. Nevertheless, based on the info rmation on the record, we are not convinced that all foreign
grain is unlike Canadian grain.

6.170 As the Panel recalled previously, Article III: 4 of the GATT 1994 requires that the
governmental measure at issue be a law, regulati on or requirement affecting the internal sale,
purchase, transportation, distribution or use of im ported products. As noted above, the United States
has argued that Section 57(c) of the Canada Grain Act is a law affecting the distribution and
transportation of grain.249
6.171 As to whether Section 57(c) of the Canada Grain Act affects distribution within the meaning
of Article III:4 of the GATT 1994, we note that the GATT 1994 does not contain a definition of
"distribution". The New Shorter Oxford Englis h Dictionary defines "distribution" to mean, inter alia,
"the dispersal of commodities among consumers effected by commerce".
250 We take this to mean that
"distribution" entails, inter alia, the supply of goods to consumers or to on-sellers.
6.172 Canada has described the Canadian bulk grain handling system as a "distribution channel" 251
for grain, another distribution channel being direct sales to domestic end-users. Given that
Section 57(c) of the Canada Grain Act directly affects access to the Canadian bulk grain handling
system, it is clear to the Panel that Section 57(c) is a measure affecting the internal distribution of
foreign grain in Canada.
252 In these circumstances, we do not see the need to determine, in addition,
whether Section 57(c) also affects internal transportation.
6.173 With respect to whether Section 57(c) appli es to foreign grain "imported" into Canada, 253 the
Panel is satisfied that at least some foreign grain is imported into Canada, distributed through the bulk
grain handling system and domestically consumed. 254 The Panel is satisfied, therefore, that
Section 57(c) of the Canada Grain Act can and does apply to goods "i mported" into Canada and,
hence, is subject to the provisions of Article III:4 of the GATT 1994.
(iii) Less favourable treatment
6.174 The United States argues that Section 57(c) of the Canada Grain Act, as such, discriminates
against imported grain. More particularly, the United States argues that Section 57(c) prohibits
receipt of foreign grain, unless special authorization is granted. The criteria used to decide whether to
grant such authorization to foreign grain are not sp ecified. The United States submits that, in contrast,
special authorization, being an extra regulatory burden, is not needed for the entry of Canadian grain
into grain elevators. Therefore, Canadian grain can move in and out of the bulk grain handling system
subject to far less burdensome regulatory requirements than is the case for foreign grain.
6.175 According to the United States, the regulatory prohibition on receipt of foreign grain has a
real and negative impact on the ability of imported US grain to move through the Canadian bulk grain
handling system, thereby affording protection to Ca nadian grain. The United States submits, in
particular, that the default prohibition impedes commercial opportunities for US grain by making it
more costly and burdensome for US grain to move through the bulk grain handling system. The
additional regulatory requirements result in real costs to grain elevators and discourage these elevators
from handling US grain. This, in turn, limits the access that US grain has to the Canadian market.

249 United States' first written submission, para. 91.
250 The New Shorter Oxford English Dictionary, L. Brown (ed.) (Clarendon Press, 1993), Vol. I, p. 709.
251 Canada's first written submission, paras. 19 and 21.
252 Neither party has contested that Section 57(c) is an internal measure within the meaning of
Article III:4 of the GATT 1994.
253 See para. 6.158 above.
254 Canada itself acknowledges that some imported (U S) grain that enters elevators is for domestic
consumption. Canada's first written submission, paras. 190 and 228 and Annex I, p. 6. See also Canada's reply
to Panel question No. 42.

6.176 The United States also argues that there is no e fficient alternative for most grain producers to
the bulk grain handling system since it allows numerous grain farmers to consolidate smaller
quantities of grain at elevators into the large bulk shipments that purchasers demand. According to
the United States, farmers who cannot take adva ntage of the bulk grain handling system face
prohibitive handling and transportation costs. The United States submits that, in addition, the
possibility of alternative distribution channels or exceptional authorizations does not remove the less
favourable treatment of foreign grain since Ar ticle III:4 of the GATT 1994 protects conditions of
competition, not trade flows per se. Accordingly, the fact that US exporters can choose to sell grain
directly to Canadian end-users is irrelevant to the question of whether discrimination is inherent in the
bulk grain handling system.
6.177 Canada argues that Section 57(c) of the Canada Grain Act distinguishes between Canadian
grain and foreign grain but does not mandate less favourable treatment for foreign grain. Canada
submits that Section 57(c) is not a prohibition. Rather, the CGC has the discretion to always
authorize foreign grain to enter elevators.
6.178 Canada also argues that the United States h as not adduced any evidence in support of its
contention that Section 57(c) of the Canada Grain Act in any way affects the conditions of
competition of US grain. Nor has the United States adduced evidence of actual, potential or probable
harm. Canada quotes figures to show that a large quan tity of US grain is imported into Canada and to
argue that, therefore, there is no factual basis for th e claim that US grain is shut out of the Canadian
market and cut off from "normal" distribution channels.
6.179 In addition, Canada argues that Section 57(c) of the Canada Grain Act is an integral part of
the quality system for grain. The key objectives of this system are to ensure that high quality grain is
produced and that the quality of the grain is main tained as it moves through the Canadian bulk grain
handling system. In this way, grain that is de livered meets customers' end-use requirements.
According to Canada, adequate guarantees in the bulk ha ndling system are necessary to preserve the
integrity of the Canadian quality assurance system.
6.180 Canada also submits that US farmers and gr ain companies can and do sell and deliver their
products in large quantities directly to end-users. Less than a third of the grain produced and
consumed in Canada in 2001-02 a nd 2002-03 moved through the elevator system. Accordingly, the
"normal" distribution channel for Canadian grain is di rect sale to end-users. Canada notes that there
are no Section 57 entry authorization requirements in r espect of US grain that is sold directly to end-
users.
6.181 The Panel commences by describing the effect a nd operation of Section 57(c) of the Canada
Grain Act . We understand that the effect of Section 57(c) of the Canada Grain Act is such that
foreign grain may not enter Canadian grain elevator s unless authorization, which is the subject of the
exercise of discretion by the CGC, is first obtained.
255 While Section 57(c) is not explicit in this
regard, Canada has confirmed that the granting of an authorization order by the CGC for receipt of
foreign grain into grain elevators is conti ngent upon a request first being made for such
authorization.256
6.182 Section 57(c) of the Canada Grain Act does not itself dictate the criteria pursuant to which
discretion is exercised by the CGC. Nor does Section 57(c) prescribe the conditions according to

255 We also note the possib ility that regulations to authorize recei pt of grain into Canadian elevators
may be issued pursuant to Section 57(c). However, we are not aware of the existence of any such regulations at
this point in time. Therefore, for the purposes of our analysis, we will not examine this possibility.
256 See, for example, Canada's second oral statement, para. 65; Canada's reply to Panel question
No. 13(a); Canada's first written submission, para. 226.

which receipt of foreign grain may be authorized. It would seem, therefore, that, in principle, receipt
of foreign grain may be authorized unconditionall y. However, it appears that, in practice,
authorization will be made subject to certain conditions in most cases. 257 Indeed, conditions may be
imposed requiring that: (i) foreign grain be kept separate from Canadian grain; 258 (ii) foreign grain be
labelled to indicate its origin; 259 (iii) equipment be cleaned before and after delivery of foreign grain
(such as where foreign grain contains a genetically modified grain not approve d in Canada or where
there is an SPS concern); 260 (iv) the CGC be notified of further movements of the foreign grain; 261
and/or (v) the CGC monitor receipt or discharge of foreign grain.262
6.183 Finally, we note that the receipt authorization orders made under Section 57(c) that were
submitted to the Panel indicate that authorization may: (i) apply to a single shipment of foreign
grain;263 (ii) be granted in advance for an extended period of time; 264 (iii) specifically allow for receipt
of multiple shipments of a particular foreign grain; 265 (iv) apply to various categories of foreign
grain;266 and/or (v) apply to shipments from one267 or a number of regions or States.268
6.184 We now turn to the United States' claim that Section 57(c) of the Canada Grain Act is, as
such, inconsistent with Article III:4 of the GATT 1994 because it treats foreign grain less favourably
than like domestic grain. It is common ground between the parties that, in order to support a finding
that Section 57(c) of the Canada Grain Act , as such, treats imported grain less favourably than like
domestic grain, the relevant requirement containe d in Section 57(c) must adversely affect the
competitive opportunities of imported grain vis-à-vis like domestic grain.269 We agree.270 We note in
this regard that in order to establish that Sec tion 57(c) adversely affects the competitive opportunities
of imported grain vis-à-vis like domestic grain, it is not necessary to demonstrate that Section 57(c)
has produced actual adverse effects on trade. 271 Canada is of the view that since the United States in
this case is challenging Section 57(c), as such, Se ction 57(c) would, under GATT/WTO practice, be
inconsistent with Article III:4 only if it mandated, or required, less favourable treatment of foreign
grain.272 Canada is referring here to the so-called "mandatory/discretionary" distinction which has

257 This is evident from the receipt authorization orders for foreign grain that have been adduced as
evidence in this case. Canada has also confirmed this. Canada's first written submission, footnote 118; Canada's
replies to Panel question Nos. 13(b) and (d). Canada has stated that the legal authority to impose conditions on
the entry of foreign grain into elevators derives from Section 57(c) of the Canada Grain Act . Canada argues
that, in accordance with Canadian principles of statutory interpretation and administrative law, a discretionary
authority to deny entry of foreign grain into elevators includes the authority to permit with conditions the entry
of foreign grain into elevators. Canada's reply to Panel question No. 69.
258 See, for example, Exhibit CDA-48.
259 See, for example, Exhibit CDA-59.
260 See, for example, Exhibit CDA-47.
261 See, for example, Exhibit CDA-48.
262 See, for example, Exhibit CDA-28.
263 See, for example, Exhibit CDA-52.
264 See, for example, Exhibit CDA-30.
265 See, for example, Exhibit CDA-50.
266 See, for example, Exhibit CDA-29.
267 See, for example, Exhibit CDA-51.
268 See, for example, Exhibit CDA-53.
269 United States' first written submission, paras. 92, 96, 100-101; Canada's first written submission,
paras. 208-209.
270 Appellate Body Report, Korea – Various Measures on Beef, supra, para 135.
271 Appellate Body Report, Japan – Taxes on Alcoholic Beverages ("Japan – Alcoholic Beverages II "),
WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R, adopted 1 November 1996, DSR 1996:I, 97, p. 16. This
statement was endorsed by the Appellate Body in Korea – Taxes on Alcoholic Beverages ("Korea – Alcoholic
Beverages"), WT/DS75/AB/R, WT/DS84/AB/R, adopted 17 February 1999, DSR 1999:I, 3, para. 119.
272 Canada's first written submission, paras. 231-237.

been applied by numerous GATT and WTO panels.
273 The United States did not specifically address
this point. We note that the Appellate Body has not, as yet, expressed a view on whether the
mandatory/discretionary distinction is a legally appropriate analytical tool for panels to use. 274 In this
case, our ultimate conclusion with respect to the Un ited States' challenge to Section 57(c) does not
depend on whether or not the mandatory/discretionary distinction is valid. This said, we will continue
on the assumption that Section 57(c) is inconsistent w ith Article III:4 only if it mandates, or requires,
less favourable treatment of imported grain.
6.185 We examine first whether Section 57(c) adve rsely affects the competitive opportunities of
imported grain vis-à-vis like domestic grain. We note that GATT/WTO jurisprudence supports the
view that the imposition of additional, or extra, requirements on imported products as compared to
like domestic products constitutes less favourable treatment. 275 In the present case, Section 57(c) of
the Canada Grain Act , on its face, prohibits receipt of foreign grain unless authorized 276, whereas
domestic grain that is identical to foreign grain in all respects except for origin is not subject to the
authorization requirement contained in Section 57(c). In contrast, neither the Canada Grain Act nor
any other legal instrument that has been brought to the attention of the Panel in these proceedings
contains a requirement applying to domestic grain that is equivale nt to the receipt authorization
requirement that is applicable to like foreign grain pursuant to Section 57(c). 277 Therefore, by
imposing a requirement on foreign grain which is not applicable to like domestic grain, Section 57(c),
on its face, treats imported grain less favourably than like domestic grain. Indeed, the fact that

273 See, for instance, Panel Report, United States – Section 129(c)(1) of the Uruguay Round Agreements
Act ("US – Section 129(c)(1) URAA "), WT/DS221/R, adopted 30 August 2002, para. 6.22; Panel Report,
United States – Anti-Dumping Act of 1916 – Complaint by the European Communities ("US – 1916 Act (EC) "),
WT/DS136/R and Corr.1, adopted 26 September 2000, as upheld by the Appellate Body Report,
WT/DS136/AB/R, WT/DS162/AB/R, DSR 2000:X, 4593, para. 6.84; Panel Report, United States – Measures
Affecting Alcoholic and Malt Beverages (" US – Malt Beverages "), adopted 19 June 1992, BISD 39S/206,
para. 5.39; Panel Report, Thailand – Restrictions on Importation of and Internal Taxes on Cigarettes ("Thailand
– Cigarettes "), adopted 7 November 1990, BISD 37S/200, para. 84; Panel Report, United States – Measures
Affecting the Importation, Internal Sale and Use of Tobacco (" US – Tobacco "), adopted 4 October 1994,
BISD 41S/I/131, para. 118.
274 Appellate Body Report, United States – Sunset Review of Anti-Dumping Duties on Corrosion-
Resistant Carbon Steel Flat Products from Japan ("US – Corrosion-Resistant Steel Sunset Review "),
275 The Appellate Body concluded in para. 268 of its Report in United States – Section 211 Omnibus
Appropriations Act of 1998 ("US – Section 211 Appropriations Act "), WT/DS176/AB/R, adopted
1 February 2002, that the provision in question imposed an additional obstacl e on foreign successors-in-interest
that was not faced by US successors-in-interest. The Appellate Body found that, by applying the "extra hurdle"
imposed by that provision only to non-US successors-in-interest, the United States had violated the national
treatment obligation contained in Article 2(1) of the Paris Convention (1967) and Article 3.1 of the TRIPS
Agreement. We recognize that this reasoning was based on the national treatment obligation contained in the
TRIPS Agreement. However, we consider that the Appellate Body's logic is equally applicable when applied in
the context of the provisions of Article III:4 of the GATT 1994. Indeed, we note that the panel in US – Malt
Beverages followed a very similar logic when it found that it was inconsistent with the United States'
obligations under Article III:4 for the United States to require that only imported beer use an "additional level of
distribution", namely, the wholesale leve l. More specifically, the panel found that "the requirement that beer
imported into the United States be distributed through in-state wholesalers or other middlemen, when no such
obligation to distribute through wholesalers exists with respect to in-state like domestic products, results in
'treatment ... less favourable than that accorded to like domestic products' from domestic producers, inconsistent
with Article III:4'". Panel Report, US – Malt Beverages, supra, paras. 5.32 and 5.35.
276 While Canada has stated that Section 57(c) shou ld not be characterized as a prohibition on the
receipt of foreign grain unless author ized, one of the CGC authorization orders that has been adduced as
evidence in this case refers to Section 57(c) in these terms. Exhibit CDA-29.
277 As noted above in footnote 247, Section 57 does require authorization for foreign and domestic
grain alike in a number of other cases. However, in none of these cases is the origin of the grain relevant.

imported grain may not be received into an elevator without prior authorization, denies imported grain
competitive opportunities that are available to like domestic grain.278
6.186 In relation to the second requirement referred to above, namely, that Section 57(c) must
mandate, or require, less favourable treatment, it is clear that Section 57(c) prohibits the receipt of
foreign grain unless authorized. While the CGC a ppears to have discretion to authorize such
receipt
279, the exercise of this discretion would not allo w Canada to avoid treating imported grain less
favourably because, regardless of the manner in wh ich the discretion is exercised, a request for
authorization to receive imported grain into elevators would still need to be made.280
6.187 On the basis of the foregoing, it would appear that Section 57(c) of the Canada Grain Act is,
as such, inconsistent with Article III:4 of th e GATT 1994 because imported grain is treated less
favourably than like domestic grain. However, Ca nada has raised a number of defences to suggest
that the additional regulatory requirement imposed on imported grain pursuant to Section 57(c) of the
Canada Grain Act does not impose any burden on imported grain or, at least, does not impose a
burden that is not also borne by like domestic grain. We consider those defences below.
Section 57 does not affect the conditions of competition between domestic grain and imported grain
6.188 Canada argues that Section 57(c) of the Canada Grain Act does not adversely affect the
conditions of competition for imported grain as co mpared with like domestic grain. More
particularly, Canada argues that the authorization process is not onerous; that elevator operators are
very familiar with the process; that authorizati ons are consistently granted; that the CGC has
discretion to always authorize receipt of foreign grain; and that advance authorization may be
obtained. We deal with each of these arguments below.
The authorization process is routine and not onerous
6.189 Canada argues that the receipt authorization process associated with Section 57(c) of the
Canada Grain Act is not onerous. In particular, Canada submits that the process to obtain receipt
authorization is routine; there is no form to fill out in order to obtain authorization; and there is no
direct cost associated with making authorization requests.
6.190 With respect to these arguments, the Panel recalls its view that less favourable treatment in
this case results from the imposition of an additi onal requirement on imported grain that does not
apply to domestic grain -- namely, the requirement that authorization be s ought and granted before
imported grain can be received into Canadian elevat ors. That the requirement in question may not be
very onerous in commercial and/or practical terms does not, in our view, detract from the fact that it is
an additional requirement not imposed on like domestic grain.
281

278 This may be illustrated by the hypothetical case where an elevator operator is forced to make a
choice between receiving foreign grain and domestic grain that is identical to foreign grain in all respects except
for origin, for example, during a period in which the elevator has almost reached its capacity. It would seem
that, in such a case, the elevator operator would prefer receiving domestic grain, as such grain would not require
him to seek and obtain prior authorization, would not expose him to the risk of a denial of entry authorization,
and would not require him to comply with any of the conditions that might be attached to the authorization of
the receipt of foreign grain.
279 See, for example, Canada's first written submission, para. 237.
280 We will return to this point at paras. 6.199 and 6.202 below.
281 Neither the text of Article III:4 of the GATT 1994 nor GATT/WTO jurisprudence indicates that
there is a de minimis exception to the "no less favourable treatment" standard in Article III:4 and Canada has not
argued that Article III:4 contains such an exception .

