Canadian Softwood Lumber Case.

1
Canadian Softwood Lumber Case.

• Melanie Masinde
• Sayakhat Meirambayeva
• Carla Menendez

2
CANADIAN LUMBER CASE

• Introduction
• Dispute with Canada over lumber dates back to
  1800s
• 1982 Coalition for Fair Lumber Imports
  petitioned the USG to place duties on imports of
  softwood lumber that had been harvested on
  Canadian Crown (government-owned) land.

3
Understanding the Dispute

• Softwood vs. Hardwood
• Fee Simple Ownership vs. Crown Land

4
Issues Complicating the Dispute

• The softwood lumber dispute comprises a number of
  different issues, making it difficult to reach a
  resolution.
• They include
• Stumpage fees
• Accusations of lumber dumping
• U.S. concerns over Canadas share of the US
  softwood lumber market and,
• The implications of Canadas multi-jurisdictional
  forestry management system

5
History

• Four categories
• Lumber I
• Lumber II
• Lumber III
• Lumber IV

6
Lumber I

• 1982 US Lumber industry petitioned US DOC to
  impose CV duty.

7
Lumber II

• Began in 1986
• Canada signed MOU agreed to pay 15 ad valorem
  tax

8
Lumber III

• Began in 1991.
• Canada wanted to withdraw from MOU and US imposed
  AD duty and CV taxes.
• Reached a Softwood Lumber Agreement in 1996.

9
Lumber IV

• 2001 Softwood Lumber Agreement expired.
• 2003 NAFTA chapter 19 ruled US tariffs were too
  high but that Canada was indeed subsidizing.
• 2005 Canada to provide 20m in legal expenses
  compensation to Canadian softwood associations.

10
Lumber IV (cont.)

• August 15 2005 U.S. refuses to abide by NAFTA.
• August 30, 2005 WTO upholds the U.S. ITC new
  Section 129 "threat of injury" ruling.
• Nov. 4, 2005 DOC announced it would comply with
  a separate NAFTA panel's order to cut a 16 duty
  on Canadian softwood lumber imports.
• Bush Administration disagrees.

11
Lumber IV (cont.)

• Dec 2005 DOC announces recalculated CV and AD
  duties at a total of 10.8.
• April 2006 US Canada reach framework agreement
  

12
Lumber IV (cont.)

• July 2006 Tariffs are removed but export taxes
  still remain
• Sept 2006 Deal signed, CV and AD taxes are
  removed and US4.4 billion returned to Canada
• Oct. 2006 Softwood Lumber Agreement enters into
  force

13
Positions of the Main Parties
14
DSB under Process.

• 2004
• On May 3, 2002 Canada requested consultations.
• On July 18, 2002 Canada requested the
  establishment of a panel.
• On October 1, 2002 Panel was established.
• On August 29, 2003 Panel report was circulated
  to Members.

15
Contd

• 2006
• May 19, 2005 Canada requested establishment of a
  panel.
• June 3, 2005 Panel was composed.
• February 14, 2006 The panel issued its report.

16
Canadas Position

• 2004
• Canada claims that the U.S. violated Articles 2.1
  and 2.4.2 of the AD Agreement.
• Violation of several provisions of the SCM
  agreements.
• -Articles 1,2,10,11,12,14,15,19
  ,22 and 32.1.
• U.S. acted inconsistently with Articles VII and
  VI2 of the GATT 1994.

17
Canadas Position (contd)

• 2006
• Canada claims that the methodology adopted by the
  DOC in the Section 129 determination is
  inconsistent with Articles 2.4.2 and 2.4 of the
  AD Agreement.
• Canada considers U.S failed to implement the
  DSBs recommendations and rulings.
• Canada claims that manipulation of transaction-
  to- transaction comparison can not be considered
  a fair comparison
• Requests return of a duty deposit.

