Document: WT/DS264/RW Page A-1 ANNEX A FIRST SUBMISSION BY THE PARTIES Contents Page A-1 First Written Submission of Canada A-2 A-2 Executive Summary of First Written Submission of the United States A-10
Document codes: WT/DS264/RW
Complainant: Canada
Respondent: U.S.
Third parties: China, EU, India, Japan, New Zealand, Thailand
Dispute stage: Mutually Agreed Solution
Agreements cited: Art. 1, 2, 4, 5, 9  Anti-dumpingArt. VI  GATT 1994Art. 18  Anti-dumping

ANNEX A

FIRST SUBMISSION BY THE PARTIES

Contents Page
A-1 First Written Submission of Canada A-2
A-2 Executive Summary of First Written Submission of the United States A-10

TABLE OF CASES CITED IN THIS SUBMISSION

Appellate Body Report United States – Final Dumping Determination on Softwood Lumber
from Canada , Report of the Appellate Body, ,
adopted 31 August 2004.
Panel Report United States – Final Dumping Determination on Softwood Lumber
from Canada , Report of the Panel, , adopted
31 August 2004.
Canada – Aircraft (Article 21.5 –
Brazil)
Canada – Measures Affecting the Export of Civilian Aircraft:
Recourse by Brazil to Article 21.5 of the DSU, Report of the Appellate
Body, , adopted 4 August 2000.
EC – Bed Linen European Communities – Anti-Dumping Duties on Imports of Cotton-
Type Bed Linen from India , Appellate Body Report,
, adopted 12 March 2001.
EC – Bed Linen (Article 21.5 –
India)
European Communities – Anti-Dumping Duties on Imports of Cotton-
Type Bed Linen from India: Recourse to Article 21.5 of the DSU by
India, Report of the Appellate Body, , adopted
24 April 2003.
US – Corrosion-Resistant Steel
Sunset Review
United States – Sunset Review of Anti-Dumping Duties on Corrosion-
Resistant Carbon Steel Flat Products from Japan , Report of the
Appellate Body, , adopted 9 January 2004.

I. INTRODUCTION

1. In United States – Final Dumping Determination on Softwood Lumber From Canada , the
Appellate Body upheld the Panel’s finding that the United States acted inconsistently with
Article 2.4.2 of the Agreement on Implementation of Article VI of the General Agreement on Tariffs
and Trade 1994 (Anti-Dumping Agreement) in determining the existence of dumping on the basis of a
methodology incorporating the practice of zeroing.
1 The Panel and Appellate Body reports were
subsequently adopted by the Dispute Settlement Body (DSB).

2. Rather than eliminate zeroing in res ponse to these recommendations and rulings, the
United States Department of Commerce (DOC) h as issued a revised determination in which it
continued to apply the practice of zeroing under a different methodology.

3. The only difference in the US approach is th at instead of zeroing in a weighted-average-to-
weighted-average methodology, it now has zeroed in a transaction-to-transaction methodology. The
Appellate Body found the practice of zeroing in a weighted-average-to-weighted-average
methodology inconsistent with US oblig ations under Article 2.4.2 of the Anti-Dumping Agreement .
This reasoning applies equally to the practice of ze roing in a transaction-to-transaction methodology.
Indeed, the original Panel indicated that: "the u se of zeroing when determining a margin of dumping
based on the transaction-to-transaction methodology woul d not be in conformity with Article 2.4.2 of
the AD Agreement".
2

4. The Appellate Body has held that the "inherent bias" of zeroing is that it inflates and distorts
dumping margins.
3 Proper implementation of the DSB’s r ecommendations and rulings in this case
would have resulted in a reduction of the margins of dumping for all of the investigated exporters and
of the "all others rate". Instead, the United Stat es has put forward as implementation in this case new
margins of dumping that are higher than the ones originally determined.4

5. Accordingly, the United States has failed to comply with the DSB’s recommendations and
rulings to bring its measures into conformity with its obligations under Articles 2.4.2 and 2.4 of the
Anti-Dumping Agreement.

II. FACTUAL BACKGROUND

A. PROCEDURAL HISTORY

6. On 22 March 2002, DOC announced a final a ffirmative determinati on of dumping against
imports of certain softwood lumber pro ducts from Canada (Final Determination).5 The original panel
that reviewed the Final Determination found th at the United States acted inconsistently with
Article 2.4.2 of the Anti-Dumping Agreement in determining the existence of margins of dumping on
the basis of a methodology incorporating the practice of "zeroing". 6 The Appellate Body upheld the
Panel’s finding and recommended that the DSB request the "United States to bring its measure into

1 Appellate Body Report, at para. 183(a).
2 Panel Report, at note 361.
3 See, for instance, US – Corrosion-Resistant Steel Sunset Review, at para. 135.
4 The continued use of “zeroing” by DOC resulted in increases in dumping margins for the investigated
exporters: Abitibi from 12.44% to 13.22%; Canfor from 5..96% to 9.27%; Slocan from 7.71% to 12.91%;
Tembec from 10.21% to 12.96%; West Fraser from 2.18% to 3.92%; and Weyerhaeuser from 12.39% to
16.35%. The “all others” rate increased from 8.43% to 11.54%, a relative increase of 37%.
5 Certain Softwood Lumber Products from Canada , 67 Fed. Reg. 15,539 (Dep’t Commerce
2 April 2002) (final determination).
6 Panel Report, at para 7.224.