6.191 In any event, it is clear from Canada's descripti on of how Section 57(c) is being applied that
Section 57(c) does impose a burden on elevator operators that adversely affects the competitive
conditions for imported grain as compared with like dom estic grain. In particular, elevator operators
would need to make a written request to the CGC for authorization.
282 While, apparently, no form
must be filled in to obtain authorization, it is, neve rtheless, necessary to send a letter (faxed or posted)
or an e-mail or to make a telephone call to be followed up in writing before authorization can be
granted.283 In making such a request, certain information must be provided to the CGC, including
regarding the type of grain, quality of the grain, origin and destination and volume of the grain as well
as the anticipated date of receipt.284 Such information must be collected before it can be provided.
6.192 It should also be noted that the evidence that has been adduced in this case indicates that
authorization is not always granted in as routine a manner as Canada suggests. Indeed, in the case of
a couple of the authorization orders that have b een referred to, delays of up to 10 days existed
between the date of request and the date on which authorization was granted.285
6.193 In light of the above, we do not consider that the less favourable treatment of imported grain
as compared to like domestic grain that results from Section 57(c) of the Canada Grain Act is
removed by virtue of the fact that the authorization process may be routine and not very onerous.
The authorization process is familiar to elevator operators
6.194 Canada has argued that elevator operators know th at they will be able to receive foreign
grain, they know how the authorization process work s and they know what the relevant requirements
are.
6.195 The United States has alleged that the criteria according to which the discretion to grant
authorization is exercised are unclear.
6.196 As noted by the Panel above, Section 57(c), on its face, does not refer to the criteria
according to which the receipt of foreign grain is authorized. Therefore, even if elevator operators are
familiar with the authorization process, the outcome of the process is subject to uncertainties, in the
sense that it may not be clear how long the CGC will ta ke to deal with a request, and in the sense that
authorization may be denied286 or granted subject to conditions.
6.197 Therefore, the Panel does not consider that the less favourable treatment of imported grain as
compared to like domestic grain that results from Section 57(c) of the Canada Grain Act is removed
by virtue of the fact that elevator operators may be familiar with the authorization process.
Authorization has been consistently granted
6.198 Canada argues that receipt authorization under Section 57(c) has been consistently granted.
Canada has asserted, and the United States has not refu ted, that no request for authorization of receipt
of foreign grain has ever been denied.
6.199 In the Panel's view, the fact that the CGC has in the past always granted authorization for
receipt of foreign grain does not, in itself, imply that it will continue to do so in the future, particularly

282 See, for example, Canada's second oral statement, para. 65; Canada's reply to Panel question
No. 13(a); Canada's first written submission, para. 226.
283 Canada's reply to Panel question No. 13(a).
284 Canada's second written submission, para. 93.
285 Exhibit CDA-49 and Exhibit CDA-59.
286 Canada has confirmed that authorization for recei pt of foreign grain may be denied. Canada's
replies to Panel question Nos. 13(b) and 69; Canada's first oral statement, para. 58.

given that the criteria according to which authorizati on is granted are not specified in Section 57(c) of
the Canada Grain Act. Moreover, Canada has not argued that th e CGC, by virtue of its past practice,
would no longer be entitled to deny authorization for receipt. To the contrary, Canada has stated that
a request for authorization would, in some circumstances, be denied. 287 In any event, even if it were
the case that authorization is consistently granted, elevator operators would still need to make and
substantiate a request for authorization for receipt of foreign grain. 288 This additional requirement, to
which domestic grain is not subject, results in less favourable treatment for imported grain.
6.200 Therefore, the Panel does not consider that the less favourable treatment of imported grain as
compared to like domestic grain that results from Section 57(c) of the Canada Grain Act is removed
merely because authorization under that section may have been consistently granted.
The CGC has discretion to always authorize receipt of foreign grain
6.201 Canada also argues that the CGC has discretion to always authorize receipt of foreign grain.
6.202 In the Panel's view, if the CGC were to grant unconditional advance authorization for all
imported grain, this might minimize the adve rse effects on competitive opportunities as between
imported and like domestic grain. However, ther e would still be a need to make a request for
authorization.289 As already noted above, the requirement to make a request for authorization is an
additional requirement that is imposed exclusiv ely on imported grain and amounts to less favourable
treatment.290
6.203 Therefore, the Panel does not consider that the less favourable treatment of imported grain as
compared to like domestic grain that results from Section 57(c) of the Canada Grain Act is removed
by virtue of the fact that the CGC has discretion to always authorize receipt of foreign grain.
There is a possibility to obtain advance authorization
6.204 Canada has noted that under Section 57(c), it has the authority to grant advance
authorization. Canada has specifically pointed to three different examples of such advance
authorization. The first is that available under the so-called Wheat Access Facilitation Programme
("WAFP").291 The second relates to the receipt of US grain into transfer elevators on an annual
basis.292 The third relates to authorizations grante d to cover several shipments or an entire crop
year.293
6.205 As an initial matter, the Panel notes that the United States has challenged Section 57(c) of the
Canada Grain Act , as such. Accordingly, we are not bein g requested to assess the consistency with

287 Canada's reply to Panel question No. 13(b).
288 See para. 6.181 above.
289 Nothing in the text of Section 57(c) suggests, and Canada has not argued, that the CGC has
discretion to not require some form of initial authorization.
290 We note that the panel in US – Malt Beverages found that certain measures that mandated less
favourable treatment of imported products were inconsistent with Article III:4, even though they were not being
applied or enforced. Panel Report, US – Malt Beverages , supra, paras. 5.39 and 5.57. We believe that, a
fortiori, under the reasoning followed in US – Malt Beverages , the CGC could not avoid an inconsistency with
Article III:4 merely by minimizing the effects of the less favourable treatment required by Section 57(c).
291 Canada has indicated that the WAFP is an exampl e of advance authorization under Section 57(c).
Canada's reply to Panel question No. 72. It appears that advance authorization under the WAFP was granted as a
result of a bilateral agreement between the Governments of Canada and the United States. Exhibit CDA-27.
292 Canada's first written submission, paras. 228 -229. Two examples of such requests and
authorizations are contained in Exhibit CDA-59.
293 Canada's second written submission, para. 94. For an example, see Exhibit CDA-50.

Article III:4 of the GATT 1994 of the examples of a dvance authorization under Section 57(c) that
have been referred to by Canada.
294
6.206 Nevertheless, these examples are evidence that the CGC has discretion to grant advance
authorisation for the receipt of foreign grain. In this regard, irrespective of the possibility that these
types of advance authorization may diminish the burden imposed upon elevator operators pursuant to
Section 57(c) insofar as they might reduce the frequency with which a request for authorization would
need to be made, a request would sti ll need to be made, at least initially. 295 As noted above, the
requirement to make a request for authorization is an additional requirement that is imposed on
imported grain and amounts to less favourable treatment, even if a request need only be made
infrequently.
6.207 Therefore, the Panel does not consider that the less favourable treatment of imported grain as
compared to like domestic grain that results from Section 57(c) of the Canada Grain Act is removed
by the possibility to obtain advance authorization under that section.
Different treatment does not imply less favourable treatment

6.208 As noted above, unlike in the case of foreign grain, authorization for the receipt of like
domestic grain is not require d under Section 57(c) of the Canada Grain Act by virtue of its origin
alone. Canada does not point to another provision that contains the same requirement for domestic
grain in arguing that less favourable treatment within the meaning of Article III:4 of the GATT 1994
does not exist.
 Rather, Canada identifies other requirement s, which, Canada argues, mean that the
treatment of imported grain is no less favourable than the treatment accorded to like domestic grain.
In support of its argument, Canada points to the Appellate Body Report on Korea – Various Measures
on Beef which states, in relevant part, that "[a] me asure that provides treatment to imported products
that is different from that accorded to like domestic produc ts is not necessarily inconsistent with
Article III:4, as long as the treatment provided by the measure is 'no less favourable'".
296 Regarding
these other requirements, Canada essentially argues that the existence of Canada's national quality
assurance system, comprising variety registration re quirements and grain grading, to which domestic
grain but not foreign grain is subject, renders it unnecessary to impose an entry authorization
requirement on Canadian grain.
6.209 The Panel notes that, in the present case, there may be legitimate reasons for Canada to treat
domestic grain and like imported grain differently, for example, because the latter has not been
subjected to the Canadian quality assurance system, which imposes certain restrictions and conditions
on Canadian grain, including with respect to production.
297 However, as the Appellate Body found in

294 We note that Canada argues that to the extent the United States' claim is that Section 57(c), as such,
is inconsistent with Article III:4, the WAFP is not re levant as it is non-mandatory and is only an example of
how the authority under Section 57(c) of the Canada Grain Act has been implemented. Canada's reply to Panel
question No. 72. The United States confirmed that it did not refer to the WAFP as a separate challenged
measure, but, rather, as an example of the CGC's regula tory requirements. United States' comments on Canada's
reply to Panel question No. 72. In any event, with resp ect to the WAFP, the scope for advance authorization is
rather limited. In particular, advance authorization is only applicable to US wheat and only for receipt into
Western Canadian primary elevators. Exhibit CDA-27; Canada's reply to Panel question No. 62.
295 We note that in the case of the WAFP, it was the US Government that obtained advance
authorization on behalf of its wheat exporters for receipt of wheat into primary elevators.
296 Appellate Body Report, Korea – Various Measures on Beef, supra, paras. 135-137.
297 Canada's reply to Panel question No. 15.

Korea - Various Measures on Beef, different treatment as betw een imported products and like
domestic products must not result in the imported products being treated less favourably.298
6.210 It is not clear to us how the arguments put forward by Canada to justify the difference in
treatment between domestic grain and like im ported grain support the conclusion that the
authorization requirement contained in Section 57(c) treats imported grain no less favourably than like
domestic grain. As we have stated previously, the authorization requirement imposed upon foreign
grain pursuant to Section 57(c) of the Canada Grain Act is an additional requirement that is not
imposed on like domestic grain. Therefore, we consider that the difference in treatment between
imported grain and like domestic grain resulting from Section 57(c) leads to imported grain being
treated less favourably than like domestic grain.
An alternative, commercially more attractive distribution channel is open to US exporters

6.211 Canada argues that US grain producers can and do sell their grain directly to end-users in
Canada. Canada has also submitted that direct sale to end-users is a less costly alternative than going
through Canadian elevators.
6.212 The United States, on the other hand, has suggested that the direct sale to end-users entails
prohibitive handling and transportation costs. In addition, the United States has argued that the bulk
grain handling system is the only viable option for sale to consumers that have significant demand
because such demand can only be satisfied by combining various lots of grain.
6.213 The Panel need not determine in this case whether or not direct sale to end-users represents
an alternative, commercially more attractive distri bution channel that is open to the United States and
other Members exporting grain to Canada. Even if this were the case, the fact that many foreign grain
producers might prefer to sell directly to Cana dian end-users would not alter the fact that
Section 57(c) of the Canada Grain Act treats imported grain less favourably than like domestic grain
in respect of receipt into Canadian grain elevators.
299
Conclusion
6.214 In conclusion, since the Panel is not persuade d by the defences put forward by Canada to
suggest that the additional regulatory requir ement imposed on imported grain pursuant to
Section 57(c) of the Canada Grain Act does not impose any burden on imported grain or, at least,
does not impose a burden that is not also borne by like domestic grain, the Panel confirms its
provisional conclusion above at paragra ph 6.187 that Section 57(c) of the Canada Grain Act is, as
such, inconsistent with Article III:4 of the GATT 1994.
(iv) Defence under Article XX(d) of the GATT 1994
6.215 Canada has sought to justify Section 57(c) of the Canada Grain Act under Article XX(d) of
the GATT 1994. Article XX(d) provides:
"Subject to the requirement that such me asures are not applied in a manner which
would constitute a means of arbitrary or unjustifiable discrimination between
countries where the same conditions prev ail, or a disguised restriction on

298 Appellate Body Report, Korea – Various Measures on Beef , supra, paras. 135 – 137. We note,
however, that less favourable treatment of imported grain may be justifiable under the general exceptions set out
in Article XX of the GATT 1994. Indeed, Canada in this case has invoked Article XX. We address Canada's
Article XX defence below at paras. 6.215- 6.252.
299 See Panel Report, US – Malt Beverages, supra, para. 5.31.

international trade, nothing in this Agre ement shall be construed to prevent the
adoption or enforcement by any contracting party of measures:
 […]
 (d) necessary to secure compliance with laws or regulations which are not
inconsistent with the provisions of this Agreement, including those relating to
customs enforcement, the enforcement of monopolies operated under paragraph 4 of
Article II and Article XVII, the protection of patents, trade marks and copyrights, and
the prevention of deceptive practices."
6.216 Consistent with the Appellate Body's guidance in US - Gasoline
300 and Korea – Various
Measures on Beef , 301 we note that a measure found to be inconsistent with one or several of the
substantive obligations of the GATT 1994 must be subj ected to a two-tiered analysis in order for it to
be justified under Article XX. Specifically, that measure must:
(a) fall within the scope of one of the recognized exceptions set out in paragraphs (a) to
(j) of Article XX in order to enjoy provisional justification; and
(b) meet the requirements of the introductory provisions of Article XX, the so-called
chapeau.
6.217 Accordingly, we will first examine whether Section 57(c) of the Canada Grain Act is
provisionally justified -- that is whether it falls within the terms of paragraph (d) of Article XX. In the
event that it does, we will then proceed to an analysis of the measure under the chapeau of
Article XX.
6.218 In determining whether Section 57(c) is provisi onally justified under Article XX(d), we note
that the text of Article XX(d) requires Canada to demonstrate three elements, namely:
(a) the measure for which justification is cl aimed must secure compliance with other
laws or regulations;
(b) those other laws or regulations must not be inconsistent with the provisions of the
GATT 1994; and
(c) the measure for which justification is claimed must be necessary to secure
compliance with those other laws or regulations.302
6.219 We commence our analysis with a consideration of whether requirement (c) has been fulfilled
on the provisional assumption that requirements (a) and (b) are met.
Necessity of the measures taken to secure compliance
6.220 Canada argues that Section 57(c) of the Canada Grain Act is necessary to secure compliance
with grading requirements contained in Sections 32, 61 and 70 of the Canada Grain Act and
Schedule III of the Canada Grain Regulations . Canada also argues that Section 57(c) of the Canada
Grain Act is necessary to secure compliance with Section 52 of the Competition Act by ensuring that

300 See Appellate Body Report, United States – Standards for Reformulated and Conventional Gasoline
("US – Gasoline"), WT/DS2/AB/R, adopted 20 May 1996, DSR 1996:I, 3, p. 22.
301 See Appellate Body Report, Korea – Various Measures on Beef, supra, para. 156.
302 The Appellate Body in Korea – Various Measures on Beef dealt with elements (a) and (b) as a
single element. Appellate Body Report, Korea – Various Measures on Beef, supra, para. 157.

foreign grain is not misrepresented as Canadian grai n in Canada and in third countries. In addition,
Canada argues that Section 57(c) of the Canada Grain Act is necessary to secure compliance with
Sections 5, 7(1), 24, 32 and 45 of the CWB Act and Section 16 of the CWB Regulations . Canada
submits that Section 57(c) is designed to secure a "very high level of compliance" with the relevant
provisions of the Canada Grain Act , the Canada Grain Regulations , the Competition Act, the CWB
Act and the CWB Regulations.
6.221 The United States argues that Section 57(c) of the Canada Grain Act , which amounts to a
wholesale prohibition on the entry of foreign grain into grain elevators, is not necessary to secure
compliance with the grading provisions of the Canada Grain Act and Regulations The United States
also argues that Canada has failed to demons trate how Section 57(c) is necessary to secure
compliance with Section 52 of the Competition Act. Regarding compliance with the CWB Act and
CWB Regulations, the United States submits that Canada h as other measures in place to ensure that
the CWB only markets Western Canadian grain and barley.
6.222 The Panel notes that the Appellate Body in Korea – Various Measures on Beef articulated a
"weighing and balancing" test as the basis for ma king a determination as to whether a measure is
"necessary" within the meaning of Article XX(d) of the GATT 1994. In particular, the Appellate
Body stated that a determination of whether a measure is necessary within the meaning of
Article XX(d) of the GATT 1994:
"[I]nvolves in every case a process of weighing and balancing a series of factors
which prominently include the contributi on made by the compliance measure to the
enforcement of the law or regulation at i ssue, the importance of the common interests
or values protected by that law or regulation, and the accompanying impact of the law
or regulation on imports or exports.
The panel in United States – Section 337 described the applicable standard for
evaluating whether a measure is "necessary" under Article XX(d) in the following
terms:
'It was clear to the Panel that a contracting party cannot justify a
measure inconsistent with another GATT provision as "necessary"
in terms of Article XX(d) if an alternative measure which it could
reasonably be expected to employ and which is not inconsistent
with other GATT provisions is available to it. By the same token,
in cases where a measure consistent with other GATT provisions is
not reasonably available, a contracting party is bound to use,
among the measures reasonably available to it, that which entails
the least degree of inconsistency with other GATT provisions.'
 303
The standard described by the panel in United States – Section 337 encapsulates the
general considerations we ha ve adverted to above. In our view, the weighing and
balancing process we have outlined is comp rehended in the determination of whether
a WTO-consistent alternative measur e which the Member concerned could
'reasonably be expected to employ' is ava ilable, or whether a less WTO-inconsistent
measure is 'reasonably available'".304
6.223 In applying the "weighing and balanci ng" test, the Appellate Body in Korea – Various
Measures on Beef and, subsequently, in EC Asbestos considered the importance of the value or

303(original footnote) Panel report, United States – Section 337, supra, footnote 69, para. 5.26.
304 Appellate Body Report, Korea – Various Measures on Beef, supra, paras. 164 - 166.

interest pursued by the laws with which the cha llenged measure sought to secure compliance, whether
the objective pursued by the challenged measure contri buted to the end that was sought to be realized
and whether a reasonably available alternative measure existed.
305 We apply the same approach here
in determining whether Section 57(c) of the Canada Grain Act is "necessary" for the purposes of
Article XX(d) of the GATT 1994.
6.224 With respect to the importance of the inte rests or values that the statutory and other
provisions with which, according to Canada, Section 57(c) secures compliance are intended to protect,
Canada has indicated that those obj ectives are to ensure the quality of Canadian grain, maintain the
integrity of the Canadian grading system, protect consumers against misrepresentation and preserve
and enforce the CWB monopoly.306 In other words, the relevant provisions are said to essentially help
maintain the integrity of Canada 's grading and quality assurance system and of the CWB's exclusive
right to sell Western Canadian grain for domestic sale or export and, thereby, to preserve the
reputation of Canadian grain notably in export markets.307 It is clear that these interests, which appear
to be essentially commercial in nature, are importa nt. It seems equally clear, however, that these
interests are not as important as, for instance, the protection of human life and health against a life-
threatening health risk, an inter est which the Appellate Body in EC – Asbestos characterized as "vital
and important in the highest degree." 308
6.225 Canada asserts that Section 57(c) of the Canada Grain Act contributes to ensuring that
Canadian grades are not inadvertently and inappropriat ely given to non-Canadian grain, that there is
no misrepresentation as to origin and as to end-use ch aracteristics of the grain, and that the identity of
foreign grain can be properly established and ma intained in the bulk grain handling system. 309 In our
view, Section 57(c) can be said to make some contribution to ensuring that foreign grain is not
inadvertently confused with Canadian grain, at least in cases where receipt authorisation granted
under Section 57(c) is made subject to the conditions that foreign grain be kept separate and that
foreign grain be labelled as such. Nevertheless, it must be noted that Section 57(c) is only an
instrument to achieve the preservation of the ident ity of foreign grain so that such grain is not
inadvertently confused with Canadian grain.
6.226 Therefore, the question remains as to whether there is an alternative measure to Section 57(c)
that is reasonably available. The Appellate Body has indicated that relevant factors for determining
whether an alternative measure is "reasonably availa ble" are: (i) the extent to which the alternative

