United States – Final Countervailing Duty Determination with Respect to Certain Softwood Lumber from Canada - Recourse by Canada to Article 21.5 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (WT/DS257): Report of the Panel

Summary

PROCEDURAL BACKGROUND

On 17 February 2004, the Dispute Settlement Body (“DSB”) adopted the recommendations and rulings in the reports of the original panel and the Appellate Body in US – Softwood Lumber IV.

In respect of pass-through, the original panel concluded that:

“the USDOC's failure to conduct a pass-through analysis in respect of upstream transactions for log and lumber inputs between unrelated entities was inconsistent with Article 10 SCM Agreement and Article VI:3 of GATT 1994.”

More specifically, the original panel found that:

“the USDOC's failure to conduct a pass-through analysis in respect of logs sold by tenure-holding timber harvesters (whether or not also lumber producers) to unrelated sawmills producing subject softwood lumber; and in respect of lumber sold by tenureholding harvester/sawmills to unrelated lumber re-manufacturers was inconsistent with Article 10 and thus Article 32.1 SCM Agreement, and with Article VI:3 of GATT 1994.”

The original panel therefore upheld Canada's claim that the United States’ imposition of countervailing duties in respect of such transactions was inconsistent with Articles 10 and 32.1 SCM Agreement and Article VI:3 of GATT 1994.

The United States appealed from the original panel's pass-through conclusion. The Appellate Body stated that the United States “contend[ed] that the [original panel] erred in finding that a pass-through analysis is required in respect of sales of logs from tenure-holding sawmills producing softwood lumber to unrelated sawmills, and for sales of lumber by tenure-holding sawmills to unrelated lumber remanufacturers.” According to the Appellate Body, the United States ”[did] not appeal the [original panel's] finding that, where a subsidy is received by an independent timber harvester, a pass-through analysis is required in respect of sales to unrelated sawmills or unrelated remanufacturers”.

In respect of pass-through, the Appellate Body stated that it upheld the original panel's finding that:

“USDOC's failure to conduct a pass-through analysis in respect of arm's length sales of logs by tenured harvesters/sawmills to unrelated sawmills is inconsistent with Articles 10 and 32.1 of the SCM Agreement and Article VI:3 of the GATT 1994.”