UNITED STATES – FINAL COUNTERVAILING DUTY DETERMINATION WITH RESPECT TO CERTAIN SOFTWOOD LUMBER FROM CANADA
Document: Recourse to Article 21.5 of the DSU by Canada Request for the Establishment of a Panel
Date: 4 January 2005
Document codes: WT/DS257/15
Complainant: Canada
Respondent: U.S.
Third parties: China, EU, India, Japan
Dispute stage: Mutually Agreed Solution
Agreements cited: Art. 10, 11, 32, 1, 2, 12, 14, 19, 22  Subsidies and Countervailing Measures (SCM)Art. VI, X:3  GATT 1994Art. 21  Subsidies and Countervailing Measures (SCM)

UNITED STATES – FINAL COUNTERVAILING DUTY DETERMINATION
WITH RESPECT TO CERTAIN SOFTWOOD LUMBER FROM CANADA

Recourse to Article 21.5 of the DSU by Canada

Request for the Establishment of a Panel

 The following communication, dated 30 Dece mber 2004, from the delegation of Canada to
the Chairperson of the Dispute Settlement Body, is circulated pursuant to Article 21.5 of the DSU.

 On 17 February 2004, the Dispute Settlement Body (DSB) adopted the Panel and Appellate
Body reports in .
1 The Panel and Appellate Body found that the US Department of
Commerce (Commerce) was required to conduct a "pass-through" analysis in respect of arm's length
sales of logs by tenured harvesters/sawmills
2 and independent harvesters to unrelated sawmills
pursuant to the General Agreement on Tariffs and Trade, 1994 (GATT 1994) and the Agreement on
Subsidies and Countervailing Measures (SCM Agreement).

 On 28 April 2004, Canada and the United Stat es reached an agreement on a "reasonable
period of time" pursuant to Article 21.3(b) of the Understanding on Rules and Procedures Governing
the Settlement of Disputes (DSU).
3 The United States confirmed in this agreement that it would
complete implementation no later than 17 December 2004.

 Shortly after adoption of the Panel and Appe llate Body reports, the United States commenced
implementation proceedings pursu ant to section 129(b) of the Uruguay Round Agreements Act
(URAA).4 On 6 December 2004, Commerce released a c ountervailing duty determination pursuant to
section 129 that announced results of its purported "pass-through" analysis. On 10 December 2004, in
accordance with an instruction of that date fro m the US Trade Representative to implement the
determination, Commerce issued a notice of impl ementation of its section 129 determination, in

1 Dispute Settlement Body, Minutes of Meeting (17 February and 19 March, 2004) , WT/DSB/M/165,
30 March 2004, at para. 49. Also See , Report of the Appellate Body, WT/DS257/AB/R, adopted 17 February
2004 ["Appellate Body Report"]; and , Report of the Panel, WT/DS257/R, adopted 17 February 2004.
2 The Appellate Body used the term "tenured harvester/sawmill" to refer to an enterprise holding a
stumpage contract that fells trees and produces logs, and also processes logs into softwood lumber. See
Appellate Body Report, at fn. 150.
3 , Agreement under Article 21.3(b) of the DSU, WT/DS257/13, 30 April 2004.
4 19 U.S.C. § 3538(b).

which it announced that the countervailing duty c ash deposit rate would be reduced, effective
10 December 2004, by 0.17 ( i.e., from 18.79 per cent to 18.62 per cent).
5 On 20 December 2004,
with the publication of the final results of the fi rst administrative review of the countervailing duty
order, Commerce established a de finitive countervailing duty rate for the period of review and
replaced the amended section 129 countervailing duty cash deposit rate with a new cash deposit rate
without any "pass-through" analysis. 6 At the DSB meeting of 17 December 2004, the United States
informed the DSB that it had complied with its rulings and recommendations.

 Canada considers that the United Stat es has failed to comply with the DSB's
recommendations and rulings by incorrectly:

 – limiting the category of transactions review ed in the "pass-through" analysis to sales
of logs by independent harvesters to unr elated sawmills, excluding transactions
between harvesters/sawmills and unrela ted sawmills, contrary to the DSB's
recommendations and rulings;

 – presuming, without an appropriate "pass-th rough" analysis, that certain transactions
between independent harvesters and unrelated sawmills were not at arm's-length and
that a "pass-through" of the alleged benefit occurred;

 – applying the results of the "pass-through" analysis to a countervailing duty cash
deposit rate invalidated as a result of j udicial review proceedings conducted in
accordance with US law, and failing to apply the results to a valid rate;
7 and

 - failing to conduct a "pass-through" analys is in the final results of the first
administrative review.
8

 Canada considers that the following measures allegedly taken by the United States to comply
with the DSB's recommendations and rulings were in consistent with US obligations under Articles 10
and 32.1 of the SCM Agreement and Article VI:3 of the GATT 1994:

 – Notice of Implementation Under Section 129 of the Uruguay Round Agreements Act;
Countervailing Measures Concerning C ertain Softwood Lumber Products from
Canada,
9 and Section 129 Determination: Final Countervailing Duty Determination,
Certain Softwood Lumber from Canada;10

5 Section 129 Determination: Final Countervailing Duty Determination, Certain Softwood Lumber
from Canada , 6 December 2004; Notice of Implementation Under Section 129 of the Uruguay Round
Agreements Act; Countervailing Measures Concerning Certain Softwood Lumber Products From Canada ,
69 Fed. Reg. 75,305 (Dep't Commerce 16 December 2004).
6 Notice of Final Results of Countervailing Duty Administrative Review and Rescission of Certain
Company-Specific Reviews: Certain So ftwood Lumber Products from Canada , 69 Fed. Reg. 75,917 (Dep't
Commerce 20 December 2004); and Issues and Decision Memorandum : Final Results of Administrative
Review: Certain Softwood Lumber Products from Canada, December 13, 2004.
7 Section 129 Determination: Final Countervailing Duty Determination, Certain Softwood Lumber
from Canada, 6 December 2004, Comment 6, at 11.
8 See e.g., Issues and Decision Memorandum : Final Results of Administrative Review: Certain
Softwood Lumber Products from Canada, 13 December 2004, at 43-48.
9 69 Fed. Reg. 75,305 (Dep't Commerce December 16, 2004)
10 6 December 2004.

 – Notice of Amended Final Affirmative Countervailing Duty Determination and Notice
of Countervailing Duty Order: Cert ain Softwood Lumber Products from Canada ;11
and

 – Notice of Final Results of Countervailing Duty Administrative Review and Rescission
of Certain Company-Specific Reviews: Certain Softwood Lumber Products from
Canada,12 and Issues and Decision Memorandum : Final Results of Administrative
Review: Certain Softwood Lumber Products from Canada.13

 Accordingly, as there is a disagreement as to the existence or consistency with a covered
agreement of the measures taken to comply w ith the rulings and recommendations of the DSB,
Canada seeks recourse to Article 21.5 of the DSU in this matter. Accordingly, Canada requests that a
special meeting of the DSB be held on 14 January 2005 to consider the following agenda item:

 United States – Final Countervailing Duty Det ermination with Respect to Certain Softwood
Lumber from Canada

 Recourse by Canada to Article 21.5 of the Understanding on Rules and Procedures
Governing the Settlement of Disputes.

 Canada requests that the DSB refer the matter to the original panel, if possible, pursuant to
Article 21.5 of the DSU.