[Federal Register Volume 67, Number 204 (Tuesday, October 22, 2002)]
[Notices]
[Pages 64956-64957]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-26761]


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OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE

[Docket No. WTO/DS-257]


WTO Dispute Settlement Proceeding Regarding the U.S. Department 
of Commerce Final Countervailing Duty Determination Concerning Certain 
Softwood Lumber From Canada

AGENCY: Office of the United States Trade Representative.

ACTION: Notice; request for comments.

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SUMMARY: The Office of the United States Trade Representative 
(``USTR'') is providing notice that, on August 19, 2002, the United 
States received a request from the Government of Canada for the 
establishment of a dispute settlement panel under the Marrakesh 
Agreement Establishing the World Trade Organization (``WTO Agreement'') 
regarding the U.S. Department of Commerce (``DOC'') final 
countervailing duty determination concerning certain softwood lumber 
from Canada. The panel was established on October 1, 2002. Canada 
alleges that the initiation and conduct of the countervailing duty 
investigation, the final determination, the provision of expedited and 
administrative reviews, and related matters are inconsistent with 
various provisions of the Agreement on Subsidies and Countervailing 
Measures (``SCM Agreement'') and the General Agreement on Tariffs and 
Trade 1994 (``GATT 1994''). USTR invites written comments from the 
public concerning the issues raised in this dispute.

DATES: Although USTR will accept any comments received during the 
course of the dispute settlement proceedings, comments should be 
submitted on or before December 1, 2002 to be assured of timely 
consideration by USTR.

ADDRESSES: Comments should be submitted (i) electronically, to 
[email protected], Attn: ``DS257 Dispute'' in the subject line, or (ii) 
by mail, to Sandy McKinzy, Monitoring and Enforcement Unit, Office of 
the General Counsel, Room 122, Office of the United States Trade 
Representative, 600 17th Street, NW., Washington, DC 20508, Attn: DS257 
Dispute, with a confirmation copy sent electronically to the e-mail 
address above or by fax to 202-395-3640.

FOR FURTHER INFORMATION CONTACT: Amber L. Cottle, Assistant General 
Counsel, Office of the United States Trade Representative, 600 17th 
Street, NW., Washington, DC, (202) 395-3581.

SUPPLEMENTARY INFORMATION: Pursuant to section 127(b) of the Uruguay 
Round Agreements Act (``URAA'') (19 U.S.C. 3537(b)(1)), USTR is 
providing notice that, on August 19, 2002, the United States received a 
request from the Government of Canada for the establishment of a WTO 
dispute settlement panel regarding the DOC final countervailing duty 
determination concerning certain softwood lumber from Canada. The panel 
was established on October 1, 2002.

Major Issues Raised and Legal Basis of the Complaint

    The notice of the DOC final countervailing duty determination 
concerning certain softwood lumber from Canada was published in the 
Federal Register on April 2, 2002, and the notice of the DOC amended 
final determination was published on May 22, 2002. The notices explain 
the basis for the DOC's final determination that Canada provides 
countervailable subsidies to the Canadian lumber industry.
    In its panel request, Canada describes its claims in the following 
manner:

1. Initiation of the Investigation

    In initiating the Lumber IV investigation, the United States 
violated Articles 10, 11.4 and 32.1 of the SCM Agreement. 
Specifically, contrary to Article 11.4, the initiation of the Lumber 
IV investigation was not based on an objective and meaningful 
examination and determination of the degree of support for the 
application by the domestic industry, because the ``Continued 
Dumping and Subsidy Offset Act of 2000'' (CDSOA), by requiring that 
a member of the U.S. industry support the application as a condition 
of receiving payments under the CDSOA, made impossible an objective 
and meaningful examination of industry support for the application.

