|Short title||Full case title and citation|
|Argentina – Ceramic Tiles||Panel Report, Argentina – Definitive Anti-Dumping Measures on Imports of Ceramic Floor Tiles from Italy, WT/DS189/R, adopted 5 November 2001, DSR 2001:XII, p. 6241|
|Argentina – Footwear (EC)||Appellate Body Report, Argentina – Safeguard Measures on Imports of Footwear, WT/DS121/AB/R, adopted 12 January 2000, DSR 2000:I, p. 515|
|Argentina – Import Measures||Appellate Body Reports, Argentina – Measures Affecting the Importation of Goods, WT/DS438/AB/R / WT/DS444/AB/R / WT/DS445/AB/R, adopted 26 January 2015|
|Argentina – Poultry Anti‑Dumping Duties||Panel Report, Argentina – Definitive Anti-Dumping Duties on Poultry from Brazil, WT/DS241/R, adopted 19 May 2003, DSR 2003:V, p. 1727|
|Canada – Aircraft||Appellate Body Report, Canada – Measures Affecting the Export of Civilian Aircraft, WT/DS70/AB/R, adopted 20 August 1999, DSR 1999:III, p. 1377|
|China – GOES||Panel Report, China – Countervailing and Anti-Dumping Duties on Grain Oriented Flat-Rolled Electrical Steel from the United States, WT/DS414/R and Add.1, adopted 16 November 2012, upheld by Appellate Body Report WT/DS414/AB/R, DSR 2012:XII, p. 6369|
|EC – Bed Linen (Article 21.5 – India)||Appellate Body Report, European Communities – Anti-Dumping Duties on Imports of Cotton-Type Bed Linen from India – Recourse to Article 21.5 of the DSUby India, WT/DS141/AB/RW, adopted 24 April 2003, DSR 2003:III, p. 965|
|EC – Chicken Cuts||Appellate Body Report, EuropeanCommunities – Customs Classification of Frozen Boneless Chicken Cuts, WT/DS269/AB/R, WT/DS286/AB/R, adopted 27 September 2005, and Corr.1, DSR 2005:XIX, p. 9157|
|EC – Countervailing Measures on DRAM Chips||Panel Report, European Communities – Countervailing Measures on Dynamic Random Access Memory Chips from Korea, WT/DS299/R, adopted 3 August 2005, DSR 2005:XVIII, p. 8671|
|EC – Hormones||Appellate Body Report, EC Measures Concerning Meat and Meat Products (Hormones), WT/DS26/AB/R, WT/DS48/AB/R, adopted 13 February 1998, DSR 1998:I, p. 135|
|EC – Salmon (Norway)||Panel Report, European Communities – Anti-Dumping Measure on Farmed Salmon from Norway, WT/DS337/R, adopted 15 January 2008, and Corr.1, DSR 2008:I, p. 3|
|EC – Tube or Pipe Fittings||Appellate Body Report, European Communities – Anti-Dumping Duties on Malleable Cast Iron Tube or Pipe Fittings from Brazil, WT/DS219/AB/R, adopted 18 August 2003, DSR 2003:VI, p. 2613|
|EC and certain member States – Large Civil Aircraft||Appellate Body Report, European Communities and Certain Member States – Measures Affecting Trade in Large Civil Aircraft, WT/DS316/AB/R, adopted 1 June 2011, DSR 2011:I, p. 7|
|Egypt – Steel Rebar||Panel Report, Egypt – Definitive Anti-Dumping Measures on Steel Rebar from Turkey, WT/DS211/R, adopted 1 October 2002, DSR 2002:VII, p. 2667|
|Guatemala – Cement I||Appellate Body Report, Guatemala – Anti-Dumping Investigation Regarding Portland Cement from Mexico, WT/DS60/AB/R, adopted 25 November 1998, DSR 1998:IX, p. 3767|
|Indonesia – Autos||Panel Report, Indonesia – Certain Measures Affecting the Automobile Industry, WT/DS54/R, WT/DS55/R, WT/DS59/R, WT/DS64/R, Corr.1 and Corr.2, adopted 23 July 1998, and Corr.3 and Corr.4, DSR 1998:VI, p. 2201|
|Korea – Commercial Vessels||Panel Report, Korea – Measures Affecting Trade in Commercial Vessels, WT/DS273/R, adopted 11 April 2005, DSR 2005:VII, p. 2749|
|Mexico – Anti-Dumping Measures on Rice||Appellate Body Report, Mexico – Definitive Anti-Dumping Measures on Beef and Rice, Complaint with Respect to Rice, WT/DS295/AB/R, adopted 20 December 2005, DSR 2005:XXII, p. 10853|
|Thailand – Cigarettes (Philippines)||Appellate Body Report, Thailand – Customs and Fiscal Measures on Cigarettes from the Philippines, WT/DS371/AB/R, adopted 15 July 2011, DSR 2011:IV, p. 2203|
|Thailand – H-Beams||Appellate Body Report, Thailand – Anti-Dumping Duties on Angles, Shapes and Sections of Iron or Non-Alloy Steel and H-Beams from Poland, WT/DS122/AB/R, adopted 5 April 2001, DSR 2001:VII, p. 2701|
|US – Anti-Dumping and Countervailing Duties (China)||Appellate Body Report, United States – Definitive Anti-Dumping and Countervailing Duties on Certain Products from China, WT/DS379/AB/R, adopted 25 March 2011, DSR 2011:V, p. 2869|
|US – Anti-Dumping Methodologies (China)||Appellate Body Report, United States – Certain Methodologies and Their Application to Anti-Dumping Proceedings Involving China, WT/DS471/AB/R and Add.1, adopted 22 May 2017|
|US – Carbon Steel||Appellate Body Report, United States – Countervailing Duties on Certain Corrosion-Resistant Carbon Steel Flat Products from Germany, WT/DS213/AB/R and Corr.1, adopted 19 December 2002, DSR 2002:IX, p. 3779|
|US – Carbon Steel (India)||Appellate Body Report, United States – Countervailing Measures on Certain Hot-Rolled Carbon Steel Flat Products from India, WT/DS436/AB/R, adopted 19 December 2014, DSR 2014:V, p. 1727|
|US – Continued Zeroing||Appellate Body Report, United States – Continued Existence and Application of Zeroing Methodology, WT/DS350/AB/R, adopted 19 February 2009, DSR 2009:III, p. 1291|
|US – Corrosion-Resistant Steel Sunset Review||Appellate Body Report, United States – Sunset Review of Anti-Dumping Duties on Corrosion-Resistant Carbon Steel Flat Products from Japan, WT/DS244/AB/R, adopted 9 January 2004, DSR 2004:I, p. 3|
