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<title>NAFTA PANEL ORDERS U.S. TO CORRECT FLAWED SOFTWOOD ANTI-DUMPING DETERMINATION</title>
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<p><font size="+1"></font><font size="+1"><strong>July 17, 2003 <em>(4:00 p.m. EDT)</em> No. 101</strong></font></p>
<p align="CENTER"><font size="+1"><strong>NAFTA PANEL ORDERS U.S. TO CORRECT FLAWED SOFTWOOD ANTI-DUMPING
DETERMINATION</strong></font></p>
<p>International Trade Minister Pierre Pettigrew welcomed today's NAFTA panel decision, which states that the United
States' application of anti-dumping duties on Canadian softwood lumber was inconsistent with U.S. domestic law. The
NAFTA panel has ordered the U.S. Department of Commerce to issue a new determination within 60 days.</p>
<p>"The panel told the U.S. to correct its flawed determination," said Minister Pettigrew. "Canada will continue to pursue all
avenues to defend its softwood lumber industry, including its other WTO and NAFTA challenges."</p>
<p>The NAFTA anti-dumping challenge has been led by the Canadian softwood lumber industry and deals with company-specific issues, including pricing practices.</p>
<p>In May 2002, the United States imposed both a countervailing duty and an anti-dumping duty on Canada's softwood
lumber exports. Canada is currently fighting both through the World Trade Organization (WTO) and NAFTA. On May 27,
2003, Minister Pettigrew welcomed the news that a WTO panel's interim decision supported Canada's claim that Canadian
provincial stumpage programs are not subsidies. A final decision in that case is expected to be released on July 22, 2003.
The results of other legal challenges are expected later this summer and fall. The Government of Canada is working closely
with the provinces and industry on these challenges.</p>
<p>For more information regarding Canada's legal challenges against the United States at the World Trade Organization and
under NAFTA, visit: <a href="https://bac-lac.wayback.archive-it.org/web/20071123040210/http://www.dfait-maeci.gc.ca/eicb/softwood/legal_action-en.asp">http://www.dfait-maeci.gc.ca/eicb/softwood/legal_action-en.asp</a></p>
<p>For more information regarding softwood lumber issues in general, please visit: <a href="https://bac-lac.wayback.archive-it.org/web/20071123040210/http://www.softwoodlumber.gc.ca/">http://www.softwoodlumber.gc.ca</a></p>
<p>The NAFTA panel decision is available at <a href="https://bac-lac.wayback.archive-it.org/web/20071123040210/http://www.nafta-sec-alena.org/">http://www.nafta-sec-alena.org</a></p>
<p align="CENTER">- 30 -</p>
<p>A backgrounder is attached.</p>
<p>For further information, media representatives may contact:</p>
<p>Sébastien Théberge</p>
<p>Director of Communications</p>
<p>Office of the Minister for International Trade</p>
<p>(613) 992-7332</p>
<p><a href="https://bac-lac.wayback.archive-it.org/web/20071123040210/mailto:sebastien.theberge@dfait-maeci.gc.ca">sebastien.theberge@dfait-maeci.gc.ca</a></p>
<p>Media Relations Office</p>
<p>Department of Foreign Affairs and International Trade</p>
<p>(613) 995-1874</p>
<p><a href="https://bac-lac.wayback.archive-it.org/web/20071123040210/http://www.dfait-maeci.gc.ca/">http://www.dfait-maeci.gc.ca</a></p>
<p align="CENTER"><strong><font size="+1">Backgrounder</strong></font></p>
<p align="CENTER"><font size="+1"><strong>CANADA'S NAFTA CHALLENGE OF U.S. DEPARTMENT OF COMMERCE'S</strong> <strong>FINAL
DETERMINATION OF DUMPING</strong> </font></p>
<p align="CENTER"><strong>Chronology of Key Events</strong></p>
<p><strong>April 2, 2001: </strong>The United States Department of Commerce (DOC) initiated its dumping duty investigation of Canadian
softwood lumber.</p>
<p><strong>October 30, 2001:</strong> The DOC made a preliminary dumping duty determination. Six Canadian exporters (respondents) were
assessed individual margins of dumping, provisionally ranging from 5.94 percent to 19.24 percent. The average margin of
dumping (12.58 percent) for these six respondents was used to establish the rate for all other Canadian exporters of
softwood lumber.</p>
<p><strong>March 22, 2002:</strong> The DOC announced a final affirmative determination of dumping. The six Canadian respondents were
assessed individual margins of dumping ranging from 2.18 percent to 12.44 percent. An "all others" margin of dumping of
8.43 percent was applied to all other Canadian exporters of softwood lumber. </p>
<p><strong>April 2, 2002:</strong> A binational panel was established under NAFTA Chapter 19 to review whether the DOC's final affirmative
determination of dumping was contrary to U.S. law.</p>
<p><strong>March 3-5, 2003:</strong> The panel held its hearing in this case. </p>
<p><strong>July 17, 2003:</strong> The panel issued its final report.</p>
<p><strong>Decision of the Tribunal</strong></p>
<p>The NAFTA Panel has ruled on each of the following points raised by the Canadian respondents:</p>
<p><strong>1. Initiation of the dumping investigation</strong></p>
<p>The Canadian respondents maintained that the DOC acted inconsistently with U.S. domestic law when it initiated a
dumping investigation based on a petition that did not include information reasonably available to the petitioner (U.S.
domestic industry).</p>
<p>The NAFTA Panel found in favour of the U.S. on the initiation issue.</p>
<p><strong>2. Single "class or kind" of merchandise</strong></p>
<p>The Canadian respondents maintained that the DOC erroneously determined there to be only a single "class or kind" of
merchandise under consideration (i.e. all "softwood lumber products"). The DOC conducted one investigation on all
softwood lumber products ranging from dimensional lumber to further manufactured products and even engineered wood
products. The Canadian respondents claimed that certain products were so distinct from the general category of "softwood
lumber" that these required distinct analysis and treatment. </p>
<p>The Panel found that more information was required to justify the DOC's single "class or kind" of merchandise
determination with respect to engineered wood products. However, with respect to Western Red Cedar and Eastern White
Pine, the Panel found that these products fell within the same "class or kind" of merchandise under U.S. law.</p>
<p><strong>3. Physical differences</strong></p>
<p>The Canadian respondents maintained that the DOC failed, when conducting comparisons between prices of products sold
in the U.S. and prices of products sold in Canada, to make adjustments for differences in physical characteristics between
the products. The Canadian respondents argued that the evidence before the DOC showed that the value of softwood
lumber varies depending on the size of the product (including differences in thickness, size and length) and that the DOC
ought to have acknowledged this in order to avoid distorting margins of dumping. The Canadian respondents also
maintained that the DOC should have taken into account value differences corresponding to dimensional distinctions in
allocating joint costs.</p>
<p>The Panel found in favour of the Canadian respondents on these arguments and instructed the DOC to issue a new
determination.</p>
<p><strong>4. Zeroing</strong></p>
<p>The Canadian respondents challenged the legality in U.S. domestic law of the DOC's practice of "zeroing" whereby
negative margins of dumping for certain product categories are set to zero, thereby inflating margins of dumping for the
product scope as a whole.</p>
<p>The Panel found that zeroing was consistent with U.S. law. </p>
<p><strong>5. Calculation of the dumping rate</strong></p>
<p>The Panel found that the DOC made several errors in its calculations of certain costs for specific Canadian respondents, and
instructed the DOC to issue a new determination in that regard. </p>
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