18
US Position

• 2004
• U.S. producers argue that they have been injured
  by imports of Canadian lumber.
• U.S argues that Article 2.4.2 deals only with
  multiple comparisons at sub-group level.
• The U.S argued that stumpage programs caused an
  unfair competition.
• 2006
• U.S insists, they implemented the recommendations
  and rulings of the DSB in this dispute.

19
Panels Decision

• 2004
• Panel found that zeroing as applied in this case
  is inconsistent with Article 2.4.2 of the AD
  Agreement
• U.S had violated several provisions of the AD
  Agreement, it had impaired benefits accruing to
  Canada under that Agreement.
• 2006
• The Panel found that the U.S remains in violation
  of Article 10 and 32.1 of the SCM Agreement, and
  Article VI3 of the GATT 1994.
• The panel upheld U.S acted inconsistently with
  Article 2.4.2 of the  AD agreement. 

20
Appeal Process

• 2004.
• U.S decision to appeal to the Appellate Body.
• Case went to the AB.
• AB Conclusion.
• On 19 January 2004, AB Report was circulated to
  Members.

• 2006.
• United States notified its decision to appeal.
• Case went to the AB.
• AB Conclusion.
• On 5 December 2005, the AB circulated its Report
  to Members.

21
Appellate Body Finding

• 2004
  
• The AB upheld the original panel's finding that
  the United States acted inconsistently with
  Article 2.4.2 of the AD Agreement.
• Upheld the panels finding that U.S violated
  Articles 2.2, 2.2.1, 2.2.1.1, and 2.4 of the
  Anti-Dumping Agreement.
• Reversed the Panel's finding, that the U.S did
  not act inconsistently with Articles 2.2, 2.2.1,
  2.2.1.1, and 2.4 of the Anti-Dumping Agreement
• AB upheld an earlier panel decision finding the
  Canadas stumpage program was inconsistent with
  SCM agreement under WTO rules.
• On August 31, 2004 The Panel and AB's report was
  adopted. (WT/DS264/AB/R)

22
Appellate Body Finding (Contd)

• 2006.
• AB Reverses the Panel's finding, DOC's Section
  129 Determination is not inconsistent with
  Article 2.4.2 of the AD Agreement. 
• Reverses the Panel's finding, that DOC's Section
  129 Determination is not inconsistent with
  Article 2.4 of the  AD agreement.
• AB reverses the Panel's conclusion, that the U.S
  has implemented the recommendations and rulings
  of the DSB in  US Softwood Lumber V, to bring
  its measure into conformity with its obligations
  under the AD Agreement.

23
ImplementationDecisions to be implemented by
brining the offending measure into conformity
with that agreement. Art 19

• What has happened?
• AB 2004 original panel
• Panel report circulated to Members of WTO on 13
  April 2004
• Panel recommended DSB request the U.S. to bring
  its measure into conformity with the  AD
  Agreement, but denied Canada's request to make
  more specific suggestions regarding
  implementation.

24
Quick Glance

• Upholds the Panel's finding, in paragraphs 7.224
  and 8.1(a)(i) of the Panel Report, that the
  United States acted inconsistently with
  Article 2.4.2 of the  Anti-Dumping Agreement  in
  determining the existence of margins of dumping
  on the basis of a methodology incorporating the
  practice of "zeroing" 
• Reverses the Panel's finding, in paragraphs
  7.2387.245 and 8.1(b)(vi) of the Panel Report,
  that the United States did not act inconsistently
  with Articles 2.2, 2.2.1, 2.2.1.1, and 2.4 of the
   Anti-Dumping Agreement  in its calculation of
  the amount for financial expense for softwood
  lumber for Abitibi, but does not make findings on
  whether the United States acted consistently or
  inconsistently with these provisions and
• Upholds the Panel's findings, in paragraphs
  7.3197.326 and 8.1(b)(ix) of the Panel Report,
  that that the United States did not act
  inconsistently with Articles 2.2, 2.2.1, 2.2.1.1,
  and 2.4 of the  Anti-Dumping Agreement  in its
  calculation of the amount for by-product revenue
  from the sale of wood chips as offsets in the
  case of Tembec.