|US – Cotton Yarn||Appellate Body Report, United States – Transitional Safeguard Measure on Combed Cotton Yarn from Pakistan, WT/DS192/AB/R, adopted 5 November 2001, DSR 2001:XII, p. 6027|
|US – Countervailing and Anti‑Dumping Measures (China)||Appellate Body Report, United States – Countervailing and Anti-Dumping Measures on Certain Products from China, WT/DS449/AB/R and Corr.1, adopted 22 July 2014, DSR 2014:VIII, p. 3027|
|US – Countervailing Duty Investigation on DRAMS||Appellate Body Report, United States – Countervailing Duty Investigation on Dynamic Random Access Memory Semiconductors (DRAMS) from Korea, WT/DS296/AB/R, adopted 20 July 2005, DSR 2005:XVI, p. 8131|
|US – Countervailing Measures (China)||Appellate Body Report, United States – Countervailing Duty Measures on Certain Products from China, WT/DS437/AB/R, adopted 16 January 2015|
|US – Countervailing Measures (China)||Panel Report, United States – Countervailing Duty Measures on Certain Products from China, WT/DS437/R and Add.1, adopted 16 January 2015, as modified by Appellate Body Report WT/DS437/AB/R|
|US – Countervailing Measures on Certain EC Products||Appellate Body Report, United States – Countervailing Measures Concerning Certain Products from the European Communities, WT/DS212/AB/R, adopted 8 January 2003, DSR 2003:I, p. 5|
|US – Export Restraints||Panel Report, United States – Measures Treating Exports Restraints as Subsidies, WT/DS194/R and Corr.2, adopted 23 August 2001, DSR 2001:XI, p. 5767|
|US – Hot-Rolled Steel||Appellate Body Report, United States – Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan, WT/DS184/AB/R, adopted 23 August 2001, DSR 2001:X, p. 4697|
|US – Lamb||Appellate Body Report, United States – Safeguard Measures on Imports of Fresh, Chilled or Frozen Lamb Meat from New Zealand and Australia, WT/DS177/AB/R, WT/DS178/AB/R, adopted 16 May 2001, DSR 2001:IX, p. 4051|
|US – Large Civil Aircraft (2nd complaint)||Appellate Body Report, United States – Measures Affecting Trade in Large Civil Aircraft (Second Complaint), WT/DS353/AB/R, adopted 23 March 2012, DSR 2012:I, p. 7|
|US – Softwood Lumber IV||Appellate Body Report, United States – Final Countervailing Duty Determination with Respect to Certain Softwood Lumber from Canada, WT/DS257/AB/R, adopted 17 February 2004, DSR 2004:II, p. 571|
|US – Softwood Lumber IV (Article 21.5 – Canada)||Appellate Body Report, United States – Final Countervailing Duty Determination with Respect to Certain Softwood Lumber from Canada – Recourse by Canada to Article 21.5 of the DSU, WT/DS257/AB/RW, adopted 20 December 2005, DSR 2005:XXIII, p. 11357|
|US – Softwood Lumber VI (Article 21.5 – Canada)||Appellate Body Report, United States – Investigation of the International Trade Commission in Softwood Lumber from Canada – Recourse to Article 21.5 of the DSU by Canada, WT/DS277/AB/RW, adopted 9 May 2006, and Corr.1, DSR 2006:XI, p. 4865|
|US – Stainless Steel (Mexico)||Appellate Body Report, United States – Final Anti-Dumping Measures on Stainless Steel from Mexico, WT/DS344/AB/R, adopted 20 May 2008, DSR 2008:II, p. 513|
|US – Steel Safeguards||Appellate Body Report, United States – Definitive Safeguard Measures on Imports of Certain Steel Products, WT/DS248/AB/R, WT/DS249/AB/R, WT/DS251/AB/R, WT/DS252/AB/R, WT/DS253/AB/R, WT/DS254/AB/R, WT/DS258/AB/R, WT/DS259/AB/R, adopted 10 December 2003, DSR 2003:VII, p. 3117|
|US – Upland Cotton||Appellate Body Report, United States – Subsidies on Upland Cotton, WT/DS267/AB/R, adopted 21 March 2005, DSR 2005:I, p. 3|
|US – Washing Machines||Appellate Body Report, United States – Anti-Dumping and Countervailing Measures on Large Residential Washers from Korea, WT/DS464/AB/R and Add.1, adopted 26 September 2016|
|US – Wool Shirts and Blouses||Appellate Body Report, United States – Measure Affecting Imports of Woven Wool Shirts and Blouses from India, WT/DS33/AB/R, adopted 23 May 1997, and Corr.1, DSR 1997:I, p. 323|
|US – Zeroing (EC)||Appellate Body Report, United States – Laws, Regulations and Methodology for Calculating Dumping Margins ("Zeroing"), WT/DS294/AB/R, adopted 9 May 2006, and Corr.1, DSR 2006:II, p. 417|
|US – Zeroing (EC) (Article 21.5 – EC)||Appellate Body Report, United States – Laws, Regulations and Methodology for Calculating Dumping Margins ("Zeroing") – Recourse to Article 21.5 of the DSU by the European Communities, WT/DS294/AB/RW and Corr.1, adopted 11 June 2009, DSR 2009:VII, p. 2911|
|AFA||Adverse facts available|
|Catalyst||Catalyst Paper Corporation|
|BCI||Business Confidential Information|
|CCAA||Companies' Creditors Arrangement Act|
|DSB||Dispute Settlement Body|
|DSU||Understanding on Rules and Procedures Governing the Settlement of Disputes|
|FIA||Forestry Infrastructure Agreement|
|Fibrek||Fibrek General Partnership|
|FIF||Forestry Infrastructure Fund|
|FSPF||Ontario Forest Sector Prosperity Fund|
|FULA||Forest Utilization License Agreement|
|GATT 1994||General Agreement on Tariffs and Trade 1994|
|Irving||Irving Paper Ltd.|
|LRR||Load Retention Rate|
|LRT||Load Retention Tariff|
|NewPage PH||NewPage Port Hawkesbury Corporation|
|NIER||Ontario Northern Industrial Electricity Rate|
