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<title>PETTIGREW CONDEMNS U.S. DECISIONSIN SOFTWOOD LUMBER CASE</title>
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<p><font size="+1"><strong>August 10, 2001 <em>(1:45 p.m. EDT)</em> No. 118</strong></font></p>
<p align="CENTER"><font size="+1"><strong>PETTIGREW CONDEMNS U.S. DECISIONS</strong></font></p>
<p align="CENTER"><font size="+1"><strong>IN SOFTWOOD LUMBER CASE</strong></font></p>
<p>International Trade Minister Pierre Pettigrew today condemned the U.S. Department of Commerce decision that Canadian
softwood lumber exports to the United States are subsidized at a rate of 19.31 percent. As a result of this decision,
provisional measures in the form of bonds or cash deposits will be imposed on Canadian lumber exports to the U.S.</p>
<p>"There is no basis in fact or law for this finding," stated Mr. Pettigrew. "In previous cases over the past 20 years, the U.S.
industry has not been able to sustain its subsidy and injury allegations against Canada. And, as the provinces have increased
their stumpage rates since the previous investigation, I believe the U.S. case remains unfounded."</p>
<p>In tandem with its preliminary determination of subsidy announced today, the Department of Commerce has also made a
finding of "critical circumstances," resulting in the retroactive application of the provisional measure to shipments made
from mid-May 2001 onward. This claim is based on unsubstantiated allegations of export subsidies as well as a "massive
surge" in softwood lumber exports in the first three months since the end of the Softwood Lumber Agreement on March 31.</p>
<p>"The Department of Commerce totally ignored compelling evidence that there was no critical surge," added Minister
Pettigrew. "They ignored data from their own census organization which released a figure of an 11.3 percent increase over
the same period last year."</p>
<p>First, documented evidence demonstrates clearly that the U.S. industry bald allegations of the existence of export subsidy
programs are unfounded. Second, based on currently available U.S. Census Bureau import data, Canadian shipments of
softwood lumber have only increased by 11.3 percent during the second quarter of 2001, compared with the same quarter in
2000. This increase is due largely to the growth of the U.S. housing market and is well below the 15 percent threshold that
the U.S. normally uses to define whether there has been a surge in exports.</p>
<p>"The irony here is that by bowing to protectionist interests," continued Mr. Pettigrew, "the U.S. government is ultimately
forcing lumber prices upward, thereby imposing a tax on its own consumers struggling to own a home and make mortgage
payments. The U.S. position is wrought with contradictions. On the one hand they're talking free trade, on the other they're
proceeding with today's decisions.</p>
<p>"The Government of Canada will continue to defend the rights of the Canadian softwood lumber industry," concluded the
Minister. "We believe there is no surge in exports, no evidence of subsidy and no injury to U.S. industry."</p>
<p>- 30 -</p>
<p>A backgrounder is attached.</p>
<p>For further information, media representatives may contact:</p>
<p>Sébastien Théberge</p>
<p>Office of the Minister for International Trade</p>
<p>(613) 992-7332</p>
<p>Media Relations Office</p>
<p>Department of Foreign Affairs and International Trade</p>
<p>(613) 995-1874</p>
<p><strong><font size="+1">Backgrounder</strong></font><font size="+1"></font></p>
<p>The U.S. Department of Commerce today issued its preliminary determination of subsidy in its countervailing duty
investigation of softwood lumber from Canada. The Department of Commerce found that Canadian softwood lumber
exports to the U.S. were subsidized in the order of 19.31 percent.</p>
<p>Also today, the Department of Commerce made an affirmative critical circumstances determination, concluding that there
has been a surge of softwood lumber exports from Canada since April 1, 2001. As a result of these two decisions,
retroactive countervailing measures, in the form of bonds or cash deposits in the order of 19.31 percent, are applicable to
shipments made on or after approximately May 20, 2001.</p>
<p>A countervailing duty is a special duty imposed to protect domestic industry from injury caused by imports that have
benefited from subsidies provided by a foreign government. Subsidies that are generally available (i.e., that are not directed
specifically at an enterprise, industry or group of enterprises or industries) are not countervailable.</p>
<p>A countervailing duty can only be applied if it has been established in an investigation that imported goods have been
subsidized and that such subsidized imports are causing material injury, or threatening to cause injury to the domestic
industry. A final determination will either confirm or dismiss the preliminary finding.</p>
<p>The Department of Commerce must determine whether a foreign government is directly or indirectly providing a
countervailable subsidy for the manufacture, production or exportation of merchandise imported into or sold to the United
States. The U.S. International Trade Commission (ITC) must determine whether the U.S. industry producing like goods has
been materially injured, or threatened with material injury, by reason of subsidized imports. If these two conditions are met,
a countervailing duty equal to the amount of the subsidy is imposed upon the imports of the subsidized merchandise.</p>
<p>"Critical circumstances" is a provision in both the anti-dumping and countervailing duty laws that allows for the limited
retroactive imposition of duties if certain conditions are met. First, documented evidence demonstrates clearly that the U.S.
industry's bald allegations of the existence of export subsidy programs are unfounded. Second, based on currently available
U.S. Census Bureau import data, Canadian shipments of softwood lumber have only increased by 11.3 percent during the
second quarter of 2001, compared with the same quarter in 2000. This increase is due largely to the growth of the U.S.
housing market and is well below the 15 percent threshold that the U.S. normally uses to define whether there has been a
surge in exports.</p>
<p>This provision serves two purposes. It deters importers from attempting to circumvent the anti-dumping and countervailing
duty laws by making massive shipments immediately after the filing of a petition (and before any relief can be imposed),
and it provides relief from the effects of such massive shipments if they do occur. </p>
<p>For the determination of critical circumstances to be final, several more decisions are required. The Department of
Commerce must also make a final determination of subsidy, as well as a final determination of critical circumstances.
These are followed by a final determination of injury by the ITC. The ITC also needs to make a final determination as to
whether the imports subject to the Department of Commerce's final affirmative critical circumstances determination are
likely to seriously undermine the remedial effect of the countervailing duty order to be issued. These decisions will be
made during the course of 2001, with a final determination of injury not expected until December 7.</p>
<p>An investigation takes roughly eight months to complete. A final determination of subsidy and injury will result in the
imposition of permanent countervailing duties. However, they would also be subject to judicial review in the U.S. Courts or
a binational panel review under Chapter 19 of NAFTA.</p>
<p>Additional background information is available at the following Web site: <a href="https://bac-lac.wayback.archive-it.org/web/20070221041001/http://www.dfait-maeci.gc.ca/~eicb/softwood/lumber-e.htm">http://www.dfait-maeci.gc.ca/~eicb/softwood/lumber-e.htm</a></p>
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