conformity with its obligations under the Anti-Dumping Agreement ".7 The DSB adopted the
Appellate Body and Panel reports on 31 August 2004.8

7. On 27 September 2004, the United States notified the DSB of its intention to implement the
DSB’s recommendations and rulings.
9 On 6 December 2004, Canada and the United States reached
agreement pursuant to Article 21.3(b) of the Understanding on Rules and Procedures Governing the
Settlement of Disputes (DSU) on a reasonable period of time to implement the DSB’s
recommendations and rulings. The United States confir med in this agreement that it would complete
implementation no later than 15 April 2005. 10 Canada and the United States subsequently agreed to
extend the reasonable period of time until 2 May 2005.11

8. On 5 November 2004, pursuant to section 129(b)(2) of the Uruguay Round Agreements Act 12
(URAA), the United States Trade Representative requ ested that DOC issue a determination that
would render its actions in the investigation not inconsistent with the findings of the DSB.

9. On 15 April 2005, DOC released a final determination under section 129 of the URAA
(Section 129 Determination), which purported to im plement the DSB’s recommendations and rulings.
In the Section 129 Determination, DOC once agai n calculated dumping margins using a methodology
that incorporated the practice of "zeroing". 13 Specifically, DOC asserted that the DSB’s rulings only
applied in a weighted-average-to- weighted-average comparison, dete rmined that it would switch to a
transaction-to-transaction comparison, and continued to zero as part of the transaction-to-transaction
methodology. As a result, the margins of dumping fo r all of the investigated exporters and the "all
others" rate increased.

10. On 19 May 2005, the United States informed the DSB that it had complied with the DSB’s
recommendations and rulings. Cana da considers that the United States failed to comply with these
recommendations and rulings. Accordingly, on 1 Ju ne 2005, Canada requested the establishment of
this Panel pursuant to Article 21.5 of the DSU.
14

B. THE US PRACTICE OF ZEROING IN THE FINAL DETERMINATION

11. The US practice of zeroing as applied by DOC in the Final Determination was described by
both the Panel and the Appellate Body.15

12. First, DOC divided the product under investigation ( i.e., softwood lumber) into sub-groups of
identical or very similar product types. Within each sub-group, DOC made certain adjustments to
ensure price comparability of the transactions, a nd then calculated a weighted-average normal value

7 Appellate Body Report, at paras. 183-184.
8 DSB, Minutes of Meeting (31 August 2004), WT/DSB/M/175, 24 September 2004, 4(a), at para. 42.
9 DSB, Minutes of Meeting (27 September 2004), WT/DSB/M/176, 19 October 2004, at para. 34.
10 United States – Final Dumping Determination on Softwood Lumber from Canada – Agreement
under Article 21.3(b) of the DSU, WT/DS264/12, 8 December 2004.
11 United States – Final Dumping Determination on Softwood Lumber from Canada – Modification of
the Agreement under Article 21.3(b) of the DSU, WT/DS264/15, 17 February 2005.
12 Uruguay Round Agreements Act, Pub. L. No. 103-465, § 129, 108 Stat. 4838, codified at 19 U.S.C. §
3538 (2000).
13 Notice of Determination Under Section 129 of th e Uruguay Round Agreemen ts Act; Anti-Dumping
Measures Concerning Certain Softwood Lumber Products From Canada , 70 Fed. Reg. 22,636 (Dep’t
Commerce 2 May 2005) (“Section 129 Determination”) (Exhibit CDA-1).
14 United States – Final Dumping Determination on Softwood Lumber from Canada – Recourse to
Article 21.5 of the DSU by Canada – Request for the Establishment of a Panel, WT/DS264/16, 2 May 2005.
15 Appellate Body Report, at paras. 64-65; and Panel Report, at para. 7.185. See also Panel Report,
Annex B-2, Responses of the United States to Questions Posed in the Context of the Second Substantive
Meeting of the Panel, Question 109, at paras. 52-56.

and a weighted-average export price per unit of the product type. If the weighted-average normal
value per unit exceeded the weighted-average export price per unit for a sub-group, the difference was
regarded as a "dumping margin" for that comparison. In contrast, if the weighted-average normal
value per unit was equal to or less than the weight ed-average export price pe r unit of a sub-group,
DOC assigned a zero value to that comparison.

13. DOC then aggregated the results of the pos itive sub-group comparisons where it considered
there was a "dumping margin".
16 Finally, DOC divided the result of this aggregation by the value of
all export transactions of the produc t under investigation (including t hose to which it had attributed a
zero value). In this way, DOC obtained an " overall margin of dumping", for each investigated
exporter, for the product under investigation.17

C. THE US PRACTICE OF ZEROING IN THE SECTION 129 DETERMINATION

14. In its Section 129 Determination, rather than eliminating zeroing from its weighted- average-
to-weighted-average calculati on methodology and recalculating the margins of dumping for each
investigated exporter and the "all others" rate, DOC used a different methodology (transaction-to-
transaction) to determine dumping, and continued to "zero" results of negative comparisons. DOC
claimed that it was allowed to continue to zero d espite the decision of the Appellate Body because the
decision was limited to the weighted-average-to-weighted-average methodology.18