|NSPI||Nova Scotia Power Incorporated|
|NSUARB||Nova Scotia Utility and Review Board|
|PHP||Port Hawkesbury Paper LP|
|POI||Period of investigation|
|PPGTP||Federal Pulp and Paper Green Transformation Programme|
|PWCC||Pacific West Commercial Corporation|
|Resolute||Resolute FP Canada Inc.|
|ROE||Return on equity|
|Sanabe||Sanabe & Associates LLC|
|SC Paper||Supercalendered Paper|
|SCM Agreement||Agreement on Subsidies and Countervailing Measures|
|TPEA||Trade Preferences Extension Act|
|USD||United States dollar|
|USDOC||United States Department of Commerce|
|WTO||World Trade Organization|
To examine, in the light of the relevant provisions of the covered agreements cited by the parties to the dispute, the matter referred to the DSB by Canada in document WT/DS505/2 and to make such findings as will assist the DSB in making the recommendations or in giving the rulings provided for in those agreements.4
Chairperson: Mr Paul O'Connor
Members: Mr David Evans
Mr Colin McCarthy
a. Supercalendered Paper from Canada: Initiation of Countervailing Duty Investigation, 80 Fed. Reg. 15981 (26 March 2015);
b. Supercalendered Paper from Canada: Final Affirmative Countervailing Duty Determination, 80 Fed. Reg. 63535 (20 October 2015);
c. Issues and Decision Memorandum for the Final Determination in the Countervailing Duty Investigation of Supercalendered Paper from Canada (13 October 2015);
d. Supercalendered Paper from Canada: Countervailing Duty Order, 80 Fed. Reg. 76668 (10 December 2015);
e. the initiation checklist, preliminary determination, questionnaires, verification reports, calculations memoranda, other determinations, memoranda, reports, and measures related to the investigation of Supercalendered Paper from Canada; and
f. determinations, memoranda, reports, and measures related to the expedited reviews initiated pursuant to Supercalendered Paper from Canada: Initiation of Expedited Review of the Countervailing Duty Order, 81 Fed. Reg. 6506 (8 February 2016), including:
i. New Subsidy Analysis Memorandum (18 April 2016), in which the United States initiated an investigation into the new subsidy allegations filed by the petitioner on 16 February 2016; and
ii. any further decisions to initiate an investigation into the amended new subsidy allegations filed by the petitioner on 25 April 2016.
[A] panel should make an objective assessment of the matter before it, including an objective assessment of the facts of the case and the applicability of and conformity with the relevant covered agreements.
a. Canada claims that the USDOC acted inconsistently with Article 1.1(a)(1)(iv) of the SCM Agreement, by improperly finding that the Government of Nova Scotia directed NSPI to provide a financial contribution to PHP.21
b. Canada also claims that the USDOC acted inconsistently with Article 12.8 of the SCM Agreement, by failing to inform the interested parties of the essential facts under consideration before finding that the Government of Nova Scotia directed NSPI to provide a financial contribution to PHP.22
c. Finally, Canada claims that the USDOC acted inconsistently with Articles 1.1(b) and 14(d) of the SCM Agreement, by erroneously determining that the Government of Nova Scotia, through the alleged entrustment or direction of NSPI, conferred a benefit to PHP through the provision of electricity for less than adequate remuneration.23
[T]o create a mechanism whereby the Partnership [PHP] pays the variable incremental costs of service, plus a significant positive contribution to fixed costs, such that other customers are better off by retaining the Partnership rather than having the Partnership depart the system and make no contribution to fixed cost recovery.35
Because NSPI is a private company, in order for its provision of electricity to [PHP] to potentially give rise to a countervailable subsidy to [PHP], the [USDOC] must consider two factors under section 771(5)(D)(iii) of the Act: whether an authority entrusted or directed NSPI to make a financial contribution to our respondent, [PHP], and whether the provision of this financial contribution (provision of electricity) would normally be vested in the government and the practice does not differ in substance from practices normally followed by governments.41
More importantly, with respect to the entrustment or direction of NSPI to provide a financial contribution under section 771(5)(B)(iii) of the Act, NSPI is required by law to provide electricity to customers who request it anywhere in Nova Scotia.[*] That is, NSPI is obligated under the laws of the Province of Nova Scotia to serve any resident or company within the Province and to provide electricity to that customer.[*] This is a legal obligation that does not exist in some other markets. In deregulated or totally open markets, power companies can chose to provide service only when it makes economic sense to do so.[*]44
[*fn original]202 See, e.g., section 52 of the Public Utilities Act; "Regulating Electric Utilities – Discussion Paper Phase One Governance Study – Liberalization and Performance – Based from the Province of Nova Scotia at 3 at Attachment 30 of the July 2, 2015 Memorandum to the File regarding Placement of Documents on the Record Relating to Public Utilities.