305 Appellate Body Report, Korea – Various Measures on Beef , supra, para. 178; Appellate Body
Report, European Communities – Measures Affecting Asbestos and Asbestos -Containing Products ("EC –
Asbestos"), WT/DS135/AB/R, adopted 5 April 2001, para. 172.
306 See Canada's second written submission, paras. 111, 113, 121 – 125; Canada's reply to Panel
question No. 80.
307 See Canada's replies to question Nos. 63, 81, 102; Canada's first written submission, para. 186.
308 Appellate Body Report, EC – Asbestos, supra, para. 172.
309 See Canada's first written submission, para. 224; Canada's reply to Panel question No. 80. We note
that Canada has also argued that the authorization requirement in Section 57(c) is necessary to address situations
such as where there is an SPS concern or a concern regarding an unapproved genetically modified organism in
shipments of grain. However, as noted below in para. 6.247, Canada has not argued that any of the provisions
of the Canada Grain Act and Regulations, Competition Act and CWB Act and Regulations, which Canada has
identified and says Section 57(c) secures compliance with, require Canada to control for SPS or GMO concerns.
Indeed, Canada has not demonstrated any link between the SPS and GMO concerns it refers to and the various
provisions of the aforementioned Canadian laws and regulations to which it has pointed. Therefore, we do not
consider that Canada's SPS and GMO concerns are releva nt in the determination of whether Section 57(c) is
"necessary" to secure compliance with the laws to which Canada has referred, namely, the Canada Grain Act
and Regulations, the Competition Act and the CWB Act and Regulations. Accordingly, we do not consider those
concerns here. However, we will address these points at paras. 6.245 - 6.249 below.

measure "contributes to the realization of the end pursued" 310; (ii) the difficulty of implementation 311;
and (iii) the trade impact of the alternative measu re compared to that of the measure for which
justification is claimed under Article XX312.313 The Appellate Body has also stated that, in addition to
being "reasonably available", the alternative measure must also achieve the level of compliance
sought.314 In this regard, the Appellate Body has re cognized that "Members of the WTO have the
right to determine for themselves the level of enforcement of their WTO-consistent laws and
regulations."315
6.227 With these considerations in mind, we will now proceed to determine whether Canada has
established that no alternative measure is reasonabl y available at present to secure compliance with
the laws and regulations that have been identif ied by Canada, taking into account the level of
compliance that Canada has stated it seeks to achie ve with respect to those laws and regulations,
namely a "very high level of compliance".
The provisions of the Canada Grain Act and Regulations
6.228 Canada has indicated that an end that is sought to be furthered through Section 57(c) of the
Canada Grain Act is to ensure that Canadian grades are not inadvertently and inappropriately given to
non-Canadian grain contrary to Sections 32, 61 and 70 of the Canada Grain Act and Schedule III of
the Regulations and that there is no misrepresentation as to origin and as to end-use characteristics of
the grain.
6.229 The Panel is not persuaded that Section 57(c), as it is, is necessary to secure compliance with
the grading provisions of the Canada Grain Act and Regulations. In particular, Canada has not
convinced us that it is necessary for it to maintain an authorization requirement for the receipt of
foreign grain. It is not clear to us why Canada could not, for example, allow foreign grain to be
received into elevators without a need for prio r CGC authorization but subject to the general
requirement that foreign grain be kept separate fro m domestic grain and with the possibility that the
CGC may grant an exemption from the segregation requirement upon request. 316 Indeed, when we
asked Canada whether there was any reason why such an alternative measure would not secure
compliance with the various laws and regulations poi nted to by Canada in justifying Section 57(c)
under Article XX(d), Canada offered none.317
6.230 We consider that a measure such as th e above-mentioned alternative measure would
contribute to ensuring compliance with the relevant provisions of the Canada Grain Act and
Regulations. In particular, the alternative arrangement would seem to ensure that Canadian grades
are not inadvertently and inappropriately given to non-Canadian grain and that misrepresentation as to

310 Appellate Body Report, EC – Asbestos, supra, para. 172.
311 Appellate Body Report, EC – Asbestos, supra, paras. 169 and 170. We believe that this factor calls
for an inquiry, inter alia , into whether implementing an altern ative measure would be unreasonably
burdensome, for instance in financial, technical and/or administrative/practical terms.
312 Appellate Body Report, EC – Asbestos, supra, para. 172.
313 The Appellate Body in Korea – Various Measures on Beef indicated that the alternative measure
may be WTO-consistent or less WTO-inconsistent if a WTO- consistent alternative is not reasonably available.
Appellate Body Report, Korea – Various Measures on Beef, supra, para. 166.
314 Appellate Body Reports, Korea – Various Measures on Beef , supra, paras. 178 and 180; EC –
Asbestos, supra, para. 174.
315 Appellate Body Report, Korea – Various Measures on Beef, supra, para. 176.
316 We put forward this alternative in Panel question No. 81.
317 Canada did offer reasons as to why the alternative measure referred to by us would not be sufficient
to address certain SPS and GMO concer ns. However, these reasons did not relate to the provisions of the
Canada Grain Act or any of the other laws relied on by Canada. Nevertheless, we will discuss these reasons
below.

origin and as to end-use characteristics of the grain is avoided because foreign grain would always
have to be kept separate from domestic grain, unless an exemption is granted by the CGC.
6.231 Regarding the difficulty of implementing the alte rnative measure and its effects on trade, we
note that Canada has indicated that, as a matter of practice under Section 57(c) , if there is no request
for mixing from the elevator operators, the entry au thorization requirement includes a condition that
foreign grain be kept separate.
318 This indicates to us that a general segregation requirement would
not pose significant implementation difficulties and would not be more trade restrictive than
Section 57(c) since this is what happens in practice under that provision.
319 Similarly, it seems that it
would not be very difficult to implement an a rrangement whereby the CGC could grant exemption
from the segregation requirement upon request since, in practice, such an arrangement would work in
a similar if not identical way to the authorization procedure that currently exists under Section 57(c)
of the Act.320
6.232 As to whether the above-noted alternative measure would achieve a "very high level of
compliance" with the relevant provisions of the Canada Grain Act and Regulations, we note, again,
that Canada did not suggest, in response to our question, that it would not. It seems to us that the
level of compliance that would be secured if su ch a measure were adopted would be as high as the
compliance level that is achieved under Section 57(c) . Indeed, in the absence of the imposition of a
condition that foreign grain be kept separate an d that foreign grain be labelled as such, the
Section 57(c) authorization requirement in itself does not appear to contribute to a great extent to the
aim of avoiding that Canadian grades are inadvert ently and inappropriately given to non-Canadian
grain and that origin and end-use characteristics of the grain are misrepresented.
Section 52 of the Competition Act
6.233 Canada has also indicated that an end that is s ought to be furthered through Section 57(c) of
the Canada Grain Act is to ensure that foreign grain maintains its identity in the bulk handling system
so that there is no misrepresentation as to origin and misleading representations with respect to end-
use characteristics of the grain contrary to Section 52 of the Competition Act.321
6.234 The Panel is not convinced that Section 57(c), as it is, is necessary to secure compliance with
Section 52 of the Competition Act . Here again, it is not clear to us why Canada could not secure
compliance with Section 52 of the Competition Act , by following, for example, the alternative
approach put forward by the Panel and referred to in paragraph 6.229 above. In the Panel's view, the
alternative measure would contribute to ensuring th at there is no misrepresentation as to origin and
misleading representation with respect to end-use characteristics of grain contrary to Section 52 of the
Competition Act because foreign grain would always be kept separate from domestic grain, unless an
exemption is granted by the CGC. Regarding the difficulty associated with implementing the
alternative measure and its effect on trade, our considerations at para graph 6.231 are equally
applicable here.
6.235 Further, it would seem to us that a requirement that foreign grain be kept separate from
domestic grain would ensure as high a level of compliance with Section 52 of the Competition Act as
is the case under Section 57(c) of the Canada Grain Act. We reiterate that we are not convinced that

318 Canada's reply to Panel question No. 71.
319 It should also be recalled that the alternative measure referred to by the Panel by way of example
could allow exemptions from the segregation requirement upon request.
320 Moreover, in our view, the alternative measure would, at a minimum, be less WTO-inconsistent
than Section 57(c). We recall in this regard that th e alternative measure would, in effect, be similar to
Section 57(c) but would not subject foreign grain to an a dditional regulatory hurdle that is not applicable to
domestic grain.
321 Canada's reply to Panel question No. 80.

in the absence of the imposition of a condition that foreign grain be kept separate and that foreign
grain be labelled as such, the Section 57(c) authori zation requirement in itself contributes to a great
extent to the aim of avoiding misrepresentation as to origin and misleading representations with
respect to end-use characteristics of the grain.
Provisions of the CWB Act and Regulations
6.236 Canada has argued that Sections 5, 7(1), 24, 32 and 45 of the CWB Act and Section 16 of the
CWB Regulations collectively set out the CWB's sole aut hority to market all wheat and barley
produced in the "designated area" that is sold eith er for export or for domestic human consumption.
Canada submits that, in respect of wheat and barley, Section 57(c) of the Canada Grain Act ensures
that foreign grain maintains its identity so as to en sure, in turn, that the CWB's exclusive jurisdiction
over the export of CWB grain is neither erode d nor inadvertently extended contrary to the CWB Act.
According to Canada, it does so by enabling grain with respect to which the CWB has no exclusive
marketing mandate, to be kept separate from the gr ain that the CWB has been established to market,
namely wheat and barley.
6.237 The Panel notes that Canada has essentially argued that without Section 57(c) of the Canada
Grain Act , the CWB would not be able to distinguish foreign wheat and barley from Western
Canadian wheat and barley, thereby compromisi ng the CWB's ability to enforce its single desk
authority for Western Canadian wheat and barley. In light of this, we consider that, in essence,
Canada has relied on the CWB Act and Regulations to justify Section 57(c) of the Canada Grain Act
on the basis that, in the absence of Section 57(c), th e identity of foreign grain could not be properly
established and maintained in the bulk grain handling system.
6.238 The Panel is not convinced that Section 57(c), as it is, is necessary to secure compliance with
the provisions of the CWB Act and Regulations identified by Canada. Again, it is not clear to us why
Canada could not secure compliance with these provisi ons by following, for example, the alternative
approach put forward by the Panel and referred to in paragraph 6.229 above. In the Panel's view, the
alternative measure would contribute to ensuring th at the CWB could distinguish foreign wheat and
barley from Western Canadian wheat and barley, because foreign grain would always be kept separate
from domestic grain, unless an exemption is grante d by the CGC. With respect to the difficulty
associated with implementing the alternative measure and its effect on trade, our considerations at
paragraph 6.231 are equally applicable here.
6.239 Additionally, it would seem to us that a require ment that foreign grain be kept separate from
domestic grain would ensure as high a level of compliance with the provisions of the CWB Act and
Regulations as is the case under Section 57(c) of the Canada Grain Act. We reiterate that we are not
convinced that in the absence of the imposition of a condition that foreign grain be kept separate and
that foreign grain be labelled as such, the Section 57( c) authorization requirement in itself contributes
to a great extent to the aim of ensuring the identity of foreign grain can be properly established and
maintained in the bulk grain handling system.
6.240 In any event, we note that the
CWB Act and Regulations would not provide a justification for
Section 57(c) for grain other than wheat and barley.
Summary
6.241 In summary, Canada has not convinced us that Section 57(c) of the Canada Grain Act, and in
particular the authorization requirement it impo ses, is necessary to secure compliance with the
provisions of the Canada Grain Act and Regulations, the Competition Act or the CWB Act and
Regulations pointed to by Canada. We have identified, by way of example, one alternative measure

that we consider is reasonably available to Cana da and would allow Canada to secure a "very high
level of compliance" with these provisions.
322
6.242 Canada has, however, pointed to certain SPS a nd GMO concerns that it says could not be
addressed through the alternative put forward by the Panel.323 We consider the arguments that Canada
made in this regard below.
Arguments made by Canada with respect to SPS/GMO concerns
6.243 Canada argues that the need for authorization prior to entry into an elevator is necessary to
address situations such as where there is an SPS concern or a concern regarding an unapproved
genetically modified organism in shipments of grai n. Canada submits that this is particularly
important given that it is very difficult, if not im possible, to deal with the consequences once such
grain enters an elevator. Canada argues that such an occurrence would have a serious negative impact
on both the level of consumer confidence in the Canadian quality assurance system and Canada's
ability to ensure and guarantee the quality of grain in its export markets. Accordingly, the entry of
foreign grain into the bulk handling system that is used to move Canadian grain for export can raise
SPS concerns that are additional to any SPS concer ns arising from the importation of foreign grain
into Canada.
6.244 The United States argues that Section 57(c) of the Canada Grain Act is not designed to
address SPS concerns since Canada already has in place SPS measures that address such concerns.
The United States notes that Canada's plant and anim al health service, the Canadian Food Inspection
Agency ("CFIA"), rather than the CGC, is respons ible for SPS measures and enforcement. When the
CFIA deems it necessary based on an appropriate risk assessment, grain cannot enter Canada without
being accompanied by separate SPS documentation ad ministered by the CFIA. These phytosanitary
certificates required by the CFIA ensure that all SPS c oncerns related to grains are addressed prior to
that grain crossing the US-Canadian border. The CFIA requires this documentation whether US grain
is destined for the domestic Canadian market or a third-country market.
6.245 The Panel notes that Canada claims that the Se ction 57(c) authorization requirement is
necessary in order to allow the CGC to respond eff ectively to SPS and GMO concerns. Indeed, as
noted above, Canada has indicated that receipt author ization for foreign grain may be made subject to
the requirement that equipment be cleaned before and after delivery where foreign grain contains a
genetically modified grain not approved in Canada or where there is an SPS concern. 324 This is also
evident from the receipt authorization orders that have been adduced as evidence in this case.325
6.246 However, Canada has not alleged befo re us that Section 57(c) of the Canada Grain Act is an
SPS measure within the meaning of the Agreement on the Application of Sanitary and Phytosanitary
Measures (the " SPS Agreement ").326 Accordingly, in considering Section 57(c), we will not have
regard to the provisions of the SPS Agreement . In addition, Canada does not seek to justify
Section 57(c) under Article XX(b) of the GATT 1994, which provides for the justification of WTO-
inconsistent measures where they are "necessary to pr otect human, animal or plant life or health".
Therefore, in considering Canada's SPS and GMO concerns, the Panel will not have regard to
Article XX(b) of the GATT 1994. Thirdly, Cana da does not seek to justify Section 57(c) under
Article XX(d) on the ground that it is a measure to secure compliance with Canada's SPS laws.

322 As we have said, in our view, the alternative m easure in question would, at a minimum, be less
WTO-inconsistent than Section 57(c).
323 Canada's reply to Panel question No. 81.
324 Canada's reply to Panel question No. 13(d).
325 See, for example, Exhibit CDA-47.
326 Annex A, para. 1.

Therefore, we will not consider whether Section 57 (c) is necessary to secure compliance with such
laws.
6.247 Moreover, Canada has not argued th at any of the provisions of the Canada Grain Act and
Regulations, Competition Act and CWB Act and Regulations, which Canada has identified and says
Section 57(c) secures compliance with, require Ca nada to control for SPS or GMO concerns. 327
Indeed, Canada has not demonstrated any link betw een the SPS and GMO concerns it refers to and
the various provisions of the aforementioned Canadian laws and regulations to which it has pointed.328
For instance, we have seen no evidence, nor heard ar gument, to suggest that there is a link between
SPS or GMO problems and end-use characteristics of imported grain. In the absence of more
information on this, we are unable to assess whether SPS and GMO problems might, for example,
affect Canada's ability to comply with Section 32 of the Canada Grain Act and issue inspection
certificates.
6.248 Canada argues that if certain products, such as GMO grain not approved in Canada, were
found in shipments of Canadian grain, this would have deleterious effects on Canadian exports, as it
would have a negative impact on consumer confid ence in Canada's quality assurance system. We
note in this respect that Article XX(d) provides that the WTO-inconsistent measure that is sought to
be justified must be "necessary to secure compliance with laws and regulations" that are not
themselves inconsistent with the provi sions of the GATT 1994. The panel in European Economic
Community - Regulations on Imports of Parts and Components found this phrase to mean "to enforce
obligations under laws and obligations" and not "to ensure the attainment of the objectives of the laws
and regulations".329 Therefore, the fact that Section 57(c) of the Canada Grain Act may allow Canada
to control for SPS and GMO problems and thus help s Canada preserve consumer confidence which,
in turn, helps to ensure the atta inment of the objectives of, say, the Canada Grain Act , would not be
sufficient to bring Section 57(c) within the protective scope of Article XX(d).
6.249 In light of the above, we consider that Cana da's arguments regarding SPS or GMO concerns
do not demonstrate that the authorization require ment contained in Section 57(c) is necessary to
secure compliance with the relevant provisions of the Canada Grain Act and Regulations, the
Competition Act or the CWB Act and Regulations. Having said this, we wish to emphasize that we are
not suggesting that Canada cannot impose requirements to control for SPS and GMO concerns.
Conclusion on Canada's Article XX(d) defence
6.250 For the reasons indicated above, the Panel fi nds that Canada has not established that
Section 57(c) of the Canada Grain Act is "necessary" to secure complianc e with Sections 32, 61 and
70 of the Canada Grain Act and Schedule III of the Regulations, Section 52 of the Competition Act
and Sections 5, 7(1), 24, 32 and 45 of the CWB Act and Section 16 of the CWB Regulations. Since the

327 See Canada's reply to Panel question No. 80. As mentioned above, according to Canada,
Section 57(c) is necessary because it seeks to ensure that: Canadian grades are not inadvertently and
inappropriately given to non-Canadian grain contrary to the Canada Grain Act and Regulations and do not
result in misrepresentation as to origin and as to end-us e characteristics of the grain; foreign grain maintains its
identity in the bulk handling system so that there is no misrepresentation as to origin and misleading
representations with respect to end-use characteristics of the grain contrary to Section 52 of the Competition Act;
and foreign grain maintains its identity so as to ensure that the CWB's exclusive jurisdiction over the export of
CWB grain is neither eroded nor inadvertently extended contrary to the CWB Act and Regulations. In referring
to these provisions, Canada makes no mention of any SPS or GMO concern that they are aimed at addressing.
328 There is no reference whatsoever to SPS/GMO con cerns in Canada's reply to Panel question No. 80
and in its reply to Panel question No. 63, both dealing with the justification of Section 57(c) under
Article XX(d).
329 Panel Report, European Economic Community – Regulations on Imports of Parts and Components
("EEC – Parts and Components"), adopted on 16 May 1990, BISD 37S/132, paras. 5.14-5.18.

measure in question is not provisionally justifie d under Article XX(d) of the GATT 1994 because it is
not "necessary", we do not need to determine, in addition, whether Section 57 "secures compliance"
with the relevant provisions of the Canada Grain Act
 and Canada Grain Regulations , the
Competition Act and the CWB Act and CWB Regulations. In addition, we do not need to determine
whether those laws and regulations are consistent with the provisions of the GATT 1994. For the
same reason, we do not consider that it is necessar y to proceed to determine whether the requirements
set out in the chapeau to Article XX have been satisfied.
6.251 Therefore, since Canada has failed to establish that the measure in question is provisionally
justified under Article XX(d) of the GATT 1994, we c onclude that Canada has failed to establish that
Section 57(c) of the Canada Grain Act is justified under Article XX(d) of the GATT 1994.
(v) Overall conclusion for Section 57(c) of the Canada Grain Act
6.252 Since we are unable to accept Canada's claim of justification under Article XX(d) of the
GATT 1994, our overall conclusion with respect to Section 57(c) is that Section 57(c) of the Canada
Grain Act is, as such, inconsistent with Article III:4 of the GATT 1994.
(c) Section 56(1) of the Canada Grain Regulations : standing mixing authorization for Eastern
Canadian grain
(i) Measure at issue
6.253 The United States argues that the measure under the Pane l's consideration is the measure in
effect at the time of the establishment of the Marc h Panel and the July Panel, which is Section 56(1)
of the Canada Grain Regulations prior to amendment. According to the United States, the amended
provision, which came into effect after the estab lishment of the March Panel and the July Panel,
although not within the terms of reference of the Panel, appears to do exactly the same thing as the
previous version of Section 56(1), since US grai n cannot qualify as Eastern Canadian grain under
either provision.
6.254 Canada did not take a position on whether the Panel should examine the measure in effect at
the establishment of the March Panel and the July Panel or the amended provision that came into
effect after the establishment of the Panels. However, Canada stated that Section 56(1) of the Canada
Grain Regulations as it existed at the time the March and July Panels were established incorrectly
referred to foreign grain. Canada states that Section 56(1) of the Regulations has since been amended
to reflect the original intent, which was to allow mixing of Eastern Canadian grain with other Eastern
Canadian grain in transfer elevators. Canada notes in this regard that Eastern Canadian grain is, in
large part, marketed domestically and is not as qua lity sensitive as Western Canadian grain, most of
which is exported.
6.255 The Panel notes that, as at the date of establishment of the March Panel and the July Panel,
Section 56(1) of the Canada Grain Regulations ("the old Section 56(1)"), being the measure that is
being challenged by the United States, provided that:
The operator of a licensed transfer elevator may mix any grade of grain being
received into or being discharged out of the elevator with grain of any other grade if
neither of the grain is western grain or foreign grain.