15. Under the transaction-to-transaction met hodology, the DOC compared or matched each
export transaction for which it had data with a normal value transaction ( i.e., a transaction in the
Canadian home market). In seeking to determin e which specific home-market transaction would be
the most suitable match for a given export tr ansaction, DOC used the same model-match
characteristics used in the Final Determination.19

16. If a particular comparison between an export sale and a home market sale yielded a negative
result (i.e., the home market price was lower than the e xport price), DOC treated that result as zero.
In the Section 129 Determination, DOC stated that it did not apply "the offset for non-dumped sales in
[its] transaction-to-transaction comparison."
20 In other words, DOC assigned a zero value to all
results of comparisons where the export price exceede d the normal value, rather than using the actual
difference. As in the Final Determination, DOC then added only the positive results together, and
divided the sum by the value of all export transacti ons to produce a final margin of dumping for each
investigated exporter.21

III. ISSUE

17. The issue before this Panel is whether the practice of zeroing in the transaction-to-transaction
methodology as applied by DOC in the Section 129 Dete rmination is inconsistent with US obligations
under Articles 2.4.2 and 2.4 of the Anti-Dumping Agreement.

18 Section 129 Determination, 70 Fed. Reg. at 22,639 (Exhibit CDA-1).
19 Ibid., at 22,637.
20 Ibid., at 22,639.
21 DOC accomplished zeroing in the Section 129 Determ ination, as it did in the Final Determination,
through just a few computer instruc tions that assign a zero to each comp arison with a negative value. See
Tembec Margin Programme for US Sales Administrative Duty (Exhibit CDA-2).

IV. LEGAL ANALYSIS

18. The Appellate Body found the practice of zeroing in the weighted-average-to-weighted-
average methodology inconsistent with US obligations under Article 2.4.2 of the Anti-Dumping
Agreement. As the original Panel concluded, "the use of zeroing when determining a margin of
dumping based on the transaction-to-transaction me thodology would not be in conformity with
Article 2.4.2 of the AD Agreement ".22 The Section 129 Determination is exactly contrary to this
conclusion.

19. It is no defence that DOC used zeroing in a transaction-to-transaction methodology in the
Section 129 Determination instead of a weighted-a verage-to-weighted-average methodology. This
change in methodology does not render DOC’s actions consistent with US obligations under the Anti-
Dumping Agreement.

20. It is also well-established that the mandate of Article 21.5 panels is to examine the
consistency of measures taken to comply with the recommendations and rulings of the DSB with
obligations under the covered agre ements. An Article 21.5 panel is not confined to examining the
measures taken to comply from the perspective of the claims, arguments, and factual circumstances
relating to the measure that was the subject of the original proceeding.
23

A. THE DETERMINATION OF THE EXISTENCE OF DUMPING BY DOC USING A
METHODOLOGY THAT INCORPORATES THE PRACTICE OF ZEROING IS INCONSISTENT
WITH ARTICLE 2.4.2 OF THE ANTI-DUMPING AGREEMENT

21. Article 2.4.2 of the Anti-Dumping Agreement provides, in relevant part, as follows:

the existence of margins of dumping during the i nvestigation phase shall normally be established on
the basis of a comparison of a weighted average norma l value with a weighted average of prices of all
comparable export transactions or by a comparison of normal value and export prices on a
transaction-to-transaction basis.

22. The Appellate Body held, consistent with th e definition of dumping contained in Article 2.1,
that, pursuant to Article 2.4.2: "‘margins of dumping’ can be found only for the product under
investigation as a whole, and cannot be found to exis t for a product type, model, or category of that
product."
24 The Appellate Body further held that:

… the results of the multiple comparisons at the sub-group level are … not "margins
of dumping" within the meaning of Article 2.4.2. Rather, those results reflect only
intermediate calculations made by an i nvestigating authority in the context of
establishing margins of dumping for the product under investigation. Thus, it is only
on the basis of aggregating all these "intermediate values" that an investigating
authority can establish margins of dumping for the product under investigation as a
whole.
25

22 Panel Report, at note 361.
23 See e.g., EC – Bed Linen (Article 21.5 – India) , at para. 79 and Canada – Aircraft (Article 21.5 –
Brazil), at para. 41.
25 Ibid., at para. 97 [emphasis in original].

23. The Appellate Body also stated:

We fail to see how an investigating author ity could properly establish margins of
dumping for the product under investigation as a whole without aggregating all of the
"results" of the multiple comparisons for all product types. There is no textual basis
under Article 2.4.2 that would justify taking into account the "results" of only some
multiple comparisons in the process of calculating margins of dumping, while
disregarding other "results". If an investigating authority has chosen to undertake
multiple comparisons, the investigating aut hority necessarily has to take into account
the results of all those comparisons in order to establish margins of dumping for the
product as a whole under Article 2.4.2.
26
24. Accordingly, the Appellate Body agreed with the Panel that the United States acted
inconsistently with Article 2.4.2 of the Anti-Dumping Agreement when DOC determined the existence
of margins of dumping on the basis of a metho dology that zeroed the results of all negative
intermediate comparisons.

25. As with the weighted-average-to-weight ed-average methodology, the transaction-to-
transaction methodology involves multiple comparison s. Every comparison made by DOC under this
methodology represents an intermediate calculation in the context of establishing margins of dumping
for the product under investigation. Thus, DOC mu st aggregate all these "intermediate values" in
establishing the margins of dumping for the product under investigation as a whole.