[*fn original]203 Id. at 6.
[*fn original]204 Id. at 3.
The [Government of Nova Scotia] directs NSPI by law to provide electricity to all companies in the Province including [PHP]. Therefore, the provision of electricity by NSPI to [PHP] satisfies the standard of entrustment or direction under section 771(5)(B)(iii) of the Act. As a result we determine that [PHP] has received a financial contribution in the form of the provision of a good or service under section 771(5)(D)(iii) of the Act.46
Therefore, not only did the [Government of Nova Scotia] entrust or direct NSPI to provide a financial contribution to [PHP] in the form of a provision of a good or service within the meaning of section 771(5)(D)(iii) of the Act, the [Government of Nova Scotia] also worked to ensure that the provision of that good or service, the provision of electricity, would be at a specially-designed LRR rate for the respondent. The NSUARB also exercised its authority to provide LRRs to companies in economic distress. Next we address whether this LRR rate provided to [PHP] is specific.53
Definition of a Subsidy
1.1 For the purpose of this Agreement, a subsidy shall be deemed to exist if:
(a)(1) there is a financial contribution by a government or any public body within the territory of a Member (referred to in this Agreement as "government"), i.e. where:
(iii) a government provides goods or services other than general infrastructure, or purchases goods;
(iv) a government makes payments to a funding mechanism, or entrusts or directs a private body to carry out one or more of the type of functions illustrated in (i) to (iii) above which would normally be vested in the government and the practice, in no real sense, differs from practices normally followed by governments[.]
In our Preliminary Determination, we found that the [Government of Nova Scotia], through the NSUARB, entrusted or directed NSPI to provide electricity to [PHP] at a reduced rate. In this final determination, we have modified our analysis to find that the [Government of Nova Scotia] directly entrusted or directed NSPI to provide electricity pursuant to the Public Utilities Act.119
In the instant investigation, the [Government of Nova Scotia] entrusted or directed a private party, NSPI, to provide a financial contribution, the provision of electricity, directly through its laws. In DRAMs from Korea, the government used a manner other than direct legislation to entrust or direct private parties to provide a financial contribution to the respondent, Hynix. Therefore, the [USDOC] had to rely on circumstantial information to determine that there was entrustment or direction of a private party to provide a financial contribution. This is not the case here. If, similar to this instant investigation, the [Government of Korea] had simply passed a law directing private financial institutions to provide a financial contribution to Hynix, the [USDOC] would not have used this two-part test because it would have been able to find entrustment or direction based solely on [Government of Korea] law.126
[T]he [Government of Canada] is incorrect that [the USDOC] analyzed the LRR, rather than electricity, as the financial contribution for this subsidy. … [The USDOC] did analyze the LRR as a financial contribution in the Preliminary Determination; however, it clarified in the Final Determination that although the LRR was relevant to its benefit analysis, the LRR was not, in itself, the financial contribution. [Issues and Decision Memorandum] at 32-37 and 108. Accordingly, [the USDOC] based its Final Determination on the provision of electricity without regard to the rate mechanism involved. [Issues and Decision Memorandum] at 37 … [.]128
Definition of a Subsidy
1.1 For the purpose of this Agreement, a subsidy shall be deemed to exist if:
(b) a benefit is thereby conferred.
Calculation of the Amount of a Subsidy in Terms
of the Benefit to the Recipient
For the purpose of Part V, any method used by the investigating authority to calculate the benefit to the recipient conferred pursuant to paragraph 1 of Article 1 shall be provided for in the national legislation or implementing regulations of the Member concerned and its application to each particular case shall be transparent and adequately explained. Furthermore, any such method shall be consistent with the following guidelines:
(d) the provision of goods or services or purchase of goods by a government shall not be considered as conferring a benefit unless the provision is made for less than adequate remuneration, or the purchase is made for more than adequate remuneration. The adequacy of remuneration shall be determined in relation to prevailing market conditions for the good or service in question in the country of provision or purchase (including price, quality, availability, marketability, transportation and other conditions of purchase or sale).
With respect to a Tier 1 Benchmark for the provision of electricity, NSPI is the primary electric utility company in Nova Scotia providing electricity to most provincial consumers, with independent power producers generating a minimal amount of electricity by comparison and supplying that electricity over NSPI's transmission and distribution network. Furthermore, the [Government of Nova Scotia] regulates the rates that NSPI charges for electricity through the NSUARB. When the government provider constitutes a majority or a substantial portion of the market, the [USDOC] determines that prices within the country are distorted, that these prices do not satisfy the regulatory requirement for a market-determined price and, therefore, cannot be used as a benchmark for determining the adequacy of remuneration. We have determined that the [Government of Nova Scotia] is providing electricity through NSPI to most consumers of electricity in Nova Scotia. Accordingly given that NSPI is entrusted or directed to provide electricity throughout Nova Scotia, electricity prices in Nova Scotia are not appropriate Tier 1 benchmarks.158
The authorities shall, before a final determination is made, inform all interested Members and interested parties of the essential facts under consideration which form the basis for the decision whether to apply definitive measures. Such disclosure should take place in sufficient time for the parties to defend their interests.
