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Canadian Softwood Lumber Case.

Canadian Softwood Lumber Case. Melanie Masinde Sayakhat Meirambayeva Carla Menendez. CANADIAN LUMBER CASE. Introduction Dispute with Canada over lumber dates back to 1800’s

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Canadian Softwood Lumber Case.

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  1. Canadian Softwood Lumber Case. Melanie Masinde Sayakhat Meirambayeva Carla Menendez

  2. CANADIAN LUMBER CASE Introduction • Dispute with Canada over lumber dates back to 1800’s • 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. Understandingthe 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 Canada’s share of the US softwood lumber market; and, • The implications of Canada’s 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 US$4.4 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. Cont’d… 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. Canada’s Position 2004 • Canada claims that the U.S. violated Articles 2.1 and 2.4.2 of the ADAgreement. • 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 VI:I and VI:2 of the GATT 1994.

  17. Canada’s Position (cont’d) 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 DSB’s 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. Panel’s Decision 2004 • Panel found that zeroing as applied in this case is inconsistent with Article 2.4.2 of the AD Agreement • U.Shad 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 VI:3 of the GATT 1994. • The panel upheld U.S acted inconsistently with Article 2.4.2 of the  AD agreement. 

  20. 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. Appeal Process

  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 ADAgreement. • 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 Canada’s 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 (Cont’d) 2006. • ABReverses 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 • Upholdsthe 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 7.238–7.245 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 7.319–7.326 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 ofrecommendationis 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 [US]DOC 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. AB’s Conclusion • ABreversesall 3 of the Panel’s 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- RecentDevelopments • 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, 2006:Softwood 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 S&D. • 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. <http://w01.international.gc.ca/minpub/Publication.aspx?isRedirect= True&publication_id=384419&language=E&docnumber=112> Canada. Foreign Affairs and International Trade Canada. Minister Emerson marks implementation of Softwood Lumber Agreement. Oct. 2006. 11October 2006. <http://w01.international.gc.ca/minpub/Publication.aspx?isRedirect =True&publication_id=384419&language=E&docnumber=112> Canada. Foreign Affairs and International Trade Softwood Lumber Retrieved 12 October 2006 <http://www.dfait-maeci.gc.ca/eicb/softwood/menu-en.asp>

  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. <http://www.ustr.gov/Document_Library/Press_Releases/2006/October/US_Trade_Representative_Susan_C_Schwab_Announces_Entry_into_Force_of_US-Canada_Softwood_Lumber_Agreement.html> United States. United States – Canada softwood Lumber Dispute. retrieved 10 October 2006 <http://www.search.com/reference/United_States%2DCanada_softwood_lumber_dispute> United States. Overview of Major Legal Decisions in the Softwood Lumber Dispute. Retrieved 10 October 2006 <http://www.mapleleafweb.com/features/economy/softwood-lumber/chronology-events.html>

  35. Cited Sources WTO (2005, November 15). Dispute Settlement Update. Retrieved October 12, 2006 from, Web Site <http://www.ustr.gov/assets/Trade_Agreements/Monitoring_Enforcement/Dispute_Settlement/asset_upload_file343_5697.pdf> WTO (2004, August 11). United States Final Dumping Determination on Softwood Lumber from Canada. Retrieved October 9, 2006 from, ITRN 602 Web site: <http://www.internationaltraderelations.com/WT0.Canada%20Lumber%20Case%20(AB%20August %202004)%20(edited)..htm> 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: <http://www.wto.org/english/tratop_e/dispu_e/264rw- 0_e.doc>

  36. Cited Sources Government of British Columbia,Canada U.S Lumber Trade Dispute, Retrieved October 10, 2006 from, <http://www.for.gov.bc.ca/HET/Softwood/disputes.htm> American Society of International Law, World Trade Organization (WTO) Appellate Body Report, Retrieved October 10, 2006 from, <http://www.asil.org/ilib/ilib0702.htm#j3> John H.Jackson,Legal,2002, Problems of International Economic Relations, Retrieved October 10, 2006 from <http://www.internationaltraderelations.com/Jackson%20Update%20(2006).pdf>

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