6.256 Amendments to the Regulations came into effect on 1 August 2003, that is, after the
establishment of the two Panels and while the Panels ' proceedings were under way. Pursuant to those
amendments, Section 56(1) was amended330 ("Section 56(1) as amended") to provide as follows:
The operator of a licensed transfer elevator may mix any grade of eastern grain being
received into or being discharged out of, th e elevator, with any other grade of eastern
grain of the same class.
6.257 In two questions posed by the Panel, the Un ited States was requested to indicate whether it
was claiming that Section 56(1) of the Canada Grain Regulations as amended, as such, is inconsistent
with Article III:4 of the GATT 1994 331 or whether it expected the Panel to rule only on the old
Section 56(1).332 The United States responded that, under the terms of reference of the March Panel
and the July Panel, the Panel is called on to make findings on the old Section 56(1) of the Canada
Grain Regulations . In the United States' view, Section 56( 1) as amended is not within the Panels'
terms of reference. The United States notes, however, that, in terms of substance, Section 56(1) as
amended is essentially the same as the old Section 56(1).
333 Canada did not express disagreement
with the United States' view that the Panel should rule on the old Section 56(1).
6.258 It is clear to the Panel that the old Section 56(1) of the Canada Grain Regulations is within
the terms of reference of both the March Panel and th e July Panel. This presen ts the issue of whether
the Panel may rule on the WTO-consistency of a measu re that has since been replaced by an amended
version of the challenged measure. We note in th is regard that, in a number of cases, panels have
adjudicated claims involving measures that no long er existed or that were no longer being applied. 334
In those cases, the relevant measures typically had been applied in the very recent past.
6.259 In this case, the amendment to the old Section 56(1) came into effect a short period of time
after the establishment of the March Panel and th e July Panel. Further, a ruling on the old

330 Section 56(1) of the Canada Grain Regulations was amended pursuant to "Regulations Amending
the Canada Grain Regulations" (Exhibit CDA-23). While S ection 25 of those Regulations states that the old
Section 56(1) is to be "replaced" by the relevant text contained in Section 25, we understand that the effect of
Section 25 was to amend the old Section 56(1). This is evident from the title of the Regulations containing
Section 25 and from statements made to this effect by Canada in these proceedings. Canada's first written
submission, footnote 106 and Canada's comments on the United States' reply to Panel question No. 67.
331 Panel question No. 9.
332 Panel question No. 66.
333 United States' reply to Panel question No. 66.
334 Panel Report, United States – Measure Affecting Imports of Woven Wool Shirts and Blouses from
India ("US – Wool Shirts and Blouses "), WT/DS33/R, adopted 23 May 1997, as upheld by the Appellate Body
Report, WT/DS33/AB/R, DSR 1997:I, 343, where the panel ruled on a measure that was revoked after the interim
review but before issuance of the final report to the parties; Panel Report, EEC – Measures on Animal Feed
Proteins ("EEC – Animal Feed Proteins "), adopted 14 March 1978, BISD 25S/49, where the panel ruled on a
discontinued measure, but one that had terminated after the terms of reference of the panel had already been
agreed; Panel Report, United States – Prohibition of Imports of Tuna and Tuna Products from Canada ("US –
Canadian Tuna "), adopted 22 February 1982, BISD 29S/91, para. 4.3, where the panel ruled on the GATT-
consistency of a withdrawn measure but only in light of the two parties' agreement to this procedure; Panel Report,
Chile – Price Band System and Safeguard Measur es Relating to Certain Agricultural Products ("Chile – Price
Band System"), WT/DS207/R, 3 May 2002 adopted 23 October 2002, as modified by the Appellate Body Report,
WT/DS207AB/R, paras.7.124-7-125,, where the panel recalled that Article 19.1 of the DSU did not prevent the
panel from making findings regarding the consistency of an expired provisional safeguard measure, if the panel
were to consider that the making of such findings is necessary "to secure a positive solution" to the dispute. The
panel decided to rule on withdrawn measures because the complainant argued that it had suffered nullification or
impairment as a result of the withdrawn measures and that it was entitled to a ruling on the matter and because the
panel considered that it would be in the interest of a prompt settlement of the overall dispute to make findings
regarding the safeguard measures at issue, even though they had been withdrawn in the course of the proceedings.

Section 56(1) would appear to be meaningful for pu rposes of this dispute, given that, in substantive
terms, the provisions of the old Section 56(1) seem to be essentially the same as those of Section
56(1) as amended.
335 Finally, we recall that, in this case, th e complaining party specifically requested
that we rule on the old Section 56(1) and the res ponding party did not oppose this request. In these
circumstances, we see no reason to decline to rule on the old Section 56(1), hereinafter referred to as
"Section 56(1)". 336
(ii) Like products
6.260 The United States argues that US grain, even when of the exact same type as domestic
Canadian grain, is subject to differential treat ment as "foreign grain" under Section 56(1) of the
Canada Grain Regulations . According to the United States, given that Section 56(1) of the
Regulations discriminates on the basis of origin rather th an on the basis of physical characteristics or
end-uses even when all other product characteris tics are exactly the same, one must reach the
conclusion that the measure at issue applies to like domestic and foreign product s. In any event, the
imported and domestic products at issu e, namely those covered by the Canada Grain Act and
Regulations are identical and are, therefore, "like products". More particularly, all imported and
domestic products falling within each of the categori es of "grain" as defined in Section 5(1) of the
Canada Grain Regulations are "like products" for the purposes of Article III:4. Some imported US
grain is the same variety as Canadian grown grain, the only difference being that the US grain is
grown south of the Canadian border.
6.261 Canada argues that for the purposes of the Canada Grain Act , not all grain types are like.
Not only is it not sufficient to define "like products " by category, but the grades and varieties of the
grain must also be taken into account in certain circumstances because of their different end-uses and
end-use characteristics. Accordingly, within each t ype of grain there are different "like" products.
Canada also submits that Section 72 of the Canada Grain Act prohibits all mixing of grain between
different grades and types, regardless of origin.337
6.262 The Panel notes that, by virtue merely of their origin, foreign grain and Western Canadian
grain are excluded from the standing mixing author ization established under Section 56(1) of the
Canada Grain Regulations . Therefore, at least implicitly, Section 56(1) of the Canada Grain
Regulations draws an origin-based distinction between Eastern Canadian grain, on the one hand, and
foreign and Western Canadian grain, on the other hand. Given the existence of an origin-based
distinction in Section 56(1) of the Canada Grain Regulations , the United States need only
demonstrate that there can or will be domestic and imported products that are like.

335 Canada appears to agree with this view. Canada's comments on the United States' reply to Panel
question No. 67.
336 The Appellate Body in Chile – Price Band System and Safeguard Measures Relating to Certain
Agricultural Products ("Chile – Price Band System"), WT/DS207/AB/R, adopted 23 October 2002, found that, in
some circumstances, only the amended measure, not the ol d measure, was to be looked at. In particular, the
Appellate Body found that "[i]f the terms of reference in a dispute are broad enough to include amendments to a
measure ... and if it is necessary to consider an amendment in order to secure a positive solution to the dispute ...
then it is appropriate to consider the measure as amended in coming to a decision in a dispute". Appellate Body
Report, Chile – Price Band System, supra, para. 144. However, among the reasons the Appellate Body adduced
in support of its decision was the fact that neither of the parties objected to this approach (para. 143) and that
such an approach was necessary to meet the demands of due process for the complaining party (para. 144). We
consider that our case is different since the United States as the complaining party has confirmed that it expects
the Panel to make findings on Section 56(1) of the Canada Grain Regulations as it existed at the time the March
Panel and the July Panel were established.
337 Canada's first oral statement, para. 61.

6.263 The United States has established to our satis faction that, as a result of the origin-based
distinction contained in Section 56(1), foreign grai n that is like Eastern Canadian grain would not
benefit from the standing mixing author ization established under Section 56(1). 338 Indeed, even
foreign grain that is identical to Eastern Canadian grain in all respects except for origin would be
excluded from the standing mixing authorization set out in Section 56(1).
6.264 Accordingly, the Panel considers that, since fore ign grain that is like Eastern Canadian grain
does not benefit from Section 56(1) of the Canada Grain Regulations, the "like products" requirement
in Article III:4 is satisfied.
(iii) Measure affecting internal distribution and/or transportation
6.265 The United States argues that Section 56(1) of the Canada Grain Regulations is a law
affecting the distribution and transportation of grain. According to the United States, most grain
transported internally in Canada will, at some point , be received and/or stored in a Canadian grain
elevator.
6.266 Canada argues that the measures at issue regarding treatment of imported grain may only be
examined from the perspective of their effect on the internal sale, offering for sale, purchase,
transportation, distribution or use of the imported gr ain. Canada submits that a portion of US grain
that enters the Canadian bulk grain handling system is destined for re-export to third countries. To the
extent that Section 56(1) of the Regulations affects US grain in transit through Canada, it is outside
the scope of Article III:4 and of the Panel's terms of reference.
6.267 The Panel again recalls that Article III:4 of GATT 1994 requires that the governmental
measure at issue be a law, regulation or requirement affecting the internal sale, purchase,
transportation, distribution or use of imported pr oducts. We found in paragr aph 6.172 above that the
bulk grain handling system, which is the context in which Section 56(1) operates, is a "distribution
channel" for grain in Canada. Section 56(1) gran ts standing regulatory mixing authorization only for
Eastern Canadian grain. We note, therefore, that Section 56(1) does not directly affect the internal
distribution of imported grain. Nevertheless, we believe it will affect the conditions of competition
between domestic and imported products in the internal Canadian market
339 in the sense that it will
disincentivise transfer elevator operators from a ccepting and distributing imported grain to end-users
through the bulk grain handling system. 340 Consequently, we conclude that it is a measure affecting
the internal distribution of foreign grain in Canada. 341 In these circumstances, we do not see the need
to determine, in addition, whether Section 56(1) also affects transportation.

338 Some varieties grown in Eastern Canada may be different from foreign varieties. However, we have
seen no evidence that this is true for all grain grown in Eastern Canada and that no Eastern varieties, or at least
like varieties, could be imported. We do not exclude the possibility that there might exceptionally be cases in
which differences in origin might coin cide or correlate with differences in physical properties, end-uses, and
consumers' tastes and habits as between the imported and domestic products so as to render them "unlike" for
the purposes of Article III:4 of the GATT 1994. Nevertheless, we are not convinced, based on the information
on the record, that all foreign grain is unlike Eastern Canadian grain.
339 See paras. 6.269 - 6.297 below.
340 The panel in Italian Discrimination Against Imported Agricultural Machinery ("Italy – Agricultural
Machinery") adopted 23 October 1958, BISD 7S/60, stated that "[t]he selection of the word 'affecting' [in
Article III:4] would imply [...], in the opinion of the Pane l, that the drafters of the Article intended to cover in
paragraph 4 not only the laws and regulations which dir ectly governed the conditions of sale or purchase but
also any laws or regulations which might adversely m odify the conditions of competition between the domestic
and imported products on the internal market". Panel Report, Italy – Agricultural Machinery, supra, para. 12.
341 Neither party has contested that Section 56(1) is an internal measure within the meaning of
Article III:4 of the GATT 1994.

6.268 With respect to whether Section 56(1) applies to foreign grain "imported" into Canada,
342 the
Panel is satisfied that at least some foreign grain th at is distributed through the transfer elevators is
imported into Canada and is domestically consumed. 343 The Panel is satisfied, therefore, that
Section 56(1) affects grain "imported" into Canada and, hence, is subject to the provisions of
Article III:4 of the GATT 1994.
(iv) Less favourable treatment
6.269 The United States submits that Section 56(1) of the Canada Grain Regulations prohibits the
mixing of imported grain and domestic grain in transfer elevators. According to the United States, the
default prohibition impedes commercial opportunities for US grain by making it more costly and
burdensome for US grain to move through the bulk grain handling system. The effect of the Canadian
anti-mixing requirement is to cut off imported gr ain from existing Canadian distribution channels,
with the effect of reducing the commercial opportu nities of imported grain to reach Canadian end-
users. The United States also argues that Ar ticle III:4 of the GATT 1994 protects conditions of
competition, not trade flows per se , so that it is not necessary to demonstrate any trade effects of
Canada's measures in order to establish a violation of Article III:4. Further, the United States argues
that the existence of alterna tive distribution channels or th e possibility of exceptional mixing
authorization does not remove the less favourable treatment of foreign grain.
6.270 Canada argues that Section 56(1) of the Canada Grain Regulations does not modify the
conditions of competition for grain to the detrimen t of imported products because mixing restrictions
in elevators apply to both domestic and imported grain. More particularly, Section 72 of the Canada
Grain Act prohibits all mixing of grain between different grades and types, regardless of origin.
Section 56(1) of the Regulations authorizes the mixing of different grades of Eastern Canadian grain
in transfer elevators because it is less quality- sensitive. In addition, Section 72(2) of the Act vests
discretion in the CGC to allow mixing of foreign grai n and Canadian grain. Canada submits that the
limitation on mixing of different grades of grain does not result in additional costs for foreign grain 344
since the process to obtain an authorization to mix Canadian and foreign grain is simple and cost free.
According to Canada, the only requirements applying to US grain are that it may not be mixed with
Canadian grain of different quality and if US grain is mixed with Canadian grain of like quality, it
should be identified as mixed grain, and not Canadian grain. The fact that elevators have to make a
request to mix Canadian grain and foreign grain so that it is not misrepresented as "Canadian grain"
does not amount to less favourable treatment of foreign grain. Further, according to Canada, there is
no evidence of elevators being less interested in receiving US grain. Canada also argues that a
significant portion of US grain exported to Canada is shipped directly to end-users, by-passing
elevators to which Section 56(1) of the Regulations applies. Mixing restrictions do not apply outside
the bulk grain handling system.
6.271 The Panel will first examine whether Section 56(1) of the Canada Grain Regulations
adversely affects the competitive opportunities of imported grain vis-à-vis like domestic grain.
Secondly, we will determine whether Section 56(1) mandates or, has the effect of mandating, more
favourable treatment of domestic grain as compared to like imported grain. We thus assume that it is
appropriate, in assessing the WTO-consistency of legislation, as such, to distinguish between

342 See para. 6.158 above.
343 As noted above in footnote 254, Canada has acknowledged that some imported (US) grain that
enters elevators is for domestic consumption. Cana da's first written submission, paras. 190 and 228 and
Annex I, p. 6. Further, Canada has indicated that transfer elevators have historically handled significant
quantities of US grain destined for both the Canadian market and the overseas market. Canada's first written
submission, para. 228. See also Canada's reply to Panel question No. 42.
344 Canada's first written submission, para. 255.

mandatory and discretionary legislation. We note in this regard that our ultimate conclusion does not
depend on the correctness of this assumption.345
6.272 With respect to the first issue -- that is, whether Section 56(1) of the Regulations adversely
affects the competitive opportunities of imported grain vis-à-vis like domestic grain -- we begin by
analysing the meaning and operation of Section 56(1) of the Regulations. Initially, we note that we
are unable to agree with the United Stat es' assertion that Section 56(1) of the Regulations contains, or
implies, a prohibition on the mixing of foreign grain with Canadian grain. 346 Section 56(1) of the
Regulations provides that "the operator of a licensed tr ansfer elevator may mix any grade of grain
being received into or being discharged out of the elev ator with grain of any other grade if neither of
the grain is western grain or foreign grain." We understand these provisions to mean, in effect, that
transfer elevator operators may mix different grades of Eastern Canadian grain 347 in transfer
elevators.348 Thus, Section 56(1) authorizes mixing; it does not prohibit mixing. Moreover, it is
concerned with the mixing of certain Canadian gr ain, not with the mixing of foreign grain with
Canadian grain.
6.273 That Section 56(1) of the Regulations does not contain a prohibition on mixing also becomes
clear when it is read together with Section 72 of the Canada Grain Act, being the provision pursuant
to which Section 56(1) was created. Under Section 72(1) of the Act, all mixing of grain of different
grades is prohibited unless such mixing is authorized by an order of the CGC or by regulation.
Section 56(1) is of the latter type, i.e., it creates a regulatory exception to the mixing prohibition
contained in Section 72(1).
6.274 Looking now at how Section 56(1) operates, we note that it provides standing, unconditional
authorization for the mixing of certain grain in transfer elevators. 349 As a practical matter, this means
that operators of transfer elevators may mix the re levant grain without having to make a prior request
for authorization.350 Thus, the regulatory mixing authorization granted by Section 56(1) confers an
advantage which does not exist with respect to, fo r instance, mixing authorization granted by order
pursuant to Section 72(2) of the Canada Grain Act . More particularly, in the case of the latter,
authorization must be granted on an on-request basis and may, in principle, be denied or be granted
subject to conditions.
6.275 On the basis of our understanding of the meaning and operation of Section 56(1), we now turn
to address the principal issue here, namely whether Section 56(1) treats imported grain less favourably
than like Eastern Canadian grain. We recall in th is regard that the standing and unconditional mixing
authorization granted by Section 56(1) only benefits Eastern Canadian grain.
351 More specifically,