a. Canada claims that the USDOC acted inconsistently with Article 1.1(b) of the SCM Agreement, by erroneously finding that PHP was the recipient of the hot idle funding and that the benefit associated with these financial contributions was not extinguished by PWCC's arm's-length purchase of Newpage PH for fair market value.169
b. Canada equally claims that the USDOC acted inconsistently with Article 1.1(b) of the SCM Agreement, by erroneously finding that PHP was the recipient of the FIF and that the benefit associated with these financial contributions was not extinguished by PWCC's arm's-length purchase of Newpage PH for fair market value.170
The question of whether the bid price was for a sale of the mill to be delivered in hot idle status, as [the Government of Nova Scotia] contends, is inapposite. The issue is actually whether the bid and sale prices reflected and incorporated the hot idle funds approved in December 2011 and March 2012. We acknowledge that PWCC's bid was offered for the mill as a going concern with the understanding that the mill was being maintained in hot idle status. However, PWCC made that bid with the expectation that [Newpage PH] would maintain it as such and could not have anticipated that [the Government of Nova Scotia] would assume responsibility for that maintenance. Thus, once [Newpage PH] could not fulfill its obligations, PWCC received a benefit in the form of additional, unanticipated financing from [the Government of Nova Scotia] for the mill's continued hot idle status. Our measurement of that benefit is not a cost‑to‑government analysis, as parties have claimed, but a recognition that the full value of maintaining the mill in hot idle status was not accounted for in the original bid.209
This agreement specifies that PHP may harvest up to 400,000 green metric tons ("GMT") of spruce or fir pulpwood per year and another 175,000 MT of biomass fuel from Crown lands. The FULA also calls for PHP to purchase 200,000 GMT of pulpwood and 200,000 MT of biomass fuel from private suppliers. Thus, under the agreement, PHP is slated to obtain approximately two-thirds of its pulpwood from Crown land and one-third from private sources.236
We recommend investigating the programs listed under "Programs on Which the [USDOC] is Initiating an Investigation." For each program, the petitioner alleged the elements of a subsidy, i.e., financial contribution, benefit, and specificity. We find that the petitioner's allegations are supported by adequate and accurate information that was reasonably available to it.239
The petitioner alleges that the [Government of Nova Scotia] provides a benefit through this program to the extent that PHP pays less than adequate remuneration for the stumpage and biomass, consistent with section 771(5)(E)(iv) of the Act. Despite significant effort, the petitioner states that it was unable to locate the stumpage prices actually paid by PHP for stumpage rights because the [Government of Nova Scotia] has redacted this information from public documents. While the petitioner states it was able to obtain the FULA between PHP and the [Government of Nova Scotia], the [Government of Nova Scotia], however, redacted from this document the details of the prices it charges for public resources. Consistent with section 771(5)(E) of the Act, the petitioner requests that the [USDOC] investigate the benefit to PHP by evaluating the prevailing market conditions for stumpage and biomass purchased, including the "price, quality, availability, marketability, transportation, and other conditions" in relation to the conditions otherwise available.240
11.2 An application under paragraph 1 shall include sufficient evidence of the existence of (a) a subsidy and, if possible, its amount[.] … Simple assertion, unsubstantiated by relevant evidence, cannot be considered sufficient to meet the requirements of this paragraph. The application shall contain such information as is reasonably available to the applicant on the following:
(iii) evidence with regard to the existence, amount and nature of the subsidy in question;
11.3 The authorities shall review the accuracy and adequacy of the evidence provided in the application to determine whether the evidence is sufficient to justify the initiation of an investigation.
a. Canada claims that the USDOC acted inconsistently with Article 12.7 of the SCM Agreement, by improperly applying AFA to Resolute in relation to information discovered at verification.261
b. Canada also claims that the USDOC acted inconsistently with Articles 12.1, 12.2, 12.3, and 12.8 of the SCM Agreement, by failing to inform Canada and Resolute of relevant information and the essential facts under consideration prior to the final determination and to provide Resolute and Canada with ample opportunity to present relevant evidence in relation to the information it discovered during verification.262
c. Finally, Canada claims that the USDOC acted inconsistently with Articles 11.2 and 11.3 of the SCM Agreement, by improperly initiating an investigation of alleged subsidies discovered during Resolute's verification, without assessing whether information discovered during the course of the verification was accurate, adequate and provided sufficient evidence of the existence of a subsidy.263
The Department of Commerce (the [USDOC]) requests information about the programs on which an investigation was initiated in order to determine whether countervailable subsidies have been provided to Canadian producers/exporters of supercalendered paper (SC paper or subject merchandise). Section 775 of the Tariff Act of 1930, as amended (the Act), also requires the [USDOC] to investigate any other potential countervailable subsidies it discovers during the course of this investigation that pertain to the manufacture, production, or exportation of SC paper from Canada.264
Does [Canada] or entities directly owned, in whole or in part, by [Canada] or any provincial or local government provide, directly or indirectly, provide [sic] any other forms of assistance to your company? If so, please describe such assistance in detail, including the amounts, date of receipt, purpose and terms, and answer all questions in the appropriate appendices.265
Does [Canada] or entities directly owned, in whole or in part, by [Canada] or any provincial or local government provide, directly or indirectly, any other forms of assistance to producers or exporters of SC Paper? Please coordinate with the respondent companies to determine if they are reporting usage of any subsidy program(s). For each such program, please describe such assistance in detail, including the amounts, date of receipt, purpose and terms, and answer all questions in the Standard Questions Appendix, as well as other appropriate appendices attached to this questionnaire.267
a. an account labelled "Subsidy yet to be received", which included reimbursements for a portion of the infrastructure cost for the conversion of its facility from heavy oil to natural gas from Hydro Quebec that indicated it had been made in 2013 and 2014;
b. an account labelled "Subsidy from Hydro for Kiln" that contained transfers of funds from Hydro Quebec for the conversion of a heavy oil kiln to a biomass kiln that had been provided in 2010 and 2011; and
c. an account labelled "Other subsidies" relating to manpower training assistance, such funds being received from 2010 to 2014.272
In cases in which any interested Member or interested party refuses access to, or otherwise does not provide, necessary information within a reasonable period or significantly impedes the investigation, preliminary and final determinations, affirmative or negative, may be made on the basis of the facts available.
