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NEWS RELEASES

March 22, 2002 (4:10 p.m. EST) No. 28

PETTIGREW LAUNCHES NAFTA CHALLENGE

FOLLOWING U.S. LUMBER DECISIONS

International Trade Minister Pierre Pettigrew today announced that Canada will launch formal proceedings under the North American Free Trade Agreement (NAFTA) challenging the U.S. Department of Commerce Final Determination of subsidy on Canadian softwood lumber.

"The Commerce Department decisions are punitive, unfounded in substance and were made to mollify protectionist interests in the United States," stated Mr. Pettigrew. "I am fully confident in our NAFTA and WTO challenges, and I am taking this action today to best advance the interests of our industry. We have won before. We will win again."

The Government of Canada has called for the establishment of a binational panel under Chapter 19 of NAFTA to review the U.S. Department of Commerce's final determination subsidy. The results of panel review are binding on the United States. When Canada is successful with the challenge, the United States Administration will be required to rescind its trade action, refund the countervailing duties imposed, and cancel any bonds.

It is expected that the Canadian industry will request a NAFTA Panel Review of the final dumping determination.

"The Government of Canada will continue to defend the Canadian softwood lumber industry. We will continue to use all legal means in all venues available to challenge these decisions," concluded the Minister.

This action by the Government of Canada is taken in conjunction with ongoing challenges of U.S. law and practice at the World Trade Organization in defence of Canada's softwood lumber industry. This NAFTA challenge does not preclude future WTO actions.

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A backgrounder is attached.

For further information, media representatives may contact:

Sébastien Théberge

Office of the Minister for International Trade

(613) 992-7332

Media Relations Office

Department of Foreign Affairs and International Trade

(613) 995-1874

http://www.dfait-maeci.gc.ca

Backgrounder

ANTI-DUMPING/COUNTERVAILING DUTY FINAL DETERMINATIONS

On March 22, 2002, the U.S. Department of Commerce (DOC) announced its final determinations of subsidy and dumping in its investigations of softwood lumber from Canada.

Final Countervailing Duty Determination

In the final countervailing duty determination, the Department of Commerce ruled that federal and provincial programs conferred countervailable subsidies of 19.34 percent.

The four Atlantic provinces are excluded from the countervailing duty action.

The DOC excluded 20 companies from countervailing duties: Armand Duhamel et fils Inc., Bardeaux et Cedres, B. Luken Logging, Beaubois Coaticook, Busque & Laflamme Inc., Carrier & Begin Inc., Clermond Hamel, Frontier Lumber, J.D. Irving, Ltd., Les Produits Forestiers D.G., Marcel Lauzon Inc., Mobilier Rustique, Paul Vallee Inc., Rene Bernard Inc., Roland Boulanger & Cite., Sault Forest Product Ltd., Scierie Alexandre Lemay, Scierie La Patrie Inc., Scierie Tech, Inc., and Wilfrid Paquet et fils.

Finally, the DOC has decided not to exclude any species from the scope of its trade action. As a result, exports of these products will be subject to countervailing duties.

Final Anti-Dumping Determination

The Department of Commerce also made its final determination in the anti-dumping investigation, ruling that Canadian producers/exporters of softwood lumber have sold their product below fair value. The anti-dumping margins range from 2.26 to 15.83 percent, with a calculated "all others" margin of 9.67 percent.

Individual dumping margins were calculated for the following six companies: Weyerhaeuser (15.83%); Abitibi (14.6%); Tembec (12.04%); Slocan (7.55%); Canfor (5.96%); and West Fraser (2.26%).

The DOC has decided not to exclude any species from the scope of its trade action. As a result, exports of these products will be subject to anti-dumping duties.

NAFTA Challenges

On February 26 and 27, 2002, the Government of Canada filed notices of intent to request NAFTA Panel Reviews under Chapter 19 with respect to the final countervailing and anti-dumping determinations. Now that the final determinations have been made, the Government of Canada will formally request a Panel Review of the final subsidy determination. We expect that the Canadian industry will request a NAFTA Panel Review of the final dumping determination.

