UNITED STATES – COUNTERVAILING MEASURES ON SOFTWOOD LUMBER FROM CANADA REQUEST FOR THE ESTABLISHMENT OF A PANEL BY CANADA
Document: REQUEST FOR THE ESTABLISHMENT OF A PANEL
Date: 16 March 2018
Document codes: WT/DS533/2
Complainant: Canada
Respondent: U.S.
Third parties: Brazil, China, EU, Japan, Kazakhstan, South Korea, Russia, Turkey, Vietnam
Dispute stage: Panel
Agreements cited: Art. 1.1(b), 14(d), 19.3, 19.4  Subsidies and Countervailing Measures (SCM)Art. VI:3  GATT 1994Art. 11.2, 11.3, 1.1(a)(1)(iii), 1.1(a)(1), 10, 19.1, 1.1(a)(1)(i), 2.1(a), 2.1(b), 10, 21.1, 21.2, 32.1, 32.5  Subsidies and Countervailing Measures (SCM)

UNITED STATES – COUNTERVAILING MEASURES
ON SOFTWOOD LUMBER FROM CANADA
REQUEST FOR THE ESTABLISHMENT OF A PANEL BY CANADA
The following communication, dated 15 March 2018 , from the delegation of Canada to the
Chairperson of the Dispute Settlement Body, is circulated pursuant to Article 6.2 of the DSU.

On 28 November 2017, the Government of Canada ("Canada") requested consultations with the
Government of the United States of Ame rica (the "United States" or " US") 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 30 of
the Agreement on Subsidies and Countervailing Measures ("SCM Agreement") concerning certain
countervailing measures on softwood lumber products from Canada as well as the US measure of
treating Nova Scotia and New Brunswick as in -country benchmarks for provincial stumpag e
markets in Alberta, Ontario and Québec.
Canada held c onsultations with the United States on 17 January 2018. These consultations failed
to settle the dispute.
I. SOFTWOOD LUMBER PRODUCTS FROM CANADA
The US countervailing measures concerning softwood lumber products from Canada include:
1. Certain Softwood Lumber Products from Canada: Final Affirmative Countervailing Duty
Determination, and Final Negative Determination of Critical Circumstances , 82 Fed.
Reg. 51,814 (November 8, 2017);
2. Countervailing Duty Investigation of Certain Softwood Lumber Products from Canada :
Issues and Decision Memorandum for the Final Determination (November 1, 2017);
3. Certain Softwood Lumber Products From Canada: Amended Final Affirmative
Countervailing Duty Determination an d Countervailing Duty Order , 83 Fed. Reg. 347
(January 3, 2018); and
4. The notice of initiation, initiation checklist, questionnaires, verification reports,
preliminary determination, decision memorandum for the preliminary determination,
calculations mem oranda, market memoranda, as well as other determinations,
memoranda, reports, and measures related to the Certain Softwood Lumber Products
from Canada countervailing duty investigation.
Canada considers these US countervailing measures to be inconsistent with provisions of the SCM
Agreement and the GATT 1994, including:

A. Stumpage
1. Articles 1.1(b) and 14(d) of the SCM Agreement as the United States improperly
rejected in -jurisdiction benchmarks for stumpage (i.e., standing timber) that
reflected prevailing market conditions in each of Alberta, British Columbia (B.C.),
Ontario, New Brunswick, and Québec as the basis for evaluating adequacy of
remuneration and, as a result, incorrectly determined the existence and amount of
any benefit;

2. Articles 1.1(b) and 14(d) of the SCM Agreement as the United States failed to
make necessary adjustments to stumpage to reflect prevailing market conditions in
assessing adequacy of remuneration when it compared:
a. Alberta, Ontario, New Brunswick, and Québec stumpage to a Nova Scotia
stumpage benchmark, and
b. B.C. stumpage to a benchmark based on US Pacific Northwest log prices,
and therefore incorrectly determined the existence and amount of any benefit;

3. Articles 1.1(b) and 14(d) of the SCM Agreement as the United States relied on a
Nova Scotia stumpage benchmark that:
a. was based on data that were unreliable and not fully disclosed,
b. suffered from methodological flaws, and
c. was otherwise not reliable, including when assessed in the light of other
more comparable out-of-jurisdiction benchmarks,
and therefore incorrectly determined the existence and amount of any benefit;

4. Articles 1.1(b), 14(d), 19.3, and 19.4 of the SCM Agreement and Article VI:3 of the
GATT 1994 as the United States, in assessing adequacy of remuneration for
stumpage, improperly set to zero the results of comparisons that did not show a
benefit before it calculated the aggreg ate benefit from the provision of stumpage,
and therefore incorrectly determined the existence and amount of any benefit;
B. Log Export Permitting Processes
5. Articles 11.2 and 11.3 of the SCM Agreement as the United States improperly
initiated an investigation into federal and provincial log export permitting processes
for B.C. logs without sufficient evidence of a financial contribution within the
meaning of Articles 1.1(a)(1)(iii) and (iv) of the SCM Agreement;

6. Articles 1.1(a)(1)(iii) and (iv), 19.3, and 19.4 of the SCM Agreement and
Article VI:3 of the GATT 1994 as the United States improperly determined that
federal and provincial log export permitting processes for B.C. logs constitute a
financial contribution by finding that:
a. the federal and provincial governments entrusted or directed private entities
to provide B.C. logs to softwood lumber producers, and
b. the provision of B.C. logs is normally vested in the federal and provincial
governments and does not diff er from the practices normally followed by
governments,
and therefore incorrectly determined the existence of a subsidy;
C. Non-Stumpage Programs
7. Articles 10, 19.1, 19.3, and 19.4 of the SCM Agreement and Article VI:3 of the
GATT 1994 as the United States improperly attributed to the production of
softwood lumber products certain alleged subsidies that were bestowed on the
production of products that were not under investigation, including:
a. BC Hydro – Electricity Purchase Agreements,

b. Hydro-Québec – Purchase of Electricity under PAE 2011-01, and
c. NB Power – Large Industrial Renewable Energy Purchase Program,
and therefore failed to ascertain the precise amount of subsidies attributable to the
product under investigation;

8. Articles 1.1(b) and 14(d) of the SCM Agreement as the United States erroneously
rejected benchmarks that reflected prevailing market conditions and instead relied
on inappropriate benchmarks that did not reflect prevailing market conditions for
the sale of the relevant type of electricity when it assessed adequacy of
remuneration concerning:
a. BC Hydro – Electricity Purchase Agreements; and
b. Hydro-Québec – Purchase of Electricity under PAE 2011-01,
and, as a result, incorrectly determined the existence and amount of any benefit;

9. Articles 1.1(a)(1)(iii), 1.1(b), and 14(d) of the SCM Agreement as the United
States failed analyze the Large Industrial Renewable Energy Purchase Program as
the purchase of good by NB Power and, as a result, incorrectly determined the
existence and amount of any benefit;

10. Articles 1.1(a)(1)(i) and (iii), 19.3, and 19.4 of the SCM Agreement and Article
VI:3 of the GATT 1994 as the United States erroneously determined that
reimbursements Québec provided to Resolute for services related to partial cut
silviculture prescriptions on provincial Crown land constituted a financial
contribution;

11. In the alternative, Articles 1.1(b), 14(d), 19.3, and 19.4 of the SCM Agreement
and Article VI:3 of the GATT 1994 as the United States improperly determined that
reimbursements Québec provided to Resolute for services related to partial cut
silviculture prescriptions conferred a benefit resulting in the imposition of
countervailing duties in excess of the amount of any alleged subsidy;

12. Articles 1.1(a)(1)(i) and (iii), 19.3, and 19.4 of the SCM Agreement and Article
VI:3 of the GATT 1994 as the United States erroneously determined that
reimbursements New Brunswick provided to J.D. Irving for services related to the
company's performance of silviculture and forest management services on
provincial Crown land constituted a financial contribution;

13. In the alternative, Articles 1.1(b), 14(d), 19.3, and 19.4 of the SCM Agreement
and Article VI:3 of the GATT 1994 as the United States improperly determined that
the reimbursements New Brunswick provided to J.D. Irving for services related to
silviculture and licence management conferred a benefit resulting in the imposition
of countervailing duties in excess of the amount of any alleged subsidy; and

14. Articles 2.1(a) and 2.1(b) of the SCM Agreement as the United States improperly
found that the Federal Accelerated Capital Cost Allowance for Class 29 Assets was
limited to certain enterprices and was de jure specific, when in fact it is generally
available to all enterprises and is based on objective criteria and conditions.

The measures of the United States set out above have also, to the extent not already specified
above, resulted in the imposition or levying of countervailing duties in a manner that is
inconsistent with Articles 10, 19.1, 19.3, 19.4, 21.1, 21.2, 32.1, and 32.5 of the SCM Agreement
and Article VI:3 of the GATT 1994.

II. THE UNITED STATES' IMPROPER DETERMINATION OF IN-COUNTRY BENCHMARKS
Canada has distinct provincial markets for stumpage that reflect important differences in the
provincial forests, the availabil ity, accessibility, and quality of standing timber, transportation
costs, distance to market, and other prevailing market conditions. These distinct provincial
stumpage markets mean that a comparison to prevailing market conditions in the country of

provision under Article 14(d) of the SCM Agreement must be made in relation to prevailing market
conditions for each province's distinct stumpage market.

The United States, in a series of previous administrative reviews, and in recent preliminary and
final coun tervailing duty determinations, has improperly treated stumpage in certain Atlantic
provinces (i.e., Nova Scotia as well as, in the previous administrative reviews, New Brunswick) as
if this stumpage were an in -country benchmark that reflected prevailing m arket conditions for
standing timber sold in provincial markets in Alberta, Ontario, and Québec.

This US measure is inconsistent with Articles 1.1(b) and 14(d) of the SCM Agreement as Nova
Scotia and New Brunswick cannot be considered to be in -country benchmarks for Alberta, Ontario
or Québec as stumpage markets in these provinces have completely different prevailing market
conditions from those in Nova Scotia and New Brunswick.

This US measure is evidenced, inter alia, by the following:
a. Notice of Final Results of Countervailing Duty Administrative Review and Rescission
of Certain Company-Specific Reviews: Certain Softwood Lumber Products From
Canada, 69 Fed. Reg. 75,917 (December 20, 2004) as amended by 70 Fed. Reg.
9,046 (February 24, 2005);
b. Issues and Decision Memorandum: Final Results of Adminstirative Review: Certain
Softwood Lumber Products from Canada (December 13, 2004);
c. Notice of Final Results of Countervailing Duty Administrative Review: Certain
Softwood Lumber Products from Canada, 70 Fed. Reg. 73,448 (December 12,
2005);
d. 2nd Adminsitrative Review of the Countervailing Duty Order on Certain Softwood
Lumber Products from Canada: Issues and Decision Memorandum: Final Results of
Adminsitrative Review (December 5, 2005);
e. Notice of Preliminary Results and Extension of Final Result of Countervailing Duty
Administrative Review: Certain Softwood Lumber Products From Canada, 71 Fed.
Reg. 33,931 (June 12, 2006);
f. Certain Softwood Lumber Products From Canada: Preliminary Affirmative
Countervailing Duty Determination, and Alignment of Final Determination With Final
Antidumping Duty Determination, 82 Fed. Reg. 19,657 (April 28, 2017);
g. Decision Memorandum for the Preliminary Determination in the Countervailing Duty
Investigation of Certain Softwood Lumber Products from Canada (April 24, 2017);
h. Certain Softwood Lumber Products from Canada: Final Affirmative Countervailing
Duty Determination, and Final Negative Determination of Critical Circumstances, 82
Fed. Reg. 51,814 (November 8, 2017);
i. Countervailing Duty Investigation of Certain Softwood Lumber Products from
Canada: Issues and Decision Memorandum for the Final Determination (November 1,
2017);
j. Certain Uncoated Groundwood Paper From Canada: Preliminary Affirmative
Countervailing Duty Determination, and Alignment of Final Determination With Final
Antidumping Duty Determination, 83 Fed. Reg. 2133 (January 16, 2018);
k. Decision Memorandum for the Affirmative Preliminary Determination in the
Countervailing Duty Investigation of Certain Uncoated Groundwood Paper from
Canada (January 8, 2018); and
l. The orders, questionnaires, verification reports, calculations memoranda, issues and
decision memoranda, as well as other determinations, memoranda, reports, and
measures related to the above administrative reviews and investigations concerning
softwood lumber products from Canada.

This measure is attributable to the United States, consists of the content id entified and described
above, and is presently occurring and likely to be continued in the future. In the alternative, it
constitutes ongoing conduct or a rule or norm of general and prospective application that is
inconsistent with the United States' WTO obligations.

The US measure set out above has also, to the extent not already specified above, resulted in the
imposition or levying of countervailing duties in a manner that is inconsistent with Articles 10,
19.1, 19.3, 19.4, 21.1, 21.2, 32.1, and 32.5 o f the SCM Agreement and Article VI:3 of the
GATT 1994.

The US countervailing measures in Certain Softwood Lumber from Canada, and the US measure of
treating Nova Scotia and New Brunswick as in country benchmarks for provincial stumpage
regimes in Alberta, Ontario and Québec, nullifies or impairs benefits accruing to Canada, directly or
indirectly, under the cited agreements.

Therefore, Canada respectfully requests, pursuant to Article 6 of the DSU and Article 30 of the
SCM Agreement, that the Dispute Sett lement Body establish a panel to examine this matter, with
the standard terms of reference as set out in Article 7.1 of the DSU.

Canada also asks that this request be placed on the agenda of the next meeting of the DSB
scheduled to be held on 27 March 2018.