As soon as possible after the initiation of the investigation, the investigating authorities should specify in detail the information required from any interested party, and the manner in which that information should be structured by the interested party in its response.309
Does the [Government of Canada] or entities directly owned, in whole or in part, by the [Government of Canada] or any provincial or local government provide, directly or indirectly, provide [sic] any other forms of assistance to your company? If so, please describe such assistance in detail, including the amounts, date of receipt, purpose and terms, and answer all questions in the appropriate appendices.311
With respect to Resolute's purchase of Fibrek, the [USDOC] does not have any of the evidence or documentation that it would require to establish that the purchase of Fibrek was an arm's-length transaction for a fair market price, or any detailed information related to the timing, bidding or bid acceptance process and, thus, cannot determine whether any of the subsidies received before or during the purchase of Fibrek by Resolute were extinguished. The [USDOC's] original questionnaire stated:
Finally, if your company obtained all or substantially all the assets of another company during the AUL period, and that company still exists as an ongoing entity, we require a complete questionnaire response for such company. It is essential to include a discussion of all such "change in ownership" transactions within your responses to the questions below regarding your company's history.
While Resolute and the [Government of Canada] responded on behalf of Fibrek, they did not supply any evidence or detailed information regarding the purchase of Fibrek by Resolute. Instead, throughout the investigation, Resolute and the [Government of Canada] have submitted unsubstantiated assertions that the purchase of Fibrek was a "hostile takeover in 2012." As a result, the [USDOC] has no evidentiary basis for determining whether the purchase, or hostile takeover, of Fibrek properly extinguishes the subsidies received by Fibrek (through a finding of both an arm's-length transaction and a transaction price reflective of fair market value). Therefore, the [USDOC] maintains its baseline presumption that the subsidy benefits are not extinguished.343
[Resolute] launched a formal public offer to acquire at least 66.7% of the issued and outstanding shares of Fibrek. The purchase offer was estimated at C$130 million. Management resisted the hostile takeover, even to the point of pursuing litigation up to the Supreme Court of Canada. In response to the opposition [Resolute] increased its offer and the final transaction has been valued at C$218 million … [t]he purchase of Fibrek in a contested, public offering for its outstanding shares is an arms-length sale … [.]358
Note 3. Acquisition of Fibrek Inc.
On December 15, 2011, we announced an offer to purchase all of the issued and outstanding shares of Fibrek Inc. ("Fibrek"), a producer and marketer of virgin and recycled kraft pulp, operating three mills. On May 2, 2012, we acquired a controlling interest in Fibrek and began consolidating the results of operations, financial position and cash flows of Fibrek in our consolidated financial statements.
Our acquisition of Fibrek was achieved in stages. In connection with the offer, between April 11, 2012 and April 25, 2012, we acquired approximately 48.8% of the then outstanding Fibrek shares. On May 2, 2012, we acquired additional shares of Fibrek, after which we owned a controlling interest in Fibrek (approximately 50.1% of the then outstanding Fibrek shares) and Fibrek became a consolidated subsidiary. After May 2, 2012, we acquired additional shares of Fibrek and, as of May 17, 2012, the offer expiry date, we owned approximately 74.6% of the then outstanding Fibrek shares. On July 31, 2012, we completed the second step transaction for the remaining 25.4% of the outstanding Fibrek shares.
As aggregate consideration for all of the Fibrek shares we purchased, we distributed approximately 3.3 million shares of our common stock and Cdn$63 million ($63 million, based on the exchange rates in effect on each of the dates we acquired the shares of Fibrek) in cash. In connection with the Fibrek shareholder vote on the arrangement, certain former shareholders of Fibrek exercised (or purported to exercise) rights of dissent in respect of the transaction, asking for a judicial determination of the fair value of their claim under the Canada Business Corporations Act. No consideration has to date been paid to the former Fibrek shareholders who exercised (or purported to exercise) rights of dissent. Any such consideration will only be paid out upon settlement or judicial determination of the fair value of their claims and will be paid entirely in cash. Accordingly, we cannot presently determine the amount that ultimately will be paid to former holders of Fibrek shares in connection with the proceedings, but we have reserved approximately Cdn$14 million ($14 million, based on the exchange rate in effect on December 31, 2012) for the eventual payment of those claims, which was recorded in "Other long-term liabilities" in our Consolidated Balance Sheet as of December 31, 2012.
Acquisition of controlling interest
The acquisition of a controlling interest in Fibrek on May 2, 2012 was accounted for as a business combination in accordance with the acquisition method of accounting pursuant to FASB ASC 805, which requires recording identifiable assets acquired and liabilities assumed at fair value (except for deferred income taxes and pension and OPEB plan obligations). Additionally, on the acquisition date, we remeasured our initial equity investment in Fibrek at the acquisition-date fair value. The acquisition-date fair value of our previously-held equity interest in Fibrek was $58 million, resulting in a loss of $1 million, which was recorded in "Other income (expense), net" in our Consolidated Statements of Operations for the year ended December 31, 2012.
In connection with the acquisition, we also assumed $121 million of Fibrek's outstanding indebtedness. For additional information, see Note 17, "Long term Debt."360
8 Fibrek, whose head office is in Quebec, is a business incorporated under the Canada Business Corporations Act, R.S.C. (1985), c. C-44. Its shares are listed on the Toronto Stock Exchange (TSX).
9 AbitibiBowater (Abitibi) is a company listed on both the New York Stock Exchange (NYSE) and the Toronto Stock Exchange, and has been doing business under the name Resolute Forest Products since its reorganization. On November 28, 2011, it announced its intention to launch a takeover bid to purchase all of Fibrek's issued and outstanding shares. Before officially launching its takeover bid on December 15, 2011, Abitibi made sure that it had the support of Fibrek's three most important shareholders: Fairfax, Pabrai, and Oakmont. Until April 13, 2012, it could count on the steadfast support of 59,502,822 shares, i.e., 46.5% of Fibrek's 130,075,556 outstanding shares.