26. There is no textual basis under Article 2.4.2 th at could justify taking into account the "results"
of only some multiple comparisons in the process of calculating margins of dumping based on either
the weighted-average-to-weighted-average or the transaction-to-transaction methodology, while
disregarding other "results". Both methodologies involve multiple comparisons. The Appellate Body
has held that an investigating authority, incl uding DOC, necessarily has to take into account the
results of all those comparisons in order to est ablish margins of dumping for the product as a whole
under Article 2.4.2.

27. The reasoning of the Appellate Body applies to the transaction-to-transaction methodology.
By failing to take into account the results of all multiple comparisons in order to establish the margin
of dumping for the product under investigation as a w hole, DOC continues to act inconsistently with
US obligations under Article 2.4.2 of the Anti-Dumping Agreement.

B. THE DETERMINATION OF THE EXISTENCE OF DUMPING BY DOC USING A
METHODOLOGY THAT INCORPORATES THE PRACTICE OF ZEROING IS INCONSISTENT
WITH ARTICLE 2.4 OF THE ANTI-DUMPING AGREEMENT

28. Article 2.4 of the Anti-Dumping Agreement sets forth a general obligation to make a "fair
comparison" between export price and normal value. In EC – Bed Linen , the Appellate Body held
that by not taking into account all comparisons, the practice of "zeroing" does not provide a fair
comparison between the export price and the normal value and is, therefore, inconsistent with
Article 2.4 of the Anti-Dumping Agreement. The Appellate Body stated as follows:

[W]e are also of the view that a comparison between export price and normal value
that does not take fully into account the prices of all comparable export transactions –
such as the practice of "zeroing" at issue in this dispute – is not a "fair comparison"

26 Ibid., at para. 98 [emphasis in original].

between export price and normal value, as required by Article 2.4 and by
Article 2.4.2.
27
29. Likewise, as the Appellate Body explained in U.S. – Corrosion-Resistant Steel Sunset Review,
zeroing introduces an "inherent bias" that "may di stort not only the magnitude of a dumping margin,
but also a finding of the very existence of dumping."28 Accordingly, not only is the practice of zeroing
in applying the transaction-to-transaction methodol ogy inconsistent with Article 2.4.2 of the Anti-
Dumping Agreement, it is also inconsistent with Article 2.4.

V. REQUEST FOR FINDINGS AND RECOMMENDATIONS

30. For these reasons, Canada asks the Panel to find that the United States failed to implement the
DSB’s recommendations and rulings and rule that it has acted inconsistently with Articles 2.4 and
2.4.2 of the Anti-Dumping Agreement by continuing to determine dumping on the basis of a
methodology that incorporates the practice of zeroing.

31. Canada also requests that the Panel recomme nd pursuant to Article 19.1 of the DSU that the
United States bring its measures into conformity w ith its obligations under Articles 2.4 and 2.4.2 of
the Anti-Dumping Agreement by recalculating dumping margins for all investigated exporters and the
"all others rate" on the basis of a methodology that does not incorporate the practice of zeroing and
that it return all anti-dumping cash deposits collected as a result of its failure to eliminate the practice
of zeroing.

27 EC – Bed Linen, at para. 55 [emphasis in original].
28 US – Corrosion-Resistant Steel Sunset Review, at para. 135.

ANNEX A-2

EXECUTIVE SUMMARY OF FIRST WRITTEN SUBMISSION
OF THE UNITED STATES

14 July 2005

Introduction

1. It is a fundamental tenet of WTO dispute settlement that "[r]ecommendations and rulings of
the DSB cannot add to or diminish the rights and obligations provided in the covered agreements".
1
Nevertheless, adding to the obligations of the Un ited States is precisely what Canada seeks to do
through the present dispute settlement proceeding. Sp ecifically, it asks the Panel to find an obligation
on the US Department of Commerc e ("Commerce") in establishing the existence of margins of
dumping using the transaction-to-transaction methodolog y, though such an obligation has no basis in
any article of the Agreement on Implementation of Article VI of the General Agreement on Tariffs
and Trade 1994 ("AD Agreement").

2. Canada asks the Panel to find that, when a ggregating the results of multiple transaction-to-
transaction comparisons, Commerce has an obligation to offset the results of comparisons in which
export prices are less than normal value with the results of comparisons in which export prices are
greater than normal value. There is no textual basi s for such an obligation. While Canada urges the
Panel to extend the logic that allowed the original panel and the Appellate Body to find an offset
obligation with respect to the average-to-average methodology, the leap to an obligation under the
transaction-to-transaction methodology has no textual support. The key language relied upon to find
an obligation in the first case is glaringly absent in the second.

Procedural History

3. At issue in the underlying dispute was Commer ce’s Final Determination in the less than fair
value investigation on certain softwood lumber from Canada.
2 Canada asserted numerous claims
regarding the initiation, scope, and methodologies applie d in that investigation. The original panel
rejected all of those claims except one, c oncerning an aspect of Commerce’s methodology for
establishing margins of dumping, and the Appellate Body upheld that result. 3 Following the DSB’s
adoption of its recommendations and rulings on 31 August 2004, the United States undertook to come
into compliance with its obligations under the AD Agreement.

