WORLD TRADE ORGANIZATION

WTO rules against U.S. in matter of investigation by U.S. International Trade Commission regarding Canadian Softwood Lumber

The World Trade Organization (WTO) has issued a Panel Report on the U.S. Investigation of the International Trade Commission (USITC) in Softwood Lumber from Canada. Canada commenced that case on December 20, 2002, by requesting consultations and alleging violations by the U.S. of GATT 1994, Article VI of the Anti-Dumping Agreement (AD Agreement), and Article 30 of the Agreement on Subsidies and Countervailing Measures (SCM Agreement).

The dispute concerns the USITC investigation and final determination regarding Canadian softwood lumber, as well as the final definitive anti-dumping and countervailing duties subsequently applied. In May 2001, the USITC determined preliminarily that there was a reasonable indication that the U.S. softwood lumber industry was threatened with material injury because of the allegedly subsidized Canadian imports. In May 2002, the U.S. Department of Commerce issued anti-dumping and countervailing duty orders on Canadian softwood lumber (see 67 Federal Register 36068, May 22, 2002). Canada asked the WTO establish a Dispute Settlement Panel to review the matter.

In a related matter, the WTO Appellate Body issued a report regarding "United States "� Final Countervailing Duty Determination with Respect to Certain Softwood Lumber from Canada"� (WT/DS257/AB/R) on Jan. 19, 2004. See 2004 International Law Update 28.

The Panel finds that the USITC determination is inconsistent with Articles 3.7 of the AD Agreement and Article 15.7 of the SCM Agreement in that the conclusion that imports would increase substantially could not have been reached by an unbiased investigating authority based on an objective examination of the evidence. The USITC analysis as to causation rests upon the likely effect of substantially increased imports in the near future. The "non-attribution"� requirement in anti-dumping cases mandates that other causal factors be distinguished and separated from the dumped imports at issue. The USITC should have considered other factors potentially causing injury in the future, and it thus is inconsistent with Article 3.5 of the AD Agreement and Article 15.5 of the SCM Agreement requiring that "injuries caused by these other factors must not be attributed"� to the subject imports. Thus, a fundamental element of the causal analysis is inconsistent with the AD and SCM Agreements.

The Panel holds, in particular:

(1) The USITC determination is not consistent with Article 3.7 of the AD Agreement and Article 15.7 of the SCM Agreement in that the finding of a likely, imminent substantial increase in imports is not one which could have been reached by an objective and unbiased investigating authority in light of the totality of the factors considered and the reasoning in the USITC determination.

(2) The USITC determination is not consistent with Article 3.5 of the AD Agreement and Article 15.5 of the SCM Agreement in that the casual analysis is based on a finding which is, itself, not consistent with Article 3.7 of the AD Agreement and Article 15.7 of the SCM Agreement.

(3) Under Article 3.8 of the Dispute Settlement Understanding (DSU), in cases where there is infringement of the obligations assumed under a covered agreement, the action is considered prima facie to constitute a case of nullification or impairment of benefits under that agreement. To the extent that the U.S. has acted inconsistently with the provisions of the AD and SCM Agreements, it has nullified or impaired benefits accruing to Canada under that Agreement.

The Panel therefore recommends that the U.S. bring its measures into conformity with its obligations under the AD and SCM Agreements.

In a related matter, on April 13, 2004, a WTO Panel issued its report in the case United States - Final dumping determination on softwood lumber from Canada (DS/264/R). There, the Panel found that:

(1) The U.S. acted inconsistently with Article 2.4.2 of the AD Agreement in determining the existence of margins of dumping on the basis of a methodology incorporating the practice of "zeroing"� (to adjust to zero value the negative margins in the investigation).

(2) The U.S., however, did not act inconsistently with its obligations under the AD Agreement in conducting its investigation.

The Panel rejects Canada's request to recommend that the U.S. revoke its anti-dumping order, and instead only recommends that the U.S. bring its antidumping measure in conformity with its obligations under the AD Agreement.

One Panel Member dissents on the issue of "zeroing."� In the Member's View, Canada failed to establish that zeroing is inconsistent either with the specific provisions of Article 2.4.2 or with the general "fair comparison"� requirement of Article 2.4. At the very least, the U.S. should be permitted to interpret Articles 2.4.2 and 2.4 as not prohibiting zeroing.

Citation: United States – Investigation of the International Trade Commission in Softwood Lumber from Canada (WT/DS277/R) (22 March 2004); United States - Final dumping determination on softwood lumber from Canada (DS/264/R) (13 April 2004). The Panel Reports are available on the website “www.wto.org.”

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