"To examine, in the light of the relevant provisions of the covered agreements cited by Canada in document WT/DS236/2 the matter referred to the DSB by Canada in that document, and to make such findings as will assist the DSB in making the recommendations or in giving the rulings provided for in those agreements."
"If there is no agreement on the panelists within 20 days after the date of the establishment of a panel, at the request of either party, the Director-General, in consultation with the Chairman of the DSB and the Chairman of the relevant Council or Committee, shall determine the composition of the panel by appointing the panelists whom the Director-General considers most appropriate in accordance with any relevant special or additional rules or procedures of the covered agreement or covered agreements which are at issue in the dispute, after consulting with the parties to the dispute. The Chairman of the DSB shall inform the Members of the composition of the panel thus formed no later than 10 days after the date the Chairman receives such a request."
· find that the Preliminary Countervailing Duty Determination of the United States in the softwood lumber case violates Articles 10, 14, 17.1, 17.2, 17.5, 19.4 and 32.1 of the SCM Agreement and Article VI:3 of GATT 1994;
· find that the Preliminary Critical Circumstances Determination of the United States in the softwood lumber case violates Article 17.1(b), 17.3, 17.4, 17.5, 19.4 and 20.6 of the SCM Agreement and Article VI:3 of GATT 1994;
· find that US countervailing duty law regarding expedited and administrative reviews and the application of that law in the Lumber IV investigation violate Articles 10, 19.3, 19.4, 21.2 and 32.1 of the SCM Agreement and that as a result, the United States has failed to ensure that its laws, regulations and administrative procedures are in conformity with its WTO obligations as required by Article XVI:4 of the WTO Agreement and Article 32.5 of the SCM Agreement; and
· recommend that the United States bring its measures into conformity with the SCM Agreement and the WTO Agreement, including by lifting the suspension of liquidation for the period of 19 May through 16 August 2001, and making company-specific expedited and administrative reviews available to exporters and producers subject to any countervailing duty order that may be issued as a result of the Lumber IV investigation.
Total Value of All Sales that Canada Provided
· first, the preliminary countervailing duty determination made by the US USDOC is inconsistent with US obligations;
· second, there is no basis in the SCM Agreement for retroactive application of provisional measures under a preliminary critical circumstances determination, and
· third, the denial of expedited reviews and company-specific administrative reviews where the USDOC conducts a country-wide investigation violates US obligations.
• First, the United States has the burden of establishing that the measure at issue is "discretionary". It asserts that the USDOC may conduct reviews, but it failed to create regulations. This explanation is insufficient to discharge this burden.
• Second, these regulations are procedural rules relating to every aspect of countervailing proceedings. The neglect of any right as fundamental as an individual review in aggregate cases would be deliberate. The preamble to the US regulations reinforces this conclusion, stating that the USDOC will not individually review firms when it uses a country-wide rate.
· Third, it is a basic principle of statutory construction that if a right is provided for in certain circumstances, its deliberate exclusion in other circumstances must be given meaning: that is, that no such right exists in those other cases. In this respect, the practice of the USDOC and its analysis of its own discretion with respect to the regulations concerning voluntary respondents demonstrates that it also interprets US law in this manner.
• Finally, the United States argues that it has broad authority under section 751 of the Tariff Act to conduct expedited reviews. This provision relates to annual administrative reviews and other forms of review, but is silent with respect to expedited reviews.
· Locational differences: The PD assumes that tree-growing and harvesting conditions are "comparable" (an ambiguous term the USDOC never bothered to define) between the Canadian and US comparison areas. The USDOC addressed none of the contrary evidence in the record that significant differences in topography, soil conditions, climate, availability of ground and water transport, and distance to mills and to markets differentiate the Canadian and US market conditions.
· Timber differences: Differences in timber characteristics such as quality and stand density affect stumpage values but the USDOC made no adjustment for these differences
· Differences in Measurements: Differences in measurement conventions between the scales used to measure timber volumes in the United States and Canada and in the way in which timber is classified as "sawtimber" make cross-border comparisons impossible.
· Differences in economic conditions: Economic conditions such as wages, capital costs, taxes, and governmental regulatory policies affect stumpage values, and cross border comparisons must take into account these differences. The only economic condition that the USDOC made an adjustment for was in the PD exchange rates.
· Differences in rights and obligations of timber harvesters: The bundle of rights and obligations under any harvesting programme affects stumpage values. Canadian tenure holders obtain harvesting rights through tenures effectively of indefinite duration. This differs from the transactions used by the USDOC that consisted of short-term timber harvesting rights in US sales. Similarly, the lump-sum payments to obtain timber harvesting rights in the United States are not equivalent to stumpage charges in Canada levied on a volumetric basis that were previously conferred. With only limited exceptions, the USDOC did not attempt adjustments for these differences.
· the USDOC refused to make adjustments for the costs Canadian timber harvesters incur scaling (measuring) provincial logs, because it claimed that "costs related to scaling are not mandatory and are not borne exclusively by tenure holders….". Provincial regulations across Canada require tenure holders to scale timber to the provinces’ requirements.
· the USDOC’s claim that it calculated "a per-unit amount for each category of Canadian obligations that was above and beyond obligations incurred by parties paying stumpage charges in the United States" is equally without foundation. The USDOC did not examine US costs and did not compare US and Canadian obligations, but simply asserted that, where similar costs existed in the United States, no adjustments were necessary.