345 See also our remarks on this issue at para. 6.184 above.
346 See, for example, United States' comments on Canada's reply to Panel question No. 70.
347 "Eastern grain" is defined in Section 2 of the Canada Grain Act as grain grown in the Eastern
Division. "Eastern Division" is defined, in turn, as "that part of Canada not included in the Western Division."
"Western Division" is defined to mean "all that part of Canada lying west of the meridian passing through the
eastern boundary of the City of Thunder Bay, including the whole of the Province of Manitoba".
348 This appears to be consistent with what Canada says is the effect of Section 56(1). Canada's
comments on the United States' reply to Panel question No. 67.
349 See Canada's reply to Panel question No. 101.
350 Section 72(2) does not explicitly provide that the granting of mixing authorisation is conditional
upon a request having first been made. However, Canada has confirmed that such a request is needed. See, for
example, Canada's reply to Panel question No. 16(a), which refers to Canada's reply to Panel question No. 13(a)
and Canada's first written submission, para. 258.
351 We note that the fact that the standing, unconditional mixing authorization granted by Section 56(1)
does not benefit foreign grain does not imply that Section 56(1) mandates the imposition of mixing restrictions
with respect to foreign grain. In our understanding, such restrictions may be imposed under other provisions of
Canadian law, but such restrictions are not the result of Section 56(1). We do not, therefore, ag ree with the

Section 56(1) permits Eastern Canadian grain of a pa rticular type and grade to be mixed with Eastern
Canadian grain of the same type, but of a different grade.
352
6.276 The United States argues that Section 56(1) tr eats foreign grain less favourably than like
Eastern Canadian grain insofar as, unlike foreign gr ain, Eastern Canadian grain can be mixed without
the need for prior authorization. The United States argues that an elevator operator should be free to
mix foreign grain with like Eastern Canadian grain as well as foreign grain with other foreign grain
without having to obtain prior authorization.353
6.277 We consider that, under the provisions of Article III:4 of the GATT 1994, foreign grain that is
like Eastern Canadian grain must, at a minimum, be conferred the same advantage Section 56(1)
confers on like Eastern Canadian grain, namely, the advantage of standing mixing authorization,
obviating the need to first obtain authorization. Mo re particularly, we think that: (i) Canada must
permit foreign grain that is like Eastern Canadian grain to be mixed with Eastern Canadian grain
subject to the same conditions that currently appl y to mixing under Section 56(1); and (ii) Canada
must permit foreign grain that is like Eastern Canadian grain to be mixed with other foreign grain that
is like Eastern Canadian grain subject to the sa me conditions that currently apply to mixing under
Section 56(1).
Mixing of foreign grain with like Eastern Canadian grain
6.278 We analyse first whether Canada permits foreign grain that is like Eastern Canadian grain to
be mixed with Eastern Canadian grain subject to the same conditions that currently apply to mixing
under Section 56(1). We note that there is some uncertainty as to whether such mixing is governed by
Section 72(2) or Section 57(c) of the Canada Grain Act.354 In the light of this, the Panel will consider
the mixing of foreign grain with Eastern Canadian grain under both provisions.355

United States' assertion in its comments on Canada's Reply to Panel question No. 76 that Section 56(1)
explicitly mandates the imposition of mixing restrictions with respect to foreign grain.
352 Canada gives the following example of mixing under Section 56(1) of the Regulations: #1 Canada
Easter White Winter Wheat may be mixed with #3 Canada Eastern White Winter Wheat. According to Canada,
the combined lot may meet the specifications for #2 Ca nada Eastern White Winter Wheat. Canada's reply to
Panel question No. 58. See also Canada's first written submission, para. 245.
353 United States' reply to Panel question No. 67.
354 The uncertainty derives from the fact that Canada has cast doubt on whether foreign grain falls
within the scope of Section 72 of the Canada Grain Act because it is not graded under the Act. Indeed, Canada
has stated that the general prohibition contained in S ection 72(1) regarding the mixing of grain of different
grades does not apply to foreign grain because foreign grain is not graded under Section 16 of the Canada Grain
Act. According to Canada, since the prohibition in Section 72(1) does not apply to foreign grain, neither does
the possibility of obtaining an exception to this prohibition by order, which possibility is envisaged in
Section 72(2). Canada's reply to Panel question No. 76. Consistent with its statement that Section 72(1) does
not apply to foreign grain, Canada has stated that the imposition of mixing restrictions, if any, with respect to
foreign grain results from conditions or limitations im posed on the entry of foreign grain into elevators
(including transfer elevators) under Section 57(c) of the Canada Grain Act. Canada's replies to Panel question
Nos. 70 and 76. The uncertainty as to whether Section 72(2) or Section 57(c) applies arises from yet another
statement made by Canada regarding the applicability of Section 72(2). Canada has stated that, under
Section 72(2), "the CGC has discretion to allow mixing of foreign grain with Canadian grain". Canada's first
written submission, para. 258. See also Canada's reply to Panel question No. 13. This statement, if correct,
appears to suggest that when foreign grain is to be mixed with Canadian grain, the fact that foreign grain is not
graded does not remove this type of mixing request from the scope of Section 72(2).
355 Since we have found that foreign grain that is "like" Eastern Canadian grain does not benefit from
Section 56(1) of the Canada Grain Regulations and since, in our understanding, the mixing of all foreign grain
is subject to Section 72(2) and/or Section 57(c) of the Canada Grain Act , it is clear that foreign grain that is
"like" Eastern Canadian grain is subject to Section 72(2) and/or Section 57(c).

Mixing under Section 72(2) of the Canada Grain Act
6.279 We begin by considering the mixing of forei gn grain with Eastern Canadian grain on the
assumption that such mixing is governed by Section 72(2) of the Canada Grain Act. Section 72(2) of
the Act provides for authorization on request and possi bly subject to conditions. Canada has stated
that the process according to which mixing authorization is granted under Section 72(2) is the same as
that which applies for the granting of receipt authorization under Section 57(c) of the Canada Grain
Act. 356 As noted above in relation to Section 57(c) of the Act, the authorization process itself involves
administrative burdens, even if it does not involve the payment of fees, etc.357
6.280 As we previously stated, Section 56(1) of the Regulations is a regulatory exception to the
general mixing prohibition set out in Section 72(1) of the Canada Grain Act. While Section 56(1)
does not itself impose additional costs and burdens on foreign grain, it effectively exempts Eastern
Canadian grain from the requirement to obtain mi xing authorization under Section 72(2), thereby
treating imported grain less favourably than like Eastern Canadian grain. Indeed, from the
perspective of transfer elevator operators, it is le ss burdensome to mix Eastern Canadian grain with
other Eastern Canadian grain than it is to mix impor ted grain that is like Eastern Canadian grain with
Eastern Canadian grain because authorization is needed in relation to the former but not the latter. In
our view, it is clear, therefore, that, as a result of Section 56(1), the competitive opportunities afforded
to imported grain are less favourable than those available to like Eastern Canadian grain.
6.281 Canada argues that there is no evidence that elevators are less interested in receiving US grain
because authorization is needed under Secti on 72(2) if that grain is to be mixed.
358 While it is true
that the Panel has not seen any evidence of elevator s being less interested in receiving US grain as a
result of the application of Section 72(2) to imported grain, it is not necessary to demonstrate actual
and specific negative effects of a trade measure in or der to establish a violation of Article III:4 of the
GATT 1994.359
6.282 Canada has also argued that the CGC would always authorize the mixing of foreign grain
with domestic grain under Section 72(2) of the Act provided that the lot of mixed grain is identified as
such to ensure that it is not misrepresented as Canadian grain. 360 I t m a y b e t h a t t h e C G C h a s
discretion to always authorize the mixing of foreig n grain that is like Eastern Canadian grain with
Eastern Canadian grain. 361 If the CGC were to authorize mixing of foreign grain with Eastern
Canadian grain in every case, this might minimize the adverse effects on competitive opportunities as
between imported and like Eastern Canadian gr ain but such effects would not be completely
eliminated since a request for mixing authorization would still need to be made whereas this is not
required for the mixing of Eastern Canadian grain.362
6.283 In sum, in our view, the standing, unconditional mixing authorization granted by
Section 56(1) confers an advantage on Eastern Canadi an grain that is not conferred on imported grain
for which mixing authorization by order pursuant to Section 72(2) of the Canada Grain Act is needed.
It is clear, therefore, that if foreign grain that is like Eastern Canadian grain can only be mixed with

356 Canada's reply to Panel question No. 16(a).
357 See our comments above in para. 6.191.
358 Canada's first written submission, para. 255.
359 Appellate Body Report, Japan – Alcoholic Beverages II, supra, p. 16. This statement was endorsed
by the Appellate Body in Korea – Alcoholic Beverages, supra, para. 119.
360 Canada's reply to Panel question No. 12; Canada's reply to Panel question No. 59(a).
361 Canada has confirmed that there has been no instance of denial of a request for authorization of
mixing of Canadian and foreign grain in transfer elevators. Canada's reply to Panel question No. 59(a).
362 We consider that this is true even if the CGC were to grant its mixing authorization under Section
72(2) unconditionally, since, even in such cases, a request for receipt would still need to be made, at least
initially.

Eastern Canadian grain under the provisions of Section 72(2) of the Act rather than Section 56(1) of
the Regulations, imported grain is afforded treatment that is less favourable than the treatment
accorded to like Eastern Canadian grain under Section 56(1).
Mixing under Section 57(c) of the Canada Grain Act
6.284 As noted above, there is some uncertainty as to whether the mixing of foreign grain with
domestic grain is governed by Section 72(2) of the Canada Grain Act or by Section 57(c) of the
Canada Grain Act.
363 If the mixing of foreign grain with Eastern Canadian grain fell to be assessed
under Section 57(c) of the Canada Grain Act instead of Section 72(2), we think that foreign grain
would also be treated less favourably than like Eastern Canadian grain. Initially, we note that we have
not been made aware of any regulations promulgate d under the authority of Section 57(c) that would
address the conditions under which foreign grain may be mixed with Canadian grain. We, therefore,
need only consider the possibility, referred to by Cana da, that the CGC, in authorizing the receipt of
foreign grain into an elevator by order may also authorize the mixing of foreign grain in question with
Canadian grain.
364
6.285 As we have noted above in our examination of Section 57(c) , authorization by CGC order
requires at least an initial request and may be granted subject to conditions. 365 Thus, in much the
same way as Section 72(2), Section 57(c) treats foreign grain that is like Eastern Canadian grain less
favourably than Section 56(1) treats Eastern Canadian grain. More particularly, while the mixing of
foreign grain with domestic grain under Section 57(c) of the Canada Grain Act is contingent upon a
request for mixing authorization having first been made, no request for mixing authorization is needed
for the mixing of Eastern Canadian grain under Section 56(1) of the Regulations.366
6.286 In sum, if foreign grain that is like Eastern Canadian grain can only be mixed with Eastern
Canadian grain under the provisions of Section 57(c) of the Act, imported grain is afforded treatment
that is less favourable than the treatment accorded to like Eastern Canadian grain under Section 56(1)
of the Regulations.
Conclusion
6.287 Therefore, whether we compare Section 56(1) of the Regulations to Section 72(2) or
Section 57(c) of the Canada Grain Act , we find that Section 56(1), as such, confers an advantage on
Eastern Canadian grain that is not accorded to like imported grain.
Mixing of foreign grain that is like Eastern Canadian grain with other foreign grain that is like Eastern
Canadian grain
6.288 Canada has stated that the general prohibition contained in Section 72(1) of the Canada Grain
Act regarding the mixing of grain of different grades does not apply to the mixing of different grades
and classes of foreign grain because foreign grain is not graded under Section 16 of the Canada Grain
Act.367 We further understand that if such mixing occurs, it must occur pursuant to Section 57(c) of
the Canada Grain Act.368

363 See footnote 354 above.
364 Canada's replies to Panel question Nos. 70 and 76.
365 See paras. 6.181 - 6.182 above.
366 We consider that this is true even if the CGC were to grant its mixing authorization under
Section 57(c) unconditionally, since, at the very least, a request for receipt authorisation would still need to be
made, at least initially.
367 Canada's reply to Panel question No. 76.
368 Canada's replies to Panel question Nos. 70 and 76.

6.289 With respect to whether Section 57(c) of the Act would allow foreign grain that is like Eastern
Canadian grain to be mixed with other foreign gr ain that is like Eastern Canadian grain under the
same conditions as apply to the mixing of Eastern Ca nadian grain with other Eastern Canadian grain
under Section 56(1) of the Regulations, we consider that this would not be the case for the reasons we
have indicated in paragraphs 6.284 - 6.285 above . The conditions under which Eastern Canadian
grain may be mixed with Eastern Canadian grain are more favourable than the conditions under which
relevant foreign grain may be mixed with other re levant foreign grain because authorization for the
mixing of Eastern Canadian grain is not needed whereas, at the very least, receipt authorization would
be needed under Section 57(c) of the Canada Grain Act before foreign grain could be mixed.
369
General Defences
6.290 On the basis of the foregoing, it would appear that Section 56(1) of the Canada Grain
Regulations is, on its face, inconsistent with Article III:4 of the GATT 1994 because foreign grain is
treated less favourably than Eastern Canadian gr ain. However, Canada has raised a number of
defences, which we consider here.
6.291 Canada has said that the mixing restric tions that apply under Section 72 of the Canada Grain
Act are just some of the many provisions that serve to maintain quality. According to Canada,
Section 72 is necessary to prevent uncontrolled mixing in the bulk grain handling system, which
would affect Canada's ability to know the quality of the grain in the system, and its ability as an
exporter to guarantee the quality, end-use characteris tics and Canadian origin of the grain. Canada
suggests that the mixing restrictions contained in Section 72 of the Canada Grain Act need not apply
to Eastern Canadian grain because such grain is, in large part, marketed domestically and is less
quality-sensitive.
6.292 The Panel notes that, in the present case, there may be legitimate reasons for Canada to treat
domestic grain and like imported grain differently, for example, because the latter has not been
subjected to the Canadian quality assurance system, which imposes certain restrictions and conditions
on Canadian grain, including with respect to production.
370 However, as mentioned by us previously,
the Appellate Body found in Korea - Various Measures on Beef that different treatment as between
imported products and like domestic products must not result in the imported products being treated
less favourably.371
6.293 It is not clear to us how the arguments put forward by Canada to justify the difference in
treatment between domestic grain and like imported grain support the conclusion that in not extending
to like foreign grain the advantage granted to E astern Canadian grain under Section 56(1), foreign
grain is not treated less favourably than like domes tic grain. As we have stated previously, the
conditions under which Eastern Canadian grain may be mixed are more favourable than the
conditions under which foreign grai n may be mixed because authorization for the mixing of Eastern

369 Canada has stated in its reply to Panel question No. 70 that additional conditions on mixing of
foreign grain and Canadian grain may be imposed in orders authorizing receipt of foreign grain under
Section 57(c) of the Act. However, even if the CGC we re not to impose any restrictions with respect to the
mixing of foreign grain, a request for receipt authorization would still need to be made.
370 Canada's reply to Panel' question No. 15.
371 Appellate Body Report, Korea – Various Measures on Beef , supra, paras. 135 – 137. We note,
however, that less favourable treatment of imported grain may be justifiable under the general exceptions set out
in Article XX of the GATT 1994. Indeed, Canada in this case has invoked Article XX. We address Canada's
Article XX defence below at paras. 6.298 - 6.320.

Canadian grain is not needed whereas, in the case of foreign grain, mixing authorisation is needed
under Section 72(2) or Section 57(c) of the Canada Grain Act.
372
6.294 Canada has also argued that Section 56(1) is an exception to a mixing prohibition –
Section 72(1) of the Canada Grain Act – that applies to all grain, domestic and imported. 373 We note
that, indeed, Western Canadian grain is also treate d less favourably than Eastern Canadian grain since
it, like foreign grain, does not benefit from the sta nding, unconditional mixing authorization that is
granted to Eastern Canadian grain under Section 56(1) of the Regulations. However, it is clear from
GATT/WTO jurisprudence that where an origin-ba sed difference in regulatory treatment is made
between products originating in one area, region or administrative unit of a country and all other like
products - that is, like products originating in other areas of the same country or originating in foreign
countries - Article III:4 requires that the foreign pr oduct be granted treatment no less favourable than
that accorded to the most-favoured domestic product.374 Accordingly, in the specific circumstances of
this case, where Canada has drawn a distinction be tween grain originating in Eastern Canada and all
other grain, Canada has to accord like imported grain treatment that is at least as favourable as the
treatment afforded to Eastern Canadian grain. In other words, the advantage Section 56(1) confers on
Eastern Canadian grain must also be conferred on like imported grain.375
6.295 Canada argues, finally, that a significant portion of US grain imported into Canada is shipped
directly to end-users, by-passing elevators to which Section 56(1) of the Regulations applies. Canada
notes that mixing restrictions do not apply outsi de the bulk grain handling system. The Panel
considers that the fact that foreign producers are not obliged to use Canadian transfer elevators and
may deliver their grain directly to Canadian end- users does not remove the less favourable treatment
accorded to imported grain with respect to mixing in transfer elevators.
6.296 In relation to the second requirement that needs to be fulfilled in establishing that
Section 56(1) of the Canada Grain Regulations is, as such, inconsistent with Article III:4 of the
GATT 1994 - that is, that Section 56(1) must mandat e, or require, less favourable treatment - we
consider that Section 56(1) is a mandatory provision, in that it gives transfer elevator operators the
right to mix Eastern Canadian grain without the need to seek and obtain prior authorization from the
CGC.
Conclusion
6.297 In conclusion, since the Panel is not persua ded by the general defences put forward by
Canada, the Panel confirms its pr ovisional conclusion above at paragr aph 6.290 that Section 56(1) of
the Canada Grain Act is, as such, inconsistent with Article III:4 of the GATT 1994.
(v) Defence under Article XX(d) of the GATT 1994
6.298 Canada has sought to jus tify Section 56(1) of the Canada Grain Regulations under
Article XX(d) of the GATT 1994.
6.299 For the reasons indicated above in consider ing Canada's Article XX(d) defence to the
United States' claim in respect of Section 57(c) of the Canada Grain Act , in determining whether

372 With respect to the mixing of foreign grain u nder Section 57(c), at th e very least, receipt
authorization would be needed.
373 Canada's first written submission, paras. 244-246.
374 Panel Report, US – Malt Beverages, supra, paras. 5.17 and 5.33.
375 We note that foreign grain cannot presently be mixed with Western grain without prior authorization
by the CGC even though there may be so me Western grain that is like Easter n grain, and foreign grain that is
also like Eastern grain. However, this situation would not change if Section 56(1) were repealed. In other
words, this situation is not a consequence of Section 56(1).