1 Understanding on Rules and Procedures Governing the Settlement of Disputes (“DSU”), Arts. 3.2
and 19.2.
2 See Notice of Final Determination of Sales at Less Than Fair Value: Certain Softwood Lumber
Products from Canada, 67 Fed. Reg. 15,539 (2 April 2002) (“Final Determination”) and accompanying Issues
and Decision Memorandum. Following an affirmative in jury determination by the United States International
Trade Commission, Commerce amended its final determination and published an antidumping duty order on 22
May 2002. See Notice of Amended Final Determination of Sales at Less Than Fair Value and Anti-Dumping
Duty Order: Certain Softwood Lumber Products From Canada , 67 Fed. Reg. 36,068 (22 May 2002). These
documents were exhibits before the panel in the underlying proceeding (specifically, exhibits CDA-1, CDA-2,
and CDA-3). As these documents are not otherwise referred to in this submission, they have not been attached
as exhibits. However, the United States would be pleased to make them available, should the Panel so request.
3 AB Report and Panel Report, United States – Final Dumping Determination on Softwood Lumber
from Canada, WT/DS64/AB/R and WT/DS64/R, respectively, adopted 31 August 2004 (referred to hereafter as
“AB Report” and “Panel Report”, respectively).

4. Commerce engaged in a process that resulted in the modification of its methodology for
establishing the existence of margins of dumping for softwood lumber from Canada.
4 T h e n e w
methodology involved transaction-to-transaction comparisons of United States export prices, or
constructed export prices, of certain softwood lumber to identical or similar normal value transactions
in Canada. For comparisons for which the US sale was made at less then normal value, the results
were aggregated and divided by the total of a ll the respondent company’s US sales to determine
whether the dumping margin for that respondent was above the de minimis level.
5 Commerce’s new
determination ("Section 129 Dete rmination") was issued on 15 April 2005 and entered into force
effective 27 April 2005.6

Scope and Standard of Review

5. With respect to the scope of the present proceeding, Canada states in its first written
submission that "the mandate of Ar ticle 21.5 panels is to examine the consistency of measures taken
to comply with the recommendations and rulings of the DSB with obligations under the covered
agreements".7 The United States does not disagree with that proposition. What is curious, however,
is the statement that follows, in which Canada urg es the Panel not to confine itself to "the perspective
of the claims, arguments, and factual circumstances relating to the measure that was the subject of the
original proceeding".
8 The United States notes, in particular, Canada’s apparent effort to distance
itself from "arguments . . . relating to the measure that was the subject of the original proceeding". 9
While it is true, of course, that this Panel is not "confined" to examine the measure now at issue from
the perspective of arguments made in the underlyi ng proceeding, it is not unreasonable to expect a
modicum of consistency between a party’s arguments in the original proceeding and its arguments
before a panel established pursuant to Article 21.5. Yet, in Canada’s case, such consistency is
noticeably lacking.

6. In the underlying proceeding, both before the panel and before the A ppellate Body, Canada’s
argument with respect to an offset requirement purporte d to be firmly grounded in text – in particular,
the phrase "all comparable export transactions" in Article 2.4.2 of the AD Agreement . Thus, in its
submission to the Appellate Body, Canada stated, "The Panel’s interpretation of Article 2.4.2 should
be upheld because it is consistent with the ordinary meaning of the requirement in Article 2.4.2 that
‘all comparable export transactions’ be included in a weighted-average to weighted-average dumping
calculation".
10 Similarly, in its first submission to the original panel, Canada argued that "zeroing"

4 The process involved the application of the new methodology in a preliminary determination issued to
the interested parties, followed by briefing on the new methodology by the interested parties, followed by the
issuance of a final determination.
5 By contrast, in the measure at issue in the un derlying proceeding, Commerce had established margins
of dumping by dividing the product under consideration into sub-groups according to model, level of trade, etc.,
performing weighted-average-to-weighted-average comparisons for each sub-group.
6 By the time Commerce issued its Section 129 Determination, it already had completed an
administrative review of each of the investigated exporters and producers. Accordingly, the Section 129
Determination had no practical effect on the cash deposit rate applicable to those companies’ exports. The “all
others” rate established in the Section 129 Determination does currently apply to exports of companies subject
to that rate. See Notice of Determination Under Section 129 of the Uruguay Round Agreements Act;
Antidumping Measures Concerning Certain Softwood Lumber Products From Canada , 70 Fed. Reg. 22,636 at
22,645 to 22,646 (Dep’t Commerce 2 May 2005) (“Section 129 Determination”) (Exhibit CDA-1). Canada
glosses over this distinction in its recitation of the facts in its first written submission.
10 Canada Appellee’s Submission, United States – Final Dumping Determination on Softwood Lumber
from Canada, WT/DS264, para. 22 (7 June 2004) (“Canada Appellee’s Submission”) (Exhibit US-1); see also

was prohibited in the aggregation of average-to-a verage comparisons "precisely because it fails to
take fully into account all comparable export transactions".
11 And, in its second submission to the
original panel, Canada urged, "‘All comparable export transactions’ requires inclusion of export
transactions that result in positive intermediate margins as well as those that result in negative
intermediate margins".12

7. While the United States disagreed with Canada’s proffered interpretation of "all comparable
export transactions", the debate undeniably was about the meaning of that text. By contrast, in the
present proceeding, Canada has departed from a textua l basis for its argument all together. It cannot
rely on the phrase "all comparable export transac tions", because that phrase does not modify the
provision in Article 2.4.2 that refers to the tr ansaction-to-transaction methodology. Instead, Canada
attempts to leverage the obligation found to exist with respect to the average-to-average methodology
in order to identify a new obligation with respect to the transaction-to-transaction methodology. This
may be why Canada is now trying to distance itself from arguments in the underlying proceeding that
were so closely bound to particular text.