2. Commerce's Final Countervailing Duty Determination

    In making the final determination, the United States acted 
inconsistently with Articles 1, 2, 10, 14, 19, 22 and 32 of the SCM 
Agreement and Article VI of GATT 1994. Specifically:
    (a) Commerce violated Articles 10, 19.1, 19.4 and 32.1 of the 
SCM Agreement and Article VI:3 of GATT 1994 by imposing 
countervailing duties in respect of practices that are not subsidies 
because there is no ``financial contribution'' by government.
    Commerce found that Canadian provincial stumpage programs 
provide goods or services and are, therefore, financial 
contributions by government under Article 1.1(a) of the SCM 
Agreement. Commerce erred in this finding. Canadian provincial 
stumpage programs do not constitute the provision of goods or 
services within the meaning of Article 1.1(a) of the SCM Agreement 
and are not ``financial contributions'' by a government;
    (b) Commerce violated Articles 10, 14, 14(d), 19.1 19.4 and 32.1 
of the SCM Agreement and Article VI:3 of GATT 1994 by imposing 
countervailing duties in respect of practices that are not subsidies 
because there is no ``benefit conferred'',
    Commerce erred by:
    (i) Determining and measuring the adequacy of remuneration for 
the alleged provision of goods or services in relation to purported 
prevailing market conditions in a country other than the country of 
provision,
    (ii) Incorrectly assessing and comparing evidence related to 
those purported market conditions, and
    (iii) Rejecting evidence of prevailing market conditions for the 
alleged good or service in question in the country of provision 
within the meaning of Article 14(d) of the SCM Agreement;
    (c) Commerce violated Articles 10, 19.1, 19.4 and 32.1 of the 
SCM Agreement and Article VI:3 of GATT 1994 by imposing 
countervailing duties in instances where no subsidy exists. Commerce 
erroneously and impermissibly presumed that an alleged subsidy 
passes through an arm's s-length transaction to a downstream user of 
an input;
    (d) Commerce violated Articles 1.2, 2.1, 2.4, 10, 19.1, 19.4 and 
32.1 of the SCM Agreement by imposing countervailing duties where 
the alleged subsidies are not

[[Page 64957]]

``specific'' within the meaning of Article 2 of the SCM Agreement.
    Commerce erroneously and impermissibly made a finding of 
``specificity'',
    (i) Based solely on the unsupported and incorrect assertion that 
only three industries use provincial stumpage, and
    (ii) Without taking into account the extent of diversification 
of economic activity within the jurisdiction of the alleged granting 
authority;
    (e) Commerce violated Article 19.4 of the SCM Agreement and 
Article VI:3 of GATT 1994 by inflating the alleged subsidy rate 
through the use of impermissible methodologies, including by:
    (i) Calculating the alleged stumpage benefit on the basis of the 
whole softwood log, and then attributing that benefit to only a 
portion of the products produced from that log,
    (ii) Excluding relevant shipments from the denominator such that 
the numerator and the denominator of the alleged benefit calculation 
where not congruent,
    (iii) Allocating the total alleged stumpage benefit over a sales 
value that had been demonstrated on the record to be inaccurate, and
    (iv) Excluding from the denominator shipments of companies 
demonstrated to be unsubsidized; and
    (f) Commerce violated Articles 10, 12, 22 and 32.1 of the SCM 
Agreement and Article X:3(a) of GATT 1994 because the investigation 
was not conducted in accordance with fundamental substantive and 
procedural requirements. In particular:
    (i) Commerce refused to accept or consider relevant evidence 
offered on a timely basis, contrary to Article 12.1 of the SCM 
Agreement,
    (ii) Commerce gathered and relied upon information not made 
available to the parties and not verified, contrary to Articles 
12.2, 12.3, 12.5 and 12.8 of the SCM Agreement,
    (iii) Commerce failed to address significant evidence and 
arguments in its determination, contrary to Article 22.5 (and 
Article 22.4 as it relates to Article 22.5) of the SCM Agreement,
    (iv) Commerce failed to issue timely decisions and to provide 
reasonable schedules for questionnaire responses, briefings, and 
hearings contrary to Articles 12.1, 12.2, 12.3 and 22.5 (and Article 
22.4 as it relates to Article 22.5) of the SCM Agreement, and
    (v) Commerce improperly applied facts available to cooperative 
parties, contrary to Article 12.7 of the SCM Agreement.