10 Initially, its offer was conditional to the tender of at least two-thirds of Fibrek's shares, a percentage that was later reduced to 50.01% on March 20, 2012. A portion of the consideration was payable in money and another in Abitibi shares, representing a value of approximately $1 per share, based on Abitibi's share price in December of 2011.
11 Being of the view that this bid was low considering the potential or actual value of Fibrek, its board of directors decided to adopt various tactics to discourage this takeover bid, which it deemed hostile, and to gain more time to elicit one or several higher bids. It therefore amended the contracts of its executives, hired consultants to establish the value of the business and its shares, set up an independent committee, and hired lawyers and other advisors.
12 On December 19, 2011, the board adopted a shareholders' rights scheme that would come into play in the event Abitibi purchased a single share and would neutralize Abitibi's offer (a defensive tactic commonly referred to by those in the [sic] as a poison pill). Following an application by Abitibi, this rights scheme was subjected to a prohibition order issued by the Bureau on February 9, 2012, effective February 13, 2012: [TRANSLATION] « WHEREAS it is now time, in the public interest, to allow the shareholders of Fibrek to decide of their own free will whether or not to tender their shares in answer to Resolute's bid (AbitibiBowater inc. (Resolute Forest Products) v. Fibrek inc., 2012 QCBDR 8). In other words, this delaying tactic to give Fibrek time to find a white knight had been going on long enough and the time had come to let the shareholders respond to Abitibi's bid.
13 Meanwhile, Mercer International inc., a British Columbia corporation operating in the same industry as Fibrek and whose shares are registered on the TSX and NASDAQ, had shown interest. In early February, after having been given access to Fibrek's books, Mercer agreed to act as their white knight. After various dealings, which included a support agreement in which Fibrek's upper management undertook to support Mercer's bid and an $8.5M break fee if they chose to support a better offer, it launched a takeover bid for Fibrek. Its bid, in cash and shares, represented a value of approximately $1.30 per share, according to the share price at the time. It was conditional to the tender of 50.1% of the shares and to various approvals, including that of its shareholders regarding the issuance of the shares required to complete the takeover bid. These agreements were negotiated on February 9, the day on which the Bureau rendered its first ruling, and were made public the very next day.
14 In the course of negotiations with Fibrek, Mercer demanded the option of buying 32,320,000 warrants for the price of $1 each, convertible to as many shares of Fibrek. In the event of a conversion, Mercer would hold 32,320,000 common shares of Fibrek, representing 19.9% of Fibrek's issued capital, for the price of $1 per share – the price offered by Abitibi. Moreover, from the moment a single share is purchased, Mercer is entitled to require the nomination of two directors to Fibrek's board.
15 Mercer's takeover bid is not conditional upon the issuance of the warrants or their conversion, as was confirmed in clarifications sent to Fibrek's shareholders on March 19, 2012, following a request from the United States Securities and Exchange Commission (SEC): "The Offer is not conditional upon the issuance or conversion of the Special Warrants".
16 On February 13, 2012, being of the view that Mercer's takeover bid and ancillary agreements (break fee and warrants) were abusive toward the shareholders and financial markets, Abitibi applied to the Bureau for a prohibition order respecting Mercer's takeover bid and warrants pursuant to section 93 of the Act respecting the Autorité des marches financiers, R.S.Q. c. A-33.2 (AAMF) and section 265 of the Securities Act, R.S.Q. c. V-1.1 (SA).
17 On February 16, 2012, Steelhead Partners LLC (Steelhead), a Fibrek shareholder with 6,479,000 issued and outstanding Fibrek shares at the time, after reviewing Mercer's takeover bid, confirmed that it would tender its shares in favour of Abitibi. Steelhead is also a shareholder of Abitibi (13.3%).
18 As at February 16, 2012, Abitibi's bid appeared to have the support of 50.7% of Fibrek shareholders, thereby condemning Mercer's rival bid to failure if it had not had the warrants, its weapon to dilute the shareholders.
19 In its February 23, 2012 ruling, the Bureau found that the break fee, which was included in the Mercer takeover bid, was outside the norm and that the issuance of warrants constituted an unconscionable transaction on the markets. It prohibited the issuance of warrants and their conversion into shares, but it did not prohibit Mercer's takeover bid, even if it was tied to an overly generous break fee.
20 Being of the view that the Bureau's ruling was contrary to Notice 62-202 relating to take-over bids – Defensive tactics (NP 62-202) adopted by the Canadian securities administrators (CSA), which includes the AMF, Mercer and Fibrek resorted to the appeal under section 115.16 AAMF to the Court of Quebec, civil division, which does not suspend the Bureau's decision (section 115.21 AAMF). The case was heard on an urgent basis before the administrative and appellate division on March 5, 6, and 7, 2012. In a judgment rendered on March 9, 2012, completed on March 16 and corrected on March 19, the appeal was allowed and the Bureau's decision was set aside.
21 Unhappy with this outcome, Abitibi turned to this Court to seek leave to appeal pursuant to section 115.22 AAMF, which it was granted on March 16. The appeal was heard on an expedited basis on March 22, 2012.362
April 11 (Reuters) – Specialtv pulp maker Fibrek Inc has become the target of a takeover battle between AbitibiBowater Inc and Mercer International, signaling that the outlook for Canada's forest products industry is brightening.
Mercer has raised its already higher cash-and-stock offer to C$182 million from C$170 million, but Fibrek's largest shareholders, including Prem Watsa's Fairfax Financial Holdings, continue to back AbitibiBowater's C$130 million bid.
Following are the milestones in this battle:
Nov 28 – AbitibiBowater commences bid for Fibrek, offers C$1 per share valuing the company at C$130 million.
Nov 29 – Fibrek acknowledges unsolicited takeover bid from AbitibiBowater. Says AbitibiBowater's bid appears opportunistic.
Dec 15 – AbitibiBowater starts formal takeover bid for Fibrek.
Jan 3 – Fibrek rejects AbitibiBowater bid. Board recommends shareholders withdraw the tendered shares immediately.
