Introduction

In August 2001, the United States Department of Commerce (USDOC) issued a preliminary determination that Canadian schemes for allocating standing timber to private harvesters – “stumpage” programs – provided countervailable subsidies to Canadian softwood lumber producers. It also preliminarily determined that critical circumstances existed in the US softwood lumber industry, caused by Canadian imports. Provisional measures were imposed on the basis of a preliminary subsidy rate of 19.31 percent, applicable to all producers/exporters, and applied to all entries of softwood lumber from Canada.

As an immediate response to the publication of the USDOC determination, Canada requested the establishment of a WTO panel. In its complaint, Canada argued that the USDOC Preliminary Countervailing Duty Determination (CDC), as well as the Preliminary Critical Circumstances Determination, violated various provisions in the Subsidies and Countervailing Measures (SCM) Agreement, as well as Art. VI:3 of GATT 1994. Canada also claimed that the US countervailing duty (CVD) law regarding expedited and administrative reviews, and the application of that law to the importation of Canadian softwood lumber, violated various provisions of the SCM Agreement.

Broadly speaking, the Panel found that the USDOC did not undertake an adequate countervailing duty determination, and that the CVDs imposed on the basis of this determination thus were illegal. The Panel also found that the SCM Agreement did not allow for the retroactive application of provisional measures, but that the US CVD law concerning expedited and administrative reviews was legal under the agreement.