25
Implementation report by losing party of
proposed implementationwithin reasonable period
of time (Art. 21.3)

• Dec. 6, 2004 Canada and the U.S. mutually agreed
  to implement the recommendations and rulings of
  the DSB from 31 August 2004 to 15 April 2005.
• The reasonable period of time was later extended
  to 2 May 2005 by agreement between the parties.
• January 14, 2005 DSB established an Article
  21.5 compliance panel to review the new DOC
  determination.
• May 19, 2005 U.S. notified the DSB that, with
  the Section 129 Determination, it had implemented
  the DSB's recommendations and rulings.

26
Implementation of recommendation is preferred.
Art. 21

• Canada considered that the U.S. had failed to
  bring its measure into conformity with its
  obligations under the AD Agreement.
• In the Article 21.5 proceedings, Canada claimed
  that the use of zeroing by DOC in the Section 129
  Determination is inconsistent with the U.S.'
  obligations under Articles 2.4 and 2.4.2 of the
  AD Agreement.
• The Panel Report was circulated to the Members of
  the WTO on 3 April 2006.

27

• Conclusion the determination of the USDOC in
  the section 129 proceeding investigation is not
  inconsistent with the asserted provisions of
  Articles 2.4 and 2.4.2 of the Anti-Dumping
  Agreement.
• We therefore consider that the United States has
  implemented the recommendations and rulings of
  the DSB in US Softwood Lumber V, to bring its
  measure into conformity with its obligations
  under the Anti-Dumping Agreement.
• May 24, 2006 Canada filed an appellant's
  submission On 12 June 2006, the U.S. filed an
  appellee's submission.

28
ABs Conclusion

• AB reverses all 3 of the Panels findings.
• AB recommends that the DSB request the U.S. to
  bring its measure into conformity with its
  obligations under the AD Agreement.
• Up to this point Canada has only threatened
  sanctions.

29
Quick Glance

• Reverses the Panel's finding, in paragraphs 5.66
  and 6.1 of the Panel Report, that the USDOC's
  Section 129 Determination is not inconsistent
  with Article 2.4.2 of the Anti-Dumping
  Agreement  and finds, instead, that the use of
  zeroing by the USDOC in the Section 129
  Determination is inconsistent with the United
  States' obligations under Article 2.4.2 of the
   Anti-Dumping Agreement
• Reverses the Panel's finding, in paragraphs 5.78
  and 6.1 of the Panel Report, that the USDOC's
  Section 129 Determination is not inconsistent
  with Article 2.4 of the  Anti-Dumping Agreement
  and finds, instead, that the use of zeroing in
  the Section 129 Determination is inconsistent
  with the "fair comparison" requirement in Article
  2.4
• Reverses the Panel's conclusion, in paragraph 6.2
  of the Panel Report, that "the United States has
  implemented the recommendations and rulings of
  the DSB in  US Softwood Lumber V, to bring its
  measure into conformity with its obligations
  under the Anti-Dumping Agreement".

30
Implementation- Recent Developments

• September 2006 New Softwood lumber agreement
  signed with USTR Susan Schwab in Ottowa.
• More than 4.4 billion back to the Canadians-
  return of duty deposits to individual softwood
  producers.
• Export Dev. Canada will purchase the rights to
  the duties and interest owed which will eliminate
  waiting pd for U.S. Customs to process funds.
• Oct. 12, 2006Softwood lumber agmnt entered into
  force.
• Canada based on current market prices for
  softwood lumber, this will require the immediate
  collection of an export tax.
• US 1. revocation of the AD and CVD orders on
  softwood lumber from Canada 2. end to the
  collection of duty deposits on imports of
  Canadian softwood lumber 3. initiation of the
  process to refund duty deposits currently held by
  U.S. Customs and Border Protection.