8. With respect to the standard of review, the a pplicable rule (as in the underlying proceeding) is
set forth in Article 17.6 of the AD Agreement. In particular, since the only issue now in dispute is a
legal issue, the applicable rule is that set forth in clause (ii) of Article 17.6. As the original panel
explained, Article 17.6(ii) contai ns "an explicit acknowledgment that the relevant provision/s of the
AD Agreement may admit of more than one permissible inte rpretation, and an instruction that, if this
process of treaty interpretation leads us to the conc lusion that the interpretation of the provision in
question put forward by the defending party is permissible, we shall find the measure in conformity
with the AD Agreement if it is based on that permissible interpretation".
13

9. In this submission, the United States will dem onstrate that the measure taken to comply with
the recommendations and rulings of the DSB was c onsistent with a permissible interpretation of
Articles 2.4.2 and 2.4 and, accordingly, should be upheld.

The Section 129 Determination is Consistent With Article 2.4.2 of the AD Agreement

10. Article 2.4.2, first sentence reads as follows:

Subject to the provisions governing fair comp arison in paragraph 4, the existence of
margins of dumping during the investiga tion phase shall normally be established on
the basis of a comparison of a weighted average normal value with a weighted
average of prices of all comparable export transactions or by a comparison of normal
value and export prices on a transaction-to-transaction basis.

The first sentence thus contemplates two alternativ e methodologies that "normally" are to be used to
establish the existence of margins of dumping durin g the investigation phase: the average-to-average
methodology and the transaction-to-transaction methodology.

id., paras. 35-37 (defending original panel report based on interpretation of words “all comparable export
transactions”).
11 Canada First Written Submission, United States – Final Dumping Determination on Softwood
Lumber from Canada , WT/DS264, para. 171 (11 April 2003) (“Ca nada First Written Submission (Original)”)
(Exhibit US-2); see also id., para. 170 (same).
12 Canada Second Written Submission, United States – Final Dumping Determination on Softwood
Lumber from Canada , WT/DS264, para. 141 (9 July 2003) (“Canada Second Written Submission (Original)”)
(Exhibit US-3); see also id., para. 144 (same).
13 Panel Report, para. 7.11.

11. Canada’s argument with respect to Article 2. 4.2, as laid out in its first submission, essentially
relies on a generalization of the reasoning of the Appellate Body in the underlying proceeding. There,
the Appellate Body found: that when applying the average-to-average comparison methodology,
Commerce established and compared multiple sub- groups of the like product "softwood lumber",
obtaining "intermediate values"; that it could establish margins of dumping only by aggregating those
intermediate values; and that in doing so, Article 2. 4.2 required it to include all of the intermediate
values obtained. Canada extrapolates from this finding that, because the transaction-to-transaction
methodology also allegedly yields in termediate values, an aggregati on of those values to establish a
single margin of dumping also must include all of the intermediate values.
14

12. There are two principal flaws with this line of reasoning. First, it does not comport with the
textual basis for the findings by the Appellate Body and the panel in the u nderlying proceeding.
Second, it assumes incorrectly that an obligatio n found with respect to the average-to-average
methodology logically must extend to the transact ion-to-transaction methodology, notwithstanding
differences between the two methodologies and between the texts of the clauses providing for them.

13. In the underlying proceeding, both the panel a nd the Appellate Body were careful to stress
that the question before them was limited to wh ether "zeroing" is permitted under the average-to-
average methodology.15 In addressing that question, both the original panel and the Appellate Body
engaged in a close reading of the text of Article 2.4.2 and, in pa rticular, the phrase "all comparable
export transactions" – a phrase included in the artic le’s articulation of the average-to-average
methodology but not in its articulation of the other two methodologies. Thus, found that:

the United States has violated Article 2.4.2 of the AD Agreement by not taking into
account all comparable export transactions when DOC calculated the overall margin
of dumping as Article 2.4.2 requires that the existence of margins of dumping has to
be established for softwood lumber on the basis of a comparison of the weighted-
average-normal-value with the weighted average of prices of all comparable export
transactions, that is, for all transactions involving all types of the product under
investigation.16

14. In defending this finding, Ca nada urged the Appellate Body to uphold the original panel’s
interpretation of Article 2.4.2 (as noted above) preci sely because "it is consistent with the ordinary
meaning of the requirement in Article 2.4.2 that ‘a ll comparable export transactions’ be included in a
weighted-average to weighted-average dumping calculation".
17

15. In analyzing the question on appeal, the Appe llate Body, after addressing the threshold issue
of the permissibility of "multiple averaging" under the average-to-average methodology, observed
correctly that the crux of the parties’ disagreemen t was "as to the proper interpretation of the terms
‘all comparable export transactions’ and ‘margins of dumping’ in Article 2.4.2 as they relate to
zeroing."
18 The Appellate Body went on to "emphasize th at [the two terms] should be interpreted in
an integrated manner." 19 Accordingly, the Appellate Body’s conclusion was the result of its
interpretation of "all comparable export transactions" together with "margins of dumping."

