WORLD TRADE
ORGANIZATIONWT/DS264/2
9 December 2002
(02-6815)
Original:  English
UNITED STATES – FINAL DUMPING DETERMINATION
ON SOFTWOOD LUMBER FROM CANADA
Request for the Establishment of a Panel by Canada
The following communication, dated 6 December 2002, from the Permanent Mission of
Canada to the Chairman of the Dispute Settlement Body, is circulated pursuant to Article 6.2 of the
DSU.
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The United States initiated anti-dumping proceedings against imports of softwood lumber
from Canada on 23 April 2001.  The Notice of Initiation was published on 30 April 2001 in the US
Federal Register, Volume 66, pages 21328 et seq.   The investigation was conducted under the US
anti-dumping statute (the Tariff Act of 1930 , as amended: 19 U.S.C. section 1763 et seq .) and the
related regulations of the United States Departme nt of Commerce (Commerce) (19 Code of Federal
Regulations 351–357).  On 21 March 2002, Commerce announced its Final Determination, which was
published on 2 April 2002, in the US Federal Register, Volume 67, pages 15,539 et seq .  Following a
final affirmative injury determination by the US International Trade Commission, Commerce
published in the Federal Register on 22 May 2002 an amended Final Determination and an
Anti-dumping Order on softwood lumber produ cts from Canada (Volume 67, pages 36,067 et seq .).
Commerce's methodologies and determinations that form the bases of its Final Determination are set
out in more detail in its underlying decision memoranda, including but not limited to its Issues and
Decision Memorandum dated 21 March 2002 and its Scope Memorandum dated 12 March 2002.  As
a result of violations of the World Trade Organization (WTO) agreements described below,
Commerce determined margins of dumping for imports of softwood lumber from Canada.
On 13 September 2002, the Government of Canada requested consultations with the
Government of the United States, concerning the final affirmative determination of sales at less than
fair value with respect to certain softwood lu mber products from Canada (Inv. No. A-122-838)
announced by Commerce on 21 March 2002 pursuant to section 735 of the Tariff Act of 1930, as
amended on 22 May 2002 (Final Determination) and concerning Commerce's initiation of the
investigation and its conduct of the investigation.  This request (WT/DS264/1) was made pursuant to
Article 4 of the Understanding on Rules and Procedures Governing the Settlement of Disputes  (DSU),
Article XXII of the General Agreement on Tariffs and Trade 1994  (GATT 1994) and Article 17 of the
Agreement on Implementation of Article VI of GATT 1994  (Anti-Dumping Agreement ).
Canada and the United States held consultations on 11 October 2002 covering the initiation of
the investigation, the conduct of the investigation and the Final Determination.  These consultations
failed to settle the dispute.
Canada therefore requests, pursuant to Articles 4 and 6 of the DSU, Article XXIII of  the
GATT 1994 and Article 17 of the Anti-Dumping Agreement , that a panel be established at the nextWT/DS264/2
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meeting of the Dispute Settlement Body, to be held on 19 December 2002.  Canada further requests
that the panel have the standard terms of reference as set out in Article 7 of the DSU.
The measures at issue include the initiation of the investigation, the conduct of the
investigation, the Final Determination and the resulting Anti-dumping Order on Softwood Lumberfrom Canada.  The Government of Canada considers these measures and, in particular, the
determinations made and methodologies adopted therein by the United States Department of
Commerce under authority of the United States Tariff Act of 1930 , including section 732(c)(4)(E), to
violate the Anti-Dumping Agreement  and the GATT 1994 for, among others, the following reasons:
1. The application filed by the US domestic industry and the subsequent initiation of the
investigation by Commerce did not comply with Article 5 of the Anti-Dumping Agreement,
including Articles 5.1, 5.2, 5.3, 5.4 and 5.8.  Specifically:
(a) The application submitted by the US domestic industry did not include evidence
reasonably available to it, including pricing of Canadian exports to the United States,
pricing of the like products sold in Canada by Canadian producers, and Canadian costdata in respect of the production in Canada of the like products.  By Commerce's
failure to determine whether the application contained all information reasonably
available to the applicant, and by Commerce initiating the investigation where the
application failed to contain evidence reasonably available to the applicant, and by
Commerce's failure to terminate the investigation when Commerce became awarethat the application failed to contain ev idence reasonably available to the applicant,
the United States violated Articles 5.2, 5.3 and 5.8 of the Anti-Dumping Agreement .
(b) The application submitted by the US domestic industry did not include sufficient
evidence of dumping to justify initiation of the investigation.  Commerce failed toexamine the accuracy and adequacy of the evidence provided in the application and
failed to reject the application in view of the lack of sufficient evidence of dumping
required to justify the initiation of an investigation, and failed to terminate the
investigation when it became evident that the application did not contain sufficient
evidence, thereby resulting in violations by the United States of Articles 5.1, 5.2, 5.3
and 5.8.
(c) The Continued Dumping and Subsidy Offset Act of 2000  (CDSOA), by requiring that
a member of the US industry support the application as a condition of receiving
payments under the CDSOA, made an objective and meaningful examination of
industry support for the application impossible.  The United States violated Articles
5.4 and 5.8 in that Commerce's initiation of the investigation was not based on anobjective and meaningful examination and determination of the degree of support for
the application by the domestic industry.
(d) The initiation by Commerce was made without a proper establishment of the facts,
was based on an evaluation of the facts that was neither unbiased nor objective anddoes not rest on a permissible interpretation of the Anti-dumping Agreement .
Accordingly, the initiation by Commerce ca nnot be upheld in light of the applicable
standard of review under Article 17.6.