Section 56(1) of the Canada Grain Regulations is justified under Article XX(d), we commence by
assessing whether Section 56(1) is necessary to secure compliance with the various laws and
regulations that Canada has pointed to.
Necessity of the measures taken to secure compliance

6.300 In addition to the arguments made above at paragraph 6.220 in defence of Section 57(c) of the
Canada Grain Act, which were also made by Canada in relation to Section 56(1) of the Canada Grain
Regulations, Canada has argued that it is concerned with uncontrolled mixing in the bulk grain
handling system that would affect Canada's ability to know the quality of the grain in the system, and
its ability as an exporter to guarantee the quality, end- use characteristics and Canadian origin of the
grain.
6.301 The United States argues that Canada already has insp ection and grading provisions in place
which make the origin of grain known to the purchaser, and this accomplishes Canada's objectives
with respect to misrepresentation. Therefore, th e prohibition on mixing generally is not necessary to
secure compliance with the grading requirements of the Canada Grain Act , the Competition Act, or
any other law or regulation identified by Canada in its submissions.
6.302 In determining whether Section 56(1) of the Canada Grain Regulations is "necessary" within
the meaning of Article XX(d) of the GATT 1994, the Panel will apply the "weighing and balancing"
test in the same way as the Appellate Body did in Korea – Various Measures on Beef and in EC –
Asbestos.376
6.303 With respect to the importance of the interests or values that the statutory and other provisions
with which, according to Canada, Section 56(1) sec ures compliance are intended to protect, Canada
has indicated that those objectives are to ensure the quality of Canadi an grain, maintain the integrity
of the Canadian grading system, protect consumers against misrepresentation and preserve and
enforce the CWB monopoly.
377 As we stated above in relation to Section 57(c) of the Canada Grain
Act, it is clear that these interests, which appear to be essentially commercial in nature, are important.
It seems equally clear, however, that these intere sts are not as important as, for instance, the
protection of human life and health against a life-threatening health risk.378
6.304 Canada asserts that Section 56(1) of the Regulations contributes to ensuri ng that the identity
and quality of grain can be established and guara nteed insofar as it does not permit uncontrolled
mixing of all grain in the bulk grain handling system. Canada argues that without such an assurance,
its ability to know the quality of the grain in th e Canadian grain handling system, its ability as an
exporter to guarantee the quality, end-use characteristics and Canadian origin of the grain would be
compromised.379 In our view, Section 56(1) can be said to make some contribution to ensuring that the
identity and quality of grain can be established and guaranteed and that foreign grain is not
inadvertently confused with Canadian grain. Nevertheless, it must be noted that Section 56(1) is only
an instrument to achieve these objectives.
6.305 Therefore, the question remains as to whethe r there is an alternative measure that is
reasonably available to Canada at present to secure compliance with the laws and regulations that
Canada has pointed to in justifying Section 56(1) of the Regulations, taking into account the level of
compliance that Canada has stated it seeks to achie ve with respect to those laws and regulations,
namely a "very high level of compliance".

376 See para. 6.223 above.
377 See Canada's second written submission, paras. 111, 113, 121 - 125.
378 See para. 6.224 above.
379 See Canada's second written submission, paras. 121 and 125.

The provisions of the Canada Grain Act and Regulations
6.306 Canada has asserted that uncontrolled mixing of foreign grain with domestic grain would
result in an inability on the part of the CGC to grade grain, to attest to the specific end-use
characteristics of the grain or to attest to the origin of the grain.
6.307 The Panel understands that Canada is suggesti ng that the advantage of standing,
unconditional mixing authorization bestowed upon Eastern Canadian grain under Section 56(1)
cannot be extended in the same way to like im ported grain because doing so would compromise the
CGC's ability to grade grain, to attest to the specific end-use characteristics of the grain or to attest to
the origin of the grain.
6.308 We are not persuaded that Section 56(1), as it is, is necessary to secure compliance with the
provisions of the Canada Grain Act and the Regulations that relate to the identification and end-use
characteristics of grain. In particular, Canada ha s not convinced us that it is necessary to limit the
standing, unconditional mixing authorization contained in Section 56(1) to Eastern Canadian grain in
order to secure compliance with those provisions. It is not clear to us why Canada could not, for
example, grant by regulation, standing authorizatio n for the mixing in transfer elevators of Eastern
Canadian grain with foreign grain that is like Easter n Canadian grain, and of foreign grain that is like
Eastern Canadian grain with other foreign grain that is like Eastern Canadian grain, subject to the
condition that mixed grain not be designated as Canadian grain.
380
6.309 In fact, Canada itself appears to acknowledge that the aforementioned alternative measure
could be implemented. 381 Canada has only indicated that any advance mixing authorization given by
regulation to foreign grain would have to be conditioned upon the identification of the mixed lot as
non-Canadian or of mixed origin. 382 We consider that a regulation that would give standing
authorization for the mixing in transfer elevators of Eastern Canadian grain with foreign grain that is
like Eastern Canadian grain and foreign grain that is like Eastern Canadian grain with other foreign
grain that is like Eastern Canadian grain but whic h would make such mixing subject to the condition
that mixed grain be labelled to indicate that it is not Canadian grain would contribute to ensuring that
misrepresentation as to origin and as to end-use characteristics of grain is avoided. We do not
consider that such an alternative measure would be more trade restrictive than Section 72(2) or
Section 57(c) of the Canada Grain Act , pursuant to which the mixing of foreign grain and domestic
grain apparently occurs, since it obviates the need for mixing authorisation to be sought and obtained
as is the case under both Section 72(2) and Section 57(c).
383 Further, according to Canada, the mixing
of foreign grain is, as a matter of practice, already subject to the requirement that it be identified as
mixed grain, and not Canadian grain.384

380 The Panel put forward this alternative to Canada in Panel question Nos. 16(b) and 16(c). It seems to
us that in those instances where a request for mixing authorization is made together with a request for
authorization to receive forei gn grain under Section 57(c) ( see Canada's replies to Panel question Nos. 12 and
76), Canada could grant standing entry authorization for foreign grain that is to be mixed with Eastern Canadian
grain or with other foreign grain, subject to the condition that the mixed foreign grain not be designated as
Canadian grain, which condition could, in turn, be made subject to exceptions on request.
381 Canada's replies to Panel question Nos. 16(b) and 16(c).
382 Canada's reply to Panel question No. 16(c).
383 As noted above, in respect of S ection 57(c), there would be a need, at least, to make a request for
receipt authorisation.
384 Canada's first oral statement, paras. 14, 65; Canada's replies to Panel question Nos. 12, 76, 77;
Exhibits CDA-30 and CDA-47. Also, we consider that the alternative measure would, at a minimum, be less
WTO-inconsistent because mixing authorization for fo reign grain would no l onger be necessary under
Section 72(2) and Section 57(c) of the Canada Grain Act.

6.310 As to whether the abovementioned alternative approach would achieve a "very high level of
compliance", the Panel considers that the leve l of compliance with the provisions of the Canada
Grain Act and Regulations would be as high as is achieved under Section 72(2) and Section 57(c) of
the Canada Grain Act , given that Canada has indicated that there has been no instance in which a
request for mixing authorization was rejected 385 and that it already subjects foreign grain to the
requirement that it be identified as mixed grain, and not Canadian grain, when mixed.
Section 52 of the Competition Act
6.311 Canada argues that Section 56(1) of the Regulations is necessary to ensure that the origin of
grain is not misrepresented in contravention of Section 52 of the Competition Act . Canada has
further argued that if Canada were not able to de termine and guarantee the origin of the grain in the
Canadian bulk grain handling system, it would no t be able to provide assurances as to quality and
end-use.
6.312 The Panel is not convinced that Section 56(1), as it is, is necessary to secure compliance with
Section 52 of the Competition Act. It is not clear to us why Canada could not secure compliance with
Section 52 of the Competition Act, by following, for example, the alternative approach put forward by
the Panel and described above in pa ragraph 6.308. In the Panel's vi ew, the alternative measure would
contribute to ensuring that there is no misrepresen tation as to origin and misleading representation
with respect to end-use characteristics of grain contrary to Section 52 of the Competition Act because
foreign grain that has been mixed would always be labelled as mixed grain rather than Canadian
grain. Regarding the difficulty associated with im plementing the alternative measure and its effect on
trade, our considerations at paragraph 6.309 are equally applicable here.
6.313 Further, it would seem to us that a requirement that mixed foreign grain be labelled as mixed
grain rather than Canadian grain would ensure as high a level of compliance with Section 52 of the
Competition Act as is the case under Section 72(2) and Section 57(c) of the Canada Grain Act given
that Canada has indicated that there has been no instance in which a request for mixing authorization
was rejected 386 and that it already subjects foreign grain to the requirement that it be identified as
mixed grain, and not Canadian grain, when mixed.387
The provisions of the CWB Act and Regulations
6.314 Canada has stated that without, inter alia, Section 56(1) of the Canada Grain Regulations ,
foreign wheat could not be distinguished from Canadian wheat and the single-desk authority of the
CWB could not be enforced.
6.315 The Panel considers that, in essence, the b asis for Canada's reliance on the CWB Act and
Regulations to justify Section 56(1) of the Canada Grain Act is that, in the absence of Section 56(1),
the identity of foreign grain could not be prope rly established and maintained in the bulk grain
handling system. In the Panel's view, the altern ative measure discussed above in paragraph 6.308
would contribute to ensuring that the identity of fo reign grain is preserved, which would, in turn,
assist in preserving the CWB's single desk authority, because foreign grain that has been mixed would
always be labelled as mixed grain rather than Canadian grain. We also note that, under the alternative
measure which has been referred to above, the mixi ng of foreign grain and Western Canadian grain in
transfer elevators would still be subject to an authorization requirement pursuant to Section 72(2)
and 57(c) of the Canada Grain Act.
388 With respect to the difficulty associated with implementing the

385 Canada's reply to Panel question No. 59(a). See also Canada's reply to Panel question No. 12.
386 Canada's reply to Panel question No. 59(a). See also Canada's reply to Panel question No. 12.
387 Canada's first oral statement, paras. 14, 65; Canada's reply to Panel question No. 12.
388 See Canada's reply to Panel question No. 108.

alternative measure and its effect on trade our considerations at para graph 6.309 are equally
applicable here.
6.316 Further, it would seem to us that a requirement that mixed foreign grain be labelled as mixed
grain rather than Canadian grain would ensure as high a level of compliance with the relevant
provisions of the CWB Act and CWB Regulations as is the case under Section 72(2) and Section 57(c)
of the Canada Grain Act given that Canada has indicated that there has been no instance in which a
request for mixing authorization was rejected
389 and that it already subjects foreign grain to the
requirement that it be identified as mixed grain, and not Canadian grain, when mixed.390 In any event,
we note that the CWB Act and Regulations would not provide a justification for Section 56(1) in
respect of grain other than wheat and barley.
Summary
6.317 In summary, Canada has not convinced us that Section 56(1) of the Canada Grain
Regulations is necessary to secure compliance with the provisions of the Canada Grain Act and
Regulations, the Competition Act or the CWB Act and Regulations pointed to by Canada. We have
identified, by way of example, one alternative meas ure that we consider is reasonably available to
Canada and would allow Canada to secure a "very high level of compliance" with these provisions.391
6.318 With respect to the SPS and GMO concerns that Canada raised, we note that they appear to be
confined to the receipt of foreign grain into Canadian elevators under Section 57(c) of the Canada
Grain Act.392 Accordingly, we do not deal with these concerns here.
Conclusion on Canada's Article XX(d) defence
6.319 Therefore, for the reasons indicated above, th e Panel finds that Canada has not established
that Section 56(1) of the Canada Grain Regulations is "necessary" to secure compliance with
Sections 32, 61 and 70 of the Canada Grain Act and Schedule III of the Regulations, Section 52 of the
Competition Act and Sections 5, 7(1), 24, 32 and 45 of the CWB Act and Section 16 of the CWB
Regulations. Since the measure in question is not provi sionally justified under Article XX(d) of the
GATT 1994 because it is not "necessary", we do not need to determine, in addition, whether
Section 56(1) "secures compliance" wi th Sections 32, 61 and 70 of the Canada Grain Act and
Schedule III of the Regulations, Section 52 of the Competition Act and Sections 5, 7(1), 24, 32 and 45
of the CWB Act and Section 16 of the CWB Regulations. In addition, we do not need to determine
whether those laws and regulations are consistent with the provisions of the GATT 1994. For the
same reason, we do not consider that it is necessar y to proceed to determine whether the requirements
set out in the chapeau to Article XX have been satisfied.
6.320 Thus, since Canada has failed to establish th at the measure in question is provisionally
justified under Article XX(d) of the GATT 1994, we c onclude that Canada has failed to establish that
Section 56(1) of the Canada Grain Regulations is justified under Article XX(d) of the GATT 1994.

389 Canada's reply to Panel question No. 59(a). See also Canada's reply to Panel question No. 12.
390 Canada's first oral statement, paras. 14, 65; Canada's reply to Panel question No. 12.
391 As we have said, it is our view that the alternative measure in question would, at a minimum, render
Section 56(1) less WTO-inconsistent. We recall in this regard that the alternative measure would not subject
transfer elevator operators to any requirement to request authorization for the mixing of foreign grain that is like
Eastern Canadian grain with Eastern Canadian grain or with other foreign grain that is like Eastern Canadian
grain.
392 Canada's replies to Panel question Nos. 13(c) and (d), 15, 81 and 102. In any event, we think that,
mutatis mutandis, our considerations above in paras. 6.243 - 6.249 are also applicable here.

(vi) Overall conclusion for Section 56(1) of the Canada Grain Regulations
6.321 Since we are unable to accept Canada's claim of justification under Article XX(d) of the
GATT 1994, our overall conclusion with respect to Section 56(1) is that Section 56(1) of the Canada
Grain Regulations is, as such, inconsistent with Article III:4 of the GATT 1994.
(d) Sections 150(1) and 150(2) of the Canada Transportation Act: rail revenue cap
6.322 Sections 150(1) and 150(2) of the Canada Transportation Act, provide as follows:
"(1) A prescribed railway company's reve nues, as determined by the Agency, for
the movement of grain in a crop year may not exceed the company's maximum
revenue entitlement for that year as determined under subsection 151(1).
(2) If a prescribed railway company's reve nues, as determined by the Agency, for
the movement of grain in a crop year exceed the company's maximum revenue
entitlement for that year as determined under subsection 151(1), the company shall
pay out the excess amount, and any penalty that may be specified in the regulations,
in accordance with the regulations."
6.323 The "grain" to which Section 150 applies is defined in Section 147 of the Canada
Transportation Act as "any grain or crop included in Schedule II that is grown in the Western
Division, or any product of it included in Schedule II that is processed in the Western Division".
"Western Division" is, in turn, defined in Secti on 147 as "the part of Canada lying west of the
meridian passing through the eastern boundary of the City of Thunder Bay, including the whole of the
province of Manitoba".
6.324 The prescribed railway companies to whom Section 150 applies are also defined in
Section 147 as "the Canadian National Railway Co mpany, the Canadian Pacific Railway Company
and any railway company that may be specified in the regulations."
6.325 The railway movements covered by Section 150 are defined in Section 147 as "the carriage of
grain by a prescribed railway company over a ra ilway line from a point on any line west of Thunder
Bay or Armstrong, to:
(a) Thunder Bay or Armstrong, Ontario, or
(b) Churchill, Manitoba, or a port in British Columbia for export,
but does not include the carriage of grain to a port in British Columbia for export to the United States
for consumption in that country."

6.326 Section 151(1) provides that "[a] prescribed railway company's maximum revenue entitlement
for the movement of grain in a crop year is the amount determined by the [Canadian Transportation]
Agency in accordance with the following formula:
 [A/B + ((C – D) x $0.022)] x E x F

 where

 A is the company's revenues for the movement of grain in the base year;

 B is the number of tonnes of grain involved in the company's movement of grain in the base
year;

 C is the number of miles of the company's av erage length of haul for the movement of grain
in that crop year as determined by the Agency;

 D is the number of miles of the company's av erage length of haul for the movement of grain
in the base year;

 E is the number of tonnes of grain involved in the company's movement of grain in the crop
year as determined by the Agency; and

 F is the volume-related composite pric e index as determined by the Agency."

6.327 The values for A, B and D in the above formul a, which are determined in the "base year",
393
are set out for the prescribed railways in Sections 151(1) and (2) respectively. Item F is defined in
Section 151(4) of the Act and, according to Section 151(5) of the Act, is determined on or before
30 April of the crop year preceding the crop year for which the maximum revenue entitlement
("revenue cap"
394) is to be determined. The rail revenue cap is determined for each prescribed railway
following the conclusion of the crop year to which the revenue cap relates.395
6.328 The United States has stated that it is challenging Section 150(1) and Section 150(2) of the
Canada Transportation Act as such.396 On the basis of this and other statements by the United States,
the Panel understands that the United States' clai m is that Sections 150(1) and 150(2) of the Canada
Transportation Act , taken together , are inconsistent with Article III:4 of the GATT 1994. 397
According to the United States, the effect of these provisions taken together is that domestic grain is
favoured over like imported grain.
398 More particularly, the United States argues that Sections 150(1)
and 150(2) cap the annual revenue th at the relevant Canadian railroads may collect for transporting
Western Canadian grain and that these railroads must refund, with penalties, any revenues received in
excess of the cap. Thus, according to the United Stat es, the relevant Canadian railroads have an
incentive to hold their rates for the transportation of Western Canadian grain at a level that will ensure
that the railroads do not exceed the revenue cap whereas no comparable incentive exists for setting the
rates charged for the transport of imported grain.399

393 It would appear that the "base year" is crop year 2000 – 2001, being the crop year in which the rail
revenue cap provisions came into force.
394 Subsequent references to "the revenue cap" relate to the revenue cap set fo r each of the prescribed
railways.
395 Canada has confirmed that the maximum revenue entitlement for each railway is determined ex post
because the maximum revenue entitlement is dependent on the number of tonnes hauled and the average length
of haul incurred during the crop year in question. Canada's reply to Panel question No. 78(b). This appears to
be consistent with Section 151(5) of the Canada Transportation Act.
396 United States' reply to Panel question No. 10.
397 In particular, we note that in its second oral st atement, the United States refers to the "rail revenue
cap programme". See, for example, para. 34. We also note that neither the request for establishment of the
March Panel nor the request for establishment of the Ju ly Panel sheds much light on which sub-sections of
Section 150 are at issue. In neith er request (WT/DS276/6 and WT/DS276/9) did the United States specify the
sub-sections at issue but merely st ated that "Canadian law caps the maximum revenues that railroads may
receive on the shipment of Canadian domestic grain, but not revenues that railroads may receive on the
shipment of imported grain".
398 United States' first written submission, para. 100.
399 United States' first written submission, para. 46.