14 Canada First Written Submission, paras. 22-25.
15 See AB Report, para. 63 (“[I]n this appeal, we are not required to, and do not address, the issue of
whether zeroing can, or cannot, be used under the other methodologies prescribed in Article 2.4.2. . . .”); id.,
paras. 77, 104, 108: Panel Report, para. 7.219 (noting that the use of the two methodologies described in
Article 2.4.2 besides average-to-average are not within the terms of reference); id., paras. 7.196, 7.200, 7.213,
7.214.
17 Canada Appellee’s Submission, para. 22 (Exhibit US-1).
18 AB Report, para. 82.
19 AB Report, para. 85.

16. In sum, the term "all comparable export transactions" was central to the findings in the
underlying proceeding. Yet, that term is absent from the provision now at issue. The first sentence of
Article 2.4.2 contemplates the establishment of ma rgins of dumping in one of two alternative ways:
first, "on the basis of a comparison of a weighted av erage normal value with a weighted average of
prices of all comparable export transaction ,," (emphasis added) or, second, "by a comparison of
normal value and export prices on a transaction-by-tran saction basis". As interpretation of the term
"all comparable export transactions" was essential to the original panel’s findings, to Canada’s
defence of those findings, and to the Appellate Body ’s findings, this Panel should reject Canada’s
assertion that the findings from the underlying proceed ing should extend to a provision in which that
term is absent.

17. The original panel correctly observed, "[W]e are required as treaty interpreters to assume that
when the drafters included language in the treaty, that they intended that language to have some
meaning".
20 The converse of that observation is also true in this dispute. When the drafters excluded
language from the treaty, it must be assumed that they did so deliberately, and the absence of a term in
one provision that is included in another provisi on must not be ignored; it must be accorded
significance. Here, the obligation that Canada asks the Panel to find is an obligation that has been
found to stem from text that is absent from the portion of Article 2.4.2 that addresses the methodology
that Commerce used in the measure at issue – the transaction-to-transaction methodology. Because of
that crucial textual difference, the Panel should reject Canada’s claim that the measure is inconsistent
with Article 2.4.2.

18. Moreover, in addition to ignoring the textual difference between the provision at issue in the
underlying proceeding and the provision now at i ssue, Canada’s argument is flawed for a second
reason. Canada assumes, without explanation, th at when it comes to the aggregation of multiple
values, there is no difference between the averag e-to-average methodology and the transaction-to-
transaction methodology. Therefore, under Canada’s argument, what goes for one necessarily must
go for the other. That assumption has no basis.

19. In the underlying proceeding, Canada pointed out that, with r espect to the average-to-average
methodology, "zeroing fails to compare a ‘weighted average’ normal value with a ‘weighted average’
of prices of all comparable export transactions, as requ ired by Article 2.4.2. Due to the conversion of
some intermediate margins to zero, the overall ma rgin of dumping that results does not reflect an
actual average, in violation of Article 2.4.2".
21 In other words, the problem with "zeroing" when it
comes to aggregating the results of average-to-average comparisons, as Canada itself argued, is that it
causes the final result to be something other than an "actual average".

20. By contrast, the clause in Article 2.4. 2 providing for the transaction-to-transaction
methodology makes no reference to an "average" or "averages". In short, the average-to-average
methodology and the transaction-to-transaction met hodology are textually distinct methodologies.
When aggregating results under the former, accor ding to Canada’s argument, an investigating
authority is required to obtain an "actual average", which arguably involves applying non-dumped
results as offsets to dumped results. The tran saction-to-transaction methodology, however, does not
involve averages. Therefore, the finding of an offset requirement applicable to the first methodology
does not mean that an offset requirement logically must apply to the second.

21. Finally, Canada seeks support for its argument on Article 2.4.2 from a footnote in the original
panel report.
22 Its reliance on that footnote is entirely misp laced. Canada neglects to recall that in the
very same sentence that Canada partially quotes, the original panel acknowledged that it was "not

20 Panel Report, para. 7.203.
21 Canada Second Written Submission (Original), para. 142 (Exhibit US-3).
22 Canada First Written Submission, paras. 3 and 18 (quoting Panel Report, n.361).

called upon to decide whether zeroing is allowed or disallowed under the transaction-to-transaction
and weighted-average-normal-value to individual export transaction methodologies". 23 Accordingly,
the statement on which Canada relies is obiter dictum . Moreover, the sentence at issue states a
conclusion without offering any explanation. And, of course, as the matter was outside of the original
panel’s terms of reference, it was not the subject of argument before the original panel (other than
tangentially, as part of discussion of the context for the matter that was before the panel).

The Section 129 Determination is Consistent With Article 2.4 of the AD Agreement

22. Regarding Canada’s argument with respect to Article 2.4, the United States notes, first, that
Canada incorrectly asserts, at paragraph 5 of its first written submission, that the DSB made
recommendations and rulings with respect to US obligations under Article 2.4 of the AD Agreement.24
Of course, neither the original panel nor the Appe llate Body ever reached the question of compliance
of the underlying measure with Article 2.4. Therefore, that provision was not the subject of any
recommendation or ruling of the DSB. Nevertheless , the United States recognizes that it is Canada’s
prerogative to raise in this proceeding the questi on of the implementing measure’s consistency with
Article 2.4.