3. Expedited and Administrative Reviews

    (a) In initiating ``expedited reviews'' with respect to the 
Lumber IV investigation, the United States has violated Articles 10, 
19.3, 19.4 and 32.1 of the SCM Agreement and Article VI:3 of GATT 
1994 because:
    (i) Commerce has failed to ensure that each exporter requesting 
an expedited review is granted a review and given an individual 
countervailing duty rate, and
    (ii) Commerce's proposed methodology for calculating company-
specific countervailing duty rates fails to properly establish an 
individual countervailing duty rate for each exporter granted a 
review.
    (b) U.S. law specifically prohibits company-specific 
administrative reviews in aggregate cases. In conducting the Lumber 
IV investigation on an aggregate basis, the United States has 
therefore violated Articles 10, 19.3, 19.4, 21.1, 21.2 and 32.1 of 
the SCM Agreement and Article VI:3 of GATT 1994 because:
    (i) Commerce is prohibited under U.S. law from conducting 
company-specific administrative reviews in this case except for 
companies with zero or de minimis rates, and
    (ii) A rate obtained following an aggregate administrative 
review will replace any company-specific rates arrived at through 
the expedited review process.

Public Comment: Requirements for Submissions

    Interested persons are invited to submit written comments 
concerning the issues raised in the dispute. Persons submitting 
comments may either send one copy by U.S. mail, first class, postage 
prepaid, to Sandy McKinzy at the address listed above or transmit a 
copy electronically to [email protected], with ``DS257'' in the subject 
line. For documents sent by U.S. mail, USTR requests that the submitter 
provide a confirmation copy, either electronically or by fax to 202-
395-3640. USTR encourages the submission of documents in Adobe PDF 
format, as attachments to an electronic mail. Interested persons who 
make submissions by electronic mail should not provide separate cover 
letters; information that might appear in a cover letter should be 
included in the submission itself. Similarly, to the extent possible, 
any attachments to the submission should be included in the same file 
as the submission itself, and not as separate files.
    A person requesting that information contained in a comment 
submitted by the that person be treated as confidential business 
information must certify that such information is business confidential 
and would not customarily be released to the public by the submitter. 
Confidential business information must be clearly marked ``BUSINESS 
CONFIDENTIAL'' in a contrasting color ink at the top of each page of 
each copy.
    Information or advice contained in a comment submitted, other than 
business confidential information, may be determined by USTR to be 
confidential in accordance with section 135(g)(2) of the Trade Act of 
1974 (19 U.S.C. 2155(g)(2)). If the submitting person believes that 
information or advice may qualify as such, the submitting person--
    (1) Must so designate the information or advice;
    (2) Must clearly mark the material as ``SUBMITTED IN CONFIDENCE'' 
in a contrasting color ink at the top of each page of each copy; and
    (3) Is encouraged to provide a non-confidential summary of the 
information or advice.
    Pursuant to section 127(e) of the URAA (19 U.S.C. 3537(e)), USTR 
will maintain a file on this dispute settlement proceeding, accessible 
to the public, in the USTR Reading Room, which is located at 1724 F 
Street, NW., Washington, DC 20508. The public file will include 
nonconfidential comments received by USTR from the public with respect 
to the dispute; the U.S. submissions to the panel in the dispute, the 
submissions, or non-confidential summaries of submissions, to the panel 
received from other participants in the dispute, as well as the report 
of the panel; and, if applicable, the report of the Appellate Body. An 
appointment to review the public file may be made by calling the USTR 
Reading Room at (202) 395-6186. The USTR Reading Room is open to the 
public from 9:30 a.m. to 12 noon and 1 p.m. to 4 p.m., Monday through 
Friday.

Daniel E. Brinza,
Assistant United States Trade Representative for Monitoring and 
Enforcement.
[FR Doc. 02-26761 Filed 10-21-02; 8:45 am]
BILLING CODE 3190-01-M