United States — Investigation of the International Trade Commission in Softwood Lumber from Canada

Consultations

Complaint by Canada.

On 20 December 2002, Canada requested consultations with the United States regarding the investigation of the USITC in Softwood Lumber from Canada (Invs. Nos. 701-TA-414 and 731-TA-928 (Final)) and the final definitive anti-dumping and countervailing duties applied as a result of the USITC’s final determination made on 2 May 2002, notice of which was published in the United States Federal Register on 22 May 2002 (Volume 67, Number 99 at pp. 36022-36023) that an industry in the United States is threatened with material injury by reason of imports of softwood lumber from Canada that the Department of Commerce has determined are subsidized and sold in the United States at less than fair value.

Canada claimed that, through these measures, the United States has violated its obligations under Article VI:6(a) of the GATT 1994, Articles 1, 3.1, 3.2, 3.3, 3.4, 3.5, 3.7, 3.8, 12 and 18.1 of the Anti-Dumping Agreement and Articles 10, 15.1, 15.2, 15.3, 15.4, 15.5, 15.7, 15.8, 22 and 32.1 of the SCM Agreement.

On 3 April 2003, Canada requested the establishment of a panel. At its meeting on 15 April 2003, the DSB deferred the establishment of the panel.

Panel and Appellate Body proceedings

Further to a second request by Canada, the DSB established a panel at its meeting on 7 May 2003. The European Communities and Japan reserved their third party rights. On 16 May 2003, Korea reserved its third party rights. On 12 June 2003, Canada requested the Director-General to compose the panel. On 19 June 2003, the Director-General composed the panel. On 19 December 2003, the Chairman of the panel informed the DSB that it would not be possible for the Panel to complete its work in six months in light of scheduling conflicts. The panel expected to complete its work in February 2004.

On 22 March 2004, the panel report was circulated to Members. The panel found that, in its final threat of injury determination, the US International Trade Commission (USITC) failed to comply with the requirements of Articles 3.5 and 3.7 the Anti-Dumping Agreement and Article 15.5 and 15.7 of the SCM Agreement in finding a likely imminent substantial increase in imports and a casual link between imports and threat of injury to the domestic industry in the US producing softwood lumber. The panel found that the USITC’s finding of likelihood of substantially increased imports was not consistent with the requirements of the Agreements, and that the causation conclusion rested on this inconsistent finding. The panel therefore found that the anti-dumping and countervailing measures imposed by the United States on imports of softwood lumber from Canada are inconsistent with the United States' obligations under those provisions, and recommended that those measures be brought into conformity with the United States' obligations.

At its meeting on 26 April 2004, the DSB adopted the panel report.

Reasonable period of time

At the DSB meeting on 19 May 2004, the United States stated that it intended to implement the recommendations and rulings of the DSB in a manner that respected its WTO obligations.  It also stated that it would require a reasonable period of time to do so and was ready to consult with Canada in accordance with Article 21.3(b) of the DSU. On 26 July 2004, the United States and Canada informed the DSB that they were holding bilateral consultations on the period of time required for the United States to implement the recommendations and rulings of the DSB and confirmed that should recourse to arbitration be sought, the award of the arbitrator made within the agreed 45-day time period shall be deemed to be the award of the arbitrator for the purpose of Article 21.3(c) of the DSU. On 1 October 2004, the United States and Canada informed the DSB that they had mutually agreed that the reasonable period of time to implement the recommendations and rulings of the DSB shall be 9 months, that is from 26 April 2004 to 26 January 2005.

At the DSB meeting on 25 January 2005, the United States stated that it had implemented the DSB’s recommendations and rulings by amending the US anti-dumping and countervailing duty order concerned, and Canada stated it was reviewing the results of the US implementation.

