"We continue to believe that it is in the interest of both the United States and Canada to reach a permanent solution to their long-standing differences over softwood lumber. We hope that today’s development will help to bring us one step closer to that end."

Background

This dispute concerns Canada’s challenge to a U.S. measure taken to comply with a prior WTO panel report. The original report found that certain aspects of the ITC’s threat of injury determination concerning softwood lumber imports from Canada were inconsistent with U.S. obligations under the WTO Antidumping and Subsidies Agreements. To implement the original panel’s recommendation that the United States come into compliance with its WTO obligations, the ITC undertook a four-month "section 129" proceeding in which it gathered additional evidence, held a public hearing, provided parties with three opportunities to submit written briefs and comments, and undertook additional analysis.

At the conclusion of its section 129 proceeding, the ITC issued a new determination on November 24, 2004, in which it found that the U.S. lumber industry is threatened with material injury by reason of imports of dumped and subsidized softwood lumber from Canada. On December 13, 2004, the antidumping and countervailing duty orders on softwood lumber from Canada were amended to reflect the issuance of the ITC’s section 129 determination. On December 20, 2004, notice of the amendment of the orders was published in the Federal Register.

The WTO challenge that led to today’s Appellate Body report was initiated by Canada on February 14, 2005, in a request pursuant to Article 21.5 of the WTO Understanding on Rules and Procedures Governing the Settlement of Disputes. The dispute was heard by the same panel that heard the original dispute. On September 23, 2005, the panel issued its report, finding the ITC’s section 129 determination to be consistent with WTO rules. The panel report was circulated to WTO Members on November 15, 2005.

The Appellate Body’s report reviewed the panel report. While the Appellate Body found the panel had not applied the correct level of scrutiny of the ITC determination, the Appellate Body explicitly stated that this did not mean that the ITC determination would be found inconsistent with U.S. WTO obligations using the correct level of scrutiny. The Appellate Body went on to find that it could not itself reach a conclusion on whether the ITC determination was WTO-consistent. For this reason, the Appellate Body concluded its report by making no recommendation one way or the other. As a result, the ITC determination remains in place.

The WTO Dispute Settlement Body is expected to adopt the report together with the panel report, as modified, within the next 30 days.

Because the Appellate Body report declined to make a finding on the WTO consistency of the ITC’s determination, the determination is allowed to stand. Accordingly, there is no basis for Canada to pursue retaliation.

###