INTRODUCTION

The United States appeals certain issues of law and legal interpretations developed in the Panel Report, United States – Final Countervailing Duty Determination with Respect to Certain Softwood Lumber from Canada, Recourse by Canada to Article 21.5 (the “Panel Report”). The Panel was established to consider a complaint by Canada with respect to the consistency with the Agreement on Subsidies and Countervailing Measures (the “SCM Agreement”) and the General Agreement on Tariffs and Trade 1994 (the “GATT 1994”) of measures claimed by Canada to have been taken by the United States to comply with the recommendations and rulings of the Dispute Settlement Body (the “DSB”) in the US – Softwood Lumber IV proceedings.

In the proceedings before the original panel, Canada challenged a number of aspects of the final determination by the United States Department of Commerce (the “USDOC”) that led to the imposition of countervailing duties on softwood lumber from Canada (the “Final Countervailing Duty Determination”). The original panel found that the failure of the USDOC to conduct a pass-through analysis in respect of certain categories of log and lumber sales was inconsistent with Articles 10 and 32.1 of the SCM Agreement and Article VI:3 of the GATT 1994. With regard to the pass-through issue, the Appellate Body upheld the original panel's finding that the “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”, and reversed the original panel's finding that the “USDOC's failure to conduct a pass-through analysis in respect of arm's length sales of lumber by tenured harvesters/sawmills to unrelated remanufacturers is inconsistent with Articles 10 and 32.1 of the SCM Agreement and Article VI:3 of the GATT 1994.”

On 17 February 2004, the DSB adopted the Appellate Body Report and the original panel report, as modified by the Appellate Body Report.7 The parties to the dispute agreed that the United States would have until 17 December 2004 to implement the recommendations and rulings of the DSB.