(i) Like products
6.329 The United States argues that US grain, even when of the exact same type as domestic
Canadian grain, is subject to differential treatme nt as "foreign grain" under Canada's transportation
measures. Given that Canada's grain transporta tion measures discriminate on the basis of origin
rather than on the basis of physical character istics or end-uses even when all other product
characteristics are exactly the same, one must reach the conclusion that Sections 150(1) and 150(2)
apply to like domestic and foreign products. In any event, the imported and domestic products at
issue, are identical and are, therefore, "like pr oducts". All imported and domestic products falling
within each of the categories of "grains" or "crops" as defined in Section 147 of the Canada
Transportation Act are "like products" for the purposes of Article III:4.
6.330 Canada argues that for the purposes of the Canada Transportation Act, each type of grain is
a different "like product".
6.331 The Panel notes that Sections 150(1) and 150(2) of the Canada Transportation Act apply to
"grain" that is defined in Section 147 of the Canada Transportation Act as "any grain or crop included
in Schedule II that is grown in the Western Division, or any product of it included in Schedule II that
is processed in the Western Division". Thus, Sec tions 150(1) and 150(2) apply to Western Canadian
grain to the exclusion, inter alia, of imported grain. Therefore, whether or not the movement of
certain grain is subject to Sections 150(1) and 150( 2) depends upon the origin of the grain that is
moved. If the grain is grown in Western Canada, Se ctions 150(1) and 150(2) a pply. However, if the
grain is not grown in Western Canada, which includ es instances where grain is imported into Canada,
Sections 150(1) and 150(2) do not apply.
6.332 In the present case, the United States has establis hed to our satisfaction that, as a result of the
origin-based distinction in Sections 150(1) and 150(2) , foreign grain that is like "grain" as defined in
Section 147 of the Canada Transportation Act would not be subject to Sections 150(1) and 150(2). In
fact, even for movements of foreign grain that woul d be identical to "grain" as defined in Section 147
in all respects except for origin, the prescribed ra ilway companies would not be subject to a revenue
cap.
6.333 Accordingly, the Panel considers that, since fo reign grain that is like domestic grain is not
subject to Sections 150(1) and 150(2), the "like products" requirement in Article III:4 of the GATT
1994 is satisfied.
(ii) Measure affecting internal transportation
6.334 The United States argues that the rail revenue cap, which relates to transportation, concerns
laws, regulations and requirements affecting transportation within the meaning of Article III:4 of the
GATT 1994. The United States also submits that the revenue cap applies to all grain movements that
"originate in Western Canada." Thus, the revenue cap applies to the internal transportation of all
grain within Canada from points in Western Canada to other Canadian destinations. All of these
movements are covered by Article III:4 of the GATT 1994.
6.335 Canada argues that a number of rail movements that are the subject of the revenue cap do not
fall within the scope of Article III:4 of the GA TT 1994 because they would be in-transit movements
under GATT 1994 Article V - namely, movements for export from Western Canada to Vancouver or
Prince Rupert and from Western Canada to Thunder Bay or Armstrong, Ontario. According to
Canada, railway movements covered by the reve nue cap that are relevant for analysis under
Article III:4 of the GATT 1994 are movements, in Ca nada, of US grain destined for the Canadian
domestic market. In particular, these would be movements through Thunder Bay or Armstrong,
originating in Western Canada, to domestic custom ers further east. Railways would charge market

prices both for Canadian and US grain on these movements. Canada argues that there are virtually no
rail movements of US grain to Thunder Bay or Ar mstrong for domestic sale in Canada. Therefore,
the United States' case is essentially hypothetical.
6.336 The Panel notes that there is an argument to be made that Sections 150(1) and 150(2) do not
regulate the transportation of grain directly. However, as will become clear from the discussion
below regarding whether Sections 150(1) and 150(2) , taken together, entail less favourable treatment
for imported grain,
400 these provisions, nevertheless, affect the internal transportation of imported
grain insofar as Sections 150(1) and 150(2) may r esult in lower railway transportation costs for
Western Canadian grain than for like imported grain. 401 For these reasons, we conclude that the rail
revenue cap mechanism set out in Sections 150 (1 ) and 150(2), is a measure affecting the internal
transportation of grain.402
6.337 With respect to whether Sections 150(1) and 150( 2) apply to foreign grain "imported" into
Canada403, the Panel is satisfied that these sections concer n at least some movements of grain destined
for the Canadian domestic market, in particular, movements to Thunder Bay or Armstrong, Ontario.404
The Panel is satisfied, therefore, that Sections 150(1) and 150(2) of the Canada Transportation Act
can and do affect the internal transportation of grain "imported" into Canada and, hence, are subject to
the provisions of Article III:4.
(iii) Less favourable treatment
6.338 The United States argues that the rail revenue cap only applies to the shipment of Western
Canadian grain. According to the United States, im ported grain is not eligible to receive the benefits
of this programme, thereby creating more favourable conditions of competition for Canadian domestic
grain as compared with imported grain. The Unit ed States submits, in particular, that railroads
shipping Western Canadian grain must choose a tari ff for transport so that the total revenue does not
exceed the government-mandated rail revenue cap so as to avoid paying a significant penalty for
exceeding the cap. In contrast, railways are free to charge higher tariffs for grain other than Western
Canadian grain in order to boost revenues not subject to the revenue cap. In other words, shipments
of Western Canadian grain that are subject to th e rail revenue cap entail lower transportation costs
than would be the case without the revenue cap.
6.339 Canada argues that US grain is not accorded less favourable treatment than that accorded to
domestic grain under the rail revenue cap because th e revenue cap regulates the revenues earned by
prescribed railways but does not regulate the rates for shipping. In addition, Canada argues that the
revenue cap does not confer treatment that is less favourable for movements of US grain that originate
and/or terminate outside the geogra phic parameters of the revenue cap. Canada submits that this is
essentially the case for all movements to Eastern Ca nada because there are no provisions in the
Canada Transportation Act that set limits on rates for individual grain movements that are not
covered by the revenue cap provisions, including the portion of movements that originate or terminate
outside the geographic territory covered by the revenue cap. For these movements, railways use
differential pricing practices - that is, they charge wh at the market will bear. Canada also argues that
the revenue cap has never been met and is unlikely to be met in the future. According to Canada, the

400 See paras. 6.338 - 6.359 below.
401 We recall in this context that the panel in Italy – Agricultural Machinery found that a measure need
not regulate a product directly in order to fall within the scope of Article III:4 of the GATT. See footnote 340
above.
402 Canada has not contested that Sections 150(1) and 150(2), taken together, are internal measures
within the meaning of Article III:4 of the GATT 1994.
403 See para. 6.158 above.
404 Canada does not contest that there are, or can be, movements of foreign grain for domestic sale in
Canada that are subject to Sections 150(1) and 150(2). Canada's first written submission, paras. 282-283.

United States' case in respect of the revenue cap is theoretical since the cap has never been reached
and the railways set rates commercially. Canada su bmits that, even according to the United States'
own methodology of calculating benefits, the US De partment of Commerce found that the revenue
cap does not confer a benefit to domestic producers.
6.340 The Panel understands the United States' claim to be that Sections 150(1) and 150(2) of the
Canada Transportation Act , taken together, are, as such, inconsistent with Article III:4 of the
GATT 1994.405 As with our analysis of the other meas ures being challenged under Article III:4, we
will first examine whether the relevant provisions, taken together, adversely affect the competitive
opportunities of imported grain vis-à-vis like domestic grain. As a s econd step, we will consider
whether Sections 150(1) and (2), taken together, mandate or, have the effect of mandating, more
favourable treatment for domestic grain as compared to like imported grain. We, thus, assume that it
is appropriate, in assessing the WTO-consistency of legislation, as such, to distinguish between
mandatory and discretionary legislation. We note in this regard that our ultimate conclusion does not
depend on the correctness of this assumption.406
6.341 With respect to the question of whether Secti ons 150(1) and 150(2), taken together, adversely
affect the competitive opportunities of imported grain vis-à-vis like domestic grain, we first consider
whether and how the revenue cap may affect the rates charged by the prescribed railways for the
transportation of Western Canadian grain, as the Un ited States suggests it does. In considering this
preliminary issue, it is useful to recall at the outset how the revenue cap is determined. In our
understanding, the Canadian Transportation Agency must establish a revenue cap for each crop year
and in respect of each prescribed railway company. It does so based on a statutorily prescribed
formula set out in paragraph 6.326 above. Significantly, some of the elements included in that
formula are fixed. 407 The remaining elements are known at the time that the revenue cap is
determined for a particular crop year.408
6.342 Bearing in mind how the revenue cap is determ ined, we now turn to analyse whether the
revenue cap may affect the rates charged by the pr escribed railways for the transportation of Western
Canadian grain. We note in this regard that Sections 150(1) and 150(2) of the Canada Transportation
Act do not contain an explicit link between the reve nue cap and the rates charged by the prescribed
railways. Moreover, as explained by Canada, the ra ilways have discretion to charge whatever rates
they wish. Nevertheless, we consider that the na ture of the revenue cap formula is such that the
revenue cap effectively constrains, or is capable of constraining, the rates charged.
6.343 It might be argued that a prescribed railway comp any could stay within the revenue cap either
by adjusting the rates charged for the transportati on of Western Canadian grain or by adjusting the
volume shipped. However, it is clear to us, on the basis of the formula according to which the

405 United States' reply to Panel question No. 10.
406 See also our remarks on this issue at para. 6.184 above.
407 Namely, "A" representing the railway company's re venues for the movement of grain in the base
year; "B" representing the number of tonnes of grain involved in the company's movement of grain in the base
year; and "D" being the number of miles of the company's average length of haul for the movement of grain in
the base year.
408 Namely, "C" representing the number of miles of the company's average le ngth of haul for the
movement of grain in that crop year as determined by the Canadian Transportation Agency and "E" being the
number of tonnes of grain involved in the company's movement of grain in the crop year as determined by the
Agency. It is apparent from the example of the determination of the revenue cap for crop year 2001 – 2002 that
was provided to the Panel (Exhibit CDA-36) that the reference to the "determination by the Agency" in relation
to these elements – "C" and "E" – refers to the auditing and verification function that the Agency performs with
respect to statistics that ar e provided by the prescribed railway comp anies. Element F, which is the volume-
related composite price index as determined by the Agen cy, is also known at the tim e that the revenue cap is
determined for a particular crop year.

revenue cap is determined, that the revenue cap w ould constrain the prescribed railways' rates rather
than the volume of grain transported by those railw ays. Changes in volume of grain shipped in a
given crop year, represented by element "E" in the revenue cap formula, result in corresponding
changes in the revenue cap. That is to say, if the volume shipped in a given crop year is lower than
for the previous crop year, the cap decreases proporti onately for the current year. Therefore, we
believe that a railway company would seek to comply with the revenue cap by adjusting rates rather
than the volume of grain shipped.
6.344 This inference is consistent with other ev idence that has been a dduced in respect of
Sections 150(1) and 150(2). In particular, Canada explained that the purpose of the revenue cap when
it was established was to provide railways with greater flexibility in setting rates in order to encourage
competition and efficiencies in the railway trans portation system while giving protection to farmers
by limiting total revenues that railways could earn from moving grain.
409 The United States also
pointed to a press release issued by Transport Ca nada announcing "the establishment of a revenue cap
that provides for an annual estimated $178 million re duction in railway revenues, which represents an
estimated 18 per cent reduction in grain freight rates from 2000-2001 levels."410 It would appear from
the foregoing that the revenue cap is not designed to require or encourage the prescribed railways to
transport smaller volumes than was the case under the ol d rate system, but to ensure that an effective
constraint would continue to be imposed on the ra ilways' rate-setting. Indeed, as we see it, the
revenue cap formula effectively prescribes a maximum average rate for the transportation of Western
Canadian grain in a given crop year.
6.345 Since we agree with the United States that th e revenue cap may affect the rates charged for
the transportation of Western Canadian grain, we need to go on to examine whether this adversely
affects the competitive opportunities of imported grain vis-à-vis like Western Canadian grain.
6.346 Based on the foregoing considerations, it is clear to us that Sections 150(1) and 150(2) will, in
some circumstances, limit the prescribed railway companies' commercial options with respect to
Western Canadian grain insofar as these sections effectively prescribe a maximum average rate for the
transportation of such grain. For instance, as noted by the United States 411, circumstances might arise
- such as a case where Canada experiences a bumper grain crop - where there is a scarcity of capacity
to move domestic grain, which would result in si gnificant upward pressure on rates. In such
circumstances, it can be presumed that the prescrib ed railways would charge the rate for movements
of Western Canadian grain dictated by the revenue cap, not least because they would be required to
pay out the amount by which the cap had been exce eded and because of the possibility that penalties
might be imposed.
6.347 In contrast, neither Sections 150(1) and 150( 2), nor, as we understand it, any other provision
of Canadian law, prescribes, actually or in effect, maximum average rates to be charged by the
prescribed railways for the movement of imported grain that is like Western Canadian grain. We note
that Sections 150(1) and 150(2) do not require th e prescribed railways to charge higher rates for
imported grain whenever the rates for Western Cana dian grain are effectively constrained by the
revenue cap. However, Canada itself has stated that the relevant railway companies are profit-
maximizers who charge rates comme rcially and, thus, will charge the highest rates the market will
bear.
412 We consider that it can be presumed that, in such circumstances, the prescribed railways

409 Canada's comments on United States' reply to Panel question No. 94. See also Exhibit CDA-34,
page 36.
410 Transport Canada, Press Release No. HO34/000 contained in Exhibit US-26.
411 United States' second written submission, para. 38.
412 Canada's first written submission, para. 298.

would, at least in some instances, such as in th e above-noted example of a bumper grain crop in
Canada, charge higher rates for imported grain.413
6.348 Accordingly, we think that, in some circum stances, and for movements originating and
terminating within the geographical scope of the revenue cap, lower transportation rates would be
charged for Western Canadian grain than for like imported grain, even if the latter were transported on
the same route under like conditions. In other word s, for movements effectuated by the prescribed
railways and entirely within the geographical scope of the revenue cap, the revenue cap adversely
affects the competitive opportunities of imported grain in asmuch as it will, in some instances, make it
more costly to transport imported grain by rail. Therefore, we consider that, at least in some
instances, Sections 150(1) and 150(2) will result in less favourable treatment being accorded to
imported grain than to like Western Canadian grain
6.349 We note that the revenue cap does not precl ude the prescribed railways from charging at
certain times of the crop year or for certain movements rates that are higher than the maximum
average rate dictated by the revenue cap (and not lo wer than the rates charged for imported grain) as
long as they also charge rates below the maximum av erage rate at other times of the crop year or for
other movements. However, the possible absence of less favourable treatment of like imported grain
in some instances does not detract from the fact that there might be less favourable treatment in other
instances.
6.350 We also note that Sections 150(1) and 150(2) draw an origin-based distinction between
Western Canadian grain and all other grain, includi ng other Canadian grain. However, as we have
stated above with respect to Section 56(1) of the Canada Grain Regulations
414, it is our view that, in
such circumstances, Canada has to accord imported grain treatment that is at least as favourable as the
treatment afforded to like Western Canadian grain.
6.351 With respect to the question of whether Sec tions 150(1) and 150(2) ma ndate or require less
favourable treatment, we note that these sections take n together require that revenues earned by the
prescribed railway companies do not exceed the companies' revenue cap in respect of the
transportation of Western Canadian grain for partic ular movements covered by the revenue cap. In
addition, we are not aware of any discretion conf erred on the Canadian Transportation Agency to
make upward adjustments to the cap in situati ons where it might otherwise be exceeded, thereby
preventing the revenue cap from imposing a cons traint on the prescribed railways' revenues. 415 We
acknowledge that, over time, the revenue cap may be adjusted upwards because the revenue cap
formula includes an upward adjust ment for inflation (through element "F") but not a downward
adjustment for productivity. 416 However, in our understanding, this adjustment to the level of the
revenue cap is not the result of the exercise of discretion by the Canadian Transportation Agency.
6.352 On the basis of the foregoing, it would appear that Sections 150(1) and 150(2) of the Canada
Transportation Act , taken together, are, on their face, in consistent with Article III:4 of the
GATT 1994 because imported grain is treated less fa vourably than like Western Canadian grain.

413 For instance, it may be that the maximum rate ra ilways can charge on Western Canadian grain is x
because of the existence of the rail revenue cap whereas the maximum rate they can charge on imported grain
because of intermodal competition (i.e., competition betwee n providers of different m odes of transportation) is
x+ y. In such a case, it would appear that a railway company would charge a higher rate for imported grain than
for Western Canadian grain without losing the business of those who want to ship imported grain to providers of
substitutable transportation services (transportation by truck, etc.). Exhibit CDA-34 contains information
regarding the pricing behaviour of railways.
414 See para. 6.294 above.
415 We note that Canada has not argued that the Canada Transportation Authority has such discretion.
416 Canada's first written submission, para. 295; Canada's reply to Panel question No. 17.

However, Canada has put forward a number of defen ces to suggest that, in reality, imported grain is
not treated less favourably than Western Canadian grain. We consider those defences below.
The revenue cap has not been constraining so far and will not be constraining in the future

6.353 Canada argues that the revenue cap has never been met and is unlikely to be met in the
future.
6.354 The Panel notes that it may be the case that the re venue cap does not currently constrain
railway rates, and that it is unlikely to do so in th e future. However, as noted by the Panel above, it is
not necessary to demonstrate actual adverse trade e ffects in establishing a violation of Article III:4
since Article III:4 protects conditions of competition and not trade effects. We also recall that,
according to GATT/WTO jurisprudence on Article III:4, the mere fact that an imported product is
exposed to a risk of discrimination is sufficient to conclude that it has been treated less favourably. 417
In any event, as noted previously by us, the reve nue cap will constrain railway rates given the right
circumstances.
6.355 Canada also submits that while the proceedings of the March Panel and the July Panel were
ongoing, the US Department of Commerce stated, in its Issues and Decision Memorandum for the
Final Countervailing Duty Determinations of the Investigations of Certain Durum Wheat and Hard
Red Spring Wheat from Canada of 28 August 2003, that "there is no evidence on the record to
indicate that the revenue cap resulted in lower revenues on capped routes."
6.356 The Panel considers that it is sufficient to note in this regard that it is reviewing
Sections 150(1) and 150(2), as such, and not their application during some particular time period. The
fact that Sections 150(1) and 150(2) may not ha ve "resulted in lower revenues on capped routes" in
the past, and, thus, may not have constrained the rates applied by the prescribed railway companies
for the transportation of Western Canadian grain is not conclusive in establishing that they cannot
adversely affect the competitive conditions of like imported grain in the future.
For movements originating and/or terminating out side the geographical scope of the revenue cap,
Sections 150(1) and 150(2) have no relevance or effect
6.357 Canada argues that the revenue cap does not conf er treatment that is less favourable for
movements of imported grain that originate and/or terminate outside the geographic parameters of the
revenue cap. More particularly, Canada submits that for such movements, the rates applied by
railways will not be affected at all by the revenue ca p since prices will be driven by what the market
will bear for the entire journey, completely inde pendently of rates charged for components of the
journey that are covered by the cap.
6.358 The Panel considers that it may well be that for the types of movements referred to by
Canada, the railway companies do and will charge identical rates for domestic and imported grain.
However, the fact that the rates for movement s originating and/or terminating outside the
geographical scope of the revenue cap might be unaff ected by the existence of the revenue cap would
not remove the less favourable treatment of importe d grain in respect of railway movements within
the geographical scope of the rail revenue cap.

