[Federal Register Volume 59, Number 80 (Tuesday, April 26, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-10065]


[[Page Unknown]]

[Federal Register: April 26, 1994]


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DEPARTMENT OF COMMERCE
 

United States-Canada Free-Trade Agreement, Article 1904 
Binational Panel Reviews: Request for an Extraordinary Challenge 
Committee

AGENCY: NAFTA Secretariat, United States Section, International Trade 
Administration, Commerce.

ACTION: Notice of Review for an Extraordinary Challenge Committee to 
review issues raised by the May 6, 1993 and December 17, 1993, 
decisions of the binational panel that reviewed the final 
countervailing duty determination and the determination on remand made 
by the United States Department of Commerce, International Trade 
Administration in the matter of Certain Softwood Lumber Products from 
Canada, Secretariat File No. USA-92-1904-01. This Request was filed 
with the United States Section of the NAFTA Secretariat on April 6, 
1994.

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SUMMARY: On April 6, 1994, the Office of the United States Trade 
Representative filed a Request for an Extraordinary Challenge Committee 
to review decisions dated May 6, 1993 and December 17, 1993. In May 6, 
1993 decision, the Binational Panel remanded to the International Trade 
Administration on several grounds. In the December 17, 1993 decision, 
the three-person majority ordered Commerce to find certain programs 
non-specific and to find the stumpage subsidies non-market distorting. 
This finding effectively required Commerce to determine that neither 
program represents a countervailable subsidy. The NAFTA Secretariat has 
assigned file number ECC-94-1904-01USA to this Request. Copies of the 
Request and the Panel decision are available from the NAFTA 
Secretariat.

FOR FURTHER INFORMATION CONTACT:
James R. Holbein, United States Secretary, NAFTA Secretariat, suite 
6021, 14th and Constitution Avenue, Washington, DC 20230, (202) 482-
5438.

SUPPLEMENTARY INFORMATION: Chapter 19 of the United States-Canada Free-
Trade Agreement (``Agreement'') establishes a mechanism to replace 
domestic judicial review of final determinations in antidumping and 
countervailing duty cases involving imports from the other country with 
review by independent binational panels. When a Request for Panel 
Review is filed, a panel is established to act in place of national 
courts to review expeditiously the final determination to determine 
whether it conforms with the antidumping or countervailing duty law of 
the country that made the determination.
    Under Article 1904.13 of the Agreement, where a Party alleges that 
a binational panel has seriously departed from a fundamental rule of 
procedure, has manifestly exceeded its powers, authority or 
jurisdiction or that a member of the panel has materially violated the 
Code of Conduct established pursuant to Article 1910, and further 
alleges that any of these actions have materially affected the panel's 
decision and threaten the integrity of the panel review process, that 
Party may request that an Extraordinary Challenge Committee be 
established under the procedure set out in Annex 1904.13 of the 
Agreement.
    Under Annex 1904.13 of the Agreement, the Government of the United 
States and the Government of Canada established Rules of Procedure for 
Article 1904 Extraordinary Challenge Committees (``ECC Rules''). These 
ECC Rules were published in the Federal Register on December 30, 1988 
(53 FR 53222). These Rules were amended in the Federal Register on 
February 8, 1994 (59 FR 5910). The ECC Rules give effect to the 
provisions of Chapter Nineteen of the Agreement with respect to 
Extraordinary Challenge Committee proceedings conducted pursuant to 
Article 1904 of the Agreement. The ECC Rules are intended to result in 
decisions typically within 30 days after the establishment of the 
Extraordinary Challenge Committee. The Extraordinary Challenge 
Committee proceeding in this matter will be conducted in accordance 
with these ECC Rules.