Jan 19 – Fibrek opposes AbitibiBowater's application to strike down its shareholder rights plan.
Jan 20 – AbitibiBowater extends offer to February 13 from January 20.
Feb 6 – Fibrek says receives proposals from third parties related to its strategic alternative process. Says a formal valuation of its common shares by Canaccord Genulty arrives at a fair value of between C$1.25 and C$1.45 per share.
Feb 10 – Mercer says to buy Fibrek for about C$170 million, or C$1.30 a share, topping AbitibiBowater's hostile bid by 30 percent, Mercer's offer Includes C$70 million in cash, rest in stock. Abitibi's offer also has the same cash portion.
Feb 13 – AbitibiBowater looks to block Mercer's offer, and extends its offer to Feb 23.
Feb 16 – Fibrek opposes AbitibiBowater's application to cease trade the Mercer offer.
Feb 23 – AbitibiBowater says Fibrek's special warrants to Mercer cease traded. These special warrants can be fully converted to Fibrek shares. Abitibi extends offer to March 9.
March 9 – Court of Quebec reverses cease trade order against 21 private placement of special warrants by Fibrek to Mercer.
March 15 – AbitibiBowater extends offer to March 19.
March 19 – Mercer says offer will expire on April 6. AbitibiBowater extends its offer for Fibrek to March 29.
March 20 – Toronto Stock Exchange approves private placement of special warrants by Fibrek to Mercer.
March 21– AbitibiBowater says reduces minimum condition to acquire Fibrek to 50.01 percent from 66.67 percent earlier. Extends offer to April 2.
March 27 – AbitibiBowater says court of appeal reinstates cease trade order on Fibrek's 32.3 million special warrants placement to Mercer.
March 28 – Fibrek and Mercer say will move the Supreme Court against the Quebec court decision blocking a key term of their deal.
April 1 – AbitibiBowater extends offer to April 11 and further reduces minimum condition to buy Fibrek to 45.7 per cent.
April 5 – Mercer extends offer to April 16.
April 11 – Mercer raises its offer by 8 percent to C$1.40 per share.365
No countervailing duty shall be levied on any product of the territory of any contracting party imported into the territory of another contracting party in excess of an amount equal to the estimated bounty or subsidy determined to have been granted, directly or indirectly, on the manufacture, production or export of such product in the country of origin or exportation, including any special subsidy to the transportation of a particular product. The term "countervailing duty" shall be understood to mean a special duty levied for the purpose of offsetting any bounty or subsidy bestowed, directly, or indirectly, upon the manufacture, production or export of any merchandise.388
No countervailing duty shall be levied389 on any imported product in excess of the amount of the subsidy found to exist, calculated in terms of subsidization per unit of the subsidized and exported product.
[T]he resulting rate is a reasonable, statutorily mandated estimate of the rate applicable to the non-selected respondents given the [USDOC's] inability to investigate all potential respondents. The all-others rate therefore reasonably reflects potential countervailable subsidy rates to all other companies.413
When a countervailing duty is imposed in respect of any product, such countervailing duty shall be levied, in the appropriate amounts in each case, on a non‑discriminatory basis on imports of such product from all sources found to be subsidized and causing injury, except as to imports from those sources which have renounced any subsidies in question or from which undertakings under the terms of this Agreement have been accepted. Any exporter whose exports are subject to a definitive countervailing duty but who was not actually investigated for reasons other than a refusal to cooperate, shall be entitled to an expedited review in order that the investigating authorities promptly establish an individual countervailing duty rate for that exporter.
[T]hat relevant dictionary definitions of the term "appropriate" include "proper", "fitting" and "specially suitable (for, to)".[*] These definitions suggest that what is "appropriate" is not an autonomous or absolute standard, but rather something that must be assessed by reference or in relation to something else. They suggest some core norm – "proper", "fitting", "suitable" – and at the same time adaptation to particular circumstances. Within Article 19.3, the circumstance-specific quality of "the appropriate amounts" is further reinforced by the immediate context provided by the words "in each case". We also note that the term "amount" is defined as something quantitative, a number, "a quantity or sum viewed as the total reached".[*]435
[*fn original]531 Shorter Oxford English Dictionary, 6th edn, A. Stevenson (ed.) (Oxford University Press, 2007), Vol. 1, p. 106.
[*fn original]532 Shorter Oxford English Dictionary, 6th edn, A. Stevenson (ed.) (Oxford University Press, 2007), Vol. 1, p. 71.
a. Canada claims that the USDOC acted inconsistently with Article 19.3 of the SCM Agreement, by improperly initiating an investigation into new subsidy allegations in the context of the expedited reviews of Irving and Catalyst, which are intended to provide company-specific rates with respect to the subsidy allegations that were made in the original investigation.453
b. Canada also claims that the USDOC acted inconsistently with Articles 11.2 and 11.3 of the SCM Agreement, by improperly initiating an investigation into new subsidy allegations during the expedited reviews of Irving and Catalyst on the basis of an application that contains insufficient evidence concerning the existence, amount, and nature of the alleged subsidies.454
Any exporter whose exports are subject to a definitive countervailing duty but who was not actually investigated for reasons other than a refusal to cooperate, shall be entitled to an expedited review in order that the investigating authorities promptly establish an individual countervailing duty rate for that exporter.
a. Canada claims that the USDOC acts inconsistently with Articles 12.1, 12.7, and 12.8 of the SCM Agreement, by applying AFA to information discovered at verification, with no assessment of whether that information is "necessary" to the investigation.493
b. Canada also claims that the USDOC acts inconsistently with Articles 10, 11.1, 11.2, 11.3, and 11.6 of the SCM Agreement, by initiating investigations into transactions, financial transfers of funds, and any assistance whatsoever, without gathering sufficient evidence of financial contribution, benefit, and specificity.494