· In Quebec, the USDOC made an adjustment for primary and secondary roads, but refused to make an adjustment for the costs of haulage roads, rather than measuring the difference between haulage road costs in Quebec and Maine. In Ontario, the USDOC used a different methodology, measuring road costs by their in-kind revenue to the Crown, rather than by the actual costs incurred by harvesters.
· In relation to B.C., the USDOC refused to adjust for timber sale costs incurred by B.C. licensees, such as the engineering and layout costs incurred to design and layout the appropriate contours and areas for harvesting. In Washington State lands (the benchmark the USDOC used) these costs are not imposed on the tenure holder.
The results of the survey suggest that the market for private timber in Ontario appears to be both competitive and efficient. Buyers and sellers have the same information about market conditions, sellers produce homogeneous products, they are price-takers and they can enter and exit the market easily. Hence the market meets the classic definition of a competitive market. The market can also be classified as efficient given its low transaction costs and low level of government involvement.
"Since the stumpage fees on public lands are the price driver for the stumpage market in those provinces, we conclude that the stumpage fees on private lands are largely derivative of the public land prices and are therefore distorted".
"Because of the provincial government’s control of the market through a system of administratively-set prices and other market distorting measures, there is no market-determined price for stumpage that is independent of the distortion caused by the government’s interference in the market".
"Toutefois, je suis conscient que la tarification des bois des forêts publiques puisse avoir une influence indirecte sur le marché privé".
"The Coalition contends the entire provincial stumpage system in Québec is not "market-based" because private prices in Québec are distorted and depressed by decades of artificially cheap provincial stumpage, and these prices are used to set public stumpage.
Citing a study published in 1988 of the "20 quality zones" in Québec …, the Coalition asserts the "cost adjustments" which Québec used to make public and private timber comparable are utterly fanciful and lead to anomalous results. Respondents point out that the Aktrin study cited by the Coalition is completely outdated and irrelevant since it examined a system that was replaced in 1989 by Québec’s current system of 28 'biophysically and geologically homogeneous tariffing zones.'
We agree with Respondents that private prices in Québec collected under Québec’s own contracted out surveys, which we examined in depth at verification, are a viable benchmark. The evidence cited by the Coalition is either outdated and irrelevant or anecdotal…"
· it has an unconditional obligation under Article 19.3 of the SCM Agreement to provide expedited reviews to any exporter not actually investigated for reasons other than a refusal to cooperate who requests such a review and in doing so promptly establish an individual countervailing duty rate for that exporter; and
· it has the discretion to grant such reviews when such a request is made.
· has failed to fully implement its obligation under Article 19.3 to provide for expedited reviews in case of specific requests to do so in country-wide cases;
· now asserts that it has the lawful "discretion" to conduct such reviews despite the absence of specific statutory or regulatory provisions;
· may not exercise its "discretion" to deny any request for an expedited review; and
· must promptly grant all such requests made in Lumber IV, and in any other investigation.
We believe, in particular, that the appropriate way to conceive of a "financial contribution" is purely as a transfer of economic resources by a government to private entities in the market, without regard to the terms of the transfer.
Of the total [productive forest land]... [a]bout 70 per cent of the resource is publicly owned. The percentage of the publicly owned resource was even higher in the past. Hence it is likely that stumpage for public pine logs has held a dominating influence on stumpage for similar logs sold by private growers in [South Australia].
· the right to harvest trees is a form of property interest. The owner of this right may go on someone’s land and cut down the trees on that land;
· standing timber refers to trees in the forest, that are incapable of being traded; and
· logs are what is produced when trees are cut down and prepared for transportation;
· Sawmills, in turn, process logs into lumber, which is the subject merchandise.
The second set of distinctions relate to the different players.
· provinces own most forests in Canada;
· timber harvesters enter into agreements with provinces to manage these forestry resources. Under these agreements, the tenure holder has the right to harvest trees, but also incurs obligations (including reforestation, and the like), regardless of the quantity of trees harvested. The tenure holder may or may not own a mill; or if it has a mill, it may not be able to process all of the logs that result from its own harvest of standing timber. So the tenure holder could sell logs, process logs itself, or export them; and
· lumber producers are the sawmill operators that process logs into lumber. They are also secondary manufacturers that buy lumber from sawmills for further processing.
· in subparagraph (iii), the converse of "provide" is "purchase". Properly construed, therefore, "provide" must mean "give" or "sell"; and
· elsewhere in the WTO Agreement, the verb "provide" is used when the drafters intended to denote "give".
· First, that the United States is required under Article 19.3 to grant expedited reviews upon request and to establish an individual countervailing duty rate;
· Second, as the United States has repeatedly stated, nothing in US law or regulations prohibits the United States from granting expedited reviews in all instances upon request and establishing individual countervailing duty rates for requesting exporters; and
· Third, that the United States has no discretion to refuse to grant expedited reviews upon request or to establish an individual countervailing duty rate for the requesting exporter.
· the interpretation of the term "good" under Article 1.1(a)(1)(iii) of the SCM Agreement;
· the determination of a "benefit" in the meaning of Article 14(d) of the SCM Agreement;
· the restricted application of Article 20.6 of the SCM Agreement to "definitive" countervailing duties.
· Canada's claim on the impermissible "pass through" determination of the benefit, and
· The scope of Article 19.3 of the SCM Agreement in view of an expedited review.