23. Like its argument with respect to Article 2.4.2, Canada’s argument with respect to Article 2.4
amounts to a conclusory statement based on an over-ge neralization of statements in certain Appellate
Body reports. In fact, Canada offers no analysis of its own with respect to the interpretation of
Article 2.4. It simply quotes two fragmen ts from the Appellate Body reports in EC – Bed Linen and
US – Corrosion-Resistant Steel Sunset Review and says, in effect, "Quid est demonstratum".
25

24. The fragments on which Canada relies are comp letely irrelevant to the question of whether
Commerce’s aggregation of the results of transaction-to-transaction comparisons in the present case is
consistent with Article 2.4 of the AD Agreement. In fact, Article 2.4 was not even at issue in the EC –
Bed Linen dispute. That dispute concerned, in releva nt part, whether the EC’s application of the
average-to-average methodology was cons istent with Article 2.4.2 of the AD Agreement .
26 T h e
fragment that Canada quotes regarding Article 2.4, therefore, was obiter dictum and, accordingly,
should not be relied on as providing any persuasive value in the present dispute.27

25. Canada’s reliance on a fragment from US – Corrosion-Resistant Steel Sunset Review is
similarly misplaced. While the question of whethe r a measure was consistent with Article 2.4 was
before the Appellate Body in Corrosion-Resistant Steel Sunset Review , it came up in the context of
completing the panel’s analysis after finding lega l error, and the Appellate Body ultimately was
unable to reach a conclusion on whether the measure was consistent with Article 2.4. 28 Given that
fact, and the fact that the methodology at issue in that dispute was an average-to-transaction
comparison methodology used in an assessment pro ceeding, which differs from the transaction-to-
transaction comparison methodology at issue here, the fragment quoted by Canada is of no relevance.

26. As Canada makes no argument to support its Article 2.4 claim other than quoting the two
irrelevant fragments noted above , Canada has failed to make a prima facie case that the Section 129

23 Panel Report, para. 7.219, n.361.
25 Canada First Written Submission, paras. 28-29.
26 See AB Report, European Communities – Anti-Dumping Duties on Imports of Cotton-Type Bed
Linen from India, WT/DS141/AB/RW, adopted 12 March 2001, para. 45(a).
27 See Panel Report, Dissenting Opinion, para. 9.23 (noting that the Appellate Body’s statement
regarding Article 2.4 in Bed Linen report “is obiter dictum, as Article 2.4 was not part of a claim before the
Appellate Body”).
28 AB Report, United States – Sunset Review of Anti-Dumping Duties on Corrosion-Resistant Carbon
Steel Flat Products from Japan, WT/DS244/AB/R, adopted 9 January 2004, para. 138.

Determination was inconsistent with Article 2.4 of the AD Agreement. As was correctly observed in
the original panel report, "[I]n WTO dispute proceedi ngs, the burden of proof rests with the party that
asserts the affirmative of a particular claim or defence".
29 Here, Canada has done nothing more than
assert a claim followed by two fragments from Appe llate Body reports that are not on point.
Accordingly, the Panel should find that Canada has failed to make a prima facie case that the Section
129 Determination is inconsistent with Article 2.4.

27. Finally, the United States notes Canada’s ob servation that "[p]roper implementation of the
DSB’s recommendations and rulings in this case would have resulted in a reduction of the margins of
dumping for all of the investigated expor ters and of the ‘all others rate’".
30 Canada seems to be
suggesting that the complaining party (or its stakeholders) must fare better under the measure
implementing the DSB’s recommendations and ruli ngs than it did under the original measure
complained of. There is no such standard under the DSU.

Conclusion

28. For the reasons stated above, Canada’s clai ms against the US implementation of the DSB’s
recommendations and rulings in this dispute are gr oundless. The United States therefore requests that
the Panel reject Canada’s claims in their entirety and find that the United States properly implemented
the recommendations and rulings of the DSB in this dispute.
31

29 Panel Report, para. 7.13.
31 As in the underlying proceeding, Canada asks the Panel to “recommend”, pursuant to Article 19.1 of
the DSU, that the United States “bring its measures into conformity with its obligations under Article 2.4 and
2.4.2 of the Anti-Dumping Agreement” in a particular manner. Canada Fi rst Written Submission, para. 31. We
understand Canada to be asking for a “suggestion” under Article 19.1 of the DSU. For the reasons set forth in
the present submission, there should be no need for su ch a suggestion, as the United States has come into
compliance with its WTO obligations. However, in the event the Panel were to accept Canada’s arguments, it
nevertheless should decline Canada’s requested “recomme nd[ation]” as inappropriate, as was the case in the
original panel and Appellate Body reports. See Panel Report, para. 8.6; AB Report, paras. 37, 183(a)-184
(noting Canada’s request but declining to grant it); see also Panel Report, United States–Anti-Dumping
Measures on Certain Hot-Rolled Steel Products from Japan, WT/DS184/R, adopted 23 August 2001, paras. 8.5-
8.14. In any event, Canada’s request goes beyond anything relevant to implementing a recommendation and
again seeks to impose an obligation – “return [of] all anti-dumping cash deposits collected as a result of
[Commerce’s] failure to eliminate the practice of zeroing” – nowhere called for under the WTO agreements.