417 Panel Report, European Economic Community – Payments and Subsidies Paid to Processors and
Producers of Oilseeds and Related Animal-Feed Proteins ("EEC – Oilseeds I"), adopted 25 January 1990, BISD
37S/86, para. 141.

Conclusion
6.359 In conclusion, since the Panel is not persuade d by the defences put forward by Canada, the
Panel confirms its provisional conclusion above at paragraph 6.352 that Sections 150(1) and 150(2) of
the Canada Transportation Act , taken together, are, as such, incons istent with Article III:4 of the
GATT 1994.
(e) Section 87 of the Canada Grain Act : producer railway cars
6.360 Section 87 of the Canada Grain Act provides that:
"(1) One or more producers of grain, not exceeding the number designated by
order of the Commission, having grain, in su fficient quantity to fill a railway car, that
may be lawfully delivered to a railway co mpany for carriage to a terminal elevator,
transfer elevator or process elevator or to a consignee at a destination other than an
elevator may apply in writing to the Co mmission, in prescribed form, for a railway
car to receive and carry the grain to the elevator or other consignee.
(2) The Commission shall, in each week , allocate to applications made by
producers of grain pursuant to subsection (1), in the order in which the applications
are received, available railway cars that ente r each shipping control area in that week
up to such number or percentage of the av ailable cars entering the area in that week
and under such terms and conditions as the Commission may order."
6.361 The United States' claim is that the provisions of Section 87 of the Canada Grain Act are, as
such, inconsistent with Article III:4 of the GATT 1994. 418 More particularly, the United States
indicated that it is claiming that Section 87 is in consistent with Article III:4 because producers of
foreign grain are legally precluded from gaining access to producer railway cars and are, thereby,
accorded less favourable treatment than producers of like Canadian grain. The United States' claim
rests on the assertion that producers of foreign grain are legally precluded from gaining access to
producer railway cars. As a threshold matter, the Pa nel needs to determine wh ether this assertion has
been sufficiently established.
419
6.362 In so doing, the Panel recalls that the Unite d States has the burden of adducing argument and
evidence as to the meaning of Section 87 to substantia te its assertion that the provisions of Section 87
have the effect of precluding producers of foreign grain from gaining access to producer railway cars.
In this regard, we note that the Appellate Body in US – Carbon Steel held:
"The party asserting that another party's munici pal law, as such, is inconsistent with
relevant treaty obligations bears the burde n of introducing evidence as to the scope
and meaning of such law to substantiate th at assertion. Such evidence will typically
be produced in the form of the text of the relevant legislation or legal instruments,
which may be supported, as appropriate, by ev idence of the consistent application of
such laws, the pronouncements of domestic courts on the meaning of such laws, the

418 United States' reply to Panel question No. 11. Since the United States is challenging Section 87 of
the Canada Grain Act as such, we do not examine whether any of the actual alloca tion orders that have been
issued pursuant to Section 87 of the Act might have been inconsistent with Article III:4.
419 We note in this regard that the Appellate Body in US – Corrosion-Resistant Steel Sunset Review
stated that "when a measure is challenged 'as such', the starting point for an analysis must be the measure on its
face. If the meaning and content of the measure are clear on its face, then the consistency of the measure as such
can be assessed on that basis alone. If, however, the meaning or content of the measure is not evident on its face,
further examination is required". Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review , supra,
para. 168. In this case, the meaning of the measure at issue is in dispute.

opinions of legal experts and the writings of recognized scholars. The nature and
extent of the evidence required to satisfy the burden of proof will vary from case to
case."
420
6.363 Below, we will examine the evidence introduced and discussed by the parties.
(i) Text of Section 87 of the Canada Grain Act
6.364 The United States relies, first, upon the text of Section 87. The United States submits that
Section 87 does not state that foreign grain is elig ible for the producer rail car programme and that,
therefore, it does not apply to foreign grain.
6.365 Canada, on the other hand, argues that the term "producer" is not defined in the Canada
Grain Act. According to Canada, there is no indication in Section 87 of the Canada Grain Act , the
Regulations or the practice of the CGC that Section 87 only applies to producers of Canadian grain.
6.366 The Panel notes that Section 87 is directed at "producers of grain". We agree that it is
possible that this term might be interpreted to mean "domestic producers of grain" or "producers of
domestic grain" as suggested by the United States. Ho wever, in our view, it is also possible that the
term "producers of grain" could be interpreted to mean "domestic and foreign producers" of grain or
"producers of domestic and foreign grain". The term "producers" as it appears in Section 87 is
unqualified. Moreover, the term "p roducers" is not defined in the Canada Grain Act . The term
"grain", on the other hand, is defined in Section 2 of the Act as "any seed designated by regulation as a
grain for the purposes of this Act". However, neith er this definition, nor the definition contained in
Section 5(1) of the Canada Grain Regulations suggests that grain should be interpreted as only
applying to domestic grain.
421 In fact, Section 57(c) of the Canada Grain Act -- a provision which is
contained in the same statute as Section 87 and has been extensively discussed before this Panel --
explicitly refers to "foreign grain" whereas other provisions of Section 57, which apply equally to
domestic and foreign grain, use the unqualified term "grain". 422 This suggests that where Canada
wanted to restrict the application of a provision to grain of a particular origin, it did so explicitly.
6.367 For these reasons, we are not persuaded that it is clear from the text of Section 87 that foreign
producers of grain, or producers of foreign grain, cannot have access to producer railway cars as
envisaged in Section 87.
(ii) Agriculture and Agri-Food Canada web site
6.368 The United States also relies upon the Agriculture and Agri-Food Canada web site, which
stated that only "Canadian grain producers with an adequate quantity of lawfully deliverable grain
may apply to the Commission."
6.369 Canada argues that, under Canadian law, web s ite information is irrelevant to the
interpretation of a law. While governments use web sites to provide information to the public, these

420 Appellate Body Report, United States – Countervailing Duties on Certain Corrosion-Resistant Carbon
Steel Flat Products from Germany ("US – Carbon Steel "), WT/DS213/AB/R and Corr.1, adopted
19 December 2002, para. 157. See also Panel Report, US – Section 129(c)(1) URAA, supra, para. 6.28.
421 We note in passing that, based on Canada's reply to a question from the Panel, it may be that, given
the fact that the text is susceptible of being read to al so cover foreign producers of grain or producers of foreign
grain, a Canadian court could, in accordance with releva nt jurisprudence by Canada's Supreme Court, interpret
Section 87 in this way if it were of the view that this is necessary to ensure conformity with Canada's WTO
obligations. Canada's reply to Panel question No. 41.
422 For instance, Section 57(d) applies to "grain" that the elevator operator believes is infested or
contaminated. Canada's reply to Panel question No. 103 confirms that Section 57(d) applies to foreign grain.

web sites are of no relevance to the interpretation of the law and cannot modify or restrict the terms of
the law. In addition, Canada has indicated that the Section of the web site to which the United States
points in support of its argument was incorrect and has since been corrected.
6.370 The Panel does not consider that the web site re ferred to by the United States has much
evidentiary value for three reasons. First, the fact that the web site in question refers only to Canadian
producers does not necessarily mean that Agriculture and Agri-Food Canada was of the view that
railway cars are not available to foreign producers because it cannot be excluded that the information
provided on the web site was targeted at domestic users of the railway car programme. Secondly, the
web site in question was not maintained by the agency responsible for the producer car programme,
namely the CGC. In this regard, we note that th e CGC web site refers to "producers" rather than
"Canadian producers" when identifying who can apply for railway cars from the CGC.
423 Thirdly, the
United States has not provided any evidence to s how that Canadian courts, in ascertaining the
meaning of federal statutes, would attach weight to statements made by government agencies on their
public web sites.
(iii) Location of loading stations for producer railway cars
6.371 The United States argues that it has shown that producer railway cars are only available to
Canadian grain producers located in certain Canadian provinces. More particularly, the United States
argues that only Canadian producers can take a dvantage of producer railway cars under Section 87
because all producer railway car loading stations are in Alberta, British Columbia, Manitoba, or
Saskatchewan.
6.372 Canada argues that Section 87 of the Canada Grain Act does not limit "eligible loading sites"
to these provinces but simply limits producer railway cars to "producers". There is no geographical
limitation in law, regulation, or in the CGC Producer Car Allocation Orders. Canada also submits that
the location of producer railway car loading sites is determined by the railways – that is, private
commercial operators, and not the Government of Canada – taking into account requests by
producers. Canada has also indicated that no Canadi an intermediary is necessary for a US producer to
obtain a producer railway car.
6.373 The Panel is not convinced by the United States' argument that foreign producers of grain
cannot obtain producer railway cars at the loading stati ons referred to by the United States. It is not
clear to the Panel why foreign grain could not be imported into Canada an d taken to the nearest
loading site. Further, even if the existing loading sites are located in areas that primarily benefit
Canadian producers, this would not, in itself, establish that foreign producers cannot obtain producer
railway cars or that it was not intended that foreign producers would be eligible to obtain such cars.
We note in this regard that the United States has not contested Canada's contention that the location of
the existing car loading sites were not determined by the Government of Canada.
(iv) Allocation orders
6.374 We also note that Canada has exhibited two CGC orders made pursuant to Section 87, one
pertaining to 2002-2003 and the other pertaining to 2003-2004. 424 While the orders appear to
distinguish between, on the one hand, applications made by producers of "grain deliverable to the
CWB" and, on other hand, applications made by all other producers, there is nothing in those orders
that suggests that foreign grain producers are not entitled to make an application for a producer
railway car under Section 87.

423 Exhibit US-10.
424 Exhibits CDA-40 and CDA-41.

(v) Conclusion
6.375 Having considered and weighed the evidence be fore us, including the text of Section 87,
Canadian government web sites and elements relating to the applica tion of Section 87, we conclude
that the United States has not met its burden of establishing that Section 87 of the Canada Grain Act
legally precludes producers of foreign grain or fo reign producers of grain from gaining access to
producer railway cars. Since the success of the Unit ed States' claim in respect of Section 87 of the
Canada Grain Act depends on the United States establishing its assertion that Section 87 precludes
producers of foreign grain or foreign producers of grain from gaining access to producer railway cars,
in view of the Panel's findings on this issue, it is not necessary to examine the United States' claim
further. The Panel, therefore, concludes that th e United States has failed to establish that Section 87
of the Canada Grain Act is, as such, inconsistent with Article III:4 of the GATT 1994.
3. Claims under Article 2 of the TRIMs Agreement
6.376 Article 2 of the TRIMs Agreement provides:
"1. Without prejudice to other rights and obligations under
GATT 1994, no Member shall apply an y TRIM that is inconsistent
with the provisions of Article III or Article XI of GATT 1994.
2. An illustrative list of TRIMs that are inconsistent with the
obligation of national treatment provided for in paragraph 4 of
Article III of GATT 1994 and the obligation of general elimination of
quantitative restrictions provided for in paragraph 1 of Article XI of
GATT 1994 is contained in the Annex to this Agreement."
6.377 Paragraph 1(a) of the Annex to the TRIMs Agreement , which was relied upon by the
United States in making its claim of violation of Article 2 of the TRIMs Agreement provides:
"1. TRIMs that are inconsistent with the obligation of national
treatment provided for in paragr aph 4 of Article III of GATT 1994
include those which are mandatory or enforceable under domestic
law or under administrative rulings, or compliance with which is
necessary to obtain an advantage, and which require:
(a) the purchase or use by an enterprise of products of domestic
origin or from any domestic source, whether specified in terms of
particular products, in terms of vol ume or value of products, or in
terms of a proportion of volume or value of its local production."

(a) Section 57 of the Canada Grain Act, Section 56(1) of the Canada Grain Regulations and
Sections 150(1) and (2) of the Canada Transportation Act
6.378 Given the Panel's conclusions above with respect to the US claim that Section 57(c) of the
Canada Grain Act, Section 56(1) of the Canada Grain Regulations and Sections 150(1) and 150(2) of
the Canada Transportation Act, taken together, are inconsistent with Article III:4 of the GATT 1994,
the Panel has decided to exercise judicial economy with respect to the claim that these measures are
also in violation of Article 2 of the TRIMs Agreement. Accordingly, the Panel will not examine the
US claims under Article 2 of the TRIMs Agreement in respect of these measures.

(b) Section 87 of the Canada Grain Act
6.379 The United States claims that Section 87 of the Canada Grain Act is an investment measure
related to trade in goods within the meaning of Article 1 of the TRIMs Agreement. The United States
argues that, since imported grain is accorded less fa vourable treatment than that accorded to like
domestic grain under Section 87 of the Canada Grain Act in violation of Article III:4 of the
GATT 1994, Section 87 is also incons istent with Article 2.1 of the TRIMS Agreement . The
United States also argues that Section 87, which requi res shippers to use domestic Canadian grain in
order to obtain an advantage, falls within paragra ph 1(a) of the Illustrative List of trade-related
measures annexed to the TRIMs Agreement . In particular, Section 87 is "mandatory" and
"enforceable". Canadian grain and its purchasers/sellers who use the rail transportation system to ship
Canadian grain obtain an advantage under Section 87 in the form of obtaining "government railway
cars", which entail lower transportation costs. This advantage is only obtained when domestic rather
than foreign grain is transported and it is an adva ntage that is covered by paragraph 1(a) of the
Illustrative List.
6.380 Canada argues that the United States has not established that Section 87 of the Canada Grain
Act is a trade-related investment measure w ithin the meaning of Article 1 of the TRIMS Agreement.
In addition, Canada argues that Sec tion 87 is not covered by paragraph 1(a) of the Illustrative List.
Canada argues that Section 87 of the Canada Grain Act does not require use of Canadian grain in
order to obtain a producer railway car. Moreover, in Canada's view, shippers do not "use" grain when
they ship it by rail. Rather, they are using the railways to provide them with transport services.
6.381 The Panel recalls its previous findings at paragra ph 6.375 above that the United States has
not established that foreign grain cannot benefit from Section 87 of the Canada Grain Act and that,
therefore, the United States has not established that S ection 87 is inconsistent with Article III:4 of the
GATT 1994. In view of these findings, it is clear th at, even if Section 87 could be considered an
investment measure related to trade in goods within the meaning of the TRIMs Agreement , the
United States has not established that Section 87 is , as such, inconsistent with Article 2.1 of the
TRIMs Agreement . Moreover, since the United States has not established that Section 87 of the
Canada Grain Act legally precludes producers of foreign grain or foreign producers of grain from
gaining access to producer railway cars, the United St ates has also failed to establish that Section 87
requires the use by an enterprise of products of domestic origin or from any domestic source within
the meaning of paragraph 1(a) of the Annex to the TRIMs Agreement.
6.382 Accordingly, the Panel dismisses the Unite d States' claim that Section 87 of the Canada
Grain Act is, as such, inconsistent with Article 2 of the TRIMs Agreement
VII. CONCLUSIONS425
A. CONCLUSIONS OF THE MARCH PANEL
7.1 For the reasons set forth in its Report, the March Panel concludes as follows:426
(a) Section 57(c) of the Canada Grain Act is inconsistent with Article III:4 of the
GATT 1994 and is not justified under Article XX(d) of the GATT 1994;

425 For an explanation of the structure of this Section, see paras. 6.1-6.3 above.
426 The March Panel made no findings with respect to the "measure relating to exports of wheat" ( i.e.,
the CWB Export Regime) which the Un ited States claimed to be inconsistent with Article XVII:1 of the

(b) Section 56(1) of the Canada Grain Regulations , as it existed at the time that the
March Panel was established, is inconsis tent with Article III: 4 of GATT 1994 and is
not justified under Article XX(d) of the GATT 1994;
(c) Sections 150(1) and (2) of the Canada Transportation Act are inconsistent with
Article III:4 of GATT 1994;
(d) The United States has failed to establish its claim that Section 87 of the Canada
Grain Act is inconsistent with Article III:4 of the GATT 1994 and Article 2 of the
TRIMs Agreement.
7.2 Article 3.8 of the DSU provides that "[i]n cases where there is an infringement of the
obligations assumed under a covered agreement, the ac tion is considered prima facie to constitute a
case of nullification or impairment". Canada failed to rebut this presumption. Therefore, to the extent
Canada has acted inconsis tently with its obligations under the GATT 1994, it must be presumed to
have nullified or impaired benefits accruing to the United States under the GATT 1994.
7.3 In the light of these conclusions, the March Panel recommends that the Dispute Settlement
Body request Canada to bring the relevant measur es into conformity with its obligations under the
GATT 1994.
427
B. CONCLUSIONS OF THE JULY PANEL
7.4 For the reasons set forth in its Report, the July Panel concludes as follows:
(a) The United States has failed to establish its claim that Canada has breached its
obligations under Article XVII:1 of the GATT 1994 because the CWB Export
Regime necessarily results in the CWB making export sales that are not in accordance
with the principles of subparagraphs (a) or (b) of Article XVII:1;
(b) Section 57(c) of the Canada Grain Act is inconsistent with Article III:4 of the
GATT 1994 and is not justified under Article XX(d) of the GATT 1994;
(c) Section 56(1) of the Canada Grain Regulations, as it existed at the time that the July
Panel was established, is inconsistent with Article III:4 of GATT 1994 and is not
justified under Article XX(d) of the GATT 1994;
(d) Sections 150(1) and (2) of the Canada Transportation Act are inconsistent with
Article III:4 of GATT 1994;
(e) The United States has failed to establish its claim that Section 87 of the Canada
Grain Act is inconsistent with Article III:4 of the GATT 1994 and Article 2 of the
TRIMs Agreement.

427 We note that Section 56(1) of the Canada Grain Regulations, as it existed at the time that the March
Panel was established, was amended, effective as of 1 August 2003. As a result, for the purposes of the March
Panel's recommendation, Section 56(1) is not a "relevant measure". See Appellate Body Report, United States –
Import Measures on Certain Products from the European Communities (" US – Certain EC Products "),
WT/DS165/AB/R, adopted 10 January 2001, paras. 81 and 129. Nevertheless, the Panel notes that Canada has
confirmed that the substantive effect of Section 56(1) as amended is the same as that under Section 56(1) as it
existed at the time that the March Panel was established. Canada's comments on the United States' reply to
Panel question No. 67.

7.5 Article 3.8 of the DSU provides that "[i]n cases where there is an infringement of the
obligations assumed under a covered agreement, the ac tion is considered prima facie to constitute a
case of nullification or impairment". Canada failed to rebut this presumption. Therefore, to the extent
Canada has acted inconsis tently with its obligations under the GATT 1994, it must be presumed to
have nullified or impaired benefits accruing to the United States under the GATT 1994.
7.6 In the light of these conclusions, the July Panel recommends that the Dispute Settlement Body
request Canada to bring the relevant measures in to conformity with its obligations under the
GATT 1994.428

Panel was established, was amended, effective as of 1 August 2003.. As a result, for the purposes of the July
Panel's recommendation, Section 56(1 ) is not a "relevant measure". See Appellate Body Report, US – Certain
EC Products , supra, paras. 81 and 129. Nevertheless, the Panel notes that Canada has confirmed that the
substantive effect of Section 56(1) as amended is the same as that under Section 56(1) as it existed at the time
that the July Panel was established. Canada's comments on the United States' reply to Panel question No. 67.