In Canada's view, the basis upon which the Department of Commerce initiated the investigation in April 2001 is inconsistent with U.S. law. This includes the determination that provincial forest management programs are "financial contributions," that such programs provide a benefit to lumber producers, which the Department of Commerce found and measured through an impermissible use of a cross-border comparison, and that the programs are specific. Other inconsistencies include the Department of Commerce's decision not to consider some 320 legitimate company applications for exclusion, the treatment of a variety of product and species requests for exclusion, and serious deficiencies in the conduct of the investigation.

Chapter 19 of NAFTA provides for a binding, binational panel review of final determinations in trade remedy cases. Panels consisting of five persons are established to review the determinations. Panels are required to ascertain whether the determinations are consistent with the trade laws of the country conducting the investigation. Under the NAFTA rules, panel rulings are required within 315 days of the request for review.

WTO Challenges

Canada will continue to pursue its WTO challenges of a number of provisions of U.S. law and of the preliminary determinations. The actions currently underway include:

1. Section 129(c)(1) of the Uruguay Round Agreements Act

This section prevents the United States from refunding duty deposits collected from foreign companies in situations where the imposition of those duties has been found to be inconsistent with WTO rules. Canada is challenging the U.S. law on its position.

2. Preliminary Determination of Subsidy

On August 9, 2001, the Department of Commerce made a preliminary determination of subsidy. Canada is challenging the initiation of the investigation, the basis upon which the preliminary determination was made, and a provision of U.S. law that limits the availability of expedited reviews to Canadian companies after completion of the countervailing duty investigation.

3. Preliminary Determination of Dumping

On October 30, 2001, the Department of Commerce made a preliminary determination of dumping. Canada is challenging the initiation of the investigation as well as the basis for the preliminary determination.

4. Future Challenges

The government will be examining the final determinations of subsidy and dumping in the coming days to determine whether further WTO challenges are warranted.

Preliminary Determinations of Subsidy and Dumping

The final determinations of subsidy and dumping were preceded by preliminary determinations in both investigations.

On August 9, 2001, the Department of Commerce issued its preliminary determination of subsidy in its countervailing duty investigation of softwood lumber from Canada. The DOC determined a subsidy rate of 19.31 percent for Canadian softwood lumber imports entering the United States.

On October 30, 2001, the Department of Commerce issued its preliminary determination of dumping. The DOC found dumping margins ranging from 5.94 to 19.24 percent, with a calculated all other margin of 12.58 percent.

Bonding/Cash Deposits

Countervailing duties: Under international trade rules and U.S. law, the Department of Commerce could impose provisional countervailing duties for no more than four months. As a result, the provisional 19.31 percent duty was imposed from mid-August to mid-December 2001. The 19.34 percent final determination subsidy rate cannot be imposed until such time as the U.S. International Trade Commission (ITC) makes an affirmative determination on injury and the Department of Commerce publishes a permanent countervailing duty order in mid-May 2002. Following that date, exporters will be required to make cash deposits to the U.S. Customs Service of the 19.34 percent subsidy rate found in the final determination.

Anti-dumping duties: In the anti-dumping investigation, companies will continue to post bonds or make cash deposits until a permanent anti-dumping duty order is imposed. After publication of the final determination of dumping in the Federal Register, expected on March 28, 2002, exporters will be required to post bonds or make cash deposits at the 9.67 percent rate found in the final determination. In the event that an affirmative determination of injury is made, the Department of Commerce will then publish a permanent anti-dumping duty order. At that point, exporters will be required to make cash deposits at the rate found in the final determination.

Next Step

It is anticipated that the U.S. International Trade Commission will schedule a vote of the Commission on the question of injury on May 1, 2002. This determination will be published approximately May 6, 2002. If the Commission makes an affirmative final injury determination, the Department of Commerce will publish permanent Countervailing and Anti-Dumping Orders by mid-May 2002.

Countervailing Duty/Anti-dumping Investigation Calendar

*Estimated