Background

    On May 28, 1992, Commerce issued its final affirmative 
determination respecting Certain Softwood Lumber Products from Canada. 
Requests for Panel Review were filed as required by the Article 1904 
Panel Rules, and a Binational Panel was convened to review the final 
determination.
    On May 6, 1993, the Binational Panel remanded Commerce's final 
determination on several grounds. The Panel remanded Commerce's 
specificity determination concerning stumpage on grounds that Commerce 
is required to articulate an analysis under all four illustrative 
specificity factors identified in Commerce's proposed regulations. 
Second, the Panel remanded the B.C. log export ban specificity finding 
on the grounds that Commerce's de jure specificity analysis was 
inadequate. It invited commerce to present a de facto analysis of the 
export ban. Third, as a second basis for remanding the finding that the 
stumpage programs were countervailable, the Panel directed Commerce to 
evaluate whether the programs could and did have a distorting effect on 
the operation of normal competitive markets.
    Commerce issued its determination on remand on September 17, 1993. 
Commerce reaffirmed its position that the governing statute did not 
require it to determine whether a government's provision of a good that 
otherwise satisfied the statutory definition of a subsidy also 
distorted the market by causing a price or output effect. Nevertheless, 
in accordance with the Panel's order, Commerce reviewed the literature, 
existing studies, and other record evidence and determined that the 
provision of stumpage at preferential rates by provincial governments 
affected the price or rates by provincial governments affected the 
price or output. Specifically, Commerce found that changes in stumpage 
fees resulted in changes in the output of softwood lumber.
    On December 17, 1993, the Panel issued its second decision. Two 
Panelists in dissent stated that they would have affirmed Commerce's 
specificity and preferentiality findings made on remand. In addition, 
the two dissenting Panelists indicated that they had reconsidered their 
earlier decision and reached an opposite conclusion with respect to the 
issues of specificity (both for stumpage and log export restrictions) 
and stumpage preferentiality, and would have affirmed commerce's 
original determination on those issues. The three-person Majority, 
however, ordered Commerce to find both programs non-specific and to 
find the stumpage subsidies non-market-distorting. This finding 
effectively required Commerce to determine that neither program 
represents a countervailable subsidy.
    On January 6, 1994, Commerce issued a second remand. Commerce 
reaffirmed its original position concerning issues contained in the 
Majority's December 17 decision. However, in compliance with the 
Panel's decision, Commerce determined that neither provincial stumpage 
programs nor B.C.'s log export restrictions constituted a 
countervailable subsidy under U.S. law.

Request for an Extraordinary Challenge Committtee

    On April 6, 1994, the United States Trade Representstive filed a 
Request for an Extraordinary Challenge Committee on behalf of the 
United States Government in its capacity as a Party to the United 
States-Canada Free-Trade Agreement, with the United States Secretary of 
the NAFTA Secretariat. Four specific counts are contained in the 
Request:
    (1) That two of the Binational Panelists maintained relationships 
or engaged in activities creating the appearance of partiality or bias 
or, in the case of one of the panelists, constituting a serious 
conflict of interest;
    (2) The Panel in its May 1993 determination, manifestly exceeded 
its power, authority, and jurisdiction by failing to apply the 
appropriate standard of review and general legal principles that a 
court of the United States would apply when it ruled that Commerce must 
determine that the preferential treatment in timber pricing led to an 
increased output of lumber;
    (3) In its analysis of Commerce's determination that provincial 
stumpage programs in fact benefit industry or group of industries, the 
Majority manifestly exceeded its power, authority, or jurisdiction by 
failing to apply the appropriate standard of review and by seriously 
misapprehending the U.S. substantive law it was required to apply. 
Instead of determining whether Commerce's finding was a permissible 
exercise of its discretion under U.S. law, the Majority systematically 
substituted its own judgment for that of Commerce as to interpretations 
of law and fact; and
    (4) For reasons similar to the case of stumpage, the Majority 
manifestly exceeded its powers, authority, and jurisdiction in its 
finding concerning whether B.C.'s log export restrictions were 
``specific'' under U.S. countervailing duty law. Commerce's remand 
determination with regard to specificity of B.C.'s log export 
restrictions, and the Majority's opinion reviewing the determination, 
each incorporated much of their respective analyses of specificity 
concerning stumpage programs. Hence the defects in the Majority's 
approach in the stumpage context identified above also apply to the 
context of specificity of log export restrictions.
    Rule 37 of the ECC Rules requires that Notices of Appearance in 
this proceeding must be filed with the United States Secretary within 
ten days after the Request is filed (by April 28, 1994). Under Rule 38 
of the ECC Rules, briefs must be filed with the United States Secretary 
within 21 days of the filing of the Request (by April 27, 1994).

    Dated: April 19, 1994.
James R. Holbein,
United States Secretary, NAFTA Secretariat.
[FR Doc. 94-10065 Filed 4-25-94; 8:45 am]
BILLING CODE 3510-GT-M