Compliance proceedings

On 14 February 2005, considering that the measures allegedly taken by the United States to comply with the DSB’s recommendations and rulings were inconsistent with United States' obligations under relevant WTO agreements, Canada requested the DSB to establish a panel under Article 21.5 of the DSU. In parallel, Canada requested on the same date the DSB's authorization to suspend concessions or other obligations (see below).

On 23 February 2005, Canada and the United States notified the DSB of an Understanding regarding procedures under Articles 21 and 22 of the DSU, which provides that the Article 22.6 arbitration be suspended until adoption by the DSB of the recommendations and rulings in the compliance proceedings.

At its meeting on 25 February 2005, the DSB agreed to refer the matter raised by Canada to the original panel.  On 2 March 2005, the compliance panel was composed.

On 25 May 2005, the Chairman of the panel informed the DSB that it would not be possible for the panel to complete its work in 90 days in light of scheduling conflicts, and that the panel expected to complete its work in September 2005.

On 15 November 2005, the compliance panel report was circulated to Members.  The compliance panel found that the determination of the USITC implementing the panel and DSB recommendations in the original dispute was not inconsistent with the United States’ obligations under the Anti-Dumping Agreement and the SCM Agreement.

On 13 January 2006, Canada notified the DSB of its decision to appeal to the Appellate Body certain issues of law covered in the compliance panel report and certain legal interpretations developed by the compliance panel. On 10 March 2006, the Chairman of the Appellate Body informed the DSB that the Appellate Body would not be able to circulate its report within the 60-day period due to the time required for completion and translation of the report, and that it estimated it would be circulated to Members no later than 13 April 2006.

On 13 April 2006, the Appellate Body report was circulated to Members. The Appellate Body clarified the standard of review to be followed by panels in reviewing threat of injury determinations. The Appellate Body found that the compliance panel had acted inconsistently with Article 11 of the DSU because it articulated and applied an improper standard of review in its assessment of the USITC's Section 129 determination. Consequently, the Appellate Body reversed the compliance panel's findings that the USITC's determination was not inconsistent with the obligations of the United States under Articles 3.5 or 3.7 of the Anti-Dumping Agreement and Articles 15.5 and 15.7 of the SCM Agreement.  It also reversed the compliance panel's finding that the United States had implemented the recommendations and rulings of the DSB in the original dispute.

However, the Appellate Body was unable to complete the analysis and determine whether the USITC's Section 129 determination was consistent or inconsistent with the United States' obligations under Articles 3.5 and 3.7 of the Anti-Dumping Agreement and Articles 15.5 and 15.7 of the SCM Agreement.

On 9 May 2006, the DSB adopted the Appellate Body report and the compliance panel report, as reversed by the Appellate Body report.

Proceedings under Article 22 of the DSU (remedies)

On 14 February 2005, simultaneous to requesting the establishment of a compliance panel (see above), Canada requested the DSB to authorize the suspension of concessions or other obligations with respect to the United States under Article 22.2 of the DSU.  On 23 February 2005 the United States requested this matter to be referred to arbitration in accordance with Article 22.6 of the DSU. At its meeting of 25 February 2005, the DSB agreed that the matter raised by the United States be referred to arbitration in accordance with Article 22.6 of the DSU. Pursuant to the Understanding regarding procedures under Articles 21 and 22 of the DSU, the Article 22.6 arbitration proceeding was suspended until the completion of the compliance proceeding.

In light of the mutually agreed solution notified on 12 October 2006, the suspended Article 22.6 arbitration proceeding was withdrawn.

Mutually agreed solution

On 12 October 2006, the United States and Canada informed the DSB that they had reached a mutually agreed solution under Article 3.6 of the DSU in the disputes DS236, DS247, DS257, DS264, DS277 and DS311.  This solution was in the form of a comprehensive agreement (Softwood Lumber Agreement) between the United States and Canada, dated 12 September 2006. On 23 February 2007, the United States and Canada informed the DSB that on 12 October 2006 they had concluded a further Agreement, which amended the original Agreement to facilitate its entry into force.