31
Resolving the trade issues

• Applause for recent developments- breaking free
  from the endless cycle of conflict, uncertainty
  and costly litigation.
• Possible Solutions
• Making an exception to natural resources.
• Ricardian Economic Theory market for these
  resources do not exhibit the normal elasticities
  in SD.
• Enter into a contractual arrangement to develop
  certain regions.
• Reduce CVD and subsidies.

32
National and International Interest Involved

• June 2006 Appeal
• European Communities, Japan, New Zealand,
  Thailand, China and India.
• Main Contenders
• USG and GOC
• Major soft wood producing Provinces and States
• Canadian and American softwood producers

33
Cited Sources

• Canada. Foreign Affairs and International Trade
  Canada. Canada and the United States agree to
  extend implementation date of the Softwood
  Lumber Agreement. Sept. 2006. 11 October 2006.
• lthttp//w01.international.gc.ca/minpub/Publicatio
  n.aspx?isRedirect
• Truepublication_id384419languageEdocnumber1
  12gt
• Canada. Foreign Affairs and International Trade
  Canada. Minister Emerson marks implementation
  of Softwood Lumber Agreement. Oct. 2006.
  11October 2006.
• lthttp//w01.international.gc.ca/minpub/Publicatio
  n.aspx?isRedirect Truepublication_id384419lang
  uageEdocnumber112gt
• Canada. Foreign Affairs and International Trade
  Softwood Lumber Retrieved 12 October 2006
• lthttp//www.dfait-maeci.gc.ca/eicb/softwood/menu-
  en.aspgt

34
Cited Sources

• Unites States. Office of the United States Trade
  Representative. U.S. Trade Representative Susan
  C. Schwab Announces Entry into Force of
  U.S.-Canada Softwood Lumber Agreement. Oct. 2006.
  11 October 2006.
• lthttp//www.ustr.gov/Document_Library/Press_Relea
  ses/2006/October/US_Trade_Representative_Susan_C_S
  chwab_Announces_Entry_into_Force_of_US-Canada_Soft
  wood_Lumber_Agreement.htmlgt
• United States. United States Canada softwood
  Lumber Dispute. retrieved 10 October 2006
  lthttp//www.search.com/reference/United_States2DC
  anada_softwood_lumber_disputegt
• United States. Overview of Major Legal Decisions
  in the Softwood Lumber Dispute. Retrieved 10
  October 2006 lthttp//www.mapleleafweb.com/features
  /economy/softwood-lumber/chronology-events.htmlgt

35
Cited Sources

• WTO (2005, November 15). Dispute Settlement
  Update. Retrieved October 12, 2006 from, Web Site
  lthttp//www.ustr.gov/assets/Trade_Agreements/Monit
  oring_Enforcement/Dispute_Settlement/asset_upload_
  file343_5697.pdfgt
• WTO (2004, August 11). United States Final
  Dumping Determination on Softwood Lumber from
  Canada. Retrieved October 9, 2006 from, ITRN 602
  Web site lthttp//www.internationaltraderelations
  .com/WT0.Canada20Lumber20Case20(AB20August 20
  2004)20(edited)..htmgt
• WTO (2006, April 3). United States-Final Dumping
  Determination on Softwood Lumber from Canada-
  Recourse to Article 21.5 of the DSU by Canada.
  Retrieved October 9, 2006 from, ITRN 602 Web
  site lthttp//www.wto.org/english/tratop_e/dispu_
  e/264rw- 0_e.docgt

36
Cited Sources

• Government of British Columbia,Canada U.S Lumber
  Trade Dispute, Retrieved October 10, 2006 from,
  lthttp//www.for.gov.bc.ca/HET/Softwood/disputes.ht
  mgt
• American Society of International Law, World
  Trade Organization (WTO) Appellate Body Report,
  Retrieved October 10, 2006 from,
  lthttp//www.asil.org/ilib/ilib0702.htmj3gt
• John H.Jackson,Legal,2002, Problems of
  International Economic Relations, Retrieved
  October 10, 2006 from lthttp//www.internationaltra
  derelations.com/Jackson20Update20(2006).pdfgt