2. Commerce erroneously determined there to be a single like product (under US law, termed
"class or kind" of merchandise) rather than several distinct like products, thereby failing to
assess domestic industry support in respect of each distinct like product and failing to assess
the sufficiency of evidence of dumping in respect of each distinct like product, thereby
resulting in violations by the United States of Articles 2.6, 4.1, 5.1, 5.2, 5.3, 5.4 and 5.8 of theWT/DS264/2
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Anti-Dumping Agreement  and Article VI:1 of the GATT 1994.  The like product and industry
support determinations by Commerce were made without a proper establishment of the facts,
were based on an evaluation of the facts that was neither unbiased nor objective and do not
rest on a permissible interpretation of the Anti-dumping Agreement .  Accordingly, the like
product and industry support determinations by Commerce cannot be upheld in light of theapplicable standard of review under Article 17.6.
3. In making the final determination, the United States acted inconsistently with Article VI of
the GATT 1994 and Articles 1, 2.1, 2.2, 2.2.1, 2.2.1.1, 2.2.2, 2.3, 2.4, 2.4.1, 2.4.2, 2.6, and 9.3
of the Anti-Dumping Agreement.  Specifically,  Commerce improperly applied a number of
methodologies based on improper and unfair comparisons between the export price and the
normal value, resulting in artificial and/or inflated margins of dumping:
(a) The United States violated Article 2 of the Anti-Dumping Agreement , including
Articles  2.4 and 2.4.2 , and Article VI:1 of the GATT 1994 by Commerce's
application of the practice of "zeroing" negative dumping margins, the effect of
which was to inflate margins of dumping and which, in the recommendations andrulings of the Dispute Settlement Body in an earlier dispute, was found to be
inconsistent with the Anti-Dumping Agreement .  A fair comparison was therefore not
made by Commerce between the export price and the normal value and a distorted
margin of dumping was calculated, thereby resulting in violations by the United
States of Articles 2.4 and 2.4.2 of the Anti-Dumping Agreement.
(b) The United States violated Article 2 of the Anti-dumping Agreement , including
Article 2.4, and Article VI:1 of the GATT 1994 by Commerce's failure, when
conducting comparisons between prices of products sold in the United States and
prices of products with different physical characteristics sold in the Canadian market,to make due allowance for differences that affect price comparability, including
differences in physical characteristics.  A fair comparison was therefore not made by
Commerce between the export price and the normal value and a distorted margin of
dumping was calculated, thereby resulting in violations by the United States of
Articles 2.4 and 2.4.2 of the Anti-Dumping Agreement.
(c) The United States violated Article 2 of the Anti-Dumping Agreement  including
Articles 2.2, 2.2.1, 2.2.1.1 and 2.2.2, and Article VI:1 of the GATT 1994 by
Commerce's failure to apply a reasonable method in calculating amounts for
administrative, selling and general expenses for specific exporters, including an
improper allocation of general and administrative expenses including financial
expenses.  A fair comparison was therefore not made by Commerce between theexport price and the normal value and a distorted margin of dumping was calculated,
thereby resulting in violations by the United States of Articles 2.4 and 2.4.2 of the
Anti-Dumping Agreement.
(d) The United States violated Article 2 of the Anti-Dumping Agreement , including
Articles 2.2, 2.2.1, 2.2.1.1, 2.2.2 and paragraph 7 of  Annex I, and Article VI:1 of the
GATT 1994 by Commerce's failure to apply a reasonable method to account for
revenues, including by-product and futures contract revenues, as offsets in calculating
costs and export price for specific exporters.  A fair comparison was therefore not
made by Commerce between the export price and the normal value and a distortedmargin of dumping was calculated, thereby resulting in violations by the United
States of Articles 2.4 and 2.4.2 of the Anti-Dumping Agreement.WT/DS264/2
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(e) The methodologies, calculations, comparisons and determinations by Commerce
were made without a proper establishment of the facts, was based on an evaluation of
the facts that was neither unbiased nor objective and does not rest on a permissible
interpretation of the Anti-dumping Agreement .  Accordingly, the methodologies,
calculations, comparisons and determinations by Commerce cannot be upheld in lightof the applicable standard of review under Article 17.6.
(f) The methodologies, calculations, comparisons and determinations by Commerce
violated Articles VI:1 and VI:2 of the GATT 1994 and Article 9.3 of the
Anti-Dumping Agreement  by levying an anti-dumping duty on softwood lumber from
Canada in an amount greater than the margin of any dumping.
In view of the claims set forth above, Canada considers that the United States has acted
inconsistently with Article VI of the GATT 1994 and Article 1 of the Anti-Dumping Agreement ,
which only permit anti-dumping measures to be applied under the circumstances provided for in
Article VI and pursuant to investigations initiated and conducted in accordance with the
Anti-Dumping Agreement .  Because the claims set forth above indicate the violations of various
provisions under the Anti-Dumping Agreement , Article VI of the GATT 1994 and Articles 1 and 18.1
of the Anti-Dumping Agreement  are consequently violated.
Canada requests that the Panel consider and find that the US anti-dumping measures
concerning imports of softwood lumber from Canada, including the initiation, conduct of theinvestigation, and Final Determination and resulting Anti-dumping Order are inconsistent with the
provisions of the WTO agreements, nullify or impair benefits accruing directly or indirectly to Canada
under the WTO agreements, and impede the achievement of the objectives of the WTO agreements.
Canada further requests that the Panel recommend that the United States revoke the
anti-dumping order in respect of softwood lumber from Canada.
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