UNITED STATES – FINAL COUNTERVAILING DUTY DETERMINATION WITH RESPECT TO CERTAIN SOFTWOOD LUMBER FROM CANADA
Document: Recourse to Article 22.2 of the DSU by Canada
Date: 4 January 2005
Document codes: WT/DS257/16
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 22.2 of the DSU by Canada

 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 22.2 of the DSU.

 Canada requests that a special meeting of th e Dispute Settlement Body (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 22.2 of the Understanding on Rules and Procedures
Governing the Settlement of Disputes

 The Panel and the Appellate Body in this disput e found that the failure of the Department of
Commerce of the United States (Commerce) to conduc t a pass-through analysis in respect of arm's
length sales of logs by tenure harvesters/sawmills to unrel ated sawmills was inconsistent with
Articles 10 and 32.1 of the Agreement on Subsidies and Countervailing Measures (SCM Agreement)
and Article VI:3 of the General Agreement on Tariffs and Trade 1994 (GATT 1994). The Panel also
found that Commerce's failure to conduct a "pass-through" analysis in respect of arm's length sales of
logs by independent harvesters ( i.e., entities that do not produce softwood lumber products under
investigation) to sawmills was inconsistent with these same provisions.

 On 17 February 2004, the DSB adopted the A ppellate Body and Panel reports. The United
States subsequently stated that it intended to implement the recommendations and rulings of the DSB.

 Canada and the United States agreed that the "reasonable period of time" for the United States
to implement the DSB's recommendations and rulings would expire on 17 December 2004. On that
date, the United States informed the DSB that it ha d complied with its recommendations and rulings.
Canada considers that the United States has faile d to comply with the DSB's recommendations and
rulings with respect to the "pass-through" analysis allegedly conducted by Commerce. Canada is,
therefore, entitled to redress under Article 22 of the Understanding on Rules and Procedures
Governing the Settlement of Disputes (DSU).

 Pursuant to Article 22.2 of the DSU, Canada requests authorization from the DSB to suspend
the application to the United States of its concession s or other obligations in an amount that will be
established each year based on the portion of the a pplicable countervailing duty rate for that year

which is illegal due to the failure of Commerce to conduct an appropriate "pass-through" analysis.
For 2005, Canada requests authorization to suspend concessions or other obligations covering trade in
the amount of C$200,000,000.

 This level of suspension is equivalent to the level of nullification and impairment of benefits
accruing to Canada that results from the United St ates' failure to bring its measures concerning
Commerce's "pass-through" analysis into compliance by 17 December 2004 with the GATT 1994 and
the SCM Agreement or to otherwise comply with the DSB's recommendations and rulings.

 Canada intends to implement this suspension of tariff concessions a nd related obligations by
imposing duties in excess of the bound rates on products originating in the United States. Each year,
prior to the imposition of the additional duties, Canada will provide the DSB with a final list